European Car and Light

Commercial Vehicle Production Outlook

December 2015

SMMT, the 'S' symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd

Contents

Introduction and analysis overviews Page Individual Vehicle Manufacturer reviews Page Introduction 2 BMW 39 Executive Summary 3 Daimler 41 The Outlook for 2016 – better than might be expected? 9 43 Market Overview & Country Summary 13 Ford 45 Alternative Scenarios 14 GM 47 Country Analysis 18 49 UK and France comparison 23 Hyundai – 50 Key Country Developments 24 PSA 51 UK 24 --Dacia 54

 The 2m units question 29 57 France 31 Tata Jaguar Land 58 Germany 32 60 Italy 33 Group 61 Spain 34 63 Production Summary 36 64 Other VMs 65

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 1

Introduction This report continues the new style of reporting which we adopted at the start of 2014. This is intended to be more manageable for readers; we now exclude much of the detail on historic developments at each vehicle company, information which can be found in previous editions of the report available on the SMMT website. www.smmt.co.uk. In addition, the model level information for vehicle production outside the UK is excluded from the current versions, although this data is available from Ian Henry of AutoAnalysis. Our focus is increasingly on developments in the UK, to make the report more relevant for UK suppliers; many of these companies should see major new business opportunities with increased sourcing at the tier 1 level in the UK especially, as well potential business too for smaller suppliers at the tier 2 and 3 level. Our coverage now runs to 2020 and to make the tables and charts more manageable from visual point of view, we now provide coverage from 2010 onwards; data for earlier years is available in previous reports on the SMMT’s website. 2021 will added in the first report in 2016. In addition, this issue contains a number of alternative scenarios for European production to the Base Outlook. The continued uncertainty in Russia and potentially in the EU as a whole means that some less attractive possibilities for how European light vehicle production volumes might develop need to be considered. Please note that for the individual VM tables we have excluded Russia owing to the uncertain situation in that country. Details on AutoAnalysis’s forecast for Russia are also available from Ian Henry. The views and projections contained in this report are those of the author, Ian Henry of AutoAnalysis. They do not represent an official SMMT view. The projections regarding new model timings, changes in production locations and the associated production volumes shown here have been compiled on the basis of information from a variety of sources. In most cases, the vehicle companies do not provide official information on which models will be made at which plants, nor do they publicly provide detailed information on future volumes and timings. These projections have been prepared on the basis of judgments made by AutoAnalysis, taking into account the information, opinion and inside from a range of industry, press and analyst sources available at the time of compiling this report. Ian Henry of AutoAnalysis will gladly address SMMT members’ specific questions on this report. Readers’ comments and questions on this report will be greatly appreciated. Please e-mail: [email protected].

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Executive Summary Will 2015’s momentum continue in 2016? As 2015 draws to a close with Europe’s automotive market growing consistently, admittedly with some way to go before it recovers to past volumes and several vehicle manufacturers continuing to invest in new vehicles and expanding their manufacturing operations, it is reasonable to ask if this broadly positive picture will continue. We remain in a low interest rate and (officially at least) a low inflation environment; some key expenditure items, notably energy continue to rise, while across much of Europe real wage growth has been modest at best, or non-existent. However, consumers are benefiting from low oil prices, which are gradually feeding through into reduced fuel pump prices; and the car companies continue to offer attractive financial packages for their customers, helping to maintain sales, or rather helping to maintain a steady flow of new lease contract business. Some financial commentators continue to express concern as to whether the economic is too dependent on debt-fuelled consumer expenditure; a logical extension of this is concern as to whether the recent economic recovery has, as best, weak foundations and another crash or recession is not far away. With political turmoil in the Middle East showing no signs of being resolved and its impact spreading to Europe’s major cities with terrorist attacks, or threats of attack, and the migration crisis not being resolved, Europe’s policy makers have a tricky path to negotiate. The UK’s referendum on its EU future looms large on the horizon, although no date has yet been set for this crucial vote; whether this will be settled after rational consideration and debate or be decided by more emotional factors, and especially the failure of Europe’s politicians to resolve the migration crisis remains to be seen. Just as economic and indeed political uncertainty were key watchwords of 2014, and throughout 2015, they are likely to remain at the forefront of consumers’ and policymakers’ minds in 2016 and beyond. This will be reinforced by the continued economic stagnation and associated political uncertainty in Russia and Ukraine and fears of a possible downturn in China. With all of the above going on, it is not surprising that getting a reliable long-term, forward-looking view of Europe’s economic prospects is somewhat challenging. For all the uncertainties which abound, recent months appear to have been rather more stable than has been the case in much of the recent past; the slow recovery across the the car market and the much-reduced level of economic activity across a range of economic sectors is regarded by many observers as the ‘new normal’. Volkswagen emissions ‘scandal’ adds to the uncertainty In September 2015 the news broke that Volkswagen had been ‘cheating’ its diesel emissions testing for the US market; subsequently the company admitted that the same engines which flouted US laws had been fitted to a total of around 11m vehicles worldwide, a substantial proportion of which had also been sold in Europe. The long term impact of this issue for the company specifically and the industry as a whole will only become clear in the months and years ahead, although the financial cost to the will certainly be substantial; depending on the size and timing of the fines and other punishments meted out by US and indeed European authorities, plus the multiple legal actions which will likely materialise soon, the emissions ‘scandal’ could be a ‘company breaker’.

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Despite the political pressures on the company in Germany, it has yet to announce the full technical solutions for affected cars; repairs and technical adjustments are now expect to begin until March 2016 and while numerous threats of class action remain, especially in the US, it would not be surprising of the national and local/regional governments in Germany had already (unofficially) taken relevant decisions regarding preventing a complete collapse of the company: we believe a political decision will have been taken behind the scenes in Germany taken that Volkswagen as a whole is too big to fail. Whether it will be able to retain its dominant market position, especially in Europe, remains to be seen. For now, we have reduced our projections for production at the Volkswagen brand specifically by up to 10% and slightly less for the other brands in the group. However, until the company’s new strategy and indeed structure – which it was said to be working on prior to the emissions scandal breaking – and the costs of the remedial action and punishments which it will have to bear are clear, this re-appraisal of the company’s prospects is both provisional and potentially optimistic; the fall could conceivably be much worse if fines and punishments significantly reduced the company’s supply of investment funds. Toyota has largely recovered well from a number of serious technical recalls and faults in recent times, while GM does not appear to have suffered permanent damage from the faulty ignitions problems in the US. The difference with the Volkswagen case is the scale of likely US government and legal intervention; this will be larger and financially more costly for Volkswagen than was the case at GM and Toyota.

Generally positive signs for the automotive market in 2015 Despite the political and economic uncertainty referred to above, 2014 saw something of a recovery in the European car market, with passenger car sales rising every month throughout 2014. This positive picture has continued in the first 10 months of 2015; March, June and August all saw year-on-year rises of over 10%, with July and September close behind at 9.5% and 9.8% respectively. For the first 10 months in total, European sales were up 8.2% at just over 11.5m, with all the major markets showing an increase, including Spain (+20.5%) and Italy (+14.7%). Exports of premium brands beyond Europe have continued to hold up well, while within Europe cheap consumer finance is widely available, making new car sales (or leases) comparatively easy to transact. Regarding exports, it is not just premium brands which have done well, with the Toyota Yaris now exported from France to North America and the (sold as a Samsung model) exported from Spain to Korea. In addition, the market has recently been boosted by a series of new models, as well as scrappage schemes and market stimuli such as the PIVE scheme in Spain; even Russia, despite its recent economic travails, adopted scrappage incentives to kick-start the car market, although with the collapse of the rouble, through 2014 and early 2015, and some vehicle companies have temporarily closed vehicles plants in Russia, stopping deliveries to dealers, it remains to be seen what the long run implications of Russia’s version of sales incentives will actually have. During 2014, sales across Europe, and indeed exports of premium brands (JLR and the Germans especially), were at least in part boosted by the wide range of new models coming on stream. In 2014 overall, the European market rose 5.7%; this was especially welcome because for the previous six years, it had experienced continuous decline. The strongest growth in 2014 amongst the key markets was in Spain (+18.4%, greatly aided by the PIVE scrappage scheme) and the UK (+9.1%, with cheap finance widely available and consumer confidence seemingly strong despite economic worries). As noted above and, in more detail, below, this growth picture continued the first 10 months of 2015, there

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 4 was positive growth in most of the EU markets except Austria (-0.7%), Estonia (-2.7%), and Luxembourg (-5.3%). In Finland, the market in September was broadly stable. Elsewhere, double digit rises were recorded in Bulgaria (13.0%), Cyprus (20.1%), Czech Republic (19.7%), Hungary (14.4%), Ireland (29.9%), Italy (14.7%), Latvia (10.8%), Lithuania (17.2%), Portugal (27.5%), Slovenia (10.1%), Spain (20.5%) and Sweden (11.7%). France rose 5.7%, Germany 5.1% and the UK (6.4%) during this period. Looking at the vehicle companies, 2014’s growth was also evident at almost all. In fact only Honda (-2.9%) amongst the major brands saw a decline for the whole year; there were also falls at (but this brand is now only sold in Italy and so a fall is unsurprising), (which lacks new models and has a very small product range) and Chevrolet (which has been withdrawn from the European market). Several of the volume brands, Volkswagen (6.7%), Ford (6.5%), (6.8%) and saw and increase of more than 5% y-o-y, while at Seat, Dacia, Nissan, Volvo and , the increases were c10%, with nearly 20% at Nissan and Mazda. Renault was not that far behind the 10% mark, with a yearly increase of 5.7%. The premium brands, , BMW, Mercedes and Jaguar , rose between 5.7% at Audi, and nearly 12.6.5%. Looked at from a brand perspective, in the first 10 months of 2015, the only major brand experiencing falling sales was again Honda (-2.9%). DS, the near-premium brand from PSA, also fell by nearly 17%, but this was due to a limited and ageing model line-up more than anything. Brands seeing double digit rises were Fiat (10.6%), (30.9%), Renault (8.3%), (24.0%), Mercedes (11.8%), Nissan (18.6%), Jaguar (33.5%) and Land Rover (16.2%). , with new models including the Fiat-made Renegade, experienced a rise of over 150%, while also rose by 81% with the launch of new models. Almost all of these brands saw their sales rise strongly on the back of all-new models, either replacements for existing vehicles or entrants into segments in which they have not previously sold.

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The following chart (courtesy of ACEA) shows the EU has actually seen a year of continued year-on-year rises in EU registrations:

Source: ACEA

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Developments in UK vehicle production 2015 has seen a number of major new models go into production and the generally positive picture for UK vehicle manufacturing continue. The new Opel/Vauxhall Astra started production in 2014, the Q30 and Rolls Royce Bentayga in November, these models having been preceded by the Jaguar XF, XE and Sport. The new Mini range and the new Qashqai have also had their first full year of production. Toyota also launched revised versions of the Auris and Avensis and with a strong end to the year expected, we think 2015 UK production should now come in at just over 1.7m which is a slight rise from previously owing to revisions to our ramp-up projections for some of the new models which have recently come on stream. Moreover, with new models due from JLR (the F-PACE which starts full production in early 2016), Nissan (the next Juke starts soon), Infiniti (the QX30 will join the Q30 in 2016) and more models from JLR especially, the picture for UK production remains very positive. And amongst the lower volume producers, will widen its range, heading over 20,000 units a year and may be higher still, Aston Martin has several new vehicles on the horizon (and may even decide to make the DBX in the UK rather than in the US), and a new London Taxi is also due to appear within a couple of years. All of this means we continue to believe that the UK remains firmly on course to produce 2m units a year by the end of the decade. Production growth in the UK had actually slowed in the last few months of 2014 for a number of reasons. The final total of just below 1.6m cars and light commercial vehicles was not far off our earlier projection of c1.63m. We had expected a quicker ramp-up last year for the new Mini and while we saw strong sales of the new in particular, sales of other models, eg and the models made by Honda fell somewhat below our earlier expectations for a variety of reasons. Also in 2014, there was an inevitable slowdown at JLR as the Freelander came to an end and its replacement, Discovery Sport, did not start production until this year. Honda also closed one of its assembly lines and the reorganisation that this has entailed has also had a knock-on effect in terms of production volumes there. A wider, European view Despite economic uncertainty, we remain cautiously optimistic regarding continued growth in European, and indeed UK, vehicle production. Including Russia, we now project production climbing to just under 20.3m in 2016 (versus 20.5m last time) and to just under 22.5m by the end of the decade (down from 23m last time); however, because Russia is the most uncertain element in these projections, we continue to highlight production volumes with Russia taken out of the equation. Without Russia, core European production is projected at 19.2m in 2015 (unchanged from last time), 19.4m in 2016 (19.5m last time), 20.16m in 2017 (20.3m last time) and c20.9-21.4m in 2018/19/20 (down around 200,000 units). It should remain at this level for a few years after that point. In this report we have also included a number of alternative scenarios for European production, to examine what might happen if an economic downturn, both within and beyond European, takes from 2016. In the worst of these, we could envisage European production (excluding Russia) falling to c16.4m in 2017 (against our Base Outlook of 20.2m) and only recovering to 17.66m by 2020. Were this to happen, European production volumes would actually be lower than those in 2010 (17.78m) and concerns over excess capacity and the need to close factories would only return. We will continue with these alternative scenarios in future reports in 2016 in view of the economic vicissitudes affecting the region and the world as a whole.

