Current situation of the European car market and the foreseeable changes

http://www.inovev.com
Jamel Taganza
Vice-President
Jamel.taganza@inovev.com
Michel Costes
President
michel.costes@inovev.com
Current situation of the
European car market
and the foreseeable
changes
November 4, 2015

Outline of the presentation
Inovev company and its methodology
The French car market, locally and in a wider spectrum
 registrations
 powertrains
Automotive production: Global, European and French
 Country
 Carmakers
 Powertrains
Key factors of change taken into account in the forecast
 Analysis as the foundation of forecast scenarios
 Key factors of change
 Expected impact of the Volkswagen case
Foreseeable Evolutions
 Market evolution: medium term scenario
 Production on national soil - all carmakers
Conclusion
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Inovev company and its methodology
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Inovev`s core Business
The Inovev company is an independent company funded by independent private
equity (individuals). Its customers are mainly in Europe and Asia.
It was recently established (2010), but its management team is composed of experts
from the automotive industry, from forty years of experiences in the automotive industry
(the President) to ten years (the Vice President).
Members of the team have particularly over the past two decades:
 Observed and analysed the global automotive market and performed forecasts on
said market.
 Analysed the design of a hundred vehicles through their complete dismantling, in
cooperation with carmakers and their suppliers.
Analyses and forecasts undertaken by Inovev are based on reliable data and a rigorous
methodology.
416/11/2015

Methodology
Acquisition of market data (registrations and sales)
relating to the past and present: mainly from ministries of transport.
Data processing
Homogenisation and implementation of all data in a common framework.
Production figures, when they are not supplied by the carmakers (most common) are estimated through different
calculations.
Analysis
 Latest changes.
 Key factors of change:
• Regulations.
• Standards and voluntary testing (Euro N'Cap).
• Carmaker policy.
• Political and media influence.
Forecasting
• Model by model.
• Engine by engine.
• Plant by plant.
Analysis of the differences between forecasts and outcomes
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The French market, locally and in a wider spectrum
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Key figures of the French market
Note: for the remainder of the presentation: PC = Passenger Car - LUV = Light Utility Vehicle.
The French automotive fleet was on the 1st January 2015 the third largest fleet of the European Union with 31.5
million vehicles (Germany: 42.3 - Italy: 36.6 - GB: 29,0 - Spain: 22.1 - Poland: 18.9).
Car ownership rate in France (number of private vehicles per capita) is in the same average as the European
Union. The most widely motorized country is Italy. Motorization rates of other major countries in the European
Union are similar to each other. Nb: Poland is at the same level as France and Germany. See Graph 1.
France is in 3rd place in terms of annual registrations in the European Union, behind Germany but also behind
Britain. See Graph 2.
French registrations (PC + LUV) have varied fairly stably during the last decade, between 2.2 million and 2.6 million
vehicles (PC + LUV) sold per year, See Graph 3,
(while production in France (all carmakers, PC + LUV) collapsed during the same period, from 3.5 million per year to
2 million vehicles).
The automotive crisis of 2008 was not experienced in the same way in France and Germany. See Graph 3 Both
countries implemented scrappage schemes, but in different ways:
 In Germany it was announced that the measure is ad hoc and limited in time.
 In France, the measure lasted longer and was more usual.
It should be noted that the scrapping schemes generally have little impact on the market level in 5-year average.
It's just a windfall gain, that anticipates sales but does not generate additional sales (windfall gain is usually followed
by a drop in sales).
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Car ownership in European countries
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Car ownership in European countries: 2015, PC, number of cars per thousand inhabitants
Average rate in Europe: 480 Compared to Japan: 450 and USA: 790
Graph 1
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How are registrations evolving in Europe?
PC + LUV registrations in Europe (2005-2015) - By country
Graph 2
Number of vehicles registered per annum
9
The French market saw the least variation in sales volumes among the other major European markets.
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How are registrations evolving in France and Germany?
PC + LUV registrations in France and Germany (2005-2015)
PC registrations in France and Germany (2005-2015) LUV registrations in France and Germany (2005-2015)
Graph 3
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Energy mix of the European and French markets
Europe has a virtually unique specificity in the world,
that of a high proportion of PC (Passenger Cars) with diesel engines: 53% in 2014.
In the world, only Korea and India have a PC market with such a large market share of diesel engines(Korea: 43% - India:
47%).
Diesel engines started in France in the late 80s (10% in 1980, 15% in 1985, 33% in 1990), within an energy framework
whose policy was to promote the use of heavier oils. See Graph 4
It remained until the late 1990s a French specificity. Then in the "late 90's / early 2000" it took off in all the countries of
Europe, primarily because of the technical progress made by European carmakers on this type of engine.
France has increased continuously its dieselisation rate from 1998 to 2008 to reach a rate of nearly 80% in 2008, just
before the crisis. Spain has increased its share of diesel engines by up to 70%.Even the UK, whose specificity in Europe is to
have diesel fuel prices that are higher than gasoline has reached and maintained since 2008 a dieselisation rate close to 50%.
Electrified powertrains, hybrids and battery electric vehicles, do not hold to this day significant place in the market:
Hybrid vehicles (share of the the European market in 2015: 3%) have been faced with two obstacles:
• A competitiveness which is difficult to highlight to users against the advantages of diesel engines.
• A low supply of European carmakers. It is noteworthy that the Toyota company has for its part developed a
strong policy of selling its hybrid vehicles in Europe and particularly in France, seeing a way to mark its different
positioning compared to other European carmakers. 43% of Toyota vehicles sold in France are hybrids.
 Battery electric vehicles (share of the the European market in 2015: 1%) have not yet established themselves, despite
the global leadership of the Renault-Nissan group (with the Leaf, its global vehicle and the Zoe, its European vehicle).
1116/11/2015

