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January 13, 2022 AGENDA Time Check: 75 Minutes Intro & Cox Automotive Mark Schirmer, Director, Public Relations The Economy Jonathan Smoke, Chief Economist Market Performance: New Vehicles Charlie Chesbrough, Senior Economist Market Performance: Used Vehicles Kayla Reynolds, Economic and Industry Insights Manager 2022 Outlook & Playlist Jonathan Smoke, Chief Economist and Resident DJ Q&A Speakers joined by Michelle Krebs, Executive Analyst Edit Master text styles 2 OUR PURPOSE Empower clients to thrive in a rapidly changing marketplace OUR VISION Transform the way the world buys, sells, owns and uses vehicles THE ECONOMY JONATHAN SMOKE CHIEF ECONOMIST @smokeoncars Edit Master text styles STATE OF THE INDUSTRY: Daily New Cases Decrease, Back-to-Normal Index Stalls Edit Master text styles 6 THE ECONOMY: Growth Strong and Most Factors Green Overall Economy Employment Conditions Buyer Confidence Wages Buyer Ability Real GDP Growth +6.7% (Q2 ’21) +2.3% (Q3 ’21) +6.7% (Q4 ’21 F) U3 Unemployment Rate 6.7% (Dec ’20) 4.2% (Nov ’21) 3.9% (Dec ’21) UofM Consumer Sentiment 80.7 (Dec ’20) 70.6 (Dec ’21) Earnings Growth 5.5% (Dec ’20) 4.7% (Dec ’21) Disposable Income Y/Y 4.4% (Nov ’20) 5.8% (Nov ’21) Edit Master text styles 7 THE ECONOMY: Credit and Rates Have Been Very Favorable Auto Finance FRBNY $168 billion (Q3 ’20) $199 billion (Q3 ’21) Interest Rates Effective Fed Funds Rate 0.09% (Dec ’20) 0.08% (Dec ’21) Average New Auto Loan Rate 4.29% (Dec ’20) 4.11% (Dec ’21) Average Retail Unleaded Gasoline Price $2.25 (Dec ’20) $3.29 (Dec ’21) Borrowing Costs Mobility Costs Edit Master text styles 8 Dealer Sentiment Index How would you describe the current market for vehicles in the areas where you operate? FOURTH QUARTER 2021 Strong 77 68 54 48 46 55 45 42 54 46 43 55 49 47 56 51 50 59 51 48 51 50 48 47 44 42 54 49 48 56 48 46 51 47 46 56 53 55 49 47 61 61 49 46 49 45 67 63 73 70 62 59 60 56 30 20 17 Weak Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Overall Q2 19 Q3 19 Franchised Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Independent Note: Scale 1 - 100 Dealer Sentiment Index Q4 2021 9 Dealer Sentiment Index What do you expect the market for vehicles in your area to look like 3 months from now? FOURTH QUARTER 2021 Strong 73 70 74 69 64 55 52 57 52 51 57 53 52 56 52 61 57 55 63 63 62 54 49 47 66 63 61 62 55 52 57 51 49 68 57 54 51 51 45 40 60 50 46 58 59 56 63 59 71 69 60 56 60 57 48 44 Weak Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Overall Q2 19 Q3 19 Franchised Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Independent Note: Scale 1 - 100 Dealer Sentiment Index Q4 2021 10 Dealer Sentiment Index Inventory/Profits Q4: How would you describe your profits over the past 3 months? Q8: How would you describe the current new-vehicle inventory levels? FOURTH QUARTER 2021 Growing Strong 82 68 67 62 48 50 49 61 49 51 57 49 60 59 64 51 49 66 61 52 59 51 56 51 43 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 63 41 Q2 19 Q3 19 New Vehicle Inventory Q4 19 Q1 20 Q2 20 81 70 48 25 86 44 29 Q3 20 Q4 20 Q1 21 13 13 14 Q2 21 Q3 21 Q4 21 Declining Weak Franchised Profits Note: Scale 1 - 100 Dealer Sentiment Index Q4 2021 11 MARKET PERFORMANCE: NEW VEHICLES CHARLIE CHESBROUGH SENIOR ECONOMIST @Charlie_Ches Edit Master text styles