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U.S. Auto Industry Chartbook BBVA Research USA Houston, TX Fourth Quarter 2013

U.S. Auto Industry Chartbook

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Pent-up demand supports vehicle sales in the short-run •Access to credit improves as banks ease standards •Business demand benefits from the recovery of the housing market and the energy boom •Exports are gaining momentum due to rapid growth in emerging markets •Excess inventory could lead to a period of strong discounts •Slow personal income growth points to a gradual expansion of sales •Asian brands continue to gain market share •Population growth assures a sustained demand; the aging process is shifting preferences

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Page 1: U.S. Auto Industry Chartbook

U.S. Auto Industry

Chartbook

BBVA Research USA

Houston, TX Fourth Quarter 2013

Page 2: U.S. Auto Industry Chartbook

Key messages

• Pent-up demand supports vehicle sales in the short-run

• Access to credit improves as banks ease standards

• Business demand benefits from the recovery of the housing market and the energy boom

• Exports are gaining momentum due to rapid growth in emerging markets

Page 3: U.S. Auto Industry Chartbook

Key messages

• Excess inventory could lead to a period of strong discounts

• Slow personal income growth points to a gradual expansion of sales

• Asian brands continue to gain market share

• Population growth assures a sustained demand; the aging process is shifting preferences

Page 4: U.S. Auto Industry Chartbook

4

Sales

Page 5: U.S. Auto Industry Chartbook

5

DemandTotal light weight vehicle sales (SAAR, million units)

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total Domestic Imported

Average 2001-2007: 16.7 millions

Average 2008-3Q13: 12.9 millions

Source: BBVA Research & Haver Analytics

Page 6: U.S. Auto Industry Chartbook

6

DemandTotal light weight vehicle sales (SAAR, million units)

2.5

2.7

2.9

3.1

3.3

3.5

3.7

3.9

4.1

4.3

90

95

100

105

110

115

120

125

130

135

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Dollar index (left axis)

Imported vehicles (right axis)

Source: BBVA Research & Haver Analytics

Page 7: U.S. Auto Industry Chartbook

7

DemandTotal vehicle sales (SAAR, million units)

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0

2

4

6

8

10

12

14

2001 2003 2005 2007 2009 2011 2013

Autos (left axis)

Light trucks (left axis)

Medium and heavy trucks (right axis)

Source: BBVA Research & Haver Analytics

Page 8: U.S. Auto Industry Chartbook

8

DemandNew auto sales by sector (SAAR, million units)

0

1

2

3

4

5

6

7

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Business Consumer

Source: Haver Analytics

Page 9: U.S. Auto Industry Chartbook

9

DemandPersonal consumer expenditures: quantity index (SA, 2009=100)

Source: Haver Analytics

80

90

100

110

120

130

140

150

160

2001 2003 2005 2007 2009 2011 2013

New autos

Net purchases of used autos

Page 10: U.S. Auto Industry Chartbook

10

Demand

Source: Bloomberg

U.S. vehicle days to turn (segment average)

40

45

50

55

60

65

2010 2011 2012 2013

Page 11: U.S. Auto Industry Chartbook

11

DemandMarket share by brand (%)

0

5

10

15

20

25

30

2Q13 2004

Source: Bloomberg

Page 12: U.S. Auto Industry Chartbook

12

DemandQuarterly unit sales (year-over-year % change)

Source: Bloomberg

-20

-10

0

10

20

30

40

50

60

3Q13 2Q13

Page 13: U.S. Auto Industry Chartbook

13

PricesConsumer price index: cars and trucks (year-over-year change)

-15%

-10%

-5%

0%

5%

10%

15%

20%

2007 2008 2009 2010 2011 2012 2013

New Used

Source: Haver Analytics

Page 14: U.S. Auto Industry Chartbook

14

PricesAuto prices

24

25

26

27

28

29

30

31

32

33

95

100

105

110

115

120

125

130

2007 2008 2009 2010 2011 2012 2013

Manheim used vehicle value index (left axis)

True market value (avg. all segments, $ thous, right axis)

Source: Haver Analytics & Bloomberg

Page 15: U.S. Auto Industry Chartbook

15

Financing conditions

2

3

4

5

6

7

8

9

2007 2008 2009 2010 2011 2012 2013

48-month new car loan

36-month used car loan

60-month new car

Car loan rates (%)

Source: Haver Analytics

Page 16: U.S. Auto Industry Chartbook

16

Financing conditions

0

1

2

3

4

5

6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Auto loan 90+ days delinquent (percent of balance)

Source: Haver Analytics

Page 17: U.S. Auto Industry Chartbook

17

Financing conditions

10

12

14

16

18

20

22

24

26

28

2007 2008 2009 2010 2011 2012 2013

Leasing penetration rate, %

Source: Bloomberg

Page 18: U.S. Auto Industry Chartbook

18

Financing conditions

40

50

60

70

80

90

100

110

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Newly originated installment auto loans ($ billion, eop, 4-qtr moving average)

Source: Haver Analytics

Page 19: U.S. Auto Industry Chartbook

19

Financing conditions

0

5

10

15

20

25

30

35

Eased maximum maturity Eased spreads on loan rates Eased requireddownpayment

Eased required credit score Extent to which loans aregranted to some customers

that do not meet crefitscoring thresholds

3Q13 3Q12

Terms and conditions on auto loans, percentage of respondents (%)