Diesel market rates in Europe in 1994-2014.
Registrations in the 27 countries of the European Union (VP, in numbers)
 In 2005 (50% PC)
 In 2011: 7.6 million PC (56%)
 In 2014: 6.5 million PC (53%).
 Dieselisation market rate (27 countries) and in a number of other countries:
- Germany - France - United Kingdom - Spain - Italy
Registrations: Total European Union Registrations: By EU country
Dieselisation rate of the European market (VP registrations)
Graph 4
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Automotive production: Global, European and French
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French Production
It is necessary to differentiate:
 production figures of French carmakers in the world,
 production figures on French soil, That may be called by the same term: French
production.
Production of French and European carmakers in the world. See Graph 5.
 Europeans carmakers can be considered as holding the first place worldwide in terms
of numbers of light vehicles (PC + LUV) produced, however, considering that:
• The Nissan company is controlled by Europe (Renault).
• Chinese vehicles produced within the JV with European carmakers (notably
Germany) are counted as vehicles under European control.
 The Renault-Nissan Group has developed strong growth and reached the fourth place
in the world and PSA has reached the 9th place in the world rankings. See Graph 6.
Production on French soil. See Graph 7.
 France is no longer a major country in terms of production on its territory. It is no
longer part of the top 10 auto producing countries in the world.
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Global production of PC + LUV in 2015
By carmakers area of control
Nissan is considered controlled by France
Global production of PC + LUV in 2015 –
By carmakers Country of control
Nissan is considered controlled by France
Worldwide Production by carmaker
Graph 5
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Worldwide Production by carmaker
By manufacturer Group - Estimated for a full year
By manufacturer Group – France and Germany
Renault (32%) Nissan (68%)
Graph 6
16
German Groups French Groups
16/11/2015
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Production on French soil and in the wider spectrum
Global production of PC + LUV in 2015 -
By producing country.
Estimated for a full year
Graph 7
France is no longer in the top 10 vehicle-producing countries.
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Energy mix by European manufacturer
Ford, PSA and Renault-Nissan groups are most dieselised,
diesel accounting for 60% of their automobile production. See Graphs 8 et 9.
Given that Renault-Nissan and PSA produce many small vehicles (which have become less dieselised), diesel proportion is
even higher than 60% for larger displacement engines.
PSA and Renault-Nissan groups are being particularly affected by a drop of diesel engines because part of their production
which is higher than their competitors is for France, a country in which diesel engines are less and less popular.
However it is the Volkswagen group which produced the largest number of diesel vehicles in Europe.
In our forecasts, we take into account the likely and certainly efficient policies set by Diesel manufacturing groups which
will aim to:
 Halting the decline of diesel engines and stabilize its market share (probably around 50% in Europe in 2018) going
against the current misinformation often assimilating Diesel engines to dirty engine, at a time when Euro 6 and Euro
6c forcing diesel engines to be as clean as gasoline engines.
 An amalgam is indeed kept between older diesel vehicles more polluting than gasoline, and new diesel vehicles at
almost the same level of pollution or even lower than gasoline vehicles. Diesel engines has indeed many customer
advantages to argue compared to gasoline engines (especially in terms of CO2 reduction and lower fuel consumption
but also in terms of customer benefits). Moreover this is even a development that some countries envy us for (eg Japan
and China which will be using diesel engines as an alternative development aim).
 Confirming the development of a new generation of diesel engines that meet the most restrictive standards,
extensively initiated already.
 Strengthen the development of electrified vehicles.
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What types of vehicles are produced in Europe?
PC + LUV production by energy in 2015
Graph 8
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What is the share of diesel and gasoline models for each carmaker?
Diesel rate by group (PC + LUV)Production of diesel vehicles (PC + LUV) in Europe (2005-2015)
gasoline rate per group (PC + LUV)Production of gasoline vehicles (PC + LUV) in Europe (2005-2015)
Graph 9
2016/11/2015
