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2016 Battery
Shipment Review
and 5 Year ForecastDale Gospodarek, VP Marketing & Strategy
Five Year
Lookback
Global OEM Vehicle Production
Source: IHS Automotive, Marklines Automotive
• Global OEM Production grew 4.8% from 2015 to 2016
• Americas production was flat, with growth in US, Mexico and Canada being offset by declines in South America
• A return to robust growth for the China OE market led to a 7.3% increase in APAC
• Europe production remained strong, up nearly 4% on the year 0
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2012 2013 201620152014
EMEA
Asia-Pacific
Americas
Global OE Vehicle Production by Region 2012-2016
(Millions)
North America OEM Vehicle Production
Source: IHS Automotive, Marklines Automotive
• North American OEM Vehicle Production increased 2.2% in 2016
• Growth was led by a healthy 5.1% increase Canada, where production has recovered from previous years
• US and Mexico production grew at 1.5% and 2.4% respectively -both countries posted significantly lower growth than the year before
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Mexico
Canada
North America OE Vehicle Production by Country 2012-2016
(Millions)
North America SLI Battery Shipments
Trends by OE and Aftermarket
• Total North American Battery Shipments were 129M units in 2016
• OE Shipments were down -0.4% in 2016 while Aftermarket shipments were up +1.7% vs. prior year
• Total North American shipments grew at a compounded growth rate of 0.7% since 2012
Source: BCI – Battery Council International 2012 - 2016
North America SLI Battery Shipments
Trends by Segment – All Channels
• In 2016, 71% of battery shipments were of Automotive batteries
• The Automotive segment contributed to 85% of the growth for North America in 2016
• Marine and Lawn and Garden contributed to 15% of the growth
Source: BCI – Battery Council International 2012 - 2016
North America SLI Battery Shipments
Trends by Segment – Aftermarket
• Total Aftermarket volumes were up +1.7% (+1.8M units) versus 2015
• Automotive segment increased +3% (+2.2M units)
• Marine and Lawn and Garden were the only other segments to be up versus last year
Source: BCI – Battery Council International 2012 - 2016
North America SLI Battery Shipments
Trends by Segment - OE
• OE units were down -0.4% (-89K units) versus 2015
• Automotive segment represented 82% of total shipments and was up +1.6% versus last year
Source: BCI – Battery Council International 2012 - 2016
DNA of The
Automotive
Aftermarket
US Vehicle Registration Trend
• Vehicle sales have returned to pre-recession levels
• 17.5M vehicles sold in 2016 vs 17.4M vehicles last year
• Ratio of sales/inventory remains around 2.7%
New Vehicle Sales
Source: Bureau of Economic Analysis
Vehicle Registration Movement
• New York DMA accounted for more than 1M new vehicle registrations in 2016 or 7.66% share of the market
Source: Experian Q4’16 Quarterly Presentation
Registration by Model Year
• 32% of the car parc is in the “Sweet Spot” down -2pts versus last year
• The “Sweet Spot” is replacing higher VIO years in the early 2000’s with lower VIO model years 2009 - 2011
Source: Experian Q4’16 Quarterly Presentation
Sweet Spot Index to VIO
Source: Experian Q4’16 Quarterly Presentation
• States east of the Mississippi River have the highest index of Sweet Spot to VIO ratio
Source: VIO - Experian Velocity 6/30/16
• There are 2.6M hybrid/electric vehicles in the US accounting for 1% of the total car parc
• 73.2% of Hybrid and Electric registrations are Model Years 2010-2016
Hybrid/Electric Vehicle Registrations
Start-Stop Registrations
• There are currently 4M vehicles in
the North America equipped with
start-stop functionality
• By 2021, there will be over 40M
start-stop vehicles in North America
13% of New car
sales in 2016
Source: IHS Global Engine Production Forecast
Market Influences
Demand Drivers
and Influences
Economy - Real GDP Growth
Source: World Bank
• Global GDP growth dipped 0.4% to 2.3% in
2016, but is expected to bounce back to
2.7% in 2017
• 2016 Canada GDP growth was a weak
1.2%, but is expected to return to the 2-3%
standard for mature markets
• Mexico and US GDP grew 2% each in 2016,
but as the US flattens over the next few
years, Mexico is expected to show more
rapid growth
2011
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2010
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2012
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2013
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2014
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2019
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2018
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2017
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2016
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2015
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Canada
United States
Global
Mexico
Disposable Income and Personal Consumption
Source: Bureau of Economic Analysis
• Real disposable personal income increased +2.8% in 2016 versus last year according to the
Bureau of Economic Analysis
• Real personal consumption expenditures in 2016 increased +2.7% versus last year
Consumer Confidence
Source: tradingeconomics.com/united-states/consumer-confidence
• Consumer sentiment currently stands at 96.3 in February 2017
• Current conditions reached the highest level since November 2000, largely due to improvement in personal finance
Unemployment Rates
Source: Bureau of Labor Statistics February 2017; 2015-2016
Top 5 Decreases vs. PY: Top 5 Highest Unemployment
2016
Rank
2015
RankState Dec'15 Dec'16 YOY chg
1 4 New Mexico 6.6 6.7 0.1
2 5 Alaska 6.4 6.6 0.2
3 7 Louisiana 6.3 6.1 -0.2
4 1 District of Columbia 6.9 6 -0.9
4 2 West Virginia 6.8 6 -0.8
State Dec'15 Dec'16 Change
South Carolina 6 4.8 -1.2
Massachusetts 4.9 3.7 -1.2
Nevada 6.8 5.7 -1.1
Arkansas 5.1 4 -1.1
District of Columbia 6.9 6 -0.9
Miles Driven
Source: Department of Transportation January 2017
• Miles driven, adjusted for population growth, is up +0.7% year over year
• Influences on miles traveled
– Demographics
– More people getting back to work
– Urbanization
National Gas Prices
• Average price is $2.33 per gallon for regular unleaded gasoline +$0.27 more than the same date last year
• Gas prices on the West Coast remain the highest in the country
Weather
• 2016 was the second warmest year on record behind 2012
• Early warm weather in the South continued this year
• Across the U.S. in June 2016, temperatures were the warmest in the 122 years of tracking
Source: NOAA – Average Temperature
Source: 2015 BCI Failure Mode Study
• Sampling of 1,454 batteries across the U.S.
