Automotive & Transportation Global Automotive Industry Vehicle Production and Business Outlook Vigneshwaran Chandran

1. Automotive & Transportation Global Automotive Industry Vehicle Production and Business Outlook Vigneshwaran Chandran – Team Leader Business Strategy and Innovation Group – Automotive Practice 12th February 2008

2. U.S. Stimulus Packages and Policy Initiatives Plan Details Policy Measures Impact on Economy • GDP increase by 1.2 % to 3.5 % by 2010 • 1.2 million to 3.6 million jobs created • Size of Package • $ 819 billion (House) • $ 885 billion (Senate) • Investment in infrastructure, education, health and energy • Business Investment Initiatives • Temporary relief such as food stamps and unemployment insurance • Fiscal relief to education and healthcare sectors • Use of Funds • Direct Government Spending -$604 billion spending on new projects • State Fiscal Relief and Tax Cuts -$212 billion in tax cuts Source : American Recovery and Reinvestment Plan, January 2009

3. European Stimulus Packages and Policy Initiatives Country Description of Policy Initiatives Germany • Package I : package of measures worth 31 billion euros, aimed at generating 50 billion euros of investment and new contracts over two years • Package II:50 billion euro ($66 billion) second stimulus package, combining investment spending and tax cuts. It included investment in infrastructure projects and education, incentives for new car purchases United Kingdom • November Package : 20 billion pound ($29.91 billion) fiscal package announced. Tax cuts and 3 billion pounds of capital spending, amounting to about 1 percent of GDP. • 26 billion euro stimulus package, equivalent to 1.3 percent of gross domestic product. France • 80 billion euros to support companies and families hit by the crisis. Italy • 38 billion Euro stimulus package (6 billion euros in tax cuts and 4 billion euros of liquidity to credit-strapped companies and households). Government spending of 11 billion euros on public works to create 0.3 million jobs. Auto Sector to get 800 million euros Spain

4. Automotive stimulus packages of governments approaches $40–50 billion in key global markets Government Measures To Stimulate the Automotive Industry Country Boost Sales / Increase Demand Sustain Production of OEMs Cost of Bailout

5. 2001 – 03 4 1980 – 82 1990 – 93 2 3 1973 – 75 1 Recessions in the Automotive Industry usually last for 2 years; 2010 is expected to be the turnaround year!!! Global Automotive Passenger Cars Production History 1950 – 2008 4 3 2 1 Collapse of the housing market in the US, leads to bank collapses in the US and Europe. Credit availability is sharply curtailed and consumer confidence falls to a low. Units (Million) Source: American Automobile Manufacturers Association, DRI-WEFA, and Global Insight; Frost & Sullivan Analysis • 1973 Oil Crisis driven by OPEC embargo on oil exports to west, leads to global economic slowdown • 1973 oil crisis and 1979 energy crisis leads to high inflation and economic stagnation (stagflation) • The 1987 stock market crash, followed by the 1990 Gulf war and a resulting rise in Oil prices affected global industrial production • Dot-com bubble bursts driving the economy down • September 11 attacks on the US further causes an economic contraction

6. 0.57m 0.49m The global automotive market is expected to contract at a CAGR of -2% between 2007 and 2010 CAGR : –2.7% 63.8 million 58.8 million 7.9m 6.3m 2.1m 0.63m 0.6m 0.54m 1.7m 0.53m 0.49m 0.43m Turkey Units (Million) 2010 2007 Note: CAGR calculated for 2007 to 2013; All figures are rounded; the base year is 2007. Source: Frost & Sullivan

7. 18.9m 13.2m 5.0m 10% Vans 13.5m 9% Vans 13% Vans 42% 30% 41% 49% 16.1% Europe (including Russia) USA Asia* Japan Small, affordable and clean cars are mega trend in the auto industry in the next 5 years Global Sales Volumes of Light Vehicles – by Vehicle Segment, 2008 • Basic and small cars have a strong sales trend in Europe and Asia at present making one fourth of the market size • USA to witness a strong growth of Small cars and super-minis in 2009 and 10 • Pickup sales expected to reach close to 1m units, while SUVs are expected to sell 1.3m units in Asia by 2010 • Asia and Europe are big markets for commercial Vans, while Japan has Vans in the passenger segment too *(India, China, Thailand, Malaysia, Indonesia, Korea)

8. 27% U.S. auto sales to start improving in the second half of 2009, with significant recovery in 2010 USA Auto Sales – by Vehicle Segment, 2008 USA Auto Sales – mix of Alternate Powertrain, 2008 2008 2010 • 46% of vehicle sales in the US constituted SUVs and Pickups in 2007 – Will fall to less than 39% by 2010 • Small cars are gaining more market share with an increase from 12% in 2007 to about 15% in 2010 • The US super-mini segment is a growth area with a CAGR of 10% (2007-10), driven by fuel prices (2007 and early 2008) and emission and recession concerns