DECEMBER SALES: Uptick In Volume Suggest Worst Likely Over Averaging just over 1 million sales each month since August, but December had relatively large gains for domestic Truck/SUV sales Monthly Light Vehicle Sales SAAR (millions) SAAR In Millions Volume in Mllions 20 Q4-2019 16.9 4.3 18 Q4-2020 16.2 4.2 Q3-2021 13.3 3.4 Q4-2021 12.8 3.2 vs Q4-2019 -24.3% -23.6% vs Q4-2020 -21.0% -22.0% vs Q3-2021 -4.1% -4.1% Dec-19 16.9 1.5 Dec-20 16.3 1.6 Nov-21 12.9 1.0 Dec-21 12.4 1.2 vs Dec-19 -26.3% -21.1% vs Dec-20 -23.8% -25.6% vs Nov-21 -3.6% 19.0% 16 14 12.4 12 10 8 6 4 2 Pass Car Lt Truck Total Light Oct-2021 Jul-2021 Apr-2021 Jan-2021 Oct-2020 Jul-2020 Apr-2020 Jan-2020 Oct-2019 Jul-2019 Apr-2019 Jan-2019 0 Source: Edit Cox Automotive, BEAstyles Master text 14 FINAL 2021 SALES VOLUME: 14.9 Million Finish After A Strong H1 and Weak H2 Market up over 3% from last year, but still 12% below 2019’s 17.0 million Light Vehicle Sales History 18 SALES VOLUME (millions) Pass Car Light Trucks Total 17 Car Share 16 CY2019 4.7 12.2 17.0 27.8% 15 CY2020 3.4 11.1 14.5 23.5% 14 CY2021 3.3 11.6 14.9 22.4% 13 2021 v 2019 -29.2% -5.3% -12.0% -5.5% We Are Here 12 11 -1.8% 4.7% 3.1% -1.1% 10 9 8 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2021 v 2020 Source: Edit Cox Automotive, BEAstyles Master text 15 MARKET OUTLOOK: Demand Is There If Supply Can Be Too How quickly the supply chain can recover will drive the market – should ramp up through the year Monthly New Light Vehicle Sales (thousands) 1,800 Supply/Sales grows from current level at: 1,600 4% pace = 16.4 million 3% pace = 15.3 million 2% pace = 14.4 million 1% pace = 13.5 million 1,400 1,200 1,000 800 1% Path 2% Path 3% Path 4% Path Oct-2022 Jul-2022 Apr-2022 Jan-2022 Oct-2021 Jul-2021 Apr-2021 Jan-2021 Oct-2020 Jul-2020 Apr-2020 Jan-2020 600 Cox Automotive 2022 Outlook: 16.0 million sales History Source: Cox Automotive Estimates, BEAstyles Edit Master text 16 CHANGING CHANNELS: Covid Causing Massive Disruption Declines in both Lease and Fleet share are low and present opportunities for OEMs – if retail purchasers pull back there are levers to pull Retail Lease Share of Retail Fleet Share of Total Vehicle Sales 34% 30% 32% 25% 30% 20% 28% 15% 26% 10% 24% 5% 22% 2021 2020 2019 2021 2020 Source: Cox Automotive analysis of IHS registrations Edit Master text styles Dec Nov Oct Sep Aug July Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug July Jun May Apr Mar Feb 0% Jan 20% 2019 17 MARKET SHARE: Asian/EU Brands Gained From American Brands – At First OEMs hit early are now recovering share – 2022 likely to be a volatile year again as pace of stock rebuild will vary Asian Brands European Brands 60% American 3 Brands (no Tesla) 14% 60% 12% 50% 50% 10% 40% 40% 8% 30% 30% 6% 20% 20% 4% 10% 2% 2021 2020 2019 2021 2020 2019 2021 Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 2020 Dec Nov Oct Sep Aug July Jun May Apr Mar Feb Dec Nov Oct Sep Aug July Jun May Apr Mar Feb 0% Jan Dec Nov Oct Sep Aug July Jun May Apr Mar Feb 0% Jan 0% Jan 10% 2019 18 OEM PERFORMANCE: Toyota Is The New Champ, Hyundai Gained Most Share GM, Ford, Stellantis combined lose nearly 5% share in 2021 – Tesla had a huge year, but more competition in 2022 OEM Toyota Q4 2021 474,379 2021 vs 2019 -21.5% 2021 vs 2020 -28.2% CY2021 2,332,263 2021 vs 2019 -2.1% 2021 vs 2020 