THE EUROPEAN AUTOMOTIVE AFTERMARKET FACTS & STRATEGIES Josef Frank Senior Advisor Aftermarket CLEPA

1. THE EUROPEAN AUTOMOTIVE AFTERMARKET FACTS & STRATEGIES Josef Frank Senior Advisor Aftermarket CLEPA CLEPA Aftermarket Department

2. The EuropeanAutomotiveIndustry • CLEPA at a glance • The European Automotive Aftermarket • EuropeanLegalFramework • Competition • Safety • Environment • Conclusion CLEPA Aftermarket Department

3. The European automotive industry 2011 • 12million jobs in total • 5million in component manufacturing / 1million in OEMs • 15 Billion € RDI component manufacturing • 18million vehicles manufactured per year • 270 million vehicles on the road all with combustion engines CLEPA Aftermarket Department

4. Trends and Challenges Demographic change Urbanization Car Sharing/ Car pooling Integrated Mobility solutions Decarbonisation of road transport CLEPA Aftermarket Department

5. Two Automotive WorldsBRIC Markets’ Growth Will Continue Light Vehicle Sales Note: Triad comprises USA, Japan & W. Europe Source: IHS Data Insights CLEPA Aftermarket Department 7 7

6. The EuropeanAutomotiveIndustry • CLEPA at a glance • The European Automotive Aftermarket • EuropeanLegal Framework • Competition • Safety • Environment • Conclusion CLEPA Aftermarket Department

7. Facts about CLEPA Founded in 1959 Represents 92 corporate members of the world’s most prominent suppliers for car parts, systems and modules 25 National trade and European sector associations representing more than 3000 member companies in total 2500SMEs more than 5 Million employees with 600 Billion € sales Partner of the EU and the UN CLEPA Aftermarket Department

8. Automotive Suppliers in Europe “Automotive Suppliers have proven their leadership in developing products that are innovative, environmentally sound and safe, providing sustainable mobility for Europe’s citizens” Peter Tyroller CLEPA President, Bosch ~ 40% of all automotive industry employees ~ 50% of the RDI budget for the automotive industry ~ 75 % of the vehicle is madeby automotive suppliers CLEPA Aftermarket Department

9. CLEPA - What we do • Influencing legislative decision process • Ensuring harmonious development of international trade • Participation in EU consultation process CARS21 • Actively endorsing the development of the necessary competitiveness • Framework conditions • Expertise on European project and fund raising • Industry networking and trade events CLEPA Aftermarket Department

10. The European Automotive Industry • CLEPA at a glance • The European Automotive Aftermarket • European Legal Framework • Competition • Safety • Environment • Conclusion CLEPA Aftermarket Department

11. Introduction to the Aftermarket The automotive aftermarket consists of: Spare parts sales for the existing European car park Repair and maintenance of the existing European car park The European car park represents 270 million vehicles with an average age of 8.2 years. CLEPA Aftermarket Department

12. The structure of the Aftermarket The annual volume of the automotive aftermarket is around EUR 100 billion for spare parts (consumer level without VAT). It consists of 2 distribution channels, Original Equipment Sales (OES) and Independent Aftermarket (IAM), each having around 50% of the market at consumer level. There are 3 main players: The Original Equipment Manufacturers (OEM) as multinationals, Independent Operators (IO), which are mainly SMEs and Parts Manufacturers (PM) (which are both multinationals or SMEs). PM IO OEM 100 Billion Euro IAM OES CLEPA Aftermarket Department

13. The Landscape of the Aftermarket Parts Manufacturing Service Delivery OEM affiliated garages Intermediaries Consumers Parts Distribution OEM brand Mainly OEM and PM branded OEMs Business OEMs OEM Distribution Network Owned and franchised dealers Insurance Companies Automobile Clubs Multi-brand dealers Dual branding (OEM / PM) Leasing Firms OE Part Manufacturer (PM) Monobranding (PM) Internet Service Delivery Independent garages Monobranding (PM) Political Decisions e.g. Scrapping Schemes Fleet Generic Independent Aftersales Service Providers Generic Parts Manufacturers Independent Distribution Network Small garages/ gasstations Private CLEPA Aftermarket Department Source: McKinsey, CLEPA