Source: Federal Reserve Senior Loan Officer Opinion Survey

Page 20: U.S. Auto Industry Chartbook

20

International trade

0

20

40

60

80

100

120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Exports Imports

Exports and imports of autos (SAAR, $ billion, chained 2009 dollars)

Source: Haver Analytics

Page 21: U.S. Auto Industry Chartbook

21

Gasoline

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012 2013

Spot price ($/gallon)

Source: Haver Analytics

Page 22: U.S. Auto Industry Chartbook

22

Gasoline

2.45

2.50

2.55

2.60

2.65

2.70

2.75

2.80

2.85

2.90

1-month ahead 3-months ahead 6-months ahead

Future prices ($/gallon)

Source: Bloomberg

Page 23: U.S. Auto Industry Chartbook

23

Consumers

Page 24: U.S. Auto Industry Chartbook

24

Consumers

40

50

60

70

80

90

100

2010 2011 2012 2013

Current economic conditions

Consumer expectations

Consumer sentiment index

Source: Haver Analytics

Page 25: U.S. Auto Industry Chartbook

25

Consumers

10.0

10.5

11.0

11.5

12.0

2010 2011 2012 2013

Plan to buy a car within 6 months, % of respondents

Source: Haver Analytics

Page 26: U.S. Auto Industry Chartbook

26

Consumers

-6%

-4%

-2%

0%

2%

4%

6%

Real disposable personal income

Employment growth

Average RDPI growth 2001-2006 = 3.2%Average RDPI growth 2010-2Q13 = 1.7%

Employment and real disposable personal income growth (yoy change)

Source: BBVA Research and Haver Analytics

Page 27: U.S. Auto Industry Chartbook

27

Household equity

-15%

-10%

-5%

0%

5%

10%

15%

0

20

40

60

80

100

120

140

160

00 01 02 03 04 05 06 07 08 09 10 11 12 13

Owners equity in real estate (NSA, Bil $, left axis)

FHFA house price index (yoy change, right axis)

Household equity and home prices

Source: Haver Analytics

Page 28: U.S. Auto Industry Chartbook

28

Savings and deleverage

0

1

2

3

4

5

6

7

8

6

7

8

9

10

11

12

13

14

15

16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Debt service ratio (right axis)

Personal savings (left axis)

12 per. Mov. Avg. (Personal savings (left axis))

Debt-to-income ratio and savings rate

Source: Haver Analytics

Page 29: U.S. Auto Industry Chartbook

29

Production

Page 30: U.S. Auto Industry Chartbook

30

Production

0

1

2

3

4

5

6

0

20

40

60

80

100

120

140

160

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Industrial production index: autos (2007=100, left axis)

BEA auto production estimate (SAAR, million.units, right axis)

Auto production

Source: Haver Analytics

Page 31: U.S. Auto Industry Chartbook

31

Capacity utilization

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Industrial production: automobile and light duty motor vehicles (SA, % of capacity)

Source: Haver Analytics

2Q13: 75.5%

2001-2007: 79.1%

Page 32: U.S. Auto Industry Chartbook

32

Investment

0

20

40

60

80

100

120

140

160

180

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Autos & equipment

Light trucks including utility vehicles

Private fixed investment: autos & equipment (billions of chained 2009 dollars)

Source: Haver Analytics

Page 33: U.S. Auto Industry Chartbook

33

Structural

Page 34: U.S. Auto Industry Chartbook

34

FundamentalsVehicle registrationsMillions

Mean age of passenger cars in operationYears

7

8

9

10

11

12

95

96 97

98

99

00 01

02

03

04

05

06

07

08

09 10 11 12

2012: 11.3

180

190

200

210

220

230

240

250

260

95

96 97

98

99

00 01

02

03

04

05

06

07

08

09 10 11

2011: 245

Source: Haver Analytics

Page 35: U.S. Auto Industry Chartbook

35

Demographics

0

50

100

150

200

250

300

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

204

0

204

2

204

4

204

6

204

8

2050

2052

2054

2056

2058

206

0

65 years and over

15-44 years

Population projections by age (millions)

Source: Haver Analytics

Page 36: U.S. Auto Industry Chartbook

36

Demographics

Les than 19 yearsold

20-29 30-39 40-49 50-59 60-69 70 and more0%

5%

10%

15%

20%

25%

2001 2011

U.S. licensed drivers by age

Source: Haver Analytics

Page 37: U.S. Auto Industry Chartbook

37

Electric cars

0

2

4

6

8

10

12

New U.S. plug-in vehicle sales (thousands)

Source: Electric Drive Transportation Association

Page 38: U.S. Auto Industry Chartbook

38

Forecasts

Page 39: U.S. Auto Industry Chartbook

39

Forecasts

Average 2012 2013 2014 2015

Auto sales (millions units) 14.4 15.6 16.3 16.7

GDP growth(% change) 2.8 1.6 2.3 2.5

Unemployment rate (%) 8.1 7.5 7.0 6.4

Fed funds(%) 0.14 0.19 0.25 0.33

3-year Treasuries(%) 0.38 0.62 1.07 1.78

Source: BBVA Research

Page 40: U.S. Auto Industry Chartbook

U.S. Auto Industry

Chartbook

BBVA Research USA

Houston, TX Fourth Quarter 2013