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Even under the worst of our scenarios, Germany will remain the powerhouse of European automotive production, with 5.6-5.8m vehicles a year to be produced there from 2016 onwards. This is slightly lower than projected previously partly because of the Volkswagen scandal hitting that brand in particular but also some Opel production moving outside Germany. At present, we now think it is unlikely that Germany will breach the 6m barrier before 2020. There is a great deal of fluidity here and much will depend on how quickly the situation at Volkswagen settles down, on the exact timing for some new models and decisions on where some models, eg the expanding Q range at Audi, will be made. Audi is now expected to move production of the next A1 from Brussels to the SEAT plant in Spain, and some planned Audi production will be moved from Germany to Belgium as a result, notably the Q6 e-tron electric SUV.. The large number of VMs with core factories in Spain – and their recent investment commitments there – means that Spain will retain its position as the second-ranked European producing country in the medium term. Production is likely to be c2.6m units or possibly higher on a consistent basis from 2016 onwards. Spain has a national ambition to reach 3m units a year, although this includes large commercial vehicles as well. For Spain to hit the national target of 3m units will require a major new model or increased export market allocation to be given to one or more of the existing Spanish plants. The decision by VW to allocate the Polo SUV to its Setubal plant in Portugal reduces the chances of Spain hitting the 3m target before 2020. All being well, UK production should still reach close to the 2m level in 2017, climb over it in 2018, and maintain this new high in 2019/20. However, as we explain in detail in the report, achieving 2m upa will depend on production allocations at Nissan, Mini and the final launch timings for new JLR models – and other vehicle companies maintaining output in the UK. It is still possible that Mini production may be not grow so much as projected here, depending on BMW’s decision regarding production allocation between the UK and Netherlands plants: earlier comments from BMW’s production chief on this subject have suggested that the UK plant will be as fully utilised as the model mix to be made there allows. Similarly, now that JLR has confirmed it will produce some vehicles at Magna Steyr in Austria under contract and will confirm its new plant in Slovakia by the end 2015, it will not grow so much as previously projected in the UK. Even so, we still expect JLR to produce in the region of 700,000 vehicles a year in the UK on an ongoing basis by the end of the decade.

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The Outlook for 2016 – better than might be expected? As we reach the end of 2015, it is worth taking stock and considering what 2016 might have in store for vehicle production in Europe and especially in the UK. This section considers the political and economic issues underpinning the sector and determining its prospects, trends in the use of diesel and the changing manufacturing strategies of the vehicle manufacturers in the UK and across Europe.

Political-economic issues 2016 will undoubtedly be the year when the debate over the UK’s membership of the EU moves centre stage. The UK government is currently trying to negotiate a limited number of changes to the country’s relationship with the EU, but it is not yet clear how far it will succeed with its aims. Nor is it clear how whatever success it might have will actually be received, first by Euro-sceptic politicians and activists and then the UK public. The timing for the referendum has also yet to be set. The SMMT favours continued membership of the EU and has adopted this position on the back of feedback from members. It is widely felt that, were the UK to leave the EU, investment decisions in favour of the UK would be less likely and the UK would also lack a sufficiently powerful voice at key decision-making bodies regarding technological and regulatory issues. Whether such considerations will weigh heavily in the minds of the UK electorate is another matter. It is likely that the UK electorate will be influenced by concerns over whether they feel their jobs and economic prosperity, and those of their children, will be best served by staying in, or getting out of, the EU. Opinion polls, whose reliability is certainly to be questioned after their collective failure at the 2015 UK general election, are at best ambivalent on this issue and it is far from clear what the majority of the public think or want here. It is also possible that non-economic issues, especially the migration and the refugee crisis, will play a significant influencing role. The failure of the EU as a political body to control – or show that it even has a policy for trying to control – migration from the Middle East and the associated rise in terrorist activity across Europe may yet prove to be sufficient to tip the balance of the vote in favour of an exit, irrespective of the power of the arguments in favour of staying in the EU. Job losses in the UK steel industry have been a major political issue too in recent months; the inability of the UK government to ‘rescue’ or subsidise struggling UK steel firms may also yet be perceived as a negative issue regarding the EU; the fact that rescuing failing firms is ideological contrary to the current government’s philosophy appears to have be ignored in this debate. Interest rates are expected to remain low well into 2016; there had been regular reports of an imminent rise in rates throughout 2015, but the Bank of England has so far decided against any increase in interest rates. The fear of plunging debt-heavy UK consumers and mortgage holders into severe difficulty is an often unspoken, key factor. Equally, the Bank wants industry to continue to invest and improve the economy’s productivity. Any rise in interest rates could well stave off much needed investment.

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Inflation is low, and by some measures we have had some deflation, with falling prices. The fall in the oil price is a key issue and with Saudi Arabia continuing to ‘over-produce’, effectively dumping oil on world markets, there is no sign of the oil price rising in the near future. Consumers especially welcome this, although as the price of oil remains low, the government’s tax revenues fall and government will have to look elsewhere to make up the shortfall.

The diesel issue The big technology story of 2015 was undoubtedly the Volkswagen diesel scandal. By fitting ‘defeat’ devices to a large number of its diesel engines, VW was able to ‘show’ that its engines emitted less NOx and other emissions than they did in reality. Sceptical environmental and air quality scientists in the US eventually asked too many difficult questions which VW could not answer about the apparent discrepancies between VW’s test results and the real world testing results. It was only when the US authorities threatened to withdraw the licence to sell 2016 model year diesel vehicles in the US that the company admitted the truth. The fall out from the scandal has a long way to go and although the company has taken a 6.7bn Euros charge on its last quarter’s accounts to cover this, it is unlikely that this will be the last such charge which the company has to make. In fact, costs of over 30bn Euros have been mentioned, but this may only cover the fines which the US authorities will levy. The costs of class actions from consumers, dealers and other interested parties in North America could easily be several times this amount, although the length of the legal process in the US means it will be some years before the true cost of the diesel scandal to VW becomes apparent. VW will start to repair or fix affected cars during Q1/2016, and it is likely it will take much of next year, if not the whole year and possibly longer, to fix all the affected engines worldwide. As well as the financial damage which the scandal will do to the company, it is not yet clear how far VW group sales and production numbers will be affected in the long term and indeed which car companies will benefit from any decline at VW. We have factored in a 5-10% fall across the VW group over the next couple of years in our Production Outlook, but this is very provisional and we will review this regularly in future issues of this report. Related to this is the ongoing switch away from diesel, towards petrol, hybrid and indeed electric cars. In our view, the move away from diesel was under way before the VW scandal broke; having been roughly 50-55% of the European market for many years, diesel is expected to see its share fall below 50% and then down to 35% over the next 8-10 years, possibly quicker than this. Europe is the main global market for diesels and it is here that the change away from diesel will be most evident. BMW, PSA, Renault and VW have particularly high ratios of diesels in their European production and sales line-ups and their diesel factories are likely to see reduced production volumes in the near term. How far they can replace diesels directly with petrol engines is another matter – a certain level of diesel sales has long been required for many years for vehicle companies to meet their CO2 obligations. The implications for the companies if their diesel sales fall to a level where they cannot meet there CO2 emissions targets could be severe. The pressure is on the industry to accelerate the development of cleaner, turbocharged petrol engines, as well bringing forward full electric or hybrid electric vehicles ever more quickly.

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UK vehicle manufacturing prospects in 2106 In the absence of a global, or even a regional, economics collapse, the prospects for the UK’s vehicle manufacturing sector in 2016 are very good. 2016 will see full year production of several JLR models introduced this year, as well as yet more new models. The same will apply to the Vauxhall Astra and the Infiniti Q30, both of which went into production in recent months. Lower volume production of the Bentley Bentayga SUV also started in 2015 and a full year of production will follow next year, as will be the case with the latest Toyota Auris and Avensis models. We expect further new models to be confirmed during 2016 at JLR, where progress will also be made with expansion of its engine plant. With all of the above and further new models in the years ahead from Honda and Nissan, plus the new London Taxi, we remain confident that UK vehicle production will indeed head towards and soon break through the 2m units a year barrier. There may also be good news from Aston Martin regarding the location for the factory for its DBX crossover, the announcement for which is expected to be made before the end of the year. Progress continued to be made throughout 2015 regarding re-shoring of components to the UK. the average UK content of UK-built vehicles is now 41% according to the most recent research by BIS; as German vehicles achieve around 60% on average, much remains to be done here in the UK.

Changes in production arrangements outside the UK 2016 and beyond will see yet more changes to Europe’s vehicle manufacturing geography and individual factory line-ups. The key highlights of this will be:  BMW: addition of new small models, below the 1-series, at Magna-Steyr in Austria.  Mercedes: addition of production of the GLC at Valmet in Finland, with a wider range of models to be made in Hungary.  Fiat: addition of new Tipo, the long-awaited replacement for the Bravo, to Tofas in Turkey; the end of Lancia Ypsilon production in Poland by the end of the decade.  Ford: addition of a new small B-SUV at the Craiova plant by the end of decade.  Opel: addition of Buick version of Insignia and large crossover at Russelsheim; production of new small crossover for PSA at Zaragosa.  Honda: end of production of Jazz and CRV in the UK, the Swindon plant concentrating on Civic only; Turkey plant to switch from Civic to small car from 2016/17.  Hyundai: expansion of existing or construction of all-new plant in Turkey, broadening model line-up for central and eastern European markets mainly.

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: all new plant in Slovakia to open in 2018, to make replacement Defender and other models yet to be confirmed.  PSA: production of Zafira and Combo replacements for Opel in France and Spain respectively; change in line-up to a range of SUVs and crossovers; expansion of DS range, including SUVs and crossovers, as well as replacements for large Citroen C5/C6. New PSA-Toyota and MPVs in France from mid-2016. Investment confirmed for Mangualde in Portugal to retain production there of next Berlingo/Partner small van.  Renault-Nissan: increased Clio production in Turkey, reduced Clio output in France; addition of Fiat, Opel and Nissan versions of Trafic to Sandouville plant; production added to Flins factory replacing lost Clio production. Also start of pick-up production at Nissan Barcelona for Nissan, Renault and Mercedes from 2017.  Toyota: addition of small B-segment SUV to Turkish plant from 2016; switch of UK plant to new TNGA platform by the end of the decade, model line-up to be confirmed.  Volkswagen: new Polo SUV to be made in Portugal, not Spain. moves from Brussels to Spain, replaced by Q6 e-tron electric SUV. Addition of all-new large plant in Poland to make Crafter following end of Daimler alliance. More expected to be made at Skoda in the Czech Republic, rather than in Spain.  Volvo: end of S60 and XC60 production in Belgium, switching to Sweden and new US plant; Belgian plant to concentrate on small on new CMA platform.

