Quick report Global Automotive sector

Quick report Global Automotive sector March 2016 p. 1

Quick report Global Automotive sector Report summary Purpose Methodology Major sources To prepare a quick profile on the automotive sector Secondary research (using recognised databases and freely available sources) LexisNexis, Avention and general internet search p. 2

Contents Sector overview... 05 Market size and growth... 07 Segments... 09 Competitive landscape... 15 p. 3

Sector overview Global Automotive sector Companies in the automotive sector can be divided into two categories: motor vehicle manufacturers and auto parts manufacturers. Both the categories are dominated by large international players. The leading motor vehicle manufacturers include General Motors, Ford, Chrysler and Volkswagen. The leading players in the auto parts category are Robert Bosch, Magna International, Continental AG, Denso Corp, ZF Friedrichshafen AG and 6 Hyundai Mobis. Segment Description Trucks Light commercial vehicles (LCVs) This segment includes all commercial vehicles that weigh less than 5.25 tonnes. Passenger cars Motorcycles Auto parts manufacturing Heavy trucks Buses and coaches This segment includes trucks that weigh more than 5.25 tonnes. This segment includes buses and coaches that weigh more than 5.25 tonnes. Passenger cars are motor vehicles with at least four wheels and not more than eight seats (in addition to the driver s). This segment includes minicars, subcompacts, compacts, mid- and full-sized luxury vehicles, sports coupes, minivans, and multi-purpose and sport utility vehicles. This sector includes powered two-wheelers. Companies in this segment manufacture automobile parts, including transmission and power train components, engines and engine parts, body parts and trim, electronics, braking systems, and steering and suspension components. It can be divided under the following three production levels: - Tier 1: Includes companies that directly supply forged products, stamped parts, die casting, plastic parts and machine parts to developers of engine parts, steering and suspension systems, air-conditioning systems, and electronic components - Tier 2: Includes companies that supply equipment and products used in the advanced and specialised components manufactured by tier 1 suppliers - Tier 3: Includes companies that supply raw materials to tier 2 suppliers Source: Global Automotive Manufacturing, MarketLine Industry Profile, Nov 2015 / npc.org / autotrends.org / The Auto Parts Industry, SE Ministry of Economy / magna.com p. 5

Market size and growth Global automotive manufacturing sector (2010 2014) Market value (USD bn) Market volume (million units) 1,207.7 1,277.8 1,308.6 1,392.4 1,450.5 136.1 142.8 142.9 147.1 149.4 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Key growth drivers Revenue from the global automotive manufacturing sector grew at a CAGR of 4.7% between 2010 and 2014 to USD1,450.5bn. During the period, sales in the sector increased at a CAGR of 2.4% to 149.4m units. China accounts for the highest share of motor vehicle consumption; however, demand is slowing down due to environmental concerns. The government is taking initiatives to drive demand, such as a 10% reduction on tax on small car purchases in 2014 to 5%. This initiative has resulted in growing demand for small cars and environment friendly cars such as electric cars. In North America, new, young drivers have a preference for cars that offer safety features. To capitalise on this trend, car makers are incorporating safety technologies such as lane assist and collision warning into small cars. The factors driving sales include low-interest rates, pent-up demand and signs of economic recovery. In Europe, the sector is recovering, driven by western European countries (mainly Germany, the UK, France, Italy and Spain). Growth in these countries has been buoyed by low interest rates, easy car financing, falling unemployment rates, and an increase in government incentives and discounts offered by car dealers. Source: Global Automotive Manufacturing, MarketLine Industry Profile, Nov 2015 / wsj.com / businessinsider.com / mlive.com / fortune.com / Global Auto Report, Nov 2015, Scotiabank p. 7