10.4% Share2021 15.5% Share2020 14.5% Difference 1.0% GM Ford 436,358 504,138 -40.4% -15.8% -43.1% -6.4% 2,202,577 1,891,753 -23.5% -21.4% -13.1% -7.0% 14.6% 12.6% 17.4% 14.0% -2.8% -1.4% Stellantis Hyundai 411,513 313,638 -24.1% -7.9% -17.6% -8.2% 1,777,393 1,489,118 -19.3% 12.4% -2.4% 21.6% 11.8% 9.9% 12.5% 8.4% -0.7% 1.5% Honda Nissan-Mitsu 287,206 219,844 -28.5% -32.7% -21.5% -14.8% 1,466,630 1,079,676 -8.8% -26.4% 8.9% 9.4% 9.7% 7.2% 9.2% 6.8% 0.5% 0.4% Volkswagen 130,860 -21.8% -25.0% 636,032 -2.0% 11.6% 4.2% 3.9% 0.3% Subaru BMW 121,008 100,891 -30.8% 0.2% -31.0% -6.0% 583,810 366,574 -16.6% 1.6% -4.6% 19.5% 3.9% 2.4% 4.2% 2.1% -0.3% 0.3% Tesla Mazda 115,248 59,543 114.4% -15.4% 69.0% -21.4% 352,471 332,756 83.3% 19.5% 71.4% 19.2% 2.3% 2.2% 1.4% 1.9% 0.9% 0.3% Daimler Volvo-Geely 79,067 28,236 -24.5% -8.3% -17.0% -22.7% 332,610 124,692 -7.2% 15.4% 2.1% 13.2% 2.2% 0.8% 2.2% 0.8% 0.0% 0.1% Tata Rivian 17,101 583 -53.4% - -43.7% - 92,380 584 -26.6% - -5.2% - 0.6% 0.0% 0.7% 0.0% -0.1% 0.0% Lucid Nation 577 3,300,190 -23.0% -21.3% 577 15,061,896 -11.6% 3.4% 0.0% 100.0% 0.0% 100.0% 0.0% 0.0% Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 19 TOP SELLING VEHICLES: F-Series Wins Again, But Ram Making Gains Toyota wins other categories, but while Camry sales gained in 2022, RAV4 lost its big lead Truck Race CY 2021 Lead CY 2020 Lead Ford F-Series 726,004 Ram Pickup 569,388 156,616 563,676 223,746 1.0% Chevrolet Silverado 519,774 206,230 586,675 200,747 -11.4% CY 2021 Lead CY 2020 Lead Y/Y Change SUV Race 787,422 Y/Y Change -7.8% Toyota RAV4 407,739 Honda CR-V 361,271 46,468 333,502 96,885 8.3% Nissan Rogue 285,602 122,137 227,935 202,452 25.3% CY 2021 Lead CY 2020 Lead Y/Y Change Car Race 430,387 -5.3% Toyota Camry 313,795 294,348 6.6% Honda Civic 263,787 50,008 261,225 33,123 1.0% Toyota Corolla 229,785 84,010 217,712 76,636 5.5% Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 20 NEW VEHICLE INVENTORY: Slowly Starting To Show Some Improvement Supply situation remains bad – 1.8 million fewer vehicles than 2020, and over 2.5 million lower than 2019 Available Supply weekly Days of Supply weekly 200 4,500,000 180 4,000,000 160 3,500,000 140 3,000,000 120 2,500,000 -62% 2,000,000 80 1,500,000 60 1,000,000 -49% 40 500,000 0 100 20 2021 2020 2019 2021 2020 2019 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Source: Cox Automotive, VMAtext Datastyles Edit vAuto Master Dec 21 BRAND INVENTORY: Toyota Wins Sales Title With Tightest Supplies Toyota and Honda very tight while Stellantis in a much different position Days of Supply 100 90 80 70 60 50 40 30 20 10 Source: Cox Automotive, VMAtext Datastyles Edit vAuto Master Alfa Romeo Dodge Jeep Chrysler Ram Audi Lincoln Volvo Hyundai INFINITI Ford GMC Chevrolet Buick MINI Nissan NATION Cadillac Genesis Volkswagen Mitsubishi BMW Mercedes-Benz Subaru Land Rover Mazda Honda Acura Kia Porsche Toyota Lexus 0 22 PRICE CATEGORY INVENTORY: Most Affordable = Least Available Demand for lower priced vehicles remains robust but not many products to choose from – not now and likely not ever Days of Supply 45 40 35 30 25 20 15 <$20K $20K-$30K $30K-$40K $40K-$50K NATION $50K-$60K $80K+ Source: Cox Automotive, VMAtext Datastyles Edit vAuto Master $60K-$80K 23 VEHICLE AFFORDABILITY: Rising Prices Transforming Marketplace COVID accelerating longer-term trends – 30% of sales now above $50,000 Average Vehicle Transaction Price $44,000 Price Growth $43,108 $42,000 $40,000 +8% since 2020 +39% since 2012 Share of Market by MSRP Price Range 2012 – 2021 9.0% 50% 8.0% 45% 7.0% 6.0% Share <$30,000 2012: 54% 2021: 19% 40% Share >$50,000 2012: 6% 2021: 30% 35% 30% $38,000 5.0% 25% 4.0% $36,000 3.0% $34,000 2.0% $32,000 $30,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20% 15% 10% 1.0% 5% 0.0% 0% <20K 20K-30K 30K-40K 40K-50K Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 50K-60K 60K+ 24 BRAND PRICE INCREASES: Big Variation – Cadillac and Porsche At Extremes Nationally, transaction prices rose over 8% but some brands – due to product mix – saw much larger/smaller changes YOY Change in Transaction Price 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Fi a Su t ba ru M az da M in i In La fin nd iti Ro ve Ni r ss an B Al uic fa Ro k m eo Le xu s BM Po W rs ch e Ki a Ra NA m TI O N Fo rd Vo lv Hy o un da i Te sla Au di Li nc ol n To yo ta Ca di ll G ac en es is Do dg e Vo Acu ra lks w ag en J Ch e ep ev ro le Ja t gu ar M Ho er ce n de d a sBe Ch n z ry M sle r i ts ub is hi G M C 0.0% Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 25 “LUXURY” MARKET: Mercedes Once Ruled – Now It’s Ford Competition rising with more brands entering higher price points Share of MSRP $50K+ Market 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 2012 Je ep Vo lv o B ui ck G en es A lfa is R om eo am R Po rs ch e Li nc ol n N is sa n To yo ta Ja gu Vo a lk sw r ag en H yu nd ai Te sl a A cu ra D od ge Fo rd Le xu La s nd R ov er C ad ill ac M C G In fin iti ud i A M W B M er ce de sB en C z he vr ol et 0.0% 2021 Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 26 NON-LUXURY MARKET: Toyota Leads The “Affordable” Market Asian brands gaining share as Americans move to higher priced product segments Share of MSRP <$50K Market 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 2012 In fin M iti its ub is hi M in i Vo lv o ud i A cu ra M er B M ce W de sB en z C ad ill ac A ui ck B a Le xu s M az d am R hr ys le r ar u C Su b M C G Je Vo ep lk sw ag en od ge ia D K To yo ta C he vr ol et H on da N is sa n H yu nd ai Fo rd 0.0% 2021 Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 27 TOTAL REVENUE: Strong Margins And Prices Offset Lower Volumes No hurry to return to “normal” - Industry revenue higher than 2019 with nearly 2 million few vehicles sold Incentive % of Transaction Price Price Share of MSRP Estimated Monthly Transaction Revenue ($ billions) 12% 104% $80 10% 102% $70 8% 100% 6% 98% 4% 96% $60 $50 $40 Total Revenue (billions) CY2019 $647 CY2020 $580 CY2021 $649 $30 2% 94% $20 Incentive % Transaction Price Price Strength 10/1/2021 7/1/2021 4/1/2021 1/1/2021 10/1/2020 7/1/2020 4/1/2020 1/1/2020 10/1/2019 7/1/2019 4/1/2019 92% 1/1/2019 0% $10 $0 Jan Feb Mar Apr May 2021 Jun Jul Aug 2020 Source: Cox Automotive, Bluetext Bookstyles EditKelley Master Sep Oct Nov Dec 2019 28 SUMMARY • Demand for vehicles in 2022 to remain robust thanks strong economic growth, improving labor markets, and exciting new products. • Biggest threats to 2022 remain COVID and the economy – new variants could disrupt the economic recovery and supply chain, and higher interest rates likely to impact affordability. • Key unknowns for 2022: • How quickly can the industry