2 DECEMBER 2019

Xavier Mosquet, Managing Director and Senior Partner

Automotive industry: The next 10 years

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Implications

Markets

Trends

For additional information: mosquet.xavier@bcg.com

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Auto sector has enjoyed an unprecedented period of growth

4 years

('62-'65)

9 years+?

('10-'18)

5 years

('96-'00)

3 years

('83-'85)

3 years

('76-'78)

3 years

('71-'73)

3 years

('92-'94)

0

15

10

5

20

Europe Union vehicle sales

(millions of units)

1990 2000 2005 2010

5 years

('94-'99)

5 years+?

('14-'18)

2 years

('06-'07)

Nine years is the US’s longest stretch of growth since 1950 without a >2% drop

or multiyear stagnation

Five years is the EU’s longest stretch of growth since

1999 without a >2% drop or multiyear stagnation

Source: BCG analysis, IHS Markit, US Bureau of Economic Analysis

United States vehicle sales

(millions of units)

0

15

5

10

20

1955 2010197019601950 1965 1975 1980 1985 1990 1995 2000 2005 1995 2018

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Economic momentum is weakening

2017

3%

18

2%

19161%

-1.0 pp.

GDP growth forecasts (%)

1. Based on analyst forecasts compiled by Bloomberg (89 forecasts for US, 46 for Eurozone, 65 for China, 33 for world), 2. Duke Fuqua CFO Survey, Dec 2008Source: BCG Henderson Institute, Bloomberg, IMF

Median forecast1 25-75% range

3%

19161%

17 2018

2%-0.4 pp.

6%

16 1917 2018

7%

5%

-0.6 pp.

162%

17 2018 19

3%

4% -0.4 pp.

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Slowdown has started

1. Light vehicles = passenger cars + light trucks < 6t GVWNote: Regions defined according to IHS definitionSource: BCG analysis, IHS Markit (November 2019)

0

100

50

6.05.0

5.3

Global light vehicle1 sales by region 2010–2031 Units (M)

6.4

23.6

6.8

5.1

14.0

6.8

7.4

18.5

17.3

7.1

17.1

2010 2012

5.1

5.7

2014

6.4 18.4

5.6

15.36.8

19.3

18.0

5.9

2011

4.9

20.4

2017

18.2

19.0

4.8

2013

7.8

18.0

21.8

7.8

7.68.0

21.1

19.8

28.0

2016

6.9

20.7

92.24.8

18.9

4.4

24.9

8.520.8

20.6

28.4

2015

6.7

4.4

4.3

6.6

4.78.9

20.7

20.6

27.5

2018

7.04.8

5.04.53.9

8.320.3

6.9

25.5

2019

18.3

19.5

3.7

5.4

72.7 75.8 79.7 83.5 86.6 88.394.3 93.7 89.6

+3.8%-4.3%

Japan/Korea South AsiaMiddle East/Africa South America North America Europe Greater ChinaCAGR (compound

annual growth rate)

150

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Car sales will decline by 9%–15% in the US and 5%–10% in the EU by 2021

2014 2016 2018 2020 2022

10

15

20

US total new car sales 2003–2023

(millions of units)

Major downturnHistoric Average downturn

2014 2016 20202018 2022

10

15

20

EU total new car sales 2003–2023

(millions of units)

Less severe 5-10%

drop in car sales

in 2021 trough

9-15% drop in car

sales in 2021 trough

following slowdown

in 2019/2020

Decrease initially fueled by

weakening auto demand. Drop will

accelerate due to macro-downturn

Source: BCG analysis, IMF, US Bureau of Economic Analysis, Federal Reserve, CBO, US Census Bureau, EIA

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Shift to electrification

Note: In the EU, objective set at 147g/km for light commercial vehicles in 2021 (125g/km in 2025 and 101.5g/km in 2030)Source: BCG, ICCT

100

180

2021

158

130

161

2015 2018

117

95

119

81

97

2025

59

2030

ChinaEU US

China

3-4% in 2020

California

3-4% in 2020

8-9% in 2025

CO₂/km targets (cars, NEDC) NEV sales targets (cars)

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Battery pack costs are declining as fast as our most aggressive 2017 projection

90

2021202002018 2019 2022 2023 2024 2025

180

2026 2027 2028 2029 2030

120

150

210

62

120

Battery pack cost ($/kWh)

126

111

147

89

10095

1. Based on BCG 2019 forecast for BEV/Pouch cells; different cell and pack designs or chemistries will drive different costs2. Conversion from cell to pack cost using a pack factor of 1.4. Source: BCG analysis and forecast, expert interviews with battery manufacturers and auto OEMs, Bloomberg New Energy Finance

BCG base case (2019)1

BCG base case (’The Electric Car Tipping Point’, 2017)

BCG low case (’The Electric Car Tipping Point’, 2017)

Bloomberg NEF (2019)

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BCG new electric cars forecast to 2030 for Europe

0

20

10

15

5%

3%

18%

4%

1%

50%

7%

37%

5%

47%

2024

Volume (M)