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Market overview and country summary The following table and chart summarise production by country European car and LCV production, 2010-2020, by country

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Austria 90,440 131,838 118,458 148,128 129,000 115,250 80,000 38,250 63,500 92,500 100,500 Belgium 571,387 558,533 508,413 468,031 465,659 330,000 311,500 166,500 175,750 250,000 253,500 Bulgaria 0 0 1,100 2,500 7,750 40,000 38,000 35,000 33,000 30,000 26,500 Czech Rep 1,049,583 1,105,689 1,174,234 1,109,405 1,246,956 1,225,500 1,251,750 1,324,250 1,353,500 1,388,000 1,342,750 Finland 6,385 2,015 0 16,500 45,500 57,500 12,000 17,500 42,500 41,000 40,000 France 2,186,643 2,266,243 1,963,199 1,795,758 1,801,564 1,872,350 1,815,250 2,049,750 2,221,500 2,189,750 2,186,000 Germany 5,698,787 6,177,648 5,675,855 5,709,664 5,870,272 5,781,238 5,694,750 5,602,450 5,638,700 5,759,500 5,763,800 Hungary 217,428 208,263 240,752 301,648 439,111 546,000 590,250 587,750 612,250 607,000 588,250 Italy 798,411 751,167 644,755 593,789 593,567 765,975 792,250 859,750 934,500 942,750 899,250 Morocco 0 0 114,731 172,744 231,844 343,000 385,000 405,000 397,000 386,500 377,000 Netherlands 48,025 40,772 27,047 0 26,000 125,000 189,000 212,000 209,500 200,000 193,500 Poland 886,169 823,659 635,979 574,408 578,416 652,250 594,000 716,000 770,000 769,250 729,500 Portugal 148,681 183,390 156,490 147,917 154,760 149,750 146,750 215,500 247,250 264,000 254,500 Romania 350,857 335,167 336,662 417,925 391,422 406,250 385,500 354,250 363,000 412,500 436,500 Russia 456,737 804,479 1,080,512 1,206,863 1,195,743 850,750 881,000 994,250 1,070,500 1,168,750 1,216,250 Serbia 15,000 8,000 30,000 117,000 102,500 95,000 91,000 88,000 85,000 95,000 102,500 Slovakia 539,101 577,907 840,304 907,909 908,072 935,000 950,250 1,005,500 1,087,750 1,177,750 1,219,500 Slovenia 212,493 157,183 130,949 93,733 118,591 165,000 173,000 161,000 151,000 145,000 132,000 Spain 2,368,832 2,362,341 1,884,422 2,113,301 2,290,382 2,565,000 2,561,500 2,699,500 2,754,750 2,788,750 2,736,750 Sweden 174,656 188,869 162,814 161,330 154,674 151,250 181,250 249,000 293,000 294,000 278,000 Turkey 1,049,652 1,142,921 960,742 1,058,393 1,131,220 1,248,250 1,334,750 1,430,250 1,456,000 1,470,250 1,420,250 UK 1,366,792 1,442,820 1,555,825 1,574,195 1,577,897 1,701,800 1,834,000 1,942,475 2,053,625 2,073,925 2,045,725 Total 18,236,059 19,268,904 18,243,243 18,691,141 19,460,900 20,122,113 20,292,750 21,153,925 22,013,575 22,546,175 22,342,525 The table below provides a summary of the total with and without Russia: Total European production with and without Russian production of international brands 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total inc. Russia 18,236,059 19,268,904 18,243,243 18,691,141 19,460,900 20,122,113 20,292,750 21,153,925 22,013,575 22,546,175 22,342,525 Total exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 19,411,750 20,159,675 20,943,075 21,377,425 21,126,275 The above is what we describe as our Base Outlook for European vehicle production through to 2020.

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Alternative scenarios Because of the economic problems in Russia, the EU and fears of a slowdown in China and North America – which remain important export markets for European vehicle producers – we need to consider alternative scenarios for how European vehicle production volumes might develop. In this light, we have prepared a number of alternative scenarios, with differing levels of potential decline in European production: it is fair to say that at this point we are unlikely to see production volumes rising above those projected in our Base Outlook. Once the situation regarding Volkswagen has settled and some of the longer term implications are clearer, we plan to develop some scenarios based on how the market might evolve in the light of a restructured Volkswagen organisation. These will consider which vehicle companies might benefit most from any long-term reduction in Volkswagen brand and indeed group volumes This is planned for the 2016 editions of this report. Scenario 1  Here, the main fall in production is at the volume manufacturers in some traditional production locations in Western Europe; lower cost locations in Eastern Europe are assumed not to be so affected in this scenario, nor is production in Germany and UK which involves mainly premium models which have rather more robust global demand.  The impact here is that Europe only loses 100-200,000 units per year compared the Base Outlook, which would seem to be very modest in the light of the general economic uncertainty. Scenario 1 - France, Spain and Italy down 2-5% pa 2016-2020 compared to Base Outlook 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total inc. Russia 18,236,059 19,268,904 18,243,243 18,691,141 19,460,900 20,122,113 20,137,680 20,985,655 21,836,253 22,368,538 22,167,865 Total exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 19,256,680 19,991,405 20,765,753 21,199,788 20,951,615 Scenario 2  Here, in addition to the falls in production in France, Spain and Italy as per scenario 1, here we have allowed for falls in the UK and Germany, mainly at the volume and mid-market manufacturers, again with premium brands largely unaffected.  The impact here is not materially different to scenario 1. Scenario 2 = scenario 1, plus Germany down 1-4% pa 2016-2020 compared to Base Outlook 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total inc. Russia 18,236,059 19,268,904 18,243,243 18,691,141 19,460,900 20,122,113 20,080,733 20,929,631 21,779,866 22,310,943 22,110,227 Total exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 19,199,733 19,935,381 20,709,366 21,142,193 20,893,977

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Scenario 3  Here, in addition to the falls in scenario 2, there is a widespread fall across the whole market of up to 5% in each country (and slightly more in Russia).  The impact here is much more significant, with production falling by up to 400,000 or more units per year in Europe excluding Russia compared to the Base Outlook; at this level, the industry would, depending on how this reduced volume affected individual companies, almost certainly face renewed concerns regarding over-capacity. 400,000 units is equivalent to more than one optimally-sized vehicle plant, while 800,000 would be equivalent to the industry potentially looking again at losing two or even three plants across the region. Scenario 3 - whole market down 2-5% pa 2016-2020, compared to Base Outlook 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total inc. Russia 18,236,059 19,268,904 18,243,243 18,691,141 19,460,900 20,122,113 19,666,348 20,499,422 21,331,758 21,846,415 21,647,924 Total exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 18,829,398 19,554,885 20,314,783 20,736,102 20,492,487

The situation, moreover, could be worse and while these are simply illustrations of what could happen, it is worth looking at what the impact of a significant downturn in the next year or two and a slow recovery thereafter might look like for the industry as a whole: “Worst case” scenarios Scenarios 1 and 2 are mild in their impact and even scenario 3 should be manageable in the medium term for the industry as a whole, even if one or other vehicle company suffers particularly badly. However, the risk of economic collapse in Russia and a significant downturn in demand in China, North America and the rest of the world as a result cannot be ignored. With this in mind, three further scenarios have been prepared, with the following assumptions:  Scenario 4: here 2016 and 2017 are 5% below the scenario 1 2015 projection, with a 5% per year recovery from the reduced level in 2018 and beyond; this gets European production back c2 units below the Base Outlook by 2020  Scenario 5 sees 2016 fall 7.5% from the scenario 2 2015 projection and then fall a further 5% in 2017, followed, by a 2.5-5% annual recovery to 2018/19/20. This brings production volumes in Europe, excluding Russia, back to around 3m units below the Base Outlook. This would only heighten the concerns about the over-capacity issue returning  And in scenario 6, we see 2016 fall 7.5% from the scenario 3 2015 projection and then fall a further 7.5% in 2017, with just a 2.5% annual recovery from thereafter; in this scenario we would expect to see a major medium term collapse in vehicle demand in Europe and the region’s export markets. Even with this modest recovery from 2017, we would not see European production volumes returning to even 2012 levels until 2020. In this scenario production would be c3.5m below the volumes projected in the Base Outlook in 2020. The implications for the potential restructuring of the manufacturing footprint across Europe in the scenario are not especially attractive; they

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would almost certainly include significant plant closures and the disappearance of one or more major manufacturer, either in toto, or through merger activity. As with all scenario-building and forecasting, the eventual result will likely be somewhere between the extremes projected here:  We believe that our Base Outlook is achievable in the absence of a major economic collapse, ie the continuation of the ‘new normal’ economic environment. Western European vehicle producers should be able to withstand the impact of a major downturn in Russia because increasingly they produce there rather than export to the country and they do not rely on Russian sales to maintain utilisation of their EU factories. To some extent, having transferred some production to China already, the premium brands are actually less exposed to any further downturn in China than in previous years.  The availability of cheap finance in the UK, much of Europe and the US should insulate the premium brands especially if they lose out on export growth in Russia. More worrying would be a slowdown in the US; at present demand appears to be holding up in these markets and indeed in the Middle East, a major destination for premium models.

Compared to the Base Outlook and scenario 3, these “worse case” scenarios produce the following totals for Europe, excluding Russia: Scenarios 3, 4. 5 and 6 versus European Base Outlook, without Russia 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Ba se Outlook e x c. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 19,411,750 20,159,675 20,943,075 21,377,425 21,126,275 Scenario 3 exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 18,829,398 19,554,885 20,314,783 20,736,102 20,492,487 Scenario 4 exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 18,441,163 17,519,104 18,395,060 18,854,936 19,326,309 Scenario 5 exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 17,826,011 16,934,710 17,358,078 17,792,030 18,681,631 Scenario 6 exc. Russia 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 17,826,011 16,489,060 16,901,286 17,323,819 17,756,914 Looked at graphically, the picture as shown overleaf:

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European Production Excl. Russia - Base Outlook and 4 less attractive scenarios

22,000,000

21,000,000 Base w/o Russia

20,000,000 Scen 3 w/o Russia 19,000,000

Units Scen 4 w/o 18,000,000 Russia

17,000,000 Scen 5 w/o Russia

16,000,000 Scen 6 w/o Russia 15,000,000 20102011201220132014201520162017201820192020 Years

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Country analysis – using the Base Outlook For the rest of this report, we return to the Base Outlook for our commentary and charts. The chart below and on the following page show production by country, first including Russia and secondly without Russia.

25,000,000 European car and LCV production by country, 2010-2020

UK Turkey 20,000,000 Sweden Spain Slovenia Slovakia Serbia Russia 15,000,000 Romania Portugal Poland Netherlands Morocco Italy 10,000,000 Hungary Germany France Finland Czech Rep Bulgaria 5,000,000 Belgium Austria

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 18

European car and LCV production by country, 2010-2020, without Russia 25,000,000

UK Turkey Sweden Spain 20,000,000 Slovenia Slovakia Serbia Romania Portugal 15,000,000 Poland Netherlands Morocco Italy Hungary 10,000,000 Germany France Finland Czech Rep Bulgaria Belgium 5,000,000 Austria

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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The following charts show the relative positions of the major European vehicle producing countries, except Russia – the dominance of Germany is clear:

Production Volumes 2010-2020: Major Countries

7,000,000

6,000,000

Czech Rep 5,000,000 France Germany 4,000,000 Italy Spain Units 3,000,000 Turkey UK 2,000,000

1,000,000

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Years

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The following chart shows the same countries, but without Germany and Russia:

Production Outlook Major Countries, excl. Germany

3,000,000

2,500,000

Czech Rep 2,000,000 France

Italy 1,500,000

Units Spain

Turkey 1,000,000 UK

500,000

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Years

After Germany, Spain will be the largest vehicle producing country in Europe throughout the period under analysis here. The UK and France will battle it out for 3rd place (after Spain) and the two countries’ relative positions will be determined by the timing of new model launches from JLR and Nissan in particular and the degree to which Renault and PSA plants actually meet the production targets which have been agreed to in these companies’ labour agreements. The decisions to move most of the production of the B-segment to Turkey and all of the production of the next Citroen C3 to Slovakia were made on economic grounds, with Renault claiming that making B-segment cars in France is unprofitable. However, the B-segment Nissan Micra will be made, by Renault, at the Flins factory near Paris which currently makes the Clio! Peugeot is also keeping some of the production of the 208 (the sister vehicle to the C3 in France). These production allocations will help improve French production volumes, but these decisions and the plans for PSA to make the replacement for the in France, only go

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 21 a small part of the way to making up for the decline in French production caused by the loss of production of models such as the Clio and C3 which are now or will soon largely be produced in Eastern Europe/Turkey. Although the UK is expected to breach the 2m units barrier soon, it should also be noted that France is now expected to maintain its lead over the UK in terms of total vehicle production; this is because rising production of by Renault and indeed PSA in its JV with Toyota. The projected rise of Turkey to nearly 1.5m upa is largely due to expansion at Tofas, Fiat’s partner in the country, and at Hyundai which will (we believe) add another plant in Turkey, or significantly expand its existing Turkish factory, by the end of the decade. Turkey’s growth is underpinned by the concentration of most of Ford’s European van production in Turkey. Tofas has plans to boost production to c350,000 units a year by the mid-2020s, while in 2014 Ford opened a new plant in Turkey dedicated to small vans. Production in the Czech Republic will also remain in the range of 1.3-1.4m upa, while production in Slovakia is expected to reach over 1m when the new Citroen C3 moves there. We are now more positive regarding Fiat in Italy than we had been in the past; we have revised upwards our projections for the Fiat/Jeep SUVs and for LCVs to be made in the country. For Alfa Romeo, however, we do not believe, based on current information on model plans, that Alfa Romeo has the model line-up to achieve the 400,000 upa which has been projected by the company. Here we have induced a much lower projection, below 300,000. Production allocations for Fiat plants may well change in the medium term and projected volumes for Italy and Poland could well vary. With strong Jeep and Fiat/Alfa SUV sales, vehicle production in Italy could soon once again approach 1m upa. In fact, the contribution of the and Jeep Renegade already means that Italy now once again produces more cars per year than are produced at Nissan Sunderland, the Nissan plant having exceeded total Italian car production between 2011 and 2014.