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Key factors of change taken into account in the forecast
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Analysis as the foundation of forecast scenarios
Graph 10
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Subject French Market European Market French Carmakers Production CO2 reduction Pollutants decrease (excluding CO2) Noise decrease
Tax change
* Decrease of taxes diffential between
gasoline and diesel - VAT on companies fleet - * - * - * - *** 0 0
The price of fuel increases, which is not in favor of the market.
The Diesel decreases and thus the CO2 increases.
* Strengthening CO2 standards - * - * +** +** N.A 0
Les prix des véhicules augmentent, ce qui n'est pas favorable au
marché. Les constructeurs français sont bien placés en CO2.
* Strengthening pollutants standards (new
cycles, levels) - * - * 0 N.A +** 0
Vehicle prices increase, which is not favorable to the market.
French carmakers are well placed to CO2.
* Scrapping incentives for the purchase of a
new vehicle or a recent occassion vehicle
0 at middle term.
Effect at short term
only
0
0 at middle term. Effect at
short term only
0 0 0 Windfall gain
* Restriction for traffic of old vehicles +* +* 0 +*** +*** +**
Consumers are encouraged to change their vehicles. It can affect
people who otherwise would not change vehicles
0 - * +** +*** +** +*** Small and medium vehicles in larger numbers.
* Electric Vehicles +** +** +** Renault /- * PSA +*** (in France) +*** +***
The development of electric vehicles at a significant scale
allows local pollution decrease
* Hybrid Vehicles 0 0 - * 0 0 +* The gain depends on the use
* Carsharing - ** - ** 0 +** +** +** (in Electric Vehicles used)
* Low Speed Electric Vehicles (LSEV) - **/+** - **/+** - * +*** +*** +***
Market of conventional vehicles declining. Benefit to LSEVs.
Opportunity for newcomers.
* Other modes of locomotion (2 wheels,
Conventional transports) - ** - ** - ** +*** +*** 0 Measures purely in favor of the environment.
Strengthening standards
Withdrawal from circulation of old vehicles
Limited speed in Europe (120 km/h) for a new vehicle
design
Support to the development
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Key factors of change
In our medium term scenario:
The French automotive market (PC + LUV) is expected to remain nearly unchanged till 2020: 2.2 million units in 2015 to 2.3 million
units in 2020.
 The European automotive market (PC + LUV) should know a growth of 2% per year on average, and reach 16.5 million units in
Europe in 2020 (15 million units in 2015).European growth will be based on the growth of markets outside France, including:
• Italy, Spain, Portugal and Greece (catching).
• Former Eastern Countries that have a low motorization rate.
In this mature market, key factors of change can impact more or less the automotive landscape, especially :
 The tax change.
 Strengthening standards.
 The withdrawal from circulation of old vehicles.
 A European speed limit leading to a vehicle resizing.
 The support for the development of transport and alternative powertrains.
The Graph 10 shows our working tool (extract from France) that reflects the impact of actions being taken on 5 variables :
• Level of the French market.
• Level of the European market.
• Production of French carmakers.
• C02 decrease.
• Pollutants decrease (except CO2).
• Noise reduction.
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Expected impact of the Volkswagen case
On the French market (PC + LUV)
 Little impact.
 A small decline in the short term (within 6 months) compared to our pre-crisis forecasts but followed by a
catch-up in 2016.
 No impact in the longer term.
On the energies breakdown within French registrations
 Small accelerated decline of diesel engines in France. But a sharp decline had been anticipated before the
Volkswagen case and fundamentals have not changed. A new energy mix balance should appear in 2018, with
diesel remaining strong component given its great advantages in terms of balance price / performance /
environment.
On production levels of French carmakers.
 Little impact, the fundamentals have not changed.
 Paradoxically, it is the VW group that could at medium and long term benefits the most from the Volkswagen
crisis.
It has indeed a very diversified offer and could be tempted to give a green image by developing electric vehicles
faster than expected . However, expenditures related to the case could force the carmaker to slow down some
investments and development (R & D in particular).
 Can be at medium and long-term an advantage for the Renault-Nissan group that benefits from having electric
vehicles.
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Foreseeable Evolutions
2516/11/2015
See graphs 11 et 12

