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Chief Economist, General Motors
MUSTAFA MOHATAREM
SEARCHING FORGROWTH MARKETS
¶ Global auto sales jumped more than 45 percent over the last decade– China accounted for more than 60% of the growth– However, auto sales in other BRIC economies – Brazil, Russia,
and India – also grew significantly– Additional growth came from a number of middle income countries –
Thailand, Turkey, Indonesia, etc.
¶ Growth prospects in China still look promising– While potential remains, pace of growth will moderate– However, the other BRIC countries have hit the “reform wall”
and sales are stagnant or declining– Significant changes in economic policies will be required – return to the Washington Consensus
– to restore growth
¶ In the long term, prospects in emerging markets remain promising provided they address their domestic economic policy challenges and achieve political stability
GLOBAL ECONOMIC AND INDUSTRY OUTLOOK
¶ China still growing, but at a slower rate
¶ North America recovery continues with record sales in Canada
¶ Western Europe posting moderate sales growth
¶ GM International sales largely mixed with slowing Asian markets partially offset by strength in MENA
¶ Eastern Europe sales collapsing largely due to Russia-Ukraine conflict
¶ South America sales continue to decline
2014 NEW VEHICLE SALES BROADLY UNSYNCHRONIZED
84.8
86.91.6
1.10.7
0.2 0.4
0.7
80
81
82
83
84
85
86
87
88
89
90
2013 GreaterChina
NorthAmerica
WesternEurope
GMInternational
EasternEurope
SouthAmerica
2014 (prel.)
Millions
Global Industry Sales 2013‐2014 Y‐o‐Y Comparison by Major Regions
GLOBAL ECONOMIC ACTIVITY GENERALLY MIXED
Country in recovery; 2 or more qtrs q/q% > 0Country near recovery; (q/q% < 0 followed by q/q% > 0)
Country in recession; 2 or more qtrs q/q% < 0SA quarterly data not available
Country near recession; (q/q% > 0 followed by q/q% < 0)
Sources: National Statistics Agencies, Haver Analytics 3
Canada• Housing risk
US• Slow housing recovery• Fed exit strategy
Mexico• Economic reforms
Argentina• High inflation• Debt default• High currency risk• 2015 elections
Brazil• Structural inefficiencies• China slowdown• Policy rate up 450bps• Declining commodity prices• Social unrest/Protests
Venezuela• Hard currency shortage• Devaluation risk• Hyperinflation• Recession; social unrest
Ukraine• Russia conflict• Recession
UK• Steady recovery• QE exit strategy• EU referendum
Euro Zone• Deflation risk; Possible QE• EUR falls to lowest level since 2006• Russia sanctions• Greek elections Jan 25
Russia• Ukraine conflict• Capital outflows• Oil prices collapse• RUB falls to record low• Policy rate up 1150bps in 2014
Japan• Recession• Second consumption tax increase delayed• JPY at weakest level since 2007China
• Econ rebalancing• Heavy indebtedness
South Africa• Work stoppages• Twin deficits
India• Post‐election reforms
Thailand• Military coup
Egypt• Economic uncertainty
following political transition
Real GDP Growth,q/q% Change
¶ Economic and political conditions consistent with modest global growth outlook¶ Economic developments in line with unsynchronized monetary policy
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Tota
l Ind
ustr
y Sa
les
(Mill
ions
)
Europe Greater China Other International Operations North America South America
CHINA AND NORTH AMERICA ARE LEADING GLOBAL VEHICLE SALES
Source: GSRA; Calculations: General Motors Company
Sales Rolling 12 Months2001-CYTD 2014 (Nov)
8
10
12
14
16
18
20
Mill
ions
of U
nits
1975 Recovery 1983 Recovery 1991 Recovery Current Recovery
AUTO SALES IN THE U.S. HAVE TRACKED PREVIOUS RECOVERIES
2008 2009 2010 2011 2012 20142013
02468
101214161820