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UK and France comparison The UK overtook France in terms of car production in 2013, and we expect this pattern to be maintained throughout the period under analysis., 2015 and beyond; the gap in favour of the UK should continue to grow, with the expected strong rise in production at JLR, and continued strong volumes for Nissan and Mini; French car production has fallen with increasing volumes of both PSA and Renault’s small car production moving to Slovakia and Turkey especially. By contrast, van production is France is rising and with the end of Transit production in the UK, France is going to remain well ahead of the UK in this segment of the market. In addition to rising van production, French car production is also expected to grow more strongly than we had projected previously; this is because we have a more positive view regarding the PSA DS brand especially – and where we see further upside volume potential. UK and France – production of passenger and light commercial vehicles, 2010-2020

Vehicle type Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Commercial France 328,569 378,063 319,133 297,486 335,940 398,000 414,500 451,500 442,500 434,750 416,000 UK 100,826 96,249 84,224 58,545 43,895 62,500 70,000 65,500 62,500 60,000 57,250 Passenger France 1,858,074 1,888,180 1,644,066 1,498,272 1,465,624 1,474,350 1,400,750 1,598,250 1,779,000 1,755,000 1,770,000 UK 1,265,966 1,346,571 1,471,601 1,515,650 1,534,002 1,639,300 1,764,000 1,876,975 1,991,125 2,013,925 1,988,475 Country Vehicle type 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 France Commercial 328,569 378,063 319,133 297,486 335,940 398,000 414,500 451,500 442,500 434,750 416,000 Passenger 1,858,074 1,888,180 1,644,066 1,498,272 1,465,624 1,474,350 1,400,750 1,598,250 1,779,000 1,755,000 1,770,000 France Total 2,186,643 2,266,243 1,963,199 1,795,758 1,801,564 1,872,350 1,815,250 2,049,750 2,221,500 2,189,750 2,186,000 UK Commercial 100,826 96,249 84,224 58,545 43,895 62,500 70,000 65,500 62,500 60,000 57,250 Passenger 1,265,966 1,346,571 1,471,601 1,515,650 1,534,002 1,639,300 1,764,000 1,876,975 1,991,125 2,013,925 1,988,475 UK Total 1,366,792 1,442,820 1,555,825 1,574,195 1,577,897 1,701,800 1,834,000 1,942,475 2,053,625 2,073,925 2,045,725

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Key Country Developments In this section we discuss the country projections for the UK, Germany, France and Spain: we also address the issue of when the UK might hit the 2m units’ annual production level which we have projected in recent reports and the circumstances which would surround this. UK 2014 witnessed the following major developments:  The start of production of the new Qashqai; and confirmation that Infiniti QX30 will be added to the Q30 production line.  The start of production of the new Opel/Vauxhall Vivaro, including the allocation of increased component sourcing to the UK. Double shift working at Luton from 2015 was also announced.  New Mini production launch, although at a slower ramp-up rate than originally expected; indeed the start of production of the new Mini was also slightly later than expected.  Announcement by Volkswagen that all the group's W12 engines will be made at the Bentley factory in Crewe.  Confirmation of new investment and model range expansion in the second half of the decade at Aston Martin. On a more negative note, 500 jobs were cut at Honda, while a production cutback to around 120,000 or less in the short term was also announced; one of the assembly lines at Honda has closed and this has led to some disruption in the production process at the plant. Nissan cut a shift on the Juke/Note line. In 2014 UK production was barely changed on 2013 (1.58m vs. 1.56m), but with the Mini in full production, new models from Nissan, JLR and Vauxhall on the way over the next two years, we expect to see a steady rise in UK output to just over 1.7m in 2015 and just over 1.8m in 2016. It will take a couple more years, further new models and sustained economic growth worldwide, but the 2m units target for UK production remains firmly within the industry’s grasp. 2015 started with the positive news of the official announcement of the Jaguar F-PACE, the second model to be made off JLR’s iQ/D7a platform in the new assembly hall at . This will be joined on the production line at Solihull by another model, positioned between the Evoque and the Sport. The XE and F-PACE have, like earlier JLR models, generated substantial contracts for the UK supply and each of these models is expected to result in over £3bn worth of business for UK suppliers. A boost of similar size should come when the sister Range Rover model to the F-PACE is finally confirmed, hopefully by the end of 2015 or early 2016. The new Vauxhall Astra has now started production and this too has meant a substantial boost to the UK supply chain, with around £1.4bn of life-time contracts awarded to UK suppliers. Nissan too has now started production of the Infiniti Q30/QX30 further boosting UK vehicle output, and providing an additional and welcome fillip to the supply chain. Honda’s allocation of worldwide supply of the next 5-door Civic to Swindon will result in higher volumes than of late for this factory and we understand that Toyota’s Burnaston plant is likely to make models based on the new Toyota New Global

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Architecture (TNGA), also towards the end of the decade. Rolls-Royce has confirmed it will make an SUV, while Bentley and Aston Martin have also indicated that by 2019/2020, a significantly wider range of vehicles will be produced in the UK by these companies too. Aston Martin is, we think, likely to make its forthcoming crossover vehicle in North America rather than the UK, although this remains to be confirmed, hopefully by the end of the year. Currently excluded from the Production Outlook are Lotus, McLaren and the London Taxi volumes; these will be added into the report from 2016. UK vehicle production by VM Group and Marque, 2010-2020

Group Marque 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Aston Martin Aston Martin 2,703 3,574 3,313 3,828 3,966 3,025 2,475 4,575 6,450 6,425 6,625 Aston Martin Total 2,703 3,574 3,313 3,828 3,966 3,025 2,475 4,575 6,450 6,425 6,625 BMW MINI 216,302 191,474 207,791 176,883 179,321 215,000 219,000 232,000 235,500 231,000 225,000 Rolls Royce 3,215 3,685 3,234 3,265 4,381 4,000 4,500 4,750 4,950 4,800 4,625 BMW Total 219,517 195,159 211,025 180,148 183,702 219,000 223,500 236,750 240,450 235,800 229,625 Ford Ford 28,270 28,170 28,031 12,989 0 0 0 0 0 0 0 Ford Total 28,270 28,170 28,031 12,989 0 0 0 0 0 0 0 GM Opel 145,139 194,952 134,412 117,241 121,403 160,000 195,000 224,500 237,500 233,500 223,250 Renault/ Nissan 34,705 15,001 17,091 20 0 0 0 0 0 0 0 GM Total 179,844 209,953 151,503 117,261 121,403 160,000 195,000 224,500 237,500 233,500 223,250 Honda Honda 129,798 97,459 165,630 138,632 121,799 115,500 115,000 103,750 129,000 135,000 133,000 Honda Total 129,798 97,459 165,630 138,632 121,799 115,500 115,000 103,750 129,000 135,000 133,000 Renault-Nissan Nissan 423,262 480,485 510,122 501,756 500,238 484,500 525,000 555,500 555,500 552,750 552,250 Renault-Nissan Total 423,262 480,485 510,122 501,756 500,238 484,500 525,000 555,500 555,500 552,750 552,250 SAIC MG 0 1,315 0 993 3,054 3,000 3,250 3,000 3,000 3,000 3,000 SAIC Total 0 1,315 0 993 3,054 3,000 3,250 3,000 3,000 3,000 3,000 Tata Jaguar 56,456 49,932 55,916 78,566 75,152 105,000 170,750 227,000 264,500 272,500 262,750 Land Rover 185,096 241,099 311,748 350,460 385,754 398,750 379,250 384,750 414,750 425,500 414,000 Tata Total 241,552 291,031 367,664 429,026 460,906 503,750 550,000 611,750 679,250 698,000 676,750 Toyota Toyota 137,054 128,146 109,429 179,233 172,215 202,000 205,000 188,000 185,000 191,000 201,000 Toyota Total 137,054 128,146 109,429 179,233 172,215 202,000 205,000 188,000 185,000 191,000 201,000 Volkswagen Bentley 4,792 7,528 9,108 10,329 10,614 11,025 14,775 14,650 17,475 18,450 20,225 Volkswagen Total 4,792 7,528 9,108 10,329 10,614 11,025 14,775 14,650 17,475 18,450 20,225 1,366,792 1,442,820 1,555,825 1,574,195 1,577,897 1,701,800 1,834,000 1,942,475 2,053,625 2,073,925 2,045,725

Further detail on model level production is provided on the following pages and in the individual VM profiles which follow. In reviewing these figures, please note that the assumptions regarding new models, especially from JLR, are those made by AutoAnalysis alone and are not an official JLR or SMMT view. In particular, AutoAnalysis believes JLR will introduce models a range of new models, many based on the D7a platform which underpins the XE and F-PACE and also some below the Discovery Sport/Evoque for sale under the Jaguar, Land Rover and Range Rover brands. It will also make the Defender replacement in higher volumes than the current model. These have not yet been officially confirmed by JLR, although we believe such models – which have been widely trailed in the UK motoring press – will be necessary for JLR to achieve the kind of volume objectives which have been spoken of in the recent past. In recent months, JLR has said it will make some low volume vehicles in Austria

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(under contract to Magna Steyr) and will confirm its proposed factory in Slovakia by the end of the year. We believe the models to be made in Austria will have electric powertrains and will be based on existing UK-made vehicles. JLR has also said that the vehicles to be made in Slovakia will be based on the aluminium iQ/D7a platform will include models below the XE/F-PACE and also the long- awaited replacement for the Defender. The Defender replacement is expected to be the first vehicle to go into production in Slovakia. Even with the addition of the plant in Slovakia and the sub-contracting of production to Magna, there is still room for expansion of production at JLR’s UK sites, especially at Castle Bromwich. Production of the Evoque is now under way in Brazil, but for now we do not believe that JLR will open a plant in the USA until the 2020s at the earliest and we now think the idea of a vehicle plant in Saudi Arabia has been discounted. With regard to Mini, we still await official clarification on the long term balance of model final variant allocation for the UK and the former Nedcar plant in the Netherlands; this will in turn depend on what the final make-up of the Mini line-up will be, with decisions on a potential roadster or a smaller Mini to be made in the near future.. It is possible that UK production could be higher, depending on the variant mix finally allocated to the two plants. That said, we understand that the Mini plant has a maximum capacity of 260,000 upa which may be difficult to achieve if the model mix to be made there is too complex. We now think Honda will achieve higher volumes for the new Civic, with its worldwide role, than the current model and with production of the heavily revised Auris and Avensis models now running at higher levels than previously thought we are more optimistic for Toyota volumes in the medium term as well; we believe this plant will adopt the new Toyota global platform, TNGA, at the end of the decade, although the models to be made remain to be confirmed. Production growth at Nissan is predicated on the assumption that Qashqai and Juke especially retain their current export markets (Russia excepted for Qashqai). Additional variants of Juke or Qashqai are expected to be made at Sunderland replacing the Note. Detailed UK production by model from 2010-2020 is shown on the following pages (Ian Henry of AutoAnalysis is available to answer questions on these projections):

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UK Production 2010-2020, by Marque and Model (part 1)