Segments (1/5) Motor vehicle manufacturing segment value (2014) Geographical motor vehicle production volume (2014)* Truck manufacturing 33.9% Car manufacturing 61.4% Cars LCVs Heavy trucks Buses and coaches Europe 18,028,727 2,101,847 265,979 38,521 Asia-Oceania 39,219,660 5,038,128 2,864,657 237,877 Americas 9,799,028 10,752,616 632,379 35,201 Motorcycle manufacturing 4.7% By value, car manufacturing is the largest segment of the global automotive manufacturing sector, while motorcycle manufacturing is the smallest. By volume, car manufacturing is the largest segment (43.3%), followed by motorcycle manufacturing (41.7%) and truck manufacturing (15.0%). Asia-Pacific contributed 46.7% to overall sector sales value in 2014, followed by Europe at 30.5% and the US at 11.0%. The global motorcycle segment is dominated by Asia-Pacific, which accounted for over 70% of sales value and over 90% of production volume in 2014. Africa 483,206 191,966 42,976 1,460 Both the US and China account for over 20% each of the global truck manufacturing sector, in terms of value. In the LCVs segment, the US accounted for the highest share of production, with 7.12m units. In Asia-Pacific, China produced 1.87m units and Thailand produced 1.12m units. In Europe, Russia leads in the production of buses and coaches, with 10,327 units. In Asia-Pacific, China produced the most buses and coaches, with 162,292 units, followed by India with 44,057 units. In 2014, car manufacturing in Europe was led by Germany (5.60m units), followed by Spain, the UK and France (1.89m; 1.52m and 1.49m units, respectively). The Asia Oceania region was led by China (19.91m units), followed by Japan, South Korea and India (8.27m, 4.12m and 3.15m units, respectively). In the Americas, the US led with 4.25m units, followed by Brazil with 2.31m units and Mexico with 1.91m units. Source: Global Automotive Manufacturing, MarketLine Industry Profile, Nov 2015 / oica.net *The data does not include motorcycles p. 9

Segments (2/5) Global car segment market value, 2010 2014 Leading car producing regions, 2012 2015 Global car manufacturing market value (USDbn) 869.4 891.3 834.6 773.0 732.5 19.4 18.3 20.6 Leading car producers by region (million units) 21.1 18.4 20.0 21.4 16.3 3.2 3.3 1.6 3.0 2.5 3.0 2.8 1.4 1.9 2.1 2.5 1.8 1.8 2.2 2.8 1.6 North America** Germany Russia China India Brazil 2013 2014 2015 2016* 2010 2011 2012 2013 2014 The global car manufacturing market grew at a CAGR of 5.0% over 2010 2014 and 2.5% y-o-y in 2014. In 2014, market volume grew 2.4% y-o-y to 64.6m units (it reached 63.1m units in 2013, 60.6m units in 2012, 57.2m units in 2011, and 55.7m units in 2010). During 2010 2014, volume grew at a CAGR of 3.8%. The leading countries in passenger car production are China and the US. In 2014, new passenger car registrations increased by 4.6% y-oy. This growth was led by China (12.1%), which accounted for more than 25% of total car sales. The Triad countries reported significant y-o-y growth during the year, with the EU growing at 5.7%, the US at 5.5% and Japan at 3.7%. *Forecast figures / **Includes light trucks / ^ Includes crossover utility vehicles Sources: Economic and Market Outlook EU Automobile Industry, 2015, ACEA / Global Auto Report, Nov 2015, Scotiabank / State of the Automotive Industry in South Africa, Apr 2015, Pretoria p. 10

Segments (3/5) Global truck segment market value, 2010 2014 Global truck segment production volumes, 2010 2014 Global truck manufacturing segment value (USD bn) Global truck segment volume (million units) 491.4 22.1 22.4 458.2 21.3 414.9 438.5 410.7 19.1 20.0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 The global truck manufacturing segment grew at a CAGR of 4.3% between 2010 and 2014 to reach USD491.4bn in 2014. During the same period, the segment in the US grew at a CAGR of 12.4%. While Asia-Pacific accounts for 42.7% of the segment s value, the US and China account for over 20% each. In 2014, the segment in the US generated USD137.8bn, followed by Europe (USD62.1bn) and the Middle East (USD2.7bn). The rest of the world generated USD79.0bn. Global production volume of the segment grew by 1.4% in 2014 to 22.4m units. LCVs is the largest sub-segment of the segment, accounting for 80.5% of its total production volume (18.1m units). It is followed by the heavy trucks sub-segment (17.9%; 4.0m units), and the buses and coaches sub-segment (1.6%; 354,000 units). Fiat is the leading player in the segment, accounting for 13.2% of total production volume. Sources: Global Truck Manufacturing, MarketLine Industry Reports, 2015 p. 11