1%

8%

19%

5%

5%

11%

55%

2023

7%

5%

6%

16%

52%

6%

6%

14%

14%

2025

39%

12%

6%

15%

13%

2026

15%

7%

7%

17%

11%

43%

2027

18%

7%

7%

10%

21%

8%

9%

37%

2029

25%

56%

7%

18%

8%

34%

2030

22%

5%

4%

13%

2021

56%

26%

6%

5%

4%

9%

2020 20282022

54%

32%

5%4%

3%

2%

2019

55%

35%

7%

3%

4%

2%

2018

55%

2%

18%

1%

8%

BEV PHEV HEV DieselMHEV Gasoline

Note: BEV = Battery electric; PHEV = plug-in hybrid electric; HEV = full hybrid electric; MHEV = mild hybrid electric Source: BCG analysis and forecast

Actuals

Regulation-driven TCO & preference driven

Impact of broader mobility trends

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Financial and non-financial incentives remain critical

CaliforniaAccess to

dedicated lanes (bus lanes)

LondonFree road tolls

1.4⁸% 0.5%3.3%⁷0.7%BEV shares in

2018 sales of

passenger cars31% 5.4% 1.0%1.4%

€6 500⁵

Max €6 500⁴ &

no purchase

tax⁶

Max €6 500⁴€4 000National financial

incentives

No VAT¹ &

purchase tax

No purchase

tax²€4 000³€6 000

2009 200920142011Financial incentives

introduction date2001 2010 20162008

Free public car

parksStuttgartParis

Note: 1. 25% 2. 10-30% 3. Vehicles <60k€ 4. Depending on range 5. Tax credits 6. 3% 7. 10-15% in Beijing & Shanghai 8. Passenger cars + trucks, ~10% in 30 Californian citiesSource: BCG

Registration quota

exemptions (Beijing & Shanghai)

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Significant growth in Driver's Assistance, then Autonomy

40

821

9

33

17

3928

2127 22

3145

7

3

3

2

11 20

1820

104

13

1

2

2

812

7

11

12

13 8

60

0

20

100

40

80

100

49

Penetration (%)

55

Total

collision

mitigation

57

42

360 view Active

pedestrian

detection

2

Cross

traffic

alert

19

92

53

1

Collision

warning

Rear

object

camera

Blindspot

alert

24

Lane

departure

warning

46

Rear

object

sonic

Front

object

camera

Self

parking

Lane

keep

assist

Front

object

sonic

14 14

5159

45

Adaptive

cruise

control

Low speed system L1

2017Increase in 2019 1H Increase in 2018

US

Note: Functionality is independently assessed (e.g. one vehicle counts for both blind spot alert and lane keep assist)Source: BCG analysis, Factory-Installed Electronic/ADAS Equipment, Wards Auto, 2017-2019MY

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Shared mobility: in New York ride hailing took share from taxis but also grew the overall market by 100%…

Jan-10 Jan-14Jan-12 Jan-16 Jan-18 Jan-20

0.0

0.2

0.4

0.6

0.8

1.0

0.5

Trips per Day (M)

New York City

0.3

0.7

1.0

TotalRide HailingYellow Cab Green Cab

Note: Ride Share 2011 – 2015 estimatedSource: BCG analysis, New York City Taxi & Limousine Commission

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… and expected to further grow the market, if not capped through regulations

2019

1.0M

2010

0.7M

0.3M

1.5M

1.5M

Steady state?

0.5M

Trips per day (M) Total share of Miles (%)

87 %

6 %

89 %

Steady state

0 %

11 %

2010

6 %

2019

64%-82%

18-36%

100 %

Note: Assuming that current regulations capping the ride hailing numbers are cappedSource: BCG analysis, Uber, Goldman Sachs Research, NYC.gov, New York City Taxi & Limousine Commission

New York city Downtown Manhattan

1.4% 3% 4.5-6%% Share of

total miles

Taxi (yellow cab + green cab)

Ride sharing

Other

Other/Private Ride Hailing Taxi

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To support the future mobility, industry will need new talents

Source: Expert interviews and job posting analysis

"Mobility centric training"

will be required to develop future talent

Today

Single focus engineer

Tomorrow

Cross-functional tinkerer

We need people that are mobility specialists

that can be pillars of deep competency

within the company

- Senior executive, U.S. OEM

Aerospace engineering was created 100 years

ago because it required a systems based

approach and a similar program is required

for new mobility

- Professor, Top US Tech university

Mechanic

al

Ele

ctr

ical

Indust

rial

Software Math and physics

AI/ML/Robotics System level thinking

Skills non-exhaustive

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… significantly more than the supply

Growth needed in

computer-focused

graduates entering the

mobility industry across

both the U.S. and

Michigan3, to keep up

with growing demand

4-6x

Note: %'s for context based on BLS data showing ~10k computer-focused FTEs and ~50k engineering FTEs in auto today.Range based on estimate that between 60-100% of university-level jobs remain physically located in the U.S.Assumed % entering mobility industry = % entering to auto industry today.Assumed ~30% of national demand for computer-focused graduates are needed in Michigan (MI has ~30% of university-level auto jobs today).

~20-30k

~5k

10yr supply of

computer-focused

grads entering

mobility industry2

~20-30k

10yr demand for

computer-focused

graduates in

mobility industry

~4-6x

Computer-focused graduates(For context: 200-300% of computer-focused jobs in auto today)

Significant skilled trades and other engineering jobs

to be created for new mobility

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What does it mean for the industry?

Prepare for slowdown

Long term stable growth

All electric

Software and new talents

Global Scale

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We are readyto shape the future…

with you!

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