Group Model range 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Aston Martin Cygnet 0558154661000000 0 DB9/DBS 1,2766574127488656003500000 Rapide 0 0 261 818 702 475 425 325 275 0 0 Vanquish 0 0 382 1,011 823 625 550 450 375 325 550 Vantage 1,427 1,596 1,528 1,162 1,566 1,225 1,050 750 900 1,250 1,300 Virage/V12 Zagato 076357623000000 0 Taraf 0 00001001000000 DB11 0 0 0 0 0 0 0 400 700 675 625 DBX 0 000000000 0 New models from 2016 0 0 0 0 0 0 0 2,500 4,000 4,000 4,000 DBS 0 0 0 0 0 0 0 150 200 175 150 Aston Martin Total 2,703 3,574 3,313 3,828 3,966 3,025 2,475 4,575 6,450 6,425 6,625 MINI MINI 0 000000000 0 MINI Coupe/Roadster 09,20023,57511,4156,2218,0000000 0 MINI 2nd gen 216,302182,274183,955163,582141,55312,0000000 0 Mini Clubvan 0 02611,88632800000 0 MINI 3rd gen 0 0 0 0 31,219 195,000 219,000 232,000 235,500 231,000 225,000 MINI Total 216,302 191,474 207,791 176,883 179,321 215,000 219,000 232,000 235,500 231,000 225,000 Rolls Royce All 3,215 3,685 3,234 3,265 4,381 4,000 4,500 4,750 4,950 4,800 4,625 Rolls Royce Total 3,215 3,685 3,234 3,265 4,381 4,000 4,500 4,750 4,950 4,800 4,625 BMW Total 219,517 195,159 211,025 180,148 183,702 219,000 223,500 236,750 240,450 235,800 229,625 28,27028,17028,03112,989000000 0 Ford Total 28,27028,17028,03112,989000000 0 Vauxhall Astra (incl. van) 4,6333,9035,384157000000 0 Astra 2010 102,655137,97190,18773,43477,83675,0000000 0 New Vivaro 0 0 0 0 14,387 62,500 70,000 65,500 62,500 60,000 57,250 Vivaro 37,85153,07838,84143,65029,18000000 0 Astra 2015 0 0 0 0 0 22,500 125,000 159,000 175,000 173,500 166,000 Vauxhall Total 145,139 194,952 134,412 117,241 121,403 160,000 195,000 224,500 237,500 233,500 223,250 Renault/ NissanTrafic/ Primastar 34,70515,00117,09120000000 0 Renault/ Nissan Total 34,70515,00117,09120000000 0 GM Total 179,844 209,953 151,503 117,261 121,403 174,250 207,500 235,500 244,000 236,000 223,000 Honda Civic 45,185 26,215 77,539 41,840 43,815 47,000 65,000 88,000 129,000 135,000 133,000 CRV 51,215 47,971 63,341 71,792 54,020 55,500 50,000 15,750 0 0 0 Jazz 33,39823,27324,75025,00023,96413,0000000 0 Honda Total 129,798 97,459 165,630 138,632 121,799 115,500 115,000 103,750 129,000 135,000 133,000

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UK Production 2010-2020, by Marque and Model (part 2)

Group Model range 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (electric) 0 0 92 8,424 17,339 13,500 15,000 17,500 21,000 23,500 26,000 Micra 54,580000000000 0 Note 52,87246,60244,88424,348000000 0 Qashqai 271,188 301,277 310,387 286,477 285,110 301,000 299,000 294,000 287,500 279,000 277,000 Juke 44,622 132,606 154,759 147,954 132,646 121,000 111,000 139,000 152,000 147,500 139,500 Infiniti QX30 0 0 0 0 0 0 22,500 28,000 30,000 33,000 31,000 Infiniti Q30 0 0 0 0 0 5,000 38,000 41,000 37,500 34,750 33,750 Note (Invitation) 0 0 0 34,553 65,143 44,000 39,500 36,000 22,500 0 0 New models from 2018 0 0 0 0 0 0 0 0 5,000 35,000 45,000 Nissan Total 423,262 480,485 510,122 501,756 500,238 484,500 525,000 555,500 555,500 552,750 552,250 tal 423,262 480,485 510,122 501,756 500,238 470,250 505,000 559,000 568,250 566,000 556,500 MG MGF 0 000000000 0 MG3/6 0 1,315 0 993 3,054 3,000 3,250 3,000 3,000 3,000 3,000 MG Total 0 1,315 0 993 3,054 3,000 3,250 3,000 3,000 3,000 3,000 0 1,315 0 993 3,054 3,000 3,250 3,000 3,000 3,000 3,000 Jaguar XJ / XJR 16,495 14,033 15,086 18,917 16,712 12,250 11,750 18,000 21,000 20,000 19,000 XK / XK8 5,5654,6043,9802,8422,28800000 0 F-type 0 0 0 9,466 11,033 12,750 12,000 11,500 5,000 0 0 XE 0 0 0 0 0 42,500 65,000 75,000 72,000 69,500 66,000 F-Pace 0 0 0 0 0 0 38,000 65,000 81,000 84,000 77,500 XE cabrio/coupe 0 0 0 0 0 0 0 2,500 13,000 14,000 12,000 XF 34,396 31,295 36,850 47,341 45,119 37,500 44,000 55,000 62,500 60,000 58,250 New D7a variants 0 0 0 0 0 0 0 0 10,000 25,000 30,000 Jaguar Total 56,456 49,932 55,916 78,566 75,152 105,000 170,750 227,000 264,500 272,500 262,750 17,23319,82515,53417,56617,95021,7509,5000000 Discovery 39,374 46,480 45,550 44,658 51,807 52,250 48,750 12,500 0 0 0 Freelander 56,48748,75352,99356,81448,04900000 0 New Discovery 0 0 0 0 0 0 0 45,000 63,000 64,500 60,000 New Range Rover 0 0 7,312 47,934 57,075 66,500 61,000 57,000 52,250 49,500 45,000 Range Rover 24,56330,84820,1670000000 0 0 40,212 112,331 124,704 126,707 86,000 77,500 71,000 73,500 85,000 90,000 47,43954,98157,86142,155000000 0 New Range Rover Sport 0 0 0 16,629 84,166 88,250 85,000 81,250 77,500 72,500 70,000 Discovery Sport 0 0 0 0 0 84,000 87,500 82,500 78,500 72,500 69,000 Range Rover Evoque Sport 0 0 0 0 0 0 0 23,000 55,000 69,500 70,500 Evoque Cabrio 0 0 0 0 0 0 10,000 12,500 15,000 12,000 9,500 Land Rover Total 185,096 241,099 311,748 350,460 385,754 398,750 379,250 384,750 414,750 425,500 414,000 Tata Total 241,552 291,031 367,664 429,026 460,906 503,750 550,000 611,750 679,250 698,000 676,750

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UK Production 2010-2020, by Marque and Model (part 3)

Group Model range 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Toyota Auris 68,687 57,411 48,821 142,751 140,068 159,000 165,000 153,000 140,000 95,000 0 Avensis 68,367 70,735 60,608 36,482 32,147 43,000 40,000 35,000 25,000 0 0 New Models on TNGA 0 0 0 0 0 0 0 0 20,000 96,000 201,000 Toyota Total 137,054 128,146 109,429 179,233 172,215 202,000 205,000 188,000 185,000 191,000 201,000 137,054 128,146 109,429 179,233 172,215 202,000 205,000 188,000 185,000 191,000 201,000 Bentley Continental Flying Spur 1,911 2,350 1,758 3,665 4,196 3,750 4,100 3,900 3,750 3,250 3,000 Continental GT/Supersports 1,481 3,240 3,442 3,400 3,426 3,750 3,500 3,250 3,000 2,825 2,750 Continental GT/Supersports cabrio 1,080 793 2,739 2,176 2,143 2,425 2,100 1,900 1,700 1,650 1,550 Arnage/Azure/Brooklands/ Mulsanne 320 1,145 1,169 1,088 849 850 825 850 775 725 675 Bentayga 0 0 0 0 0 250 4,250 4,750 5,250 5,000 4,500 Sub Bentayga 0 0000000002,500 Gran Coupe/Convertible 0 0 0 0 0 0 0 0 3,000 5,000 5,250 Bentley Total 4,792 7,528 9,108 10,329 10,614 11,025 14,775 14,650 17,475 18,450 20,225 UK total 1,366,792 1,442,820 1,555,825 1,574,195 1,577,897 1,701,800 1,834,000 1,942,475 2,053,625 2,073,925 2,045,725

The 2 million units question This Production Outlook service was the first report to go on the record suggesting that the UK could, or indeed should, soon be able to make 2m vehicles a year. Throughout 2014 and 2015, this view has been widely reported in the press and is also quoted by other commentators, including by Professor in a report entitled, “The Motor Industry in the UK: A Cool Shower of Reality”. As noted in previous reports, we agree with Professor Rhys who highlighted that for the UK to reach the 2m target, a number of things need to happen and indeed need to happen in parallel: our view of these necessary developments can be summarised as follows:  Output growth continues at JLR especially: JLR output has almost doubled since 2010 and many new models are in the pipeline. Even though some production of the Evoque and Discovery Sport is now taking place in China and Brazil and a new plant is provisionally planned for Slovakia, there remains scope for further production growth in the UK. Increased output at Castle Bromwich following the investment in a new aluminium body shop there, new models added at Solihull, reconfiguration of the once the current Discovery moves to a new platform and further investment at Halewood all seem likely and indeed plausible; such moves are actually likely to be necessary for the volumes projected here – and indeed JLR’s overall ambitions – to be achieved. We also believe that some of the XE derivatives will be made at Castle Bromwich rather than Solihull.  Nissan maintains and grows its production volume modestly: it many be difficult for Nissan to reach 600,000 upa at Sunderland without building another assembly line, so there may not be much more growth possible at Nissan beyond the volumes shown here without major investment. However, it is worth noting that volume is not necessarily all that matters: the decision to make the Infiniti Q30/QX30 in the UK, and switch production of the to Barcelona, may have meant a “loss” of c40,000 upa in terms of the numbers of vehicles made; however, but the price point – and therefore the ex-factory value – of the Infiniti models will be significantly higher than that of the

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Pulsar. The value to the UK in terms of export earnings, as most of the Q30/QX30 will be sold abroad, and to suppliers in terms of value per vehicle will undoubtedly be higher than the economic value of an equivalent number of lower-priced Pulsars. We also believe a new model or variants of other models currently made in Sunderland will be added to the plant by the end of the decade to replace the Note; details and timings remain to be confirmed.,  Mini output needs to be at or as close to the Oxford plant’s 260,000 upa capacity: depending on the model variants allocated to Oxford versus the plant in the Netherlands, output at Oxford may be below this target; however, here too the value of the Minis made in the UK is likely to be higher than those made in the Netherlands. We understand that the Dutch plant will focus on the 3-door hatch and cabrio, while the UK plant will focus on the 5-door model and the new estate Clubman. The plant location for the eventual replacement for the Countryman remains to be confirmed; the Coupe, Roadster and Paceman models made on the outgoing Mini platform are not due to be replaced, although a roadster version (known as Superleggera) is under consideration. We believe that even if Mini volumes are roughly comparable between the UK and the Netherlands, UK models will be of higher unit value and therefore what may be lost in terms of volume going to the Netherlands should be compensated in the UK in terms of increased economic value.  And finally output needs to be maintained, and ideally grown once again, at Honda, Toyota and Vauxhall. In the past, we have had our doubts over potential boosts to production at the two Japanese plants. Our understanding now is that the Toyota factory will adopt the TNGA platform for future vehicles in the C and D segments. Vehicles made on this platform would replace the current line-up by the end of the decade, with the exact models to be made and their launch timing still to be confirmed; model cycle issues mean that decisions regarding production allocations will have to be made in the next couple of years. Honda has seen production of the Jazz finish this year and in 2017 production of the next CRV moves to Canada. The plant will then focus on the new 5-door Civic which will be supplied worldwide. For both Japanese VMs, opportunities exist in the growing crossover segment for both companies to add vehicles to their European manufacturing line-up; whether they will or not remains to be seen.  With regard to GM volumes, having seen the new Astra and assessed its likely positioning, we are more optimistic for this than we were before and now project UK production of around 170,000 upa; the Ellesmere Port factory has, we understand, capacity to build more than 200,000 pa, although were this to happen it would also have to move to a three-shift system. For this to happen, demand the new Astra would need to be a "runaway" success and then the debate would concern the allocation of production between the UK and Poland, where the second Astra plant is located. Ellesmere Port will add the estate (Sports Tourer) version in 2016 and while there have been press reports of a GT, 3-door model as well, GM has previously said the GTC version of the current Astra would not be replaced as the market for this body style is too small. In conclusion, the UK can still reach – and in our view is very much capable of reaching – the 2m pa target, but we recognise that this will be dependent on a favourable economic outlook and decisions in the UK’s favour continuing to be made by the major vehicle companies. In this regard, as we have noted before, the continued development of the UK supply chain is essential; being able to source more and more components in the UK will help boost the case for further UK investment at the vehicle companies, just as investment by the vehicle companies in the UK boosts the investment case for suppliers.