1901 1908 1915 1922 1929 1936 1943 1950 1957 1964 1971 1978 1985 1992 1999 2006 2013 2020
Mill
ions
of U
nits
THIS TIME IS NO DIFFERENT
TheRoaringTwenties
Great Depression
First Oil ShockSecond Oil Shock
The GreatModeration
1991 S&L Crisis2009 GreatRecession
VEHICLE SALES TOOK OFF AFTER CHINA JOINED WTO IN 2003,TOTAL VEHICLE SALES EXCEEDED 23 MILLION UNITS IN 2014
Sources: GM Global Sales Reporting System
2.2 2.5 3.44.6 5.2 5.8
7.18.5 9.1
13.7
18.3 18.719.4
22.223.9
0.1 0.1 0.10.4 0.5
0.70.9 1.0 1.1
1.8
2.42.5 2.8
3.23.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
GM
(Millions)
Indu
stry
(Mill
ions
)
Industry GM
50
60
70
80
90
100
110
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Mini Small Medium High Luxury PV
VEHICLE PRICES IN CHINA BEGAN TO DECLINE AFTER WTO ACCESSION
Sources: Cheshi.com.cn
80
90
100
110
120
130
140
150
160
170
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
Peak
Rea
l GD
P =
100
at T
ime
= 0
China (No Peak)
India (Peak = 2008 Q3)
Indonesia (No Peak)
Turkey (Peak = 2008 Q1)
S Korea (Peak = 2008 Q3)
Mexico (Peak = 2008 Q2)
Brazil (Peak = 2008 Q3)
S Africa (Peak 2008 Q3)
Canada (Peak = 2008 Q3)
USA (Peak = 2007 Q4)
Russia (Peak = 2008 Q2)
UK (Peak = 2008 Q1)
FROM A LONGER TERM PERSPECTIVE, THE GLOBAL ECONOMY IS EXPERIENCING A MULTI-SPEED RECOVERY WITH EMERGING MARKETS GENERALLY OUTPERFORMING DEVELOPED MARKETS
Sources: National Statistics Agencies, Haver Analytics; Calculations: General Motors Company
Key:North AmericaG7 EconomiesBRICMisc. Other
Real GDP Relative to Pre-Crisis Peak
0
50
100
150
200
250
300
2007 2008 2009 2010 2011 2012 2013 2014
Sale
s =
100
at 2
007
IndonesiaChinaIndiaBrazilS. KoreaTurkeyCanadaJapanUSAUKMexicoGermanyS. AfricaRussiaFranceItaly
IN LINE WITH THE POST-CRISIS REAL GDP DEVELOPMENT,NEW VEHICLE SALES SINCE 2007 HAVE BEEN LARGELY UNEVEN
Key:North AmericaG7 EconomiesBRICMisc. Other
New Vehicle Sales Relative to 2007
Sources: Polk, General Motors Company; Calculations: General Motors Company
0102030405060708090
100
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014
Mill
ions
GLOBAL NEW VEHICLE SALES ARE ESTIMATED TO TOTAL 86.9M IN 2014,UP 20.2M SINCE THE 2009 RECESSION
Source: Polk, General Motors Company; Calculations: General Motors Company
13.7M
34.8M41.8M
50.5M
64.7M
81.2M
First Oil ShockSecond Oil Shock
Gulf WarDissolution of Soviet Union
Asian Financial Crisis
Great Recession
Euro Introduced
¶ Growth in sales fromthe 1990’s to the 2000’s largely reflected synchronized gainsamong developed and developing markets
¶ Growth in new vehiclesales in the currentdecade largely reflectsgains from developing markets
CONTRIBUTORS TO GLOBAL SALES GROWTH
Source: Polk (data through 2013CY); Calculations: General Motors Company
New Vehicles Sales (000’s)1990’s 2000’s 2010’s
1 USA 14,764 USA 16,189 China 18,7312 Japan 6,766 China 6,602 USA 13,7573 Germany 3,820 Japan 5,599 Japan 4,9754 France 2,374 Germany 3,625 Brazil 3,7065 Italy 2,263 United Kingdom 2,713 Germany 3,3406 United Kingdom 2,196 France 2,577 India 3,2017 South Korea 1,311 Italy 2,570 Russia 2,6938 Canada 1,299 Brazil 1,977 France 2,4469 Brazil 1,292 Russia 1,796 United Kingdom 2,367
10 China 1,248 Spain 1,700 Italy 1,75911 Spain 1,243 Canada 1,639 Canada 1,69912 Russia 768 India 1,453 Iran 1,56213 Australia 642 South Korea 1,330 South Korea 1,54914 Netherlands 570 Mexico 1,031 Australia 1,07315 India 553 Australia 920 Thailand 1,056
Top 15 Total 41,109 Top 15 Total 51,721 Top 15 Total 63,914Top 15 as % of Total 81% Top 15 as % of
Total 80% Top 15 as % of Total 80%
Green Text: Increase versus previous decade averageRed Text: Decrease versus previous decade average
