Canadian Sales - 2013

Strada iQ
January 2014

What a Year
1.74 M
The first quarter of 2013 (down 2%) gave no indication of such a strong year. Finally in the 2nd quarter everyone throttled up to move iron in a convincing fashion. Fascinating results when the auto industry gets aggressive.

Nuke the Market

With all manufacturers firing on all cylinders. They nuke the market with tempting offers. The Canadian consumer

loves to get nuked

with tempting offers.

Cheap Credit
Its no secret that subsidized loans and leases make vehicles affordable. While the customer presumably assumes the value risk with ever longer loan terms.

Trade Deficiencies
Who cares. Cheap loans, imaginative financing, facilitates dealing with trade in deficiencies. Enabled by the financial service providers. Subsidized by the manufacturers.

Longer Terms
Terms are inexorably getting longer to arrive at an appealing monthly payment. Roll over the trade deficiency, the taxes, no down payment, extend the term.

Lower the Rate Lengthen the Term

Close the sale with the

subsidized monthly payment.

To stay in the budget

The Risk
Customers use the subsidized low interest loans to continually roll over the trade in risk to a new vehicle. Manufacturers and financial service providers assist customers to roll over the risk. Manufacturers assume the residual risk in a lease, and assist customers to roll over the risk in a loan.

Manufacturers actively assist customers to roll over the used vehicle risk.

Moves Iron
New Product Subsidized Rates
To record sales never seen for many years. How can you move so much iron?

Popularity of Pick Ups

Abbreviated Ownership Cycle

Nuke and churn the market.

Tempt the opportunistic buyer.

Keep dealer inventories high.

Higher Inventories

It all works.

It moves a ton of iron. Why did it take so long to execute?

CPO
When you move so much iron with such tempting offers. The balancing act tilts against Certified Pre Owned, and recent model year used vehicles.

Especially for manufacturers with established CPO programs.

CPO is the Canary in the coal mine

The Months in 2013

Our Thoughts

January: (-2%) No sales management from 2012, Audi huge blink at -26% February: (-3%) Testing the market, is this realityscary stuff. March: (-0.5%) The Japanese and Koreans are napping, - 2% for the quarter. April: (+8%) After an alarming 1st quarter, everyone throttles up. May: (+5%) Lets keep it up, to get a strong quarter June: (+1%) A breather, lets asses the positions, up 2% YTD some relief. July: (+10%) Flat out in the summer, Ford blinked at -10%

August: (+6%) More flat out who else will blink, BMW a huge blink at -15%
September: (+4%) Keep it up for a strong quarter, BMW blinks again at -12%, Mazda blinks at -16%, Kia has been winking all summer. October: (+7%) Momentum, and intense competition, Acura blinks at -18%, Kia now blinks at -12%

November: (+6%) Flat out to generate more blinks, Acura blinks again -5%
December: (+4%) Strong finish with some selected sales management by a few.

Blink
For the second year, every manufacturer going into the 3rd quarter seeks opportunistic sales. For one to acquire opportunistic sales, another must blink.

Get aggressive to gain an advantage

Levers to create blinks:

Product Programs

Uncover weak spots in the competition, to create blinks.

Inventory
Tactics

Some Numbers
2013

Compact

Mid Size Sedans

Honda Civic..64,063 Hyundai Elantra57,760 Toyota Corolla44,449 Mazda 3....40,466

Jetta.30,413 Ford Fusion ..20,145 Toyota Camry..18,245 Honda Accord.........17,165 Hyundai Sonata..14,519 Chrysler 200....11,666 Nissan Altima...10,488 Chevy Malibu..6,834

As expected the Civic remains on top, followed by a strong performance for the Elantra and Corolla

The Jetta remains ahead, the Camry and Accord continue to trade paint.

All Figures from Automotive News

AgreedJetta is a success story.

Some Numbers 1
2013

CUV/SUV

Pick Up

Ford Escape.45,141 Honda CR-V.34,481 Toyota RAV4.33,156 Hyundai Santa Fe29,220 Chrysler Journey..27,745 Chevy Equinox.....19,819

Ford F Series.

96,931

Ram.63,218 GMC Sierra.. 35,229 Chevy Silverado.29,088

Up by 13% in 2013, dramatically better than the overall market. Its an enduring love affair with big vehicles.

The Escape ahead, while the Japanese trade paint, and Hyundai keeps the leaders focused no to blink.