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France The decline in French production in recent years is clear from the table below. French vehicle production by Group and Marque, 2010-2020

Group Marque 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Daimler Smart 97,435 103,560 103,000 99,000 77,500 125,000 133,000 129,000 123,000 119,250 116,000 Daimler Total 97,435 103,560 103,000 99,000 77,500 125,000 133,000 129,000 123,000 119,250 116,000 GMOpel00000000000 GM Total 00000000000 PSA 442,656 449,348 353,982 273,850 254,250 214,500 136,250 120,000 163,500 146,500 159,500 Fiat 20,338 19,786 14,250 11,500 9,500 7,500 0 0 0 0 0 Lancia 1,561 0 0 0 0 0 0 0 0 0 0 Opel 0 0 0 0 0 0 10,000 58,750 75,000 72,500 70,000 Peugeot 760,728 775,918 661,247 604,000 619,150 598,000 575,500 649,000 677,000 652,250 647,000 Toyota 0 0 0 3,500 7,500 10,000 7,000 12,500 16,500 17,750 15,500 DS 68,624 116,186 89,203 117,000 91,000 85,000 75,500 118,000 202,500 231,500 260,000 PSA Total 1,293,907 1,361,238 1,118,682 1,009,850 981,400 915,000 804,250 958,250 1,134,500 1,120,500 1,152,000 Renault-Nissan Mercedes-Benz 0 0 14,311 17,687 0 25,750 24,000 25,000 26,500 29,000 30,000 Nissan 0 0 0 0 0 0 46,500 95,000 102,000 109,000 103,500 Renault 636,789 652,292 527,206 478,221 533,164 581,600 588,500 602,500 584,500 563,000 540,500 Renault-Nissan Total 636,789 652,292 541,517 495,908 533,164 607,350 659,000 722,500 713,000 701,000 674,000 Toyota Toyota 158,512 149,153 200,000 191,000 209,500 225,000 219,000 240,000 251,000 249,000 244,000 Toyota Total 158,512 149,153 200,000 191,000 209,500 225,000 219,000 240,000 251,000 249,000 244,000 Total 2,186,643 2,266,243 1,963,199 1,795,758 1,801,564 1,872,350 1,815,250 2,049,750 2,221,500 2,189,750 2,186,000 Having originally announced that it would make c80,000 Micras in France, Renault-Nissan later said that Nissan Micra production in France will now be over 100,000pa. This vehicle will play a key role in Renault increasing its French production to over 700,000 pa. The addition of the Fiat version of the and the Nissan version (NV300) will further boost Renault production and take it over the 710,000 pa target, the volume at which it agreed it would produce in France as part of its union agreement and commitment to the French government. PSA too has committed to producing over 1m units in France; while this is likely to be achieved, it is certainly going to be a challenge given that it has moved a significant proportion of B-segment vehicle production to Spain and Slovakia in recent years. Citroen output in France is clearly falling, with the situation accentuated by the switch of the next C3 to Slovakia. Regarding the DS range, the model line-up to be made in France remains to be confirmed, but a wider range, with both a smaller model and a larger, top-of-the-range model are likely to be added, although the largest model would almost certainly be made in China. Most of the rise in PSA volumes from 2017 onwards is due to the DS range expansion. We do not expect Toyota’s long-term aim of increasing production in France to significantly over 250,000pa to be effective before the end of the decade, although this could be brought forward if the French plant receives a higher allocation of export markets for the Yaris outside Europe. Production for Opel (the Zafira replacement) is included within the PSA volumes. Daimler figures refer to Smart only, with Mercedes Citan vans included within the Renault total.

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Germany Production here in recent years has been strong, largely on the back of a the performance from the premium brands as shown in the table below. However, the VW scandal will have an impact on German production and we also expect most future growth at Mercedes to come from plants outside Germany, namely in Hungary and further afield outside Europe. Capacity constraints at Bremen are understood to be the main reason behind the decision to plan for additional GLC production at Valmet in Finland. Germany vehicle production by Group and Marque, 2010-2020

Group Marque 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 BMW BMW 939,255 1,079,612 1,045,024 1,112,469 1,106,706 1,154,000 1,197,000 1,223,850 1,267,800 1,335,750 1,331,000 BMW Total 939,255 1,079,612 1,045,024 1,112,469 1,106,706 1,154,000 1,197,000 1,223,850 1,267,800 1,335,750 1,331,000 Daimler Dodge/ Freightliner 5,0231,900000000000 Maybach15721417830000000 Mercedes-Benz 1,092,246 1,092,051 1,108,427 1,149,095 1,166,765 1,097,250 1,073,000 1,035,000 1,037,250 1,041,500 1,038,750 VW 35,103 45,744 44,266 44,242 49,912 42,000 12,500 0 0 0 0 Daimler Total 1,132,529 1,139,909 1,152,871 1,193,340 1,216,677 1,139,250 1,085,500 1,035,000 1,037,250 1,041,500 1,038,750 Ford Ford 741,803 729,940 694,004 616,364 674,867 757,000 729,000 722,500 746,000 749,500 735,500 Ford Total 741,803 729,940 694,004 616,364 674,867 757,000 729,000 722,500 746,000 749,500 735,500 GM Opel 436,849 442,040 387,525 360,561 365,430 250,500 219,750 245,750 273,000 303,000 303,000 GM Total 436,849 442,040 387,525 360,561 365,430 250,500 219,750 245,750 273,000 303,000 303,000 Volkswagen Audi 1,003,492 1,145,212 838,739 852,330 844,872 858,650 882,750 806,100 782,000 763,250 793,750 Porsche 89,144 128,905 151,267 165,622 203,097 199,338 192,500 203,750 213,150 220,750 228,050 Volkswagen 1,355,715 1,512,030 1,406,425 1,408,978 1,465,314 1,421,511 1,388,250 1,365,500 1,319,500 1,345,750 1,333,750 Volkswagen Total 2,448,351 2,786,147 2,396,431 2,426,930 2,506,592 2,480,488 2,463,500 2,375,350 2,314,650 2,329,750 2,355,550 Total 5,698,787 6,177,648 5,675,855 5,709,664 5,870,272 5,781,238 5,694,750 5,602,450 5,638,700 5,759,500 5,763,800 Although BMW, Mercedes and VW-Audi have all been expanding production outside Germany in recent years, notably in China, Brazil and the USA, Germany remains the home of these brands’ production networks and this strategy will remain in place. The big uncertainty here is what will happen to Volkswagen and indeed Audi production volumes in the light of the emissions ‘scandal’. It is a little too early to be clear on this, but at this stage we see Volkswagen volumes hit by around 100-150,000 units per year in the near term and by around 30-50,000 at Audi in the long run owing to consumers shifting to other brands. However, in Audi’s case, production volumes in Germany will also be affected by production location decisions for its expanding range of SUVs and e-tron (electric) vehicles. The Q5 is moving to Mexico, the Q6 will be made in Belgium and uncertainty remains over the production location for the Q8 Opel production will be boosted by the expansion of models made off the Insignia platform; a larger SUV-crossover and a Buick version of Insignia are expected to be added at Russelsheim, while production of the Corsa at Eisenach could actually increase if Opel’s Spanish plant is capacity-constrained, especially if with strong sales of the Mokka and Meriva continue. However, with the end of Astra and Zafira production in Germany, it will be another year before Opel production volumes in Germany show any signs of recovery. The premium brands continue to expand in China and the US especially, while Mercedes is also increasing production capacity in Hungary. BMW has substantial capacity available in Leipzig to increase production of its “i” range, especially since production of the X1 has moved to Regensburg.

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Italy Italy vehicle production by brand, 2010-2020

Group Marque 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Fiat Alfa Romeo 120,068 136,121 92,053 75,428 66,466 48,150 50,750 163,250 236,250 238,500 220,750 Citroën 37,038 44,267 47,238 32,500 30,000 33,000 37,500 40,500 41,000 39,000 37,500 6,627 7,314 7,663 7,086 7,394 6,750 6,250 7,500 7,750 8,000 7,500 Fiat 450,339 399,836 387,741 377,641 348,793 440,000 442,250 385,500 395,000 406,500 400,750 30,013 30,665 30,000 27,500 29,250 34,500 36,250 38,000 37,000 36,000 34,500 Jeep 0 0 0 0 26,652 143,500 149,000 139,000 127,500 122,000 111,000 Lancia 96,195 70,614 26,659 9,257 2,972 0 0 0 0 0 0 5,842 6,161 6,204 19,188 39,936 23,075 27,750 37,250 42,250 46,250 43,750 Peugeot 46,716 54,451 45,000 43,000 39,500 34,250 39,500 44,000 41,500 40,000 36,500 Chrysler/Jeep00000000000 Fiat Total 792,838 749,429 642,558 591,600 590,963 763,225 789,250 855,000 928,250 936,250 892,250 FordFord4,3460000000000 Ford Total 4,3460000000000 Volkswagen 1,227 1,738 2,197 2,189 2,604 2,750 3,000 4,750 6,250 6,500 7,000 Volkswagen Total 1,227 1,738 2,197 2,189 2,604 2,750 3,000 4,750 6,250 6,500 7,000 Total 798,411 751,167 644,755 593,789 593,567 841,000 827,550 900,775 960,850 969,550 940,900

This table shows the scale of decline in production at Fiat in recent years. In 2013 and 2014, with production of c591-592,000, total output was less than half of the 1.2m units which the Fiat group had made in Italy in 2007. The implementation and success of the combined Fiat- Chrysler’s new strategy is clearly essential. Production growth in 2015 is due almost entirely to the new Fiat 500X and Jeep Renegade which add over 200,000 units annually. Growth from 2017 is largely due to Alfa Romeo. Despite a great many pronouncements from the group, much remains uncertain, with start of production dates for many new models, especially Alfas, shifting all too regularly; these shifts have typically meant delays rather than production start-ups being brought forward. Moreover, the full implications of these shifting plans in terms of Fiat’s manufacturing footprint in Italy – and indeed elsewhere in Europe – have yet to be fully clarified. Fiat has said all of the new Alfa range will be made in Italy, but we remain to be convinced that it will be able to produce (or indeed find the customers for) the 400,000 units’ annual target set for this brand. Part of this target includes 150,000 units which are due to be sold in the US, from a current level of zero. This may be achievable in the 2020s, but even so this remains an ambitious target. The ambitions for the Alfa brand certainly look to be on the optimistic side and we believe total Alfa production will be below 250,000. Our view is that production in Italy will focus on the Panda, the 500X SUV/Jeep Renegade, and Alfas and all ; Fiat brand production will also grow in Turkey (where Fiat’s partner, Tofas, plans to raise output to over 350,000 pa by 2023), and Poland, and be maintained in Serbia, although the volumes for the 500L which is made there have been a disappointment. There have been reports that Panda production could move to Poland but were that to happen, there is no obvious model for the Pomigliano plant and Fiat has shown great reluctance to close a factory in Italy. On balance we think production of the Panda will remain in Italy.