re-stock dealer lots • How much do manufacturers really want to Source: Cox Automotive, Bluetext Bookstyles EditKelley Master 29 MARKET PERFORMANCE: USED VEHICLES KAYLA REYNOLDS MANAGER, ECONOMIC AND INDUSTRY INSIGHTS @AutoKayla Edit Master text styles QUARTERLY SALES PACE: Slowing After A Spring Frenzy Q3 Q4 Total Used SAAR Retail Used SAAR July 41.8 21.8 August 40.9 21.3 September 39.7 20.7 October 40.7 21.2 November 39.1 20.4 December Forecast 39.1 20.4 Edit Master Estimates text styles Source: Cox Automotive 32 INVENTORY MANAGEMENT: Used Days’ Supply Near Normal Available Supply weekly Days of Supply weekly 3,200,000 100.0 90.0 3,000,000 80.0 70.0 2,800,000 60.0 2,600,000 50.0 40.0 2,400,000 30.0 2021 2020 2019 20.0 2,200,000 2021 2020 2019 2,000,000 10.0 0.0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Source: vAuto and Cox Edit Automotive Master text Estimates styles Sept Oct Nov Dec 33 PRICE MOVEMENT: Upward Trend Leads to Record Highs MY 2018 Retail and Wholesale Price Index 2020 Retail Index 2021 Retail Index 2020 Wholesale Index 2021 Wholesale Index 145% 135% 125% 115% 105% 95% 85% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Edit MasterEstimates text styles Source: Cox Automotive 34 RETAIL INVENTORY: Affordability Decreasing for Used Vehicles 50% Average List Price Average Mileage 45% December 2020 $21,979 66,381 40% December 2021 $28,105 69,921 35% 30% 25% 20% 15% 10% 5% 0% $0K-$10K $10K-$15K $15K-$20K $20K-$25K December-20 $25K-$30K $30K-$35K $35K + December-21 Source: vAuto and Cox Automotive Edit Master Estimates text styles 35 USED-VEHICLE SALES AND FORECAST FULL-YEAR FORECASTS 2019 40.0 2020 37.3 2021 40.9 2022 39.3 2023 39.7 RETAIL FORECASTS 2019 21.0 2020 19.8 2021 21.4 Edit Master Estimates text styles Source: Cox Automotive 2022 22.1 2023 21.2 36 2022 OUTLOOK & PLAYLIST JONATHAN SMOKE CHIEF ECONOMIST @smokeoncars Edit Master text styles 16.0M 2022 FORECASTS 13.6M 2.4M FLEET SALES NEW SALES NEW RETAIL SALES 3.7M 27% NEW LEASE VOLUME LEASE PENETRATION CPO SALES 39.3M 22.1M -3% USED SALES USED RETAIL SALES 3.0M DEC 2022 Y/Y MANHEIM USED VEHICLE VALUE INDEX 39 TEN PREDICTIONS FOR 2022 #1: Vehicle Demand Will Remain Robust, Especially Through the First Half #4: EV Growth Will Outpace Industry Growth #5: Auto Loan Rates Will Rise #8: Robust Dealership Consolidation Will Continue #2: Used-Vehicle Values Will Depreciate Again, After the Spring #6: Lease Demand Will Improve in 2022 #9: Consumer Shift To Online Becomes Dominant #3: Tight Vehicle Supply Will Gradually Improve #7: The Service Revenue Opportunity Will Continue To Be Robust For Dealers #10: Direct-To-Consumer Model Will Force Dealers To Adapt Edit Master text styles 40 PLAYLIST: Riding the Anti-Crash Wave I Feel Good By Pitbull, Anthony Watts & DJ White Shadow Dealer Optimism Do It To It By ACraze Featuring Cherish Sunshine By OneRepublic No By Little Mix Vehicle Demand Used-Vehicle Market Economic Health Edit Master text styles 41 Q&A THANK YOU! Contact Information: Dara Hailes Manager, Public Relations Cox Automotive [email protected] Mark Schirmer Director, Public Relations Cox Automotive [email protected] For additional content from Cox Automotive: www.coxautoinc.com/newsroom/ www.coxautoinc.com/marketsnapshot Sign up for From the Newsroom, our biweekly newsletter: www.coxautoinc.com/signup