9. Developed Markets in Red; Russia and CEE are expected to clock positive growth in 2010; West EU down until mid ‘10 European Auto Sales, 2008 European Auto Sales, 2008 -19.5% -11.8% -2.1% Million Units Million Units -2.3% 4.8% -3.4% *Eastern Europe excludes Russia volumes *Austria, Belgium, Denmark, Finland, Greece, Ireland, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland • Russia and Turkey are the only considerable growth markets in 2010 with positive growth trends, although they are also expected to witness weakness in 2009 • Russia is expected to become the largest market in Europe on par with Germany by 2010 • All key 5 western European markets are expected to witness negative growth with 2010 expected to be the year of recovery with improving economic conditions

10. What will catalyze the turnaround? – BRIC and emerging economies will lead the recovery through 2010 Q2/Q3 2010 Q3/Q42009 • Improvement in credit availability and increase in consumer confidence index • Customer demand bounce-back based upon stimulus – scrapping bonus and incentive for buying fuel-efficient cars • US demand for vehicles is highly cyclical and currently down on credit worries • Although there is a supply side govt. stimulus, demand is still low • Cumulative deferred demand (CDD), government stimulus & global recovery to drive growth USA Q4 2009 Mid2010 • Government measures include subsidizing new car purchases and, increase procurement of new cars for governmental needs and provide financial support to Russian OEMs • Banking and financial system is expected to recover by Q4 with government backup, bringing liquidity and credit back in the market • The Brazil and Colombian markets have been impacted by the credit crunch, with more than 70% of vehicles being credit financed • Recovery from the slowdown is subject to improvement in Credit situation and vehicle financing by 2010 Europe Brazil Q2/Q3 2009 Q4 09 /Q1’10 • Indian market still showing positive growth on the back of economic boom driven by services industry • Manufacturing slowdown in 2009, is expected to recover with recover of the US and rising consumer confidence • Growth will also be driven by new low-cost car model launches in 2009/10 • RMB appreciation, rise in raw material prices, low demand in export markets and low credit availability have affected China's auto export market • Government stimulus, revival of the export market and local consumption will revive Auto growth Russia China India

11. “Flexibility in Capacity” and “Inter Brand JVs” Will Help OEMs Survive the Industry Downturn:Example of Toyota’s new Takaoka Plant ; Able to Build 8 High-Volume Models as against 3 on the Original Assembly Line Press Shop Welding Parts Shops Body Shop Paint Shop # 1 Assembly Shop # 1 Paint Shop # 2 Body Shop Assembly Shop # 2/3 Paint Shop # 3 • 2006 – 660,000 Capacity Current Plant • Cost-cutting to generate more than $2.5 billion • Lead time to add new model halved • Sensors that monitor quality during each process Stamping presses that use servo-motors rather than hydraulics, combined with high-speed delivery robots. Future Plant Welding Parts Shops Press Shop A "set parts system" that delivers a basket of parts to each vehicle. A welding system that slashes the cost of jigs and other tooling. Body Shop Paint Shop # 1 Ditch huge expensive machinery Assembly Shop # 1/2 A paint process that eliminates the need to let the base coat dry. Paint Shop # 2 • 2009 – Capacity 500,000

12. Developing economies to drive future growth in global vehicle production – By 2016/17; 60% of global production to come from Asia, Eastern Europe and South America World Automotive Market: Light Vehicle Production, 2007-2015 95 Million Vehicles 18.1% 70.3 Million Vehicles 7.0% 22.9% 41.1 17.6% 5.1% Others 2.5 Thailand 2.2 Korea 3.8 1.7% 21.4% 10.7% 27.4 Japan 11.1 1.6% 8.5% Others 10.5 Million Units India 4.4 16.7 UK 2.0 Others 5.1 U.K. 2.0 43.3% Spain 2.6 39.5% Germany 6.3 China 17.1 Others 3.2 6.7 USA 11.6 France 3.3 1.2% 1.6 Brazil 5.4 1.1 Russia 3.1 0.3 Note: Vehicle Production in Million Units The above vehicle production forecast is for passenger cars and light commercial vehicles (<3.5 t). Vehicle segments included are Basic, Executive, Large, Lower Midsize, Luxury, MPV, Pickup / Truck, Small, Sports, SUV, Upper Midsize and Van Note: Africa - Morocco, South Africa Asia - Australia, China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Taiwan, Thailand Eastern Europe – Azerbaijan, Belarus, Bosnia, Czech Republic, Hungary, Kazakhstan, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey, Ukraine, Uzbekistan Middle East - Iran North America - Canada, Mexico, USA South America - Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Venezuela Western Europe - Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, UK Source : JD Powers / Frost & Sullivan

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15. Thank you! Anna Anlauft Corporate Communications Executive Corporate Communications +49 (0) 697 703 312 anna.anlauft@frost.com Vigneshwaran Chandran Team Leader Automotive & Transportation +44 (0) 20 7915 7880 vchandran@frost.com