02 LMC

Mexico Automotive Market:
Investment
Jeff Wegehaupt - Analyst, North American Forecasts

23 July 2014
2014 LMC Automotive Limited, All Rights Reserved.
www.lmc-auto.com
Outline
Mexico Economic Overview
North American Demand Environment
North American Production Dynamics
Mexico Production Outlook by Manufacturer
Summary
www.lmc-auto.com
Economic Improvement Expected in 2014 for Mexico

6.0%
4.0%
2.0%
0.0%
-2.0%
2008
2009
2010
2011
2012
2013
2014
2015
-4.0%
-6.0%
Q1 GDP growth was a mere 1.8% (YoY), however the worst of the downturn seems to
be over, and annual GPD growth is expected to be at 2.4% (YoY)
While the economy is picking up, downside risks arise from any stalling in the US
recovery, a possible drought due to the El Nio weather, and rising global oil prices
Source: Oxford Economics, LMC Automotive
www.lmc-auto.com
Outline
Summary
www.lmc-auto.com
Mexico Sales Current Snapshot & ST Outlook
May 2014 selling rate (SAAR) was a stronger-than-expected 1.11 mn units up 6.6% from April
2014 and the first time to return to the 1.1 mn mark since November 2013
Junes 1.09 mn SAAR was down from May but still stronger than expected
Sales are expected to hit 1.07 mn units this year, up 1% from 2013
Source: LMC Automotive
www.lmc-auto.com
2014 Mexico Sales Body Type Share Movement

Cars continue their slide, but overall
share still dominates market 63.5%
market share
0.8%
SUVs gain share fueled by Small

demand 19.0% market share
0.5%
Vans and MPVs experience incremental

growth from new entrants 4.2%
market share
0.3%

www.lmc-auto.com
North American Light Vehicle Sales Outlook

+4%
Millions
13.9
.8
1.6
11.6
2010
15.2
.9
1.6
17.1
1.0
1.7
14.5
18.4
1.1
1.7
15.6
20.6
1.4
19.1
1.1
1.8
19.5
1.1
1.8
16.3
16.6
2014
2015
1.9
17.4
12.7
2011
2013:
+8% 15.57mn
2012
2013
2013:
+3% 1.74mn
7
2020
2013:
+8% 1.06mn
www.lmc-auto.com
Outline
Summary
www.lmc-auto.com
NA Production and Capacity Long-term Trend

25
100%
Millions
20
3.4
15
5.9
9.0
5.0
4.1
2.1
1.5
10
15.0
12.6
11.8
13.1
15.4
16.2
1.7
1.2
2.0
1.9
1.9
1.7
1.8
1.8
80%
60%
16.8
17.3
17.8
18.4
18.8
19.0
19.2
19.2
40%
20%
8.5
0%
2007
2009
2011
NA Production
2013
2015
2017
Underutilized Capacity
2019
2021
% Utilization
Fundamentally different vehicle production environment

Entering post recovery phase where increased NA sourcing and exports drives production
expansion - utilization remains 90%+
Demand driven growth takes supporting role, but adds a layer of stability
www.lmc-auto.com
NA Production and Sales Gap Narrows

25.0
Restructuring
~ 4mn
Millions
20.0
15.0
~ 2mn
10.0
NA Sales
Exports
NA Production
5.0
Localization
Investment/New Territory
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0.0

10
www.lmc-auto.com
North America an Export Hub?

Exports
1,875K
1,298K
862K
2010
2013
2018
Exports in 2013 were 8% of total production; 2018 expected to be at least 10%

Audi plant comes online with exports of Q5 and Q6 expected to Europe and Asia
Honda plans to grow exports significantly, with NA being global source for Acura and Insight;
volume to SA and EU expected to grow (some of this has been pared back)
Source: LMC Automotive, BEA, Industry Sources

11
www.lmc-auto.com
Production Shift 2000 to 2020

Industry
2000
17.2mn
2020
19.1mn
1.4
0.1
9.5
Other
Millions
2.8
1.4
8.1
MidWest/Ont.
Central
1.9
1.6
4.8
US - South
4.7
Mexico
12
www.lmc-auto.com
Investment Pours into Mexico

