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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

© 2014 LMC Automotive Limited, All Rights Reserved.

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0% 4. a possible drought due to the El Niño weather.Economic Improvement Expected in 2014 for Mexico 6.0% 2.0% 2008 2009 2010 2011 2012 2013 2014 2015 -4. LMC Automotive © 2014 LMC Automotive Limited.0% -6.0% 0.8% (YoY).lmc-auto. All Rights Reserved. downside risks arise from any stalling in the US recovery. and annual GPD growth is expected to be at 2. 3 www.com .0% • Q1 GDP growth was a mere 1. however the worst of the downturn seems to be over.4% (YoY) • While the economy is picking up.0% -2. and rising global oil prices Source: Oxford Economics.

lmc-auto. 4 www.com .Outline • Mexico Economic Overview • North American Demand Environment • North American Production Dynamics • Mexico Production Outlook by Manufacturer • Summary © 2014 LMC Automotive Limited. All Rights Reserved.

Mexico Sales – Current Snapshot & ST Outlook • May 2014 selling rate (SAAR) was a stronger-than-expected 1.1 mn mark since November 2013 • June’s 1. 5 www.09 mn SAAR was down from May but still stronger than expected • Sales are expected to hit 1.11 mn units – up 6.lmc-auto. up 1% from 2013 Source: LMC Automotive © 2014 LMC Automotive Limited.com . All Rights Reserved.07 mn units this year.6% from April 2014 and the first time to return to the 1.

2% market share 0.5% Vans and MPVs experience incremental growth from new entrants – 4. but overall share still dominates market – 63.0% market share 0.lmc-auto.2014 Mexico Sales – Body Type Share Movement Cars continue their slide.com .3% Source: LMC Automotive © 2014 LMC Automotive Limited. All Rights Reserved.5% market share 0.8% SUVs gain share fueled by Small demand – 19. 6 www.

6 17.6 1.8 16.com .06mn www.lmc-auto.8 1.8 19.6 2010 Source: LMC Automotive 15.57mn © 2014 LMC Automotive Limited.6 2014 2015 1. All Rights Reserved.0 1.7 14.5 1.6 20.74mn 7 2020 2013: +8% 1.7 15.1 1.1 1.4 12.7 2011 2013: +8% 15.North American Light Vehicle Sales Outlook +4% Millions 13.4 19.3 16.9 17. 2012 2013 2013: +3% 1.5 18.1 1.1 1.1 1.9 1.6 11.2 .4 1.9 .

Outline • Mexico Economic Overview • North American Demand Environment • North American Production Dynamics • Mexico Production Outlook by Manufacturer • Summary © 2014 LMC Automotive Limited. 8 www.lmc-auto. All Rights Reserved.com .

2 1.8 19.9 1. All Rights Reserved.8 80% 60% 16. but adds a layer of stability Source: LMC Automotive © 2014 LMC Automotive Limited. 9 www.4 18.0 5.7 1.5 10 15.0 1.0 5 12.8 18.9 9.1 15.com .8 1.1 1.2 2.0 19.lmc-auto.7 1.4 15 5.utilization remains 90%+ • Demand driven growth takes supporting role.8 17.4 16.1 2.NA Production and Capacity Long-term Trend 25 100% Millions 20 3.2 19.2 40% 20% 8.8 13.5 0 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 .0 4.9 1.6 11.3 17.

All Rights Reserved.0 ~ 2mn 10.0 NA Sales Exports NA Production 5.NA Production and Sales Gap Narrows 25. 10 www.lmc-auto.0 15.com .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 Source: LMC Automotive © 2014 LMC Automotive Limited.0 Restructuring ~ 4mn Millions 20.

298K 862K 2010 2013 2018 • Exports in 2013 were 8% of total production.com .North America… an Export Hub? Exports 1. Industry Sources © 2014 LMC Automotive Limited. with NA being global source for Acura and Insight. BEA. All Rights Reserved.875K 1. volume to SA and EU expected to grow (some of this has been pared back) Source: LMC Automotive.lmc-auto. 11 www. 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.

South 4.2mn 2020 19. All Rights Reserved. 12 www.8 US .9 1.com .lmc-auto.1 MidWest/Ont. Central 1.1mn 1.Production Shift — 2000 to 2020 Industry 2000 17.5 Other Millions 2.4 0.1 9.8 1.4 8.6 4.7 Mexico Source: LMC Automotive © 2014 LMC Automotive Limited.

Investment Pours into Mexico +3. All Rights Reserved.lmc-auto.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% Source: LMC Automotive © 2014 LMC Automotive Limited.com . 13 www.