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Spain This table shows the expected strong rise in Spanish production, reflecting the wide range of VMs present in the country and the core role which their plants there play in these vehicle manufacturers’ European production strategies. Spain vehicle production by brand, 2010-2020

Group Marque 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Daimler Mercedes-Benz 70,248 78,000 70,500 65,000 66,000 81,000 87,250 84,000 81,500 80,000 78,250 Daimler Total 70,248 78,000 70,500 65,000 66,000 81,000 87,250 84,000 81,500 80,000 78,250 Fiat Iveco 15,500 16,000 14,500 11,500 10,000 9,500 9,000 10,000 10,000 9,000 8,500 Fiat Total 15,500 16,000 14,500 11,500 10,000 9,500 9,000 10,000 10,000 9,000 8,500 Ford Ford 256,650 230,500 133,500 224,551 282,011 387,250 399,500 387,250 362,750 361,250 362,500 Ford Total 256,650 230,500 133,500 224,551 282,011 387,250 399,500 387,250 362,750 361,250 362,500 GM Opel 380,145 365,419 264,975 281,171 319,599 367,250 343,500 381,000 385,000 372,000 355,750 Citroen 0 0 0 0 0 0 25,000 55,000 52,000 48,750 46,250 GM Total 380,145 365,419 264,975 281,171 319,599 367,250 368,500 436,000 437,000 420,750 402,000 PSA Citroën 295,527 260,825 178,079 227,319 280,250 325,000 328,500 333,250 338,000 332,000 340,000 Opel 0 0 0 0 0 0 0 0 10,000 25,000 28,000 Peugeot 220,513 220,000 172,124 210,358 132,000 111,500 106,500 113,000 116,000 106,500 100,000 PSA Total 516,040 480,825 350,203 437,677 412,250 436,500 435,000 446,250 464,000 463,500 468,000 Renault-Nissan Nissan 91,115 144,500 124,618 153,554 105,736 112,000 119,000 155,000 175,000 197,000 181,000 Renault 339,327 341,090 276,170 264,053 343,566 480,000 496,250 498,000 484,500 461,500 444,000 Renault-Nissan Total 430,442 485,590 400,788 417,607 449,302 592,000 615,250 653,000 659,500 658,500 625,000 Volkswagen Audi 108 19,654 105,000 97,652 112,500 102,500 93,500 149,000 220,000 245,000 239,000 Seat 334,004 333,000 276,537 307,352 328,720 300,000 268,500 259,000 251,000 291,000 302,500 Volkswagen 365,695 353,353 268,419 270,791 310,000 289,000 285,000 275,000 269,000 259,750 251,000 Volkswagen Total 699,807 706,007 649,956 675,795 751,220 691,500 647,000 683,000 740,000 795,750 792,500 Total 2,368,832 2,362,341 1,884,422 2,113,301 2,290,382 2,565,000 2,561,500 2,699,500 2,754,750 2,788,750 2,736,750 This table shows how production growth in Spain is spread across a large number of vehicle companies. Although there is no longer a Spanish-owned vehicle company [SEAT is owned by VW and some SEAT production takes place outside Spain as well, in Portugal and the Czech Republic], other major companies, notably Ford, Mercedes, Opel, PSA, Nissan and VW, have committed significant funds to their operations in the country in recent times; Renault is also planning further production growth there too, with the new Kadjar boosting combined Renault-Nissan Spanish production to over 600,000 upa in the near term. As a result of this – and Spain’s significant labour cost advantage over France especially – the country is likely to see continued strong production volumes. Another example of this cost advantage is at Audi, with production of the next A1 due to shift from Belgium to the SEAT plant from 2018. In addition, at Volkswagen’s Pamplona plant, there is the capacity to add another variant or two to the Polo made in Spain. We had expected a B- segment SUV based on the Polo would be added to Pamplona production in the next couple of years, but we now believe this will go to VW plant in Portugal. Certainly, Ford production should remain strong in the years ahead following the transfer of Mondeo, S-Max and Galaxy production from Belgium – the company says it planned to make over 400,000 units in Spain in 2015, but we now think, following slower than anticipated ramp-ups of the models transferred from Genk, and very tough competition in these vehicles’ segments, such a production volume

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 34 is unlikely. Renault output rises on the back of Captur production (which has been running more than 200,000 upa compared to original projections of less than half this amount), and the addition of the Kadjar C-segment SUV crossover to Spanish production. PSA will also take on production of the next (which will be a rebadged version of the next Berlingo/Partner) further boosting output at the Vigo plant. PSA production has been boosted by the success of the C4 Cactus, a model which has single-handedly also saved PSA’s factory in Madrid which would have closed had this vehicle not been allocated here. With all these new models and associated investment, Spain will remain the second largest vehicle producing country in Western Europe after Germany. This will be in line with the country’s government and automotive trade association plan to grow annual production to 3m units, a figure which includes medium and large commercial vehicles which are excluded from our analysis. Even so, we think the 3m annual total is somewhat optimistic, especially following the decision to make the Polo SUV in Portugal and some uncertainty as to where some SEAT models will be made in the long run; an increasing number of SEATs are actually made by Skoda. Spain’s best chance of hitting 3m units a year would be if the new Citroen SUVs, and PSA-Opel/Vauxhall models to be made in Spain are major successes, especially since the plants where these vehicles are or will be made have sufficient excess capacity to allow the 3m target to be reached.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 35

Production Summary As a prelude to the VM reviews, the following tables and charts summarise production volumes to 2019 by VM group European car and LCV production, 2010-2020 VM group: including Russia

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 BMW 1,215,250 1,377,414 1,355,549 1,418,186 1,424,408 1,594,500 1,674,500 1,687,600 1,746,250 1,825,050 1,819,125 Daimler 1,311,018 1,328,741 1,379,940 1,508,909 1,580,677 1,652,250 1,555,750 1,489,750 1,535,750 1,534,250 1,522,500 ,669,078 1,554,689 1,290,311 1,263,934 1,250,625 1,434,975 1,451,250 1,570,500 1,677,750 1,693,000 1,620,750 Ford 1,760,286 1,556,214 1,357,714 1,394,971 1,391,108 1,525,750 1,517,750 1,494,750 1,497,500 1,551,250 1,575,500 GM 1,419,352 1,395,537 1,201,711 1,125,282 1,071,605 971,000 926,750 1,082,250 1,131,000 1,129,250 1,089,250 Honda 150,103 109,800 188,130 153,445 133,432 126,500 132,000 121,750 152,500 157,500 153,000 Hyundai-Kia 505,010 720,628 905,989 895,886 1,070,060 1,117,000 1,114,000 1,219,250 1,287,250 1,423,500 1,425,750 Mitsubishi 52,275 52,772 40,047 23,900 22,200 18,750 18,750 21,000 19,750 19,250 18,500 PSA 2,315,280 2,300,258 1,901,724 1,901,685 1,855,768 1,832,750 1,731,000 1,963,500 2,196,000 2,178,250 2,194,750 Renault-Nissan-Dacia 2,453,216 2,630,847 2,512,673 2,700,370 2,909,975 3,235,100 3,456,750 3,597,750 3,596,000 3,589,250 3,501,500 Suzuki 178,897 168,555 159,750 150,040 157,490 186,500 240,000 255,000 247,000 235,500 222,000 Tata JLR 241,552 291,031 367,664 429,026 460,906 503,750 550,000 621,750 729,250 778,000 778,750 Toyota 476,763 478,087 486,698 582,306 631,395 642,750 664,000 758,000 779,500 768,500 750,250 Volkswagen Group 4,287,912 4,841,508 4,670,434 4,721,789 5,068,025 4,861,763 4,822,775 4,838,500 4,911,875 5,101,700 5,129,275 Volvo 165,103 443,526 420,116 413,841 417,956 372,250 391,750 387,500 461,250 519,500 502,500 Others 34,964 19,297 4,793 7,571 15,270 46,525 45,725 45,075 44,950 42,425 39,125 Total 18,236,059 19,268,904 18,243,243 18,691,141 19,460,900 20,122,113 20,292,750 21,153,925 22,013,575 22,546,175 22,342,525 European car and LCV production, 2010-2020 VM group: excluding Russia

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 BMW 1,215,250 1,377,414 1,355,549 1,418,186 1,424,408 1,594,500 1,674,500 1,687,600 1,746,250 1,825,050 1,819,125 Daimler 1,311,018 1,328,741 1,378,071 1,505,590 1,573,177 1,648,750 1,553,750 1,484,750 1,528,250 1,524,250 1,514,000 Fiat 1,669,078 1,554,689 1,290,311 1,261,296 1,245,625 1,428,475 1,441,250 1,560,500 1,665,250 1,678,000 1,608,250 Ford 1,679,896 1,457,407 1,241,126 1,291,993 1,336,207 1,488,500 1,468,000 1,434,750 1,413,750 1,452,750 1,464,000 GM 1,281,047 1,196,310 929,482 867,326 895,394 938,500 926,750 1,082,250 1,131,000 1,129,250 1,089,250 Honda 150,103 109,800 188,130 153,445 133,432 126,500 132,000 121,750 152,500 157,500 153,000 Hyundai-Kia 505,010 594,501 680,891 687,670 833,060 915,250 922,000 996,750 1,053,250 1,150,500 1,151,750 Mitsubishi 48,025 40,772 27,047 0 0 0 0 0 0 0 0 PSA 2,293,280 2,268,995 1,874,799 1,879,677 1,832,765 1,817,000 1,719,500 1,933,750 2,163,500 2,139,250 2,149,750 Renault-Nissan-Dacia 2,351,368 2,446,458 2,295,792 2,361,880 2,489,930 2,875,600 3,041,750 3,152,750 3,129,000 3,094,250 2,982,750 Suzuki 178,897 168,555 159,750 150,040 157,490 186,500 240,000 255,000 247,000 235,500 222,000 Tata JLR 241,552 291,031 367,664 429,026 460,906 503,750 550,000 621,750 729,250 778,000 778,750 Toyota 461,763 463,587 458,698 539,493 584,215 611,000 627,000 709,000 725,000 714,500 696,750 Volkswagen Group 4,192,968 4,703,342 4,490,512 4,517,244 4,865,322 4,718,263 4,677,775 4,686,500 4,752,875 4,936,700 4,955,275 Geely Volvo 165,103 443,526 420,116 413,841 417,956 372,250 391,750 387,500 461,250 519,500 502,500 Others 34,964 19,297 4,793 7,571 15,270 46,525 45,725 45,075 44,950 42,425 39,125 Total 17,779,322 18,464,425 17,162,731 17,484,278 18,265,157 19,271,363 19,411,750 20,159,675 20,943,075 21,377,425 21,126,275

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 36

European car and LCV production by VM group, 2010-2020 25,000,000 including Russia Others

Geely Volvo

Volkswagen Group 20,000,000 Toyota

Tata JLR

Suzuki 15,000,000 Renault-Nissan-Dacia

PSA

Mitsubishi 10,000,000 Hyundai-Kia

Honda

GM

5,000,000 Ford

Fiat

Daimler

0 BMW 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 37

European car and LCV production by VM group, 2010-2020 25,000,000 excluding Russia Others

Geely Volvo

Volkswagen Group 20,000,000 Toyota

Tata JLR

Suzuki 15,000,000 Renault-Nissan-Dacia

PSA

Mitsubishi 10,000,000 Hyundai-Kia

Honda

GM

5,000,000 Ford

Fiat

Daimler

0 BMW 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 38

BMW

Overview 2014 was an excellent year for BMW, the fifth in succession when it achieved record levels for sales volumes, revenues and earnings. It also continued with significant investment for new i3 and i8, plus the launch of new Mini range and expanded the 3-series/4-series range. Following a record year in 2014, the first nine months of 2015 have also seen an impressive performance from the group: worldwide sales are up 7.5% on 2014 at nearly 1.65m; revenue e was also up 14% at 22.3bn Euros, while EBIT rose 4.3% to 2.35bn Euros. Recent and expected No major changes to existing European production footprint since last time. The most important recent change sees that the future production new X1 made in Regensburg in southern Germany rather than Leipzig in the east. Leipzig will concentrate on models in the developments “i” series. The X2 coupe SUV will also be made at Regensburg. Expanding CFRP material and components production capacity in US and Germany to allow for significant expansion of i3/i8 and other i-models in due course. New Mini started production in both UK and Netherlands; production added at Nedcar plant in Netherlands from late 2014 owing to limit of 260,000 upa at Oxford, with up to 250,000 Minis to be made in Netherlands. Balance of model allocation between UK and Netherlands will see UK focus on 5-door version and the Clubman, while Netherlands will make mainly 3- door and cabrio versions, although both plants can make 3- and 5-door versions according to demand. The production location for the Countryman remains to be confirmed. BMW production chief, Harald Kruger, confirmed in 2014 that the Mini range will continue to be made in two plants. Any production of Minis – including the Countryman – in Brazil will be low volume and largely kit-based. US and Chinese production of Minis has been discounted for now. Production of Mini Clubman and Clubvan from 2nd generation platform has finished, but coupe and roadster versions will continued in production in the UK through 2015. Clubman version on new platform shown at the recent Frankfurt motor show, but there will not be a Clubvan version. New Mini range will also not have coupe, roadster and Paceman versions, but retain 3- and 5-door hatch, cabrio, estate (Clubman) and off-roader (Countryman). Another Mini brand model remains to be confirmed; this will be either be an MPV, a “mini-Mini” (based on the Rocketman concept shown at past motor shows) or a Mini roadster, based on the Superleggera show car. Production location and timing remain to be confirmed. Expansion at Rolls-Royce expected to follow on from decision to build an SUV, which will cost at least UK£250,000, and be produced at a rate of around 1,500 upa. As part of a renewed cost reduction strategy, BMW is looking to apply common architectures to key components, across platforms. For example, it plans to used common attachments, head restraints and seat installation procedures and fixings in all its plants for efficiency and cost saving benefits. Other areas where it is looking for commonality across model lines include the engine bay design, irrespective of engine size, and the fuel tank/energy storage solutions. Within its engine range, it claims it has already achieved 60-% commonality within both its diesel and petrol engines; it is now looking to reach 30-40% commonality of components between diesel and petrol engines for further savings and efficiencies.

