Developments in the Automotive Industry

1. Developments in the Automotive Industry IARA Las Vegas March 9, 2011

2. …100+ years at the crossroads • Information • Quality • Changing Vehicles • Technology • Alternative Fuels • New Makes and Models • 2 Minute Drill • Q&A

3. IntelliChoice Motor Trend Auto Group • Motor Trend • Original Enthusiast Magazine • Automobile • Life Style and Ownership • IntelliChoice • Quantitative Data

4. WHAT WE DO • Empowering and educating consumers since 1986 • Online service for buyerssince 1996 • The preferred resource for automotive purchasing decisions • Automotive Analysis • Cost of Ownership • www.IntelliChoice.com • Source Interlink Media • Automotive Digital Network • In-Market Channel

5. COST OF OWNERSHIP VALUES • For over 25 years, we have helped consumer do their homework • Provide vehicle ownership costs, ratings, and values • The Cost of Ownership includes: • Depreciation • Maintenance • Repairs • Fuel Costs • Financing • Insurance • License and Registration

6. Transformation into an Information Society • Wave 1 — Agricultural Society • Wave 2 — Industrial Society • Wave 3 — Information Society

7. Kelley Blue Book • 1920’s Buy Sheet • Ceiling Price • Regional Guide • Consumer Guide • Internet Pioneer • www.kbb.com

8. Consumerism - Information • Transparency of pricing • Used Vehicle Values • New Car Prices • Online Negotiation • Inventory Availability • Alternative ways to buy

9. Social Media Communities User Generated Web 2.0…3.0 Localization Internet 3rd Screen Personal Screen Ubiquitous Information & Technology Trends:

10. 2012 Ford Focus Introduction… • Face Book • Twitter • Social Media…not Auto Shows or Enthusiast Magazines • User Generated Content • Everybody knows everything…and has something to say about it… • Journalists meet…

12. J.D. POWER, III – 40 years ago The Wall Street JournalMay 7, 1973 Realizing the Power of the Voice of the Customer

13. I can’t get no Satisfaction • Voice of the consumer • CSI Consumer Satisfaction Index • Rate the Product • Sales Satisfaction • Rate the Process • Measurement gone wrong • Comparisons don’t make sense

14. Every Major Automotive Company Depends on Insights

15. Not Listening to CustomersCould be Very Costly

16. Brands we’ve recently lost

17. and we almost lost…

18. No more Quality?

19. US Automotive Sales Collapse Total 17.4 17.2 17.0 16.9 16.8 16.7 16.5 16.1 Over 7M Units Lost Retail 13.2 14.8 14.6 Volume 14.2 14.0 13.8 10.4 13.2 13.0 12.8 10.6 8.6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

20. Industry Walk: Retail Forecast 14.8 2M Retail Units Lost 12.8 Volume 11.6 10% YoY Risk 11.2 13% YoY 2000 2007 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 2008 Macro Gas Home Vehicle Used Credit Interest Net Product Other Economic Prices Equity Equity Vehicle Avail- Rates Pricing Activity Impact ability 20 20 20

21. U.S.: Light Vehicle Sales Forecast Million of Units Shallow Peak 2000 Recent Peak 2005? Long-Term Trend Short-Term Trend

22. A car for every household…

23. A car for every driver…

24. A car for every purpose…

25. The Changing Vehicles… • Larger - Baby Seats…BS • Heaver - Safety – Comfort and Convenience • Luxury Transition - WLTC…LR…SR • Luxury Brands VW and Hyundai?

26. Vehicle interiors were pretty basic for a while… 1962 Cadillac Coupe de Ville 1960 Ford Thunderbird

27. However, are they becoming too complex… 1986 Chevrolet Monte Carlo 1983 Mercedes-Benz 300SD

28. …or are we becoming more accustomed? Infiniti G35 Cadillac SRX

29. Even the entry level cars have it all. KIA Soul Nissan Cube

30. What’s really involved in driving? • What we are doing… • Change the radio • Insert a CD • Adjust your iPod • Work the phone • Program a destination • Try to activate something by voice • Adjust movie for kids in the back What we should be doing… • Aim high in steering • Get the big picture • Keep your eyes moving • Leave yourself an out • Make sure others see you

31. Voice Navi Radio/CD RSE PDA Web/Email Hard Drive Aux Phone Aim High Diagnostics Big Picture Leave an out Intelligent Cruise Eyes Moving Be Seen Speed Warning Real Time Traffic Collision Detection Lane Departure Warning Blind Spot Warning Night Vision Stability Control Navigating HMI

32. Technology

33. Top 10 Options • Automatic Transmission (Definitely) • 4WD (FWD and traction control) • Leather (OK) • Cruise Control (OK…make it adaptive) • Heated Seats (Yes!) • Trailer Hitch (Occasionally) • DVD (Really?) • Third Row (If there is room) • Moon Roof (Maybe?) • Navigation (With traffic, speed and Google-map)

34. …but what about? • Climate Control • Blue Tooth • IPod/MP3 • Back-up Cameras • Parking Assist • Blind Spot Detection • Lane Departure

35. and you heard of? • Surround View • Touch Pad • WIFI Hotspot • Braking Override • Accident Pre-sense • Pedestrian Recognition

36. …we don’t seem to need? • Integrated Child Seat • Digital Dash • Voice Reminders • Video Screen Integration • Heads up • Night Vision

37. Can you recall this many recalls • AAA Test Engineer • Independent Engineer • Automotive Expert Witness • Investigative Journalist • Behavioral Psychologist • Aerospace Engineer • OEM System Specialist

38. Unintended Acceleration • Electronic Throttle • Positive with the Negative • Brakes Work • Manual Transmission • Pedal Application • Role of Media and Litigation • Insulation from the Act of Driving

39. Alternative Powertrains

40. Going Green • Hybrid • Electric • Diesel • CNG

41. Industry “Green” Trends • Smaller (Micro) Cars • Wagons and Hatchbacks • Internal Combustion Engine Improvements • 25% more power • 10% better mileage • Smaller Engines • 4 cyl Toyota Siena • 6 cyl Mustang (300 hp 31mpg) • 6 cyl BMW 7 Series • Electricity

42. U.S. Light Vehicle Sales – Price/SizePercent Growth Year Over Year Source: J.D. Power Automotive Forecasting

43. Increase in Model Competition Models Net: -4 -26 12 -13 0 15 12

44. Wasn’t that a great Olympics?!

45. CHINA: Tremendous Opportunity Tremendous Risk… • Little margin for error • Quality can’t be sacrificed for market presence • Internet magnifies and immortalizes every misstep • Image repair is increasingly difficult • Toyota and Hyundai took years to reestablish quality reputations but today you may not get a 2nd chance • Speed of change is staggering • Societal stress from rapid industrialization and consumerism growth • “Everyday you see somethingthat you don’t see everyday”

46. Everyone’s Betting on China… More Brands Competing than any other Market in the World Source: JDPA Research

47. China IQS PP100 Score – Nameplate

48. China IQS PP100 Score – Nameplate

49. Why are the Chinese exporting to other markets first? • Less stringent safety and emissions regulations • Higher demand for low-priced simple cars • Less demanding consumers (quality, power, refinement) • Lower upfront investment needed (branding, etc) • Time to improve their products/processes • China govt doesn’t want to risk damage to China brand image

50. Requirements for entry into the US market… Technology Crashworthiness Fuel Economy or Alternative Fuel Emissions