Market evolution: medium term scenario
PC + LUV European Market: Volume PC + LUV French market : Volume
PC + LUV European market: % diesel
engines
PC + LUV French market: % diesel engines
2616/11/2015
Graph 11
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Production on national soil - all carmakers
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Graph 12
Europe 29 + Turkey (PC+LUV) – Production on Europe Soil France (PC+LUV) – Production on France Soil

Conclusion
French market
We expect:
 A French market that remains stable between 2015 and 2020.
Alternative transport will be the key of this stability.
 A mathematical cleaner air, between 2015 and 2020 thanks to the withdrawal of old polluting vehicles and by replacing them
with cleaner new vehicles, gasoline or diesel. This consolidation could be accelerated by measures to increase the speed of
withdrawal.
In the long term the development of battery electric vehicles is expected to further reduce local pollution while reducing noise.
 The diesel engine is very likely to remain an important engine in Europe in the coming years due to:
• Its contribution to CO2 reduction targets.
• His lower consumption.
• Its popular customer benefits appreciated by a large part of the population.
We expect a ratio of 50% in France and in Europe, France joining other European countries.
Production of French carmakers
We expect:
• In the short term, growth of French carmakers will be stronger as long as they continue to sell diesels in Europe, popular
with consumers, and that gives them an advantage over other carmaker that do not manage this technology.
• In the medium and long term, an even stronger growth in the case of electric vehicle development, supported by
technological developments and a proactive government policy.
2916/11/2015

Postal address:
34 rue Camille Pelletan
92300 Levallois-Perret
France
Stationary telephone: + 33-952 96 06 68
Contacts:
 Managing director
Michel Costes
 Sales and marketing
Jamel Taganza
jamel.taganza@inovev.com
Postal address:
34 rue Camille Pelletan
92300 Levallois-Perret
France
Stationary telephone: + 33-952 96 06 68
Contacts:
 Managing director
Michel Costes
 Sales and marketing
Jamel Taganza
jamel.taganza@inovev.com

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