The Outlook for the North America Light Vehicle Market

1. The Outlook for the North America Light Vehicle Market • George MaglianoSenior Economist • IHS Automotive • October 2013

2. US Economy – Has Lost Momentum but not Stalled • Although less critical, the Eurozone Sovereign Debt Crisis remains a significant risk in the global environment. • Greece needs another round of funding to stay in the Eurozone, but the recession in Europe was deeper and longer. • The US economy’s fundamentals are improving, but fiscal policy headwinds will restrain near-term growth. • We now expect the federal spending sequester to last through December, taking 0.5 percentage point off 2013 real GDP growth, compared with a no-sequester case. • Monetary policy will remain accommodative, FED Funds rate remains near zero into 2015, although QE3 will be wound down sooner. • Housing markets will continue their resurgence, supporting growth. • Consumers will cautiously increase spending in response to gains in asset values, employment, and income. • The US energy boom is creating jobs, investment, and a competitive advantage. • Real GDP growth will pick up from approximately 1.5% this year to roughly 2.5% in 2014.

3. North American Business Cycles are Synchronized (Real GDP, percent change)

4. U.S. Economy - Probability of a Recession - 20% (Percent unless otherwise noted / September 2013)

5. Crude Oil Price vs. Gasoline Price Global Game Changer

6. Real GDP growth remains below 2% in 2013, reflecting sluggish gains in exports and investment. Employment gains and rising confidence will support consumer spending. Oil prices should remain high enough to support continued development of the Canadian oil sands, leading to rising liquids production. The Bank of Canada is likely to hold its policy rate at 1.0% through summer 2014. The Canadian dollar is expected to remain below parity with the US dollar. In 2014-15, a strengthening US economy will lead to faster export growth. Western provinces will lead Canada’s near-term growth. Balanced Growth in Canada’s Economy

7. Canada Outlook Summary Real GDP growth (%) Consumer price inflation (%) Exchange rate per USD* Current-account balance** *Annual average, **Billions of US dollars

8. US - Auto Market Overview - Signs of a Breakout • The auto market has been a stellar performer in a lackluster economy. • Pent – Up demand is driving the auto recovery; and unless the economy deteriorates, sales will remain strong. • Currently we estimate pent–up demand at 8 mm units • In August the SAAR broke the 16 mm unit barrier for the first time since the end of 2007, without much effort, little pay-back is excepted. • Retail not fleet sales continue to drive the market. • The weak Yen gives the Japanese OEMs more fire power, but we don’t expect an all out price war. • Incentives are now being used tactically, transactions prices remain strong. • Auto credit quality is excellent and availability is improving. • Inventory remains under control. • The used car and truck market will remain strong. • Cost pressures are easing and industry profits in North America are good. • Production will be stronger than sales. • Reduced estimates of population growth, especially for Gen Y, limits future auto demand.

9. Commodity Costs – Tracking Sideways this Year Steel Aluminium Plastic Resins Rubber Glass Iron US Vehicle @ 3500 Lbs In $ European Car @ 2700 Lbs in Euro (Note : Spot and not contracted prices and excludes precious metals, fuel, processing and transportation costs and profit)

10. Intention to Buy New Vehicle in 6 Months (Percent Yes) Conference Board

11. New Vehicle Sales – By Credit Score Months Source: CNW Marketing

12. Median Age – New Vehicle Buyer (Years) Months CNW Marketing

13. New Auto Loan Rates – Commercial Banks& Finance Companies (48 Months) (Percent) Quarters Federal Reserve Board

14. Incentives to MSRP (Percent) Months CNW Marketing

15. Residual Value Index (Index = Lease contract residual value versus CNW estimate of residual at end of lease term) Months Source: CNW Marketing

16. U.S. Light Vehicle Sales — Lease Penetration (Share) Source: CNW Marketing

17. United States — Light Vehicle Sales, SAAR (Units in Millions)

18. U.S. Light Vehicle Inventory — Units (Units in thousands) Months — Seasonally Adjusted

19. U.S. Light Vehicle Inventory — Days Supply (Days Supply) Light Trucks Cars Months — Seasonally Adjusted

20. U.S. Light Vehicle Sales 2008: 13.2M units 2009: 10.4M units 2010: 11.6M units 2011: 12.7M units 2012: 14.5M units 2013: 15.6M units 2014: 15.9M units 2015: 16.3M units (Units in millions)

21. U.S. Light Vehicle Sales:Relative to Employment (Percent)

22. Canada – Light Vehicle Sales (Units/ 000’s) Impacts Corridors 1,2,3,4,5

23. Mexico – Light Vehicle Sales (Units/ 000’s)

24. North America - Light Vehicle Production (Share of NA Prod.) (Units in millions)

25. North American Exports- New Cars & Light Trucks Produced in NA and Sold Outside NA (Units)

26. Autos - The Bottom Line • The auto industry is in its best shape to withstand economic adversity. • Auto credit quality is outstanding, availability will improve this year. • Industry pricing power will continue to strengthen. • Leasing is on the way back. • Small cars will gain market share but crossovers will remain very popular. • Higher fuel economy standards are the next big challenge (opportunity). • The industry has done a great job reducing capacity and cost, but we can’t rest on our laurels. • Initially replacement demand drives volume, longer term demographics sustain sales. • Eventually the economy will support volume levels that are more normal for the auto industry. • The industry has become more profitable and once volume returns, it will become even more so.

27. Thank you for participating! • George MaglianoSenior Economist • IHS Automotive • 212-884-9509 • George.magliano@ihs.com