• Battery life declined 4 months to 51
months
• A change of this magnitude results in a
nearly +2 point increase in replacement
rates worth over 5M incremental units
across the entire market
Changing Assumption on Battery Life
Battery Installation Trends
• 58.1% of automotive battery consumers are DIFM and require battery installation
• The DIY segment has increased +1.7pts versus 2012 and is up +0.2pts versus last year
Source IMR Consumer Data 4Q Ending Q4 2016
Consumer Research
Source: Decision Process 2015; Spectrum Awareness Study 2016
• 52% of recent battery purchasers had a failure that led to their purchase
• 7 out of 10 battery decision-makers are likely to use internet resources to help find a replacement battery for their vehicle
• Only 18% of battery decision-makers are familiar with batteries that have AGM technology
Emerging Trends
Pressure on Brick and Mortar
Source: Fung Global Retail Tech
Amazon Share of US Apparel MarketRetail Outlet Count ’15 - ’17
E-Commerce
Traditional Offline96%
E-Tailing4%
Bricks and Clicks
On-Line Market Place
Pure Play Generalist
Pure Play Specialist
Manufacturer Direct
~25%
~15%
<10%
~50%
<1%
Millennial Consumers
Source: Deloitte Global Automotive Consumer Study
Economic
Uncertainty
Lending
Immigration
Environmental Policy
Currency
GeoPolitical Risk
Job and Wages Trade Policies
Health Care
Economic Uncertainty
Political Landscape
The Trump Effect:
• Border Adjustability Tax (BAT) • Lower corporate tax rate offset by a destination tax on
imported goods
• Trade Agreements • Trans-Atlantic Partnership (TAP) – Cancelled by
Trump
• NAAFTA – Intense focus on renegotiating an
agreement that is “fair” for the United States
• Relaxing Regulatory Moves• EPA – CAFÉ standards, Drilling and pipelines
• Review of Dodd-Frank Wall Street Reform and
Consumer Protection Act
Confidential & Proprietary
Market Summary
Optimistic Growth
• Stable employment
• Miles driven continue to grow
• Vehicles in operation continues to
grow and there are more vehicles
in the sweet spot
• Gasoline prices down, putting
more discretionary dollars in
consumer pockets
• Millennials finally move out and
buy a car
Pessimistic Growth
• Political uncertainty
• CPI increasing faster than Real
Wage growth putting pressure
on disposable income
• Waning consumer confidence
• Rising interest rates and
general inflation
• Consumers disabling start-stop
functionality causing batteries
to last longerSource: Internal JCI
2016 to 2021 Forecast
Global OEM Vehicle Production
• The strongest vehicle production
growth through 2021 will be
found in Asia-Pacific, with a
CAGR of 2.5% from 2016-2021
• The Americas will continue low,
steady growth, at 1.5%, through
the five year period
• EMEA will grow at a CAGR of 2%
over the period, fueled by
continued recovery and
developing Eastern countriesSource: IHS Automotive, JCI Analysis
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2016
Americas
Asia-Pacific
EMEA
Global OE Vehicle Production by Region 2016-2020
(Millions)
North America OEM Vehicle Production
• Trade and regulatory uncertainty will
impact production in 2017, causing a
1.5% decline in the region - the first
since 2009
• Slow growth will return in 2018, and
the market will grow at a CAGR of
1% over the five year period
• US production increases an average
of 0.5% per year, while Mexico grows
at 6% and Canada shrinks an average
of 5% annually through 2021
Source: IHS Automotive, JCI Analysis
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Mexico
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North America OE Vehicle Production by Country 2016-2021
(Millions)
North America Battery Shipments
Source: BCI – Battery Council International
• Total North American battery shipments of are expected to grow at a 1.5% compounded rate through 2020
• OE shipments are projected to grow at a .9% CAGR
• Aftermarket shipments are expected to grow at a 1.6% CAGR