+3.3mn
11%
New Capacity
Millions
15%
Honda Celaya
Mazda Salamanca
Nissan Aquascalientes II
Toyota Salamanca w/Mazda
Fiat-Chrysler Saltillo Van
Audi San Jose Chiapa
Daimler Aquascalientes III
w/Nissan
BMW SLP
Kia Monterrey
Hyundai?
18%
67%
25%
64%

13
www.lmc-auto.com
Outline
Summary
14
www.lmc-auto.com
Thousands
BMW (BMW Mexico)
120%
160
140
100%
120
80%
100
80
60%
60
40%
40
20%
20
0
0%
Compact
Midsize
Large
$1 billion investment
for Mexican facility
nearly a lock for
2016/17 1 Series, Z4,
and 3 Series
Initial capacity of
50,000 units and will
build up to 150,000
units by 2020
Capacity utilization is
expected to be high,
given the models at this
plant will not only serve
North America, but the
global markets as well.
Utilization

15
www.lmc-auto.com
Thousands
Fiat Chrysler (Saltillo, Saltillo Van, Toluca)
600
120%
500
100%
400
80%
300
60%
200
40%
100
20%
0%
Compact
Midsize
Large
Utilization
500 (FF) production

dropping in 2016
volume will be replaced
with C-SUV Jeep
Dodge Journey previously
planned to be dropped
will continue as a similar
but yet defined
replacement will push
utilization well above
capacity at Toluca
$1.085 billion investment
in Saltillo Van facility
Promaster (VF)
production began in July
2013

16
www.lmc-auto.com
Thousands
Ford (Cuautitlan, Hermosillo)
600
120%
500
100%
400
80%
300
60%
200
40%
100
20%
Fiesta (B299N) dropping

from Cuautitlan in 2015
volume to be replaced by
Ecosport (B515)
Next-gen Focus (C519)
and Escape (C542)
expected to join
Cuautitlan pushing
utilization close to 100%
Hermosillo will continue
as a source of
Fusion/MKZ production
0%
Compact
Midsize
Large
Utilization

17
www.lmc-auto.com
Thousands
General Motors (Ramos Arizpe, San Luis Potosi, Silao)
120%
900
800
100%
700
80%
600
500
60%
400
300
40%
200
20%
100
0
0%
Compact
Midsize
Large
Beginning in 2016, Ramos

Arizpe is projected to start
competing with GMs Fort
Wayne Truck plant volume
With GMs plan to drop
the Regal, Verano (D2SB)
production is expected to
notice a significant bump
in volume over the D1SB
Improved platform scale
next-gen Equinox to move
to Delta
Timing of the next-gen
pickups (T1XX) has been
moved up to 2018
Utilization

18
www.lmc-auto.com
Thousands
Honda (Celaya, Guadalajara)
500
450
400
350
300
250
200
150
100
50
0
120%
100%
80%
60%
40%
20%
0%
Compact
Midsize
Large
New Celaya plant came

online starting with the
Fit (2WF) this year
followed by the HR-V,
City, and Civic
Initial capacity at Celaya
is 200,000 units but is
expected to increase to
520,000 units to bolster
regional production and
increase export activity
Guadalajara will
continue as a source of
the CR-V
Utilization

19
www.lmc-auto.com
Thousands
Hyundai (Monterrey)
300
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
250
200
150
100
50
0
Compact
Midsize
Large
Kia Monterrey Plant

localize small vehicles
with displacements of
2.0L and below starting
in 2017
Capacity expected at
300,000 units/year
Continue to explore
further expansion Hyundai?
Utilization

20
www.lmc-auto.com
Thousands
Mazda (Salamanca)
300
120%
250
100%
200
80%
150
60%
100
40%
50
20%
0%
Compact
Midsize
Large
Mazda resumed full

production in North
America in February with
the Mazda3 (J36) at
newly constructed facility
in Salamanca
Mazda2 (J03A)
production will begin
later this year
Partnered with Toyota,
Mazda will produce Small
Car models for Toyota
and Scion based on
Mazda Skyactive-B
architecture in 2015
Utilization

21
www.lmc-auto.com
1,000
900
800
700
600
500
400
300
200
100
0
120%
100%
80%
60%
40%
20%
Compact
Midsize
Large
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
0%
2011
Thousands
Renault-Nissan (Aguascalientes I,II,III, Cuernavaca)

