Automotive industry Facts and Figures 2014 Guido Nelissen 1

Iam...absolutely mesmerized by some of the double-digit performances that ive seen coming out of the supplier base. And unfortunately, when i see this, my blood pressure goes up, Marchionne, CEO FCA The car has to adapt to what Apple is doing, to what Google is doing, and thats an uncomfortable situation and not one automakers have been in, in the past, Mr. Singh, Qualcomm Luxury vehicles and trucks, including pickups and large SUVs account for 14% of global car sales but 60% of sector profits, Dan Ammann, President GM European suppliers as Faurecia and Valeo have a five-to 10-year window for above-average organic growth because of automotive megatrends, John Stanley, Automotive News Europe 2

1. Markets First increase in registrations since 2007: +5,7% Spain: +18% Stagnation in France Collapse of the Russian market: -35% Forecast: +3 to 4% in 2015 Sales in the US plunged over 6,5m to 10m between 2007 and 2009, but after 6 years of growth, they have reached the again the pre- crisis level of 17 m. (however what goes up, must go down sometime...) Global light vehicle production will increase from 82,6m in 2014 to 105m in 2018 Non-NAFTA vehicle imports in the US peaked at 26% in 2009 but declined since to 21% nowadays, in large part thanks to expansion of car production in Mexico (8 new assembly lines are expected to come online in the country until 2020 representing 2m extra- capacity) 3

2. Strategic alliances ZF (9th) acquired TRW (9th)to create the global No.2 (behind Bosch but surpassing Denso) for about $11-12bn ZF (Friedrichshaven): powertrains and chassis, TRW (Michigan): worlds biggest car-safety equipment supplier (airbags, collision sensors, braking-and steering equipment) As part of the agreement Bosch will take over the 50% share of ZF in their joint-venture for steering systems (expected antitrust issues) Rationale: The deal bring together under one roof all the technologies needed to have a fully automated vehicle ZF wants a bigger foothold in the market for self-driving and connected cars 6

Strategic alliance Nissan-Mercedes since 2010 Small cross-shareholdings Joint development and manufacturing of componets Twingo and Smart are build on the same platform Citan Van is built with Renault A new joint-venture will be set up in Aguascalientes Mexico (where Nissan has already a plant) with a capacity of 300,000 vehicles (subcompact, start in 2017). Both partners will also collaborate on advanced research, design of premium compact vehicles Daimler will sell its 4% stake in Tesla (in 2009 it took a stake of 9,1% but as a result of capital increases this was watered down). 8

new owner of Saab, National Electric Vehicle Sweden (owned by National Modern Energy (a Chinese renewable power-plant builder) sought protection from its creditors as it failed to deliver on a objective to produce 120.000 cars. Probably Indias Mahindra will buy NEVS. Mahindra will buy 51% of Peugeot Scooters in order to support the international expansion of the struggling twowheeler businesses of both groups Mahindra acquires technology and design from PSA PSA Scooters is already making losses for 10 years European market lost 45% of sales since 2007 although small scooters have been outsourced to Chinese Qingqi in 2007) 9

3. Social Volvo Trucks: -4,400 globally of which 1,300 with Renault Trucks in France (of which 800 consultants and 500 open-ended contracts) PSA: -3,450 in 2015 (1,500 early retirements, 1,400 transfers to new positions, 550 buy-outs) but also creation of 2,000 apprenticeships AvtoVAZ: - 7.500 in 2014 from 55,000 to 30,000 by 2020 mainly white collars (there are situations when we have managers who only manage one person) 5 bn. Cost savings plan with VW, 2 bn. With Audi Externalisation components (transmissions Kassel?) Ceasing unprofitable models? GM St.Petersburg: from 3 to 2 shifts (500 redundancies on 2,000 workers Ford Craiova (B-Max minivan): -680 10

Honda Swindon: elimination of 1 production line and cutting 750 jobs in two restructurings (Honda Europe is lossmaking since 2007) Dealerships have fallen by 12% to 47.500 in western Europe since 2007 (-24% in Spain) 11

Volvo Gent: insourcing of Johnson Controls Interior (180 empl.) and DSV (pre-assembly and warehousing, 600 empl.) as part of a strategy for a more age-related HMR policy The new flagship XC90 SUV Volvo will be built in Torslanda and add 1,300 jobs (which increases total employment to 4,600) Bittersweet: Ford Valencia Capacity +40% to 400,000 (2000 cars per day) Since 2013 it added 3000 jobs to 8000 6 models Relocation from Ford Genk 12

Employment 13

4. Company strategies 14

FCA FCA quoted at NYSE since October, HQ in UK and registration in the Netherlands: final step in the conversion of a Italian small-car company into a US focused manufacturer powered by 4x4s and pick- up trucks ambition is to increase sales by more than 50% to 7m by 2018 By launching 30 new models (48 bn investment plan) By bringing Alfa, Jeep and Maserati to the emerging markets By reviving struggling Chrysler marque in the US and quadrupling sales of Alfa (re-entry on the US markets) Supported by a rebound in SUVs and pick-ups in the US But Fiat is carrying about 10 bn net debt (and 8 bn pension obligations) Will sell its remaining shares (6% in total) in CNH to US investors for about 602m EUR 15