Some Numbers 2
2013

Entry Luxury

Luxury SUV/CUV

BMW 3 Series12,507 M-B C Class..9,356 Audi A4......5,956 Cadillac ATS3,256 Infiniti G/Q50......3,048

Lexus RX7,789 Audi Q57,547 Acura MDX......6,114 Acura RDX...6,112 M-B GLK...5,979 BMW X3......5,658 M-B M Class...4,804 BMW X5..4,704 Cadillac SRX ........3,765 Buick Enclave....3,286 Lincoln MKX......3,238 Infiniti J/QX60......3,191 BMW X1..2,910

Lexus IS...2,579
Acura TL..2,374 Lincoln MKZ.1,625 Cadillac CTS..997

What else is new 3 Series ahead, ATS beat the G/Q50 combo, with IS nosing out the TL. CTS will be interesting next year.

Shuffling of positions, very competitive segment.

Some Numbers 3
2013

Pony Cars

Did You Know

Mustang.5,054 Camaro..2,167 Challenger.1,514

SLS AMG.......67 Lamborghini....46 Maserati....214 Ferrari....214 Panamera.....328 GT-R..125 R8....111 Bentley...147 Volt.....931

George Follmer (Mustang) probably got bored by the lack of competition.

Leaf....470

Shorter Ownership
As terms get longer to arrive at a monthly payment that fits the budget. The ownership cycle is abbreviating. With 40% considering, and almost 10% actively shopping for a new vehicle within 24 months.

Longer terms and shorter ownership cycle

Manufacturers in 2013
Our Thoughts

Audi: (+2%) Good performance especially the Q5 Acura: (+10%) On the strength of the ILX MDX RDX BMW: (+1%) After a few blinks still in front of the MerBimAu race Chrysler: (+6%) Still # 2Dart Grand Cherokee andRam huge numbers Ford: (+2%) # 1 in 2013, although felt the competition GM: (+3%) Its still not right at GM, gave in to the Japanese, and Ram.

Honda: (+10%) The Civic at # 1 and strong gains by Accord.

Manufacturers in 2013 - 1
Our Thoughts

Hyundai: (+1%) Modest increase, strong numbers by Elantra and Santa Fe Infiniti: (+11%) Improved with Q50 and QX60 Jaguar: (+96%) Finally a gain after a challenging 2012 Kia: (-7%) Begs the question What is going on? Land Rover: (+20%) Again the Evoque and Sportstrong Lexus: (+5%) Steady increase with ES IS and the RX as usual

Mazda: (+0%) Again this year the CX5 saves the day

Manufacturers in 2013 - 2
Our Thoughts

Mercedes-Benz: (+5%) Lost # 1 to BMW, B Class GLK saved the day Mini: (-4%) Niche / Specialty cars are fickle. Mitsubishi: (+7%) Hovering around with only 2 models Nissan: (+11%) Gaining with the Pathfinder. Porsche: (+22%) Boxster, Cayman, Cayenne, with a glimmer from the 911. smart: (-6%) Sliding again in 2013

Subaru: (+19%) What can you say Wow XV Crosstrek, Forrester

Manufacturers in 2013 - 3
Our Thoughts

Suzuki: (-43%) Closing the shop. Toyota: (+1%) In the game with strategic gains. Volkswagen: (+6%) Maintained strong momentum with Jetta and Tiguan Volvo: (-16%) What can you say?

Sales in Canada were up 4% for the year.

The Japanese solidified their positions, especially Honda and Toyota.

Hyundai held its position, while Kia gave some ground. GM persists in leaving pockets of vacuum filled by other.

A record breaking 2013.

Epic competition.

Success
The Canadian market is hyper competitive, been like that for years. Success hinges on having your competition blink.

Discretion is essential
especially with a myriad of social platforms, and pundits.

In a hyper competitive market

Why would your competition tell you everything they know?

Sustainable?
Can the value of auto loans continue to rise in 2014? What do you think? Do you think anyone has the answer?

There remain pockets of ebullient household credit growth most notably, the value of car loans is rising at an eye-watering 18% per year (Exhibit 15). From Canada Economic
Compass.

Our Thoughts
On 2014

Will the level of financing, programs, subsidies persist?

Lower value of the Canadian dollar will impact some manufacturers and strategies?

As usual new models/product will provide an advantage.

Will the Canadian consumer continue to remain bullish and optimistic to acquire additional debt especially during the second half of 2014?

Astute manufacturers contrary to 2013 will be hyper aggressive during the first quarter of 2014.

Thank You