¶ During the recession, vehicle sales in Russia were in sharp contrast to other BRIC markets¶ Scrappage programs in Germany and France helped to limit the impact of the recession¶ As of 2014, China and developed markets are supporting growth in new vehicle sales¶ Flat sales in India, and declining sales in Brazil and Russia reflect a combination of cyclical, structural, and
political concerns
NEW VEHICLE SALES DEVELOPMENT AMONG THE TOP 10 MARKETS
2003 2007 2009 2013 2014 (Prelim.)USA 16,900 USA 16,406 China 14,191 China 21,451 23,900
Japan 5,849 China 9,245 USA 10,536 USA 15,652 16,858China 4,934 Japan 5,350 Japan 4,604 Japan 5,376 5,518
Germany 3,502 Germany 3,482 Germany 4,049 Brazil 3,760 3,464United
Kingdom 2,943 United Kingdom 2,796 Brazil 3,208 Germany 3,258 3,357
Italy 2,496 Russia 2,794 France 2,685 India 3,140 3,150France 2,441 Italy 2,776 Italy 2,358 Russia 2,898 2,539
Spain 1,715 France 2,585 India 2,267 United Kingdom 2,596 2,844
Canada 1,637 Brazil 2,495 United Kingdom 2,220 France 2,173 2,211
Brazil 1,377 India 1,977 Russia 1,527 Canada 1,797 1,890Sources: Polk, General Motors Company; Calculations: General Motors Company
0
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
China Total Industry Sales (M
illions)Tota
l Ind
ustr
y Sa
les
(Mill
ions
)
Brazil India Russia China (right axis)
MARKETSARE FACING CHALLENGES WITH VEHICLE SALES STALLING OR DECLINING
Brazil, China, India and Russia: Sales Rolling 12 Months2001-CYTD 2014 (Nov)
Sources: GM Global Sales Reporting System
Pre-Recession Growth Drivers¶ Synchronized global growth¶ High risk appetite¶ High commodity prices¶ High pent-up demand¶ Strong growth of middle class
Post-Recession Limits to Growth¶ Uneven global recovery¶ Increased risk aversion; capital outflows¶ High dependency on commodity sectors
or key export markets¶ Partially exhausted pent-up demand ¶ Slower expansion of middle class¶ Recession exposed structural concerns
GROWTH AMONG THE BRIC MARKETSHAS BECOME LESS SYNCHRONIZED SINCE THE RECESSION
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
170.0
-16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26
Inde
x
Quarters Before and After Peak
Russia (Peak = 2008:Q2)
Brazil (Peak = 2008:Q3)
India (Peak = 2008:Q3)
China (No Peak; 100 = 2008:Q2)
Sources: National Statistics Agencies, Haver Analytics: Calculations: General Motors Company
Normalized Real GDP withPre-Crisis Peak = 100 at Quarter = 0
-
100
200
300
400
500
600
700
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
Vehi
cle
Parc
Per 1
,000
Peo
ple
Real GDP Per Capita (2005 USD)
THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE,IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY
Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company
Other factors include the road infrastructure, congestion, urbanization, and population density
NorwaySwitzerland
DenmarkIreland
SwedenBelgium/Lux.
Netherlands
Hong Kong
Singapore
Israel
Taiwan
South Korea
Italy
SpainGreece
Portugal
Czech/Slovakia
Poland
Baltics
Hungary
Malaysia
RussiaArgentina
MexicoRomania
ChileUruguayThailand
Ukraine
Brazil
South AfricaTurkey
Middle East Operations
IndonesiaIndia
FinlandCanada
FranceGermany
Austria
Japan
United Kingdom
China
-
100
200
300
400
500
600
700
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
Vehi
cle
Parc
Per 1
,000
Peo
ple
Real GDP Per Capita (2005 USD)
THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE,IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY
Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company
Other factors include the road infrastructure, congestion, urbanization, and population density
NorwaySwitzerland
DenmarkIreland
SwedenBelgium/Lux.