Spin-off of Ferrari 10% of the shares will be sold to the public by mid-2015 Remainder of FCAs 90 per cent stake will be handed over to the groups shareholders Estimates of the value of Ferrari range between 5bn to 12bn 16

Mercedes Overhaul of its manufacturing operations Moving away from a manufacturing network controlled by individual factories to a leaner system centered around vehicle architectures and model lines Individual plants will no longer operate autonomously but production will be organized according to product architectures, independent of locations Four senior managers (for each of the brands architectures) will replace the individual plant directors 17

Renault Increase of production in France from 510.000 (2013) to 710,000 in 2016 new models for Douai (Espace, Laguna), Sandouville (Trafic) and Flins (Nissan Micra) this will create 750/1,000 extra-jobs (open-ended contracts), after having reduced employment with 8,200 convergence plan for closer integration of engineering, manufacturing, purchasing and human resources By 2020 70% of vehicles to be built on 3 platforms (Common Module Family, CMF) Synergies will increase from 2,8bn in 2013 to 4,3bn in 2016 18

PSA China has become its biggest market with of its volume Construction of 4th assembly plant in China has started in Wuhan (360.000 vehicles). Dongfeng Peugeot has already 3 plants in Wuhan (600.000 cars a year). PSA has also a jv with Chongqing Changan Automobile (in Shenzhen, 200.000 vehicles) Component sourcing from low-cost countries will be doubled to 40% PSA will set-up a R&D center in Casablanca (the center will be run jointly with consultant Altran) first step for low-cost production in the country? Start of production of CKD kits in Kazakhstan Production in Poissy will be reduced to a single line as the C3 will be produced in Slovakia. Poissy (Peugeot 208 and DS3 subcompact) will produce a new compact vehicle in 2018 which will safeguard the future of the plant 19

Ford Profit forecasts for the EU pushed back from next year until after 2015 The first aluminium-bodied F150 pick-up truck drove off the production line in Dearborn which should reduce weight by 13% and fuel consumption by between 5 and 20% F-series stand for 90% of Fords global profit in recent years 20

Volvo Unveiled its first new model under Chinese ownership, the XC- 90, a make-or-break model as Volvo had to become independent from platforms, engines and components from Ford: a new architecture (SPA, Scalable Product Architecture), a new powertrain, new vehicle and new electrification The XC90 should boost sales in the US and China (both 61,000 with a decline of 50% in the US in the last decade) The car will be built in Sweden Next up for a complete refresh is the S90 Chinese-built S60L will be shipped to the US Volvo wants to increase sales from 428,000 in 2013 to 800,000 by 2020 21

Components Visteon is considering a plan to split the company into 2, one focused on electronics (and connected car technology) and the other on climate controls It will sell its 70% in a Korean climate controls joint-venture to Hahn & Co, a Korean private equity fund and to tyremaker Hankook. Also Federal Mogul will split its retail replacement parts from its engine parts division These deals show a continued move away from being supplier conglomerates and towards auto technologies 22

Regions 23

China In 2013 GM reported $3,7 bn net income by its Chinese joint- ventures (against $3,8 bn. Overall net income) China accounts for 1/3 of VWs and GMs vehicle sales GM will open 5 new assembly plants In 2013 VW reported 9,6 bn operating profits in China compared with 11,7 bn worldwide Qoros, set up in 2007 by Chery and Israel Corporation (now Singapore based Kendon), entered the European market (Slovakia) JLRs first China factory was opened in Changsu and will produce the Range Rover Evoque and a Jaguar saloon (from 2016). The plant with a capacity of 130,000 is a jv with state- owned Chery 24

Russia Slump in Russia: sales -16% in 2014, -35% in 2015? Weaker ruble (-40%) undermines carmakers that import most of their parts GM, Audi and JLR temporarily stopped selling cars Ford writes off all the equity in its jv called Sollers ($329m) 25

Technology Hybrid Air technology PSA 26

Electrical Powertrains Sales EV: from 31,615 in 2013 to 53,000 in 2014. Nissan Leaf is market leader followed by Tesla S, BMW i3 and Renault Zo Probably plug-in hybrids will overtake the electric vehicles in 2015 (Mitsubishi Outlander, BMW i3 and Volvo V60) GM will discontinue Ampera (a rebadged Volt and Car of the Year in 2012) after the redesign of the latter in 2016 Market for lithium batteries dominated by Panasonic (36%) and Automotive Energy Supply Corp. (a joint-benture between Nissan and NEC) while US battery makers as Ener1 and A123 Systems filed for bankruptcy PSA will discontinue its Hybrid Air technology 27

GM Bolt: Complete shake-up of the EV market? 28

Hydrogen Toyota launched the first hydrogen-powered car on the mass market, the Mirai (66,000 EUR without subsidies and tax credits) Also Hyundai started leasing a fuel-cell car in California Honda will enter the market of hydrogen cars in 2016 Followed in 2017 by Nissan/Daimler/Ford (alliance) But the cars will be sold at a loss, only by 2025 the hydrogen cars will be commercially viable for mass use By 2020 (Tokyo Olympics) Toyota aims to launch the next generation at a much lower cost (1/3 -1/4) thanks to re- engineering the fuel cell and reducing drastically the use of expensive precious metals) 29