14. The market can be divided by age of the vehicles in segment I (0-4 years), segment II (>4-8 years) and segment III (> 8 years). Segment I vehicles used to be served mainly by OES, segments II and III mainly by IAM ~25% ~50% ~85% OEM pressure ~75% ~50% ~15% Segment I Segment II Segment III (>4 (0 - 4 years) - 8 years) ( > 8 years) OES channel IAM channel Source: A.T. Kearney, SupplierBusiness Drivers for change inthe Aftermarket On the one hand, due to technical reasons such as better quality of components and increase of electronic parts, valuable repair and spare part sales shifted in Segment II and the OEM want increase their share. IAM pressure On the other hand, due to intermediaries like leasing companies, insurances and new business models there is an increasing demand for maintenance from the IAM in Segment I. CLEPA Aftermarket Department

15. The consequence for the Aftermarket 3 players - 2 Distribution channels - 1 Market IAM (Independent Aftermarket) OES (Original Equipment Sales) OES IAM OES IAM CLEPA Aftermarket Department

16. Passenger Safety Systems (Airbags etc.) Dynamic Navigation, Telematic systems Modern lighting technology Adaptive Cruise Control Technological Trends The car has become a computer on wheels Steer-By-Wire Car managementSystem Cartronic Brake-By-Wire Cockpit modules and instrument clusters High-pressure Diesel Injection Systems ABS/ASR ESP Gasoline Direct Injection (DI Motronic) Alternative energy supplies (H2, Fuel Cell)  Increasing share of electronics of production costs: 22% in 2000; 35% in 2012 CLEPA Aftermarket Department

17. Decisive factors to be part of the Aftermarket Knowledge is power • To stay in this market all participants need access to Repair and Maintenance Information (RMI) to maintain and repair the vehicles and • Access to the Vehicle Identification Number (VIN) for unequivocal parts identification CLEPA Aftermarket Department

18. The EuropeanAutomotiveIndustry • CLEPA at a glance • The European Automotive Aftermarket • EuropeanLegal Framework • Competition • Safety • Environment • Conclusion CLEPA Aftermarket Department

19. Vehicle retailing The new Automotive Framework for Competition Automotive aftermarket Transitional period until 31 May 2013: Former MVBER 1400/2002 • Since 1 June 2010: • New sector-specific BER 461/2010 ("new MVBER" or "Aftermarket-BER") & sector-specific guidelines • Where sector-specific instruments are silent: General Vertical BER 330/2010 & general guidelines As from 1 June 2013:General Vertical BER 330/2010 & sector specific + general guidelines CLEPA Aftermarket Department 25

20. The content of the Competition Framework The EU Commission makes it very clear with the new MVBER and guidelines that, in order to preserve competition between authorised and independent repair and sales channels, particular attention will be paid to: Access of independent repairers to all spare parts Ability of parts manufacturers to sell directly to the aftermarket Ability of parts manufacturers (PM) to apply their own logo to parts supplied to the vehicle manufacturer (OEM) Ability of authorised repairers to source quality spare parts from the supplier of their choice Access of independent operators to technical information, tools and training Misuse of legal and extended warranties CLEPA Aftermarket Department

21. Access to RMI and parts identification for Euro 5/6 PC and LCV and Euro VI HDV Legislation: Both legislations 715/2007 and 692/2008 incl. amendment 566/2011 for PC&LCV and 595/2009 and 582/2011 incl. amendment for HDV are in place. Situation: The text for the amendments with the purpose to get processable data, which enables the parts suppliers to create their technical information and catalogues on the same quality level as the OEMs, doesn’t emphasize this clearly. Consequence: The OEMs interpret it differently and refer to their websites. The parts suppliers insist to get the data processableand will take all necessary measures to get them. This includes talks with the OEMs but also if necessary legal measures. CLEPA Aftermarket Department

22. Aspects of remanufacturing • The European automotive remanufacturing business is worth approximately 8 to 10 billion Euros (retail sales)* CLEPA Aftermarket Department

23. The benefits of remanufacturing at a glance • Environment • CLEPA members offer 27 automotive product groups which can be remanufactured • Reman has the potential to reduce emissions in the EU 27 by 400 ktCO2. This is comparable: - to the saving of 170 millions litres of gasoline per year or - to the emissions of 200,000cars per year or - to the absorption of 30,000 hectares forest per year 2. Employment • Remanoffers around 32,000 jobs in EU 27, increasing in number 3. Safety • Reman products fulfil a similar function and are warranted as the “original product” (see definition) 4. Economy • Reman products, due to savings of raw-materials and manufacturing, are significantly cheaper CLEPA Aftermarket Department