Segments (4/5) Global motorcycle segment market value, 2010 2014 Global motorcycle segment production volumes, 2014 Global motorcycle segment market value (USD bn) Global motorcycle segment volume share 60.3 66.3 63.4 64.8 67.8 United States 6.5% Rest of the world 14.5% Europe 7.5% Asia-Pacific 71.5% 2010 2011 2012 2013 2014 The motorcycle manufacturing segment reported revenue of USD67,819.9m in 2014. Its production volume increased at a CAGR of 0.4% during 2010 2014 to reach 62.3m units. The leading companies in the segment are Bajaj Auto Ltd, Hero MotoCorp, Honda Motor and Yamaha Motor Co. Asia-Pacific is the largest contributor to global production, accounting for over 70% of the global value and over 90% of the global production volume in 2014. Many manufacturers in the region have shifted their production operations from mature markets to low-cost regions, such as India and Vietnam. In South America, Brazil has the largest motorcycle manufacturing industry, accounting for over half of all motorcycles produced on the continent in 2014. Sources: Global Motorcycle Manufacturing, MarketLine Industry Reports, 2015 p. 12

Segments (5/5) Global auto parts manufacturing sector, 2010 2014 Automotive suppliers EBIT margin (%) Revenue growth (y-o-y) 7.0 6.5 6.9 7.2 7.5 20% 12% 4% 8% 5% 2010 2011 2012 2013 2014* EBIT margin (%) 2010 2011 2012 2013 2014* Revenue growth (y-o-y) Key growth drivers In 2010 2014, the auto parts manufacturing industry grew at a CAGR of 4.3%. It was led by NAFTA and China, which grew at CAGRs of 9.3% and 8.0%, respectively.* Europe-based manufacturers in the industry benefit from the region s leading technology position and favourable customer mix, while NAFTA suppliers continue to benefit from restructuring their business during the 2008/2009 auto crisis. Due to a decline in oil prices in 2014, customers increased their discretionary spending. This, in turn, increased demand for automobiles and auto parts. The auto parts manufacturing industry derives 95% of its demand from the automobile manufacturing sector. As the global economy recovers from the 2009 recession, automobile sales have increased in both mature and developing markets. In recent years, recalls by automobile companies have increased rapidly. In 2014, over 600m vehicles were recalled in the US, the highest ever. This has increased the sales of auto parts, as manufacturers need to replace defective parts. Source: Global Automotive Supplier Study, 2014, Roland Berger Strategy Consultants / uiowa.edu / ibisworld.com / 2015 Automotive Industry Outlook and Strategic Insight, Feb 2015, Frost & Sullivan *Data according to IHS, Roland Berger/Lazard, 2014 figure is estimated based on data for 14 European, North American and Asian OEMs p. 13

Competitive landscape The automotive manufacturing sector has a competitive pricing environment, driven in part by excess capacity, which is concentrated in Europe and Asia. IHS Automotive estimates that the global automotive industry had excess capacity of about 31m units in 2015. The sector is not dominated by a single producer. The following are the 12 largest companies in the sector by revenue. Company Segment Country Revenue in FY2015 (USD bn) Y-o-Y revenue growth (%) Net income in FY2015 (USD bn) Volkswagen AG* Automotive manufacturing Germany 268.7 2.7% 14.4 Toyota Motor Automotive manufacturing Japan 248.0-3.1% 19.8 Daimler AG Automotive manufacturing Germany 165.9-4.1% 9.4 General Motors Automotive manufacturing US 152.4-1.9% 9.8 Ford Motor Company Automotive manufacturing US 149.6 3.5% 7.4 Fiat Chrysler* Automotive manufacturing UK 122.8 15.2% 0.01 Honda Motor Automotive manufacturing Japan 121.4-2.4% 4.6 BMW* Automotive manufacturing Germany 106.7 6.0% 7.6 Nissan Motor Automotive manufacturing Japan 103.6-1.0% 4.2 SAIC Motor* Automotive manufacturing China 102.3 12.1% 4.9 Hyundai Motor Co Automotive manufacturing South Korea 81.3-3.6% 5.0 Robert Bosch* Automotive parts manufacturing Germany 64.9 4.9% 3.2 Source: Company Annual Reports 2014 2015 *Figures for FY2014 p. 15

Disclaimer Although the information contained in this publication has been obtained from sources believed to be reliable, the author and InsightBee disclaim all warranties as to the accuracy, completeness or adequacy of such information. InsightBee shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. p. 16