Self-driving cars Combination of radars, (infrared) cameras, sensors and powerful, high-speed (real time) computers, big data Together with Adaptive cruise control Advanced mapping Collision avoidance systems automatic steering (lane changing) Vehicle-to-vehicle communication by wireless transponders Strong back-up systems to guarantee safety Technological disruption, new paradigm Cars belong to the evolution of the internet of things: highly sophisticated autonomous and connected mobile computers Value added will shift to companies developing software and electronic content (like in the mobile phone business) the one that controls the brain (the operating system) will also control the value So carmakers and suppliers will have to invest heavily in building their software capability, but also standalone software companies will enter the sector Tipping point is near as long as the cars are designed to assist the driver For cars without steering wheel and pedals, there are still many roadblocks: legal, infrastructure, technology, price 30

Roadmap for self-driving cars 2016: proliferation of driver assistance technology 2020: self-driving on highways: accelerating, braking and changing lanes 2025: computer-controlled driving (with the driver able to take control and override autonomous functions) ?: fully driverless cars 31

Platform strategy Move to megaplatforms Enormous economies of scale Lower development costs Faster times to market Ability to build multiple cars on one line VW has a substantial head start by shifting from integral to modular platforms (toolkits) which enables to vary the basic dimensions of a car built off a specific platform The MQB platform will underpin 6m cars and 40 models with different wheelbases, track widths, wheel sizes and seat positions VW invests 50 bn in development costs and capital expenditure to launch MQB But so far MQB hasnt delivered the expected savings VW has been hoping for Renault-Nissan is closest to achieving VWs scale: by 2020 it will have 70% of its cars built on 3 platforms (with 3,5m cars built on the CMF B (the common module family including the Clio PSA: from 7 to 2 in 2022. Its new Efficient Modular Platform EMP2 will built 11 models and 1,5m cars by 2018 GM: from 14 in 2015 to 4 in 2025 32

Environment Fiat and BMW (currently at 133g) will not hit the new CO2 cap until 2022 and 2024 respectively (facing a fine of 95 EUR for every extra gram that each new car emits) Also Suzuki, Hyundai, Mazda and Honda risk to miss the targets CO2-emissions from new cars per country Germany: 136 (highest after Poland 138) Lowest: Netherlands: 109, Greece, 112 Resulting from diffences in car tax systems US: near doubling fuel efficiency from 27,5 miles per gallon in 2012 to 54,5 mpg in 2025 average fuel 33

Regulation European Commission sent formal charge sheets to Daimler, Volvo, MAN, CNH Industrial for alleged price-fixing (during 14 years they set up a cartel to agree on the timing and price increases for the introduction of new emission technologies) 14 carmakers are fined $420 (2% of revenue) in India for stiffling competition in the market for spare parts: arbitrary and high prices for their spare parts and distorting fair competition by using their dominant position to protect their market for repair services 34

Audi ($41m.) and Chrysler have been found guilty for vertical infractions on the Chinese Anti-Monopoly law: fixing the retail prices charged by their downstream dealers for spare parts and repair services Also BMW and Mercedes are under investigation, they responded with huge price cuts on their components Also 12 Japanese car parts suppliers were accused and fined ($202m, the biggest anti-trust fine ever in China) for horizontal infractions (collusion between competitors to set pricing levels for their components) 35

Miscellaneous Former Porsche CEO Wiedeking(together with CFO Hrter) must stand trial over the companys failed bid to use options to acquire VW (2008) Porsche secretly began acquiring options to buy VW shares in 2008 but dismissed speculation that its ambition was to acquire a 75% stake (=full control) Porsche finally acquired 74%, as a result there was a lack of VW shares on the market When Porsches options position was revealed in October 2008, VWs stock surged to record highs as short sellers raced to buy shares to repay their borrowed shares (as they were betting that VWs share would drop) Hedge funds have sued Porsche for more than 5bn. Claiming that Porsche didnt disclose the ownership of the package (or about its accumulation of options on VW shares (market manipulation) Porsches failed takeover attempt left it with a big debt pile that pushed it to the brink of bankruptcy 36

GM has issued 75 recalls covering 30m vehicles in 2014 with defects of various kinds (it recorded $2,5 bn. Charges in the first two quarters) Defective ignition switches have been linked to 30 deaths Defective airbags (4 fatalities) made by Takata sparks recall of 17m vehicles across the world 37

VW plant in Chattanooga established a Community Organization Engagement granting eligible labour groups three levels of access and dialogue with management (tresholds 15, 30 and 45%) This will give the UAW access to the company But no mentioning of the right to collective bargaining Recently VW recognized a second yellow union 38

Thank you for your attention! Self driving carSelf-driving car With steering wheel and pedalswithout steering wheel and pedals 39

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Automotive industry Facts and Figures 2014 Guido Nelissen 1