24. Technology evolution calls for remanufacturing Electronic Remanufacturing knowledge Mechanical Electric • Remanufacturing requires more and more R&D and also sophisticated manufacturing and testing processes. CLEPA Aftermarket Department

25. DEFINITION for Reman * “A remanufactured part fulfils a similar function as the original part [1] It is restored from an existing part (core [2]), using standardized industrial processes [3] in line with specific technical specifications [4]. A remanufactured part is given the same warranty as a new part [5] and it clearly identifies [6] the part as a remanufactured part and the remanufacturer ” * This is a common definition of APRA, CLEPA, FIRM, supported by MERA and RIC. A remanufactured part is different from a reused, repaired, rebuilt, refurbished, reworked or reconditioned part. These categories are not subject to this definition and the process of remanufactured parts. CLEPA Aftermarket Department

26. DEFINITION for Reman * Footnotes: [1]“Original part”, “matching quality part”•BER 461/2010/EC Article 1, Para h) in connection with supplementary guidelines 2010/C 138/05, Para 19•BER 461/2010/EC Article 1, Para h) in connection with supplementary guidelines 2010/C 138/05, Para 20 [2] Core•A core is a used “original” or “matching quality” part which will be remanufactured [3] Industrial processes•An industrial process is an established process, which is fully documented•The size of the industrialized production batch is not limited; only one part could be remanufactured•In the case of remanufacturing, the minimum procedures used in the industrial process are: core management, core sorting, dismantling, cleaning of all internal and external components, replacement of all missing parts, restoration of all impaired, defective or substantially worn parts to a sound condition or replacement thereof, reworking, machining or performing such other operations as are necessary to put the part in original working condition or better, components assembly and final testing of each remanufactured part [4]Specific technical specifications•Specific technical specifications, established by the remanufacturer and consistently applied [5] Warranty as new part•The remanufacturer must give a warranty for the remanufactured part which is the same as the warranty required by law for a “new part”, if one is required by law [6] Clearly Identifies•A non-removable, sustainable and uncoded marking is put on each remanufactured part CLEPA Aftermarket Department

27. Manufacturers Against Product Piracy • WTO (World Trade Organization) estimates the share of counterfeits at the total global trade volume of 5% to 7% • 80% of the profits of counterfeit exports from China is created outside China (Hong Kong police investigator) • Global loss of 750,000 labour in the automotive industry due to counterfeiting (MEMA). 56% of passenger cars in China are running on counterfeit parts • In China, 190,000 people died in 2001 due to counterfeited medicine Counterfeiting is a safety issue CLEPA Aftermarket Department

28. Manufacturers Against Product Piracy A CLEPA Initiative: • Serve CLEPA members more effective in Brand Protection Issues • Take over leadership for brand protection in the automotive aftermarket • Create possible cooperation & synergies with associations, partners and official bodies active in Brand Protection • Better results with increasing numbers of seizures and discouraging counterfeiters • Promotion of two digit MAPP Code (Manufactures Against Product Piracy) Similar is not the same In the market we are competitors, in Brand Protection we are partners CLEPA Aftermarket Department

29. CLEPA activities to ensure • Competition • MVBER (assure compliance) • Acces to RMI and VIN in a processable form • Reman and Antifake measures • Safety • Acces to RMI and VIN • Remanufacturing • Manufacturers Against Product Piracy • Environmental awareness • Remanufacturing CLEPA Aftermarket Department

30. 4th Aftermarket Conference 28-29 November, Brussels The global Automotive World in 2020 • Challenges - Opportunities and the Framework www.get-connected.com • Internet and Aftermarket – Opportunities or Threats? How to service automotive electronics in 2020 • Means and Needs from where we stand today CLEPA Aftermarket Department

31. Conclusion CLEPA, as the voice of the suppliers, defends the interests of the suppliers for a fair competition and favourable conditions for the consumers … the rest is business… THANK YOU Josef Frank Senior Advisor CLEPA Aftermarket 38