Netherlands
Hong Kong
Singapore
Italy
SpainGreece
Portugal
Czech/Slovakia
Poland
Baltics
FinlandCanada
FranceGermany
Austria
Japan
United Kingdom
Israel
Taiwan
South Korea
Hungary
Malaysia
RussiaArgentina
MexicoRomania
ChileUruguayThailand
Ukraine
Brazil
South AfricaTurkey
Middle East Operations
IndonesiaIndia
China
-
100
200
300
400
500
600
700
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
Vehi
cle
Parc
Per 1
,000
Peo
ple
Real GDP Per Capita (2005 USD)
THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE,IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY
Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company
Other factors include the road infrastructure, congestion, urbanization, and population density
Hong Kong
Singapore
Hungary
Malaysia
RussiaArgentina
MexicoRomania
ChileUruguayThailand
Ukraine
Brazil
South AfricaTurkey
Middle East Operations
IndonesiaIndia
China
Israel
Taiwan
South Korea
NorwaySwitzerland
DenmarkIreland
SwedenBelgium/Lux.
NetherlandsItaly
SpainGreece
Portugal
Czech/Slovakia
Poland
Baltics
FinlandCanada
FranceGermany
Austria
Japan
United Kingdom
In terms of vehicle density,developed markets aretrending at levels thatreflect market saturation
THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE,IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY
Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company
Other factors include the road infrastructure, congestion, urbanization, and population density
-
100
200
300
400
500
600
700
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
Vehi
cle
Parc
Per 1
,000
Peo
ple
Real GDP Per Capita (2005 USD)
NorwaySwitzerland
DenmarkIreland
SwedenBelgium/Lux.
Netherlands
Singapore
Italy
SpainGreece
Portugal
Czech/Slovakia
Poland
Baltics
Hungary
Malaysia
RussiaArgentina
MexicoRomania
ChileUruguayThailand
Ukraine
Brazil
South AfricaTurkey
Middle East Operations
IndonesiaIndia
FinlandCanada
FranceGermany
Austria
Japan
United Kingdom
In terms of vehicle density,developed markets aretrending at levels thatreflect market saturation
China
Israel
Taiwan
South Korea
Developing Markets Have Upside Potential
Hong Kong
Country 2013 Vehicle Parc/1,000 People
U.S. 796Australia 702
Japan 590Korea 393Russia 322Taiwan 312
Thailand 208Brazil 198China 91Egypt 56India 26
ALTHOUGH NOT WITHOUT ROAD BUMPS AND RISKS,INDUSTRY POTENTIAL REMAINS HUGE IN CHINA AT THIS STAGE
Source: Ward’s Auto, United Nations, GM calculation
0
20
40
60
80
100
120
WHERE WILL OIL PRICES GO IN 2015?
22
• OPEC and the U.S. cut production in early 2015
• Global economy expands faster than expected in early 2015 (China, Europe, etc.)
• OPEC and the U.S. cut production in H2 2015
• Global economy continues at uneven pace (China slowdown ends, Europe continues to struggle)
• OPEC and the U.S. do not cut production until late in 2015, if at all.
• Global economy continues at uneven pace (China slowdown continues, Europe continues to struggle)
2015 Range
Current Price
West Texas Intermediate (USD Per Barrel)
54.24
135.94
59.95
36.89
73.44
20.36
0
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012 2013 2014WTI NatGas=
NATURAL GAS
23
WTI Crude Oil Vs. Natural Gas Equivalent (In Barrels)
• To compare oil (priced in dollars per barrel) and natural gas (priced in dollars per million BTUs) on an energy equivalent basis, natural gas prices have to be increased by a factor of 5.8, because one barrel of oil produces 5.8 million BTUs of energy.
• Relative to the price of oil, natural gas prices have been falling steadily since early 2006, and are now almost 80% cheaper than oil on an energy-equivalent basis. (American Enterprise Institute)
¶ Auto industry will remain a growth industry for the foreseeable future
¶ China alone will provide more growth in auto sales and revenue than possible in other industries
¶ The other BRIC countries also have tremendous potential, but will need to make significant policy changes
¶ A number of middle income countries – Indonesia, Turkey, Thailand, Malaysia, etc. – offer good prospects
¶ I am especially intrigued by the potential in Mexico as it implementsenergy policy reforms
¶ Africa could be the next “frontier” market – high risks, but high rewards
¶ Don’t forget the large developed markets in North America, Western Europe,and Japan as they will provide significant revenue growth, and will remain the prime markets for advanced technology vehicles
SUMMARY