Aguascalientes II came
online with the start of
production of the Sentra
(L12F)
Aguascalientes III partner w/Daimler to
produce the QX30, GLA,
and CLA based on the
MFA platform
Nissan B-SUV (W02F) for
Mexico at Aguascalientes
in 2016
Commercially oriented
MPVs NV200 & City
Express at Cuernavaca
Utilization

22
www.lmc-auto.com
Thousands
Toyota (Baja)
70
140%
60
120%
50
100%
40
80%
30
60%
20
40%
10
20%
0%
Compact
Midsize
Large
Baja remains a source

for the Tacoma
capacity utilization high
in the long-term
Venture spirit,
investment w/Mazda
Small Car models for
Scion and Toyota to be
produced at Mazdas
Salamanca plant
Utilization

23
www.lmc-auto.com
Volkswagen (Puebla, San Jose Chiapa)
120%
1,000
900
800
700
600
500
400
300
200
100
0
100%
80%
60%
40%
20%
Compact
Midsize
Large
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
0%
2011
Thousands
Aggressive growth
targets; VW 800K US
sales, Audi 200K
Utilization
Starting in 2016, San

Jose Chiapa will be the
global source for Q5
(AU426) and Q6
(AU519) - capacity at
200,000 units/year
Given the addition of
the Golf (VW370) in
Puebla this year, the
600,000 unit capacity
plant is expected to be
at overcapacity from
2015 onward

24
www.lmc-auto.com
Outline
Summary
25
www.lmc-auto.com
Summary
Light Vehicle sales in Mexico are expected to continue to pick up in H2
2014 along with an improving economy and reach 1.07 mn units this year
North American production passed 16mn in 2013 for first time since 2002
and 2014 continues trend Inventory risk now much lower
Long-term North American production is supported by import
substitution and increased exports market pushes over 19 million units
with substantial increase in launch activity
A pronounced shift to Mexico driving the lions share of capacity growth
in the North America region
Supplier opportunities exist with 65 new launches (New Entries/Major
Redesigns) in Mexico in the 2014-2021 timeframe
26
www.lmc-auto.com
Accurate real-time
automotive intelligence,
forecasting and analysis
Thank You
JWegehaupt@lmc-auto.com
27
www.lmc-auto.com

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02 LMC

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Mexico Automotive Market:

Jeff Wegehaupt - Analyst, North American Forecasts

2014 LMC Automotive Limited, All Rights Reserved.

Economic Improvement Expected in 2014 for Mexico

2014 LMC Automotive Limited, All Rights Reserved.

Mexico Sales Current Snapshot & ST Outlook

2014 Mexico Sales Body Type Share Movement

SUVs gain share fueled by Small

Vans and MPVs experience incremental

Source: LMC Automotive

North American Light Vehicle Sales Outlook

Source: LMC Automotive

2014 LMC Automotive Limited, All Rights Reserved.

2014 LMC Automotive Limited, All Rights Reserved.

NA Production and Capacity Long-term Trend

Fundamentally different vehicle production environment

NA Production and Sales Gap Narrows

Source: LMC Automotive

North America an Export Hub?

Exports in 2013 were 8% of total production; 2018 expected to be at least 10%

Source: LMC Automotive, BEA, Industry Sources

Production Shift 2000 to 2020

Investment Pours into Mexico

Source: LMC Automotive

2014 LMC Automotive Limited, All Rights Reserved.

BMW (BMW Mexico)

Source: LMC Automotive

Fiat Chrysler (Saltillo, Saltillo Van, Toluca)

500 (FF) production

Source: LMC Automotive

Ford (Cuautitlan, Hermosillo)

Fiesta (B299N) dropping

Source: LMC Automotive

General Motors (Ramos Arizpe, San Luis Potosi, Silao)

Beginning in 2016, Ramos

Source: LMC Automotive

Honda (Celaya, Guadalajara)

New Celaya plant came

Source: LMC Automotive

Kia Monterrey Plant

Source: LMC Automotive

Mazda resumed full

Source: LMC Automotive

Renault-Nissan (Aguascalientes I,II,III, Cuernavaca)

Source: LMC Automotive

Baja remains a source

Source: LMC Automotive

Volkswagen (Puebla, San Jose Chiapa)

Starting in 2016, San

Source: LMC Automotive

2014 LMC Automotive Limited, All Rights Reserved.

2014 LMC Automotive Limited, All Rights Reserved.

2014 LMC Automotive Limited, All Rights Reserved.

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