14 www.lmc-auto. All Rights Reserved.com .Outline • Mexico Economic Overview • North American Demand Environment • North American Production Dynamics • Mexico Production Outlook by Manufacturer • Summary © 2014 LMC Automotive Limited.

000 units by 2020 • Capacity utilization is expected to be high. but the global markets as well. 15 www.000 units and will build up to 150. given the models at this plant will not only serve North America. All Rights Reserved.com . Z4. and 3 Series • Initial capacity of 50. Utilization Source: LMC Automotive © 2014 LMC Automotive Limited.lmc-auto.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.

085 billion investment in Saltillo Van facility – Promaster (VF) production began in July 2013 Source: LMC Automotive © 2014 LMC Automotive Limited.Thousands Fiat Chrysler (Saltillo. Toluca) 600 120% 500 100% 400 80% 300 60% 200 40% 100 20% 0 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. All Rights Reserved.lmc-auto. 16 www.com . Saltillo Van.

Hermosillo) 600 120% 500 100% 400 80% 300 60% 200 40% 100 20% 0 • 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 Source: LMC Automotive © 2014 LMC Automotive Limited. 17 www.Thousands Ford (Cuautitlan.com .lmc-auto. All Rights Reserved.

Ramos Arizpe is projected to start competing with GM’s Fort Wayne Truck plant volume • With GM’s plan to drop the Regal. San Luis Potosi.Thousands General Motors (Ramos Arizpe. 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 Source: LMC Automotive © 2014 LMC Automotive Limited.com . All Rights Reserved. Silao) 120% 900 800 100% 700 80% 600 500 60% 400 300 40% 200 20% 100 0 0% Compact Midsize Large • Beginning in 2016. 18 www.lmc-auto.

000 units but is expected to increase to 520.lmc-auto. City. 19 www. 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. All Rights Reserved.000 units to bolster regional production and increase export activity • Guadalajara will continue as a source of the CR-V Utilization Source: LMC Automotive © 2014 LMC Automotive Limited. and Civic • Initial capacity at Celaya is 200.Thousands Honda (Celaya.com .

com .0L and below starting in 2017 • Capacity expected at 300.lmc-auto.000 units/year • Continue to explore further expansion Hyundai? Utilization Source: LMC Automotive © 2014 LMC Automotive Limited. All Rights Reserved. 20 www.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.

21 www.Thousands Mazda (Salamanca) 300 120% 250 100% 200 80% 150 60% 100 40% 50 20% 0 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. All Rights Reserved.lmc-auto.com . Mazda will produce Small Car models for Toyota and Scion based on Mazda Skyactive-B architecture in 2015 Utilization Source: LMC Automotive © 2014 LMC Automotive Limited.

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 Source: LMC Automotive © 2014 LMC Automotive Limited.II. 22 www.1. GLA.com . Cuernavaca) • Aguascalientes II – came online with the start of production of the Sentra (L12F) • Aguascalientes III partner w/Daimler to produce the QX30.lmc-auto. All Rights Reserved.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.III.

All Rights Reserved. 23 www. investment w/Mazda – Small Car models for Scion and Toyota to be produced at Mazda’s Salamanca plant Utilization Source: LMC Automotive © 2014 LMC Automotive Limited.com .Thousands Toyota (Baja) 70 140% 60 120% 50 100% 40 80% 30 60% 20 40% 10 20% 0 0% Compact Midsize Large • Baja remains a source for the Tacoma – capacity utilization high in the long-term • Venture spirit.lmc-auto.

San Jose Chiapa) 120% 1. San Jose Chiapa will be the global source for Q5 (AU426) and Q6 (AU519) .lmc-auto. All Rights Reserved.Volkswagen (Puebla.000 units/year • Given the addition of the Golf (VW370) in Puebla this year. the 600.000 900 800 700 600 500 400 300 200 100 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. 24 www. VW 800K US sales.000 unit capacity plant is expected to be at overcapacity from 2015 onward Source: LMC Automotive © 2014 LMC Automotive Limited.com .capacity at 200. Audi 200K Utilization • Starting in 2016.

Outline • Mexico Economic Overview • North American Demand Environment • North American Production Dynamics • Mexico Production Outlook by Manufacturer • Summary © 2014 LMC Automotive Limited.com . All Rights Reserved. 25 www.lmc-auto.

All Rights Reserved.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 lion’s 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 © 2014 LMC Automotive Limited. 26 www.com .lmc-auto.

lmc-auto.com © 2014 LMC Automotive Limited.Accurate real-time automotive intelligence. 27 www. forecasting and analysis Thank You JWegehaupt@lmc-auto.com . All Rights Reserved.