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Key new models 2-series Activity and Gran Tourers (first BMW models to be made on new FWD UKL1 platform shared with Mini). These two models will not be sold in the US as they are seen as too small for US consumers and their expectation of small MPVs. New X1 also share UKL1 platform. BMW will meet demand for a sporty SUV with the 3-door X2, in the same vein that the X4 offers a sporty version of the X3. By the end of the decade, we expect BMW to introduce a small car and small crossover below the 1-series and X1, based on the same configuration/technologies underpinning the Mini; these models’ names remain to be confirmed, we expect some, or possibly all of these, to be made at Magna-Steyr in Austria. 4-series Gran Coupe (4-door coupe version of 3-series, similar concept to 6-series Gran Coupe) well-received. Moving the 2- door 3-series into 4-series has had no negative impact on brand perception, rather the reverse, with incremental sales evident. 9-series, to compete against Daimler’s S-class and proposed Audi A9, expected to be confirmed within the next year. Other relevant news Supplying diesels engines to Toyota Corolla Verso and face-lifted Avensis, the first practical example of BMW-Toyota co- operation; co-operation in fuel cells and sports cars to follow. Press reports suggest that BMW will share the development work to replace the Z4 with Toyota. Fuel cell i5 using Toyota technology understood to be due for announcement soon, with production likely at Leipzig.

BMW group production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Austria 56,478 102,643 99,500 125,569 108,000 96,500 65,000 15,000 28,500 53,500 65,000 Germany 939,255 1,079,612 1,045,024 1,112,469 1,106,706 1,154,000 1,197,000 1,223,850 1,267,800 1,335,750 1,331,000 Netherlands 0 0 0 0 26,000 125,000 189,000 212,000 209,500 200,000 193,500 UK 219,517 195,159 211,025 180,148 183,702 219,000 223,500 236,750 240,450 235,800 229,625 Total 1,215,250 1,377,414 1,355,549 1,418,186 1,424,408 1,594,500 1,674,500 1,687,600 1,746,250 1,825,050 1,819,125

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Daimler

Overview Despite rising sales, range expansion and growth outside Europe, Daimler remains under strong competitive pressure, especially from BMW. It has invested €1.5bn at Sindelfingen where a new, far-reaching labour agreement has been implemented with the aim of achieving €500m of annual cost savings in the plant. Investment at Sindelfingen is part of a €3bn investment across Germany, including major expansion of powertrain production at Unterturkheim. Daimler is investing heavily to help it achieve a 10% margin in the medium term, part of its “Next Stage” strategy. This has been specifically designed to get the company closer to the margins achieved by Audi and BMW. Because Mercedes makes its own transmissions (while BMW outsources transmissions to ZF and others), the company has a higher workforce than BMW and can come out unfavourably in some comparisons. The company is aiming for 800m Euros of savings in 2015, and a 5% rise in unit sales, alongside a 10% rise in operating profits. Daimler reported somewhat mixed results in Q3: globally, unit sales were up 13%, with revenue up the same to 37.3bn Euros. Group EBIT and net profits actually fell, but the company claims its group EBIT in 2015 from ongoing business will be much higher than it was in 2014. Although it expects only limited growth in car sales, it is expecting 2015 to have been an excellent year for its van business. 2016 should be a better year for cars overall with the C-class range completed, and a wider range of SUVs also in production, albeit some of which will be made outside Europe. Recent and expected Continued expansion in Hungary where a third shift has recently been added to ease production bottlenecks for the CLA, future production GLA and related models. An increase in GLA production will only ameliorate shortages of production of the vehicle on the US developments market. A & B-class and derivative models can now be made at a rate of 400-500 upa between the German and Hungarian factories. Further production growth to 300,000 upa is still expected in Hungary, although the model mix and timing to reach this volume have not yet been confirmed; reaching this enhanced volume may not occur until the turn of the decade. GLB crossover expected by the end of the decade, quite possibly using some technology from the (in a reversal of the technology exchange which saw the MFA platform donated for the Infiniti Q30/QX30). Owing to capacity constraints at the Bremen plant, additional production of the GLC SUV will take place – from 2017 – at Valmet in Finland when the contract for additional A-class production comes to an end. Manufacture of A-class, C-class and GLA confirmed for new €170m plant in Brazil from 2016; A-class derivatives also to be manufactured in a joint venture plant with Renault-Nissan which will also make models similar to the Infiniti Q30/QX30 made in the UK. Decision announced not to make a Mercedes branded product below A-class, at not least for Europe; any growth in this segment would come through the expansion of the Smart range. However, a concept vehicle for an SUV below GLA has been shown in China and may be launched there after 2020. Contract assembly of large (Crafter) van for VW to end in 2016. €190m investment in Vitoria, Spain for new Vito/Viano van now in production. New van plant confirmed for USA, to make Sprinter, for sale at Mercedes and Freightliner. Press rumours in early 2015 suggested that Daimler was considering a car plant for Russia; Mercedes is one of the few brands with no presence in car production in Russia (even BMW has a CKD partner in ), but in view of the economic

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downturn in Russia, a plant there is unlikely in the near term; it would require a sustained recovery in that country for the idea to be seriously considered now. Daimler’s plans include 8 new models due to be launched during 2015 (of which 4 are new high-margin SUVs, plus the all- new AMG GT sport car); it will also launch 12 new models or variants by 2020 which have no predecessor. Its position as a technology leader will be enhanced by the launch of no less than 10 Plug-In versions of existing models by the end of 2017. Key new models New C-class launched during 2014, with production split between Europe, USA and South Africa, plus Brazil from 2016. New GLC (replacement for renamed GLK) in 2016 to include coupe-style version. Traditional, original G-Wagen to continue until at least 2022. Other relevant news Continues with co-operation with Renault-Nissan, including Citan small van (produced at Renault Maubeuge plant), cross- engine supply and shared engine development for new 4-door Smart and Twingo. In Europe, has also provided MFA platform technology for Nissan for Infiniti Q30/QX30. Major change to model naming strategy: Mercedes vehicles are now be named around the 5 core models, A, B, C, E and S. Off-road vehicles will now be styled GL, plus the letter of the mainstream vehicle they are most closely linked to: hence GLA (based on A-class), GLC (based on C-class, formerly GLK), GLE (linked E-class, formerly ML) and GLS (linked to S- class, formerly GL); sports cars will be designated SL, plus a relevant letter (ie SLK becomes SLC) and 4-door coupes, become CL, plus the relevant letter (ie CLA, CLS etc). This naming system is designed to bring a certain Germanic logic to a naming system which had become difficult for outsiders to understand and which lacked consistency. Daimler, moreover, claimed it will add 12 more models by 2020 all of which have no direct antecedence and this naming strategy is designed to make it easier and more logical to name the new models. What the impact of this will be on customers remains to be seen, but it certainly seems likely that a wider range of body styles will be offered especially in the A/B-class, C-class and SUV segments.

Daimler (Mercedes and Smart) group production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Austria 5,304 7,122 8,750 14,250 14,500 13,500 12,500 13,250 15,000 14,000 13,500 Germany 1,132,529 1,139,909 1,152,871 1,193,340 1,216,677 1,139,250 1,085,500 1,035,000 1,037,250 1,041,500 1,038,750 Finland 0 0 0 16,500 45,500 57,500 12,000 17,500 42,500 41,000 40,000 France 97,435 103,560 103,000 99,000 77,500 125,000 133,000 129,000 123,000 119,250 116,000 Hungary 5 150 42,950 117,500 153,000 232,500 223,500 206,000 229,000 228,500 227,500 Spain 70,248 78,000 70,500 65,000 66,000 81,000 87,250 84,000 81,500 80,000 78,250 Total 1,305,521 1,328,741 1,378,071 1,505,590 1,573,177 1,648,750 1,553,750 1,484,750 1,528,250 1,524,250 1,514,000

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 42

Fiat

Overview Takeover of Chrysler completed in early January 2014, but financial markets have been somewhat critical and dubious of the ambitious new strategy set out for Fiat-Chrysler in May 2014. New strategy involves substantial investment in Chrysler, Jeep and Alfa brands and a refocused and reduced Fiat range. New group HQ located in London, with new name, Fiat Chrysler Automobiles, FCA. The company will, according to CEO Sergio Marchionne, ultimately merge with another vehicle company and in May and June 2015 actively courted GM as its preferred merger partner, but GM rejected these advances. It would appear that FCA will have go it alone and Marchionne’s wish to develop extensive cross-company technology and module sharing in order to save on development costs. Here too, he has been unable so far to find a willing partner. Globally, the group still aims to reach 7m upa by 2018, up from 4.4m in 2013; this ambitious target will involve investment of over $2bn across the group and $700m in Alfa specifically, although some financial analysts have questioned where Fiat will get the requisite investment funds from. The decision to sell a stake in Ferrari, via an IPO, may be one route to raising necessary funds, despite Fiat saying it is fully funded, in terms of financial resources to complete its planned expansion. Despite extensive detail on new models and sales volumes, detail on manufacturing locations remains to be clarified. We think the Punto replacement – as well as a revised 500– will be made in Poland, rather than Italy, although Italian production is once again on the rise with the 500X and Jeep Renegade in high demand. We now think the Lancia Ypsilon will come to an end in 2019 and will not be replaced, signalling the end of the line for this brand. At the 2015 , Sergio Marchionne admitted that Fiat would never again be a mass-market, volume player in Europe. He added that it was no longer economic for Fiat to be a high volume player, driven by the need to retain or gain market share. Instead it will focus on globalising Jeep and Alfa and concentrating on its 500 brand in Europe especially. The 500 range will consist of the 3-door model, 500L minivan and 500X SUV, plus a version of the Punto replacement which is expected to take on the 500 name: these models will form what Fiat calls its “Emotional” range. In parallel, there is the “Rational” range, based around the Panda and derivatives and a long-overdue replacement for the Uno. The long run target for Alfa Romeo, at 400,000 upa, continues to seem ambitious, especially since Marchionne has said that all Alfas will be made in Italy; we project Alfa volumes at less than 250,000. Moreover, in order to meet US sales targets we would expect some production in North America at some point, especially if Alfa is to achieve its ambitious US sales target of 150,000 pa. Recent and While the merger of Fiat and Chrysler was being completed, investment in Fiat’s European factories was on hold, other than a €700m expected future investment at Sud to make the new Ducato van and continuing to ready the Melfi plant to allow 500X/Renegade production to production begin. Since the merger, investment has been revived to revamp Mirafiori and Cassino to prepare for new Alfa range. 1,000 new, full- developments time jobs have been added at Melfi following successful production launch of the 500X/Jeep Renegade. €630m investment is also under way at Tychy for the Punto replacement and revised 500 range. This will increase capacity utilisation at Tychy well above the current 50% level. Tofas, Fiat’s partner in Turkey, (rather than Fiat) had confirmed US$520m investment in Tofas during 2014; the aim is to reach 350,000 upa by 2023 (vs. c228,000 in 2014). Growth plans in Turkey are based on the assumption of a significant increase in exports, both into Europe and the Middle East/Central Asia. The first new model from Turkey will be the Bravo replacement and was been showcased as the Aegea, but will in fact be called Egea in Turkey, elsewhere it will adopt an old Fiat name, Tipo. It will be

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offered in sedan, hatchback and estate formats. The replacements Scudo will be made by Renault in France as a derivative of the Trafic. Key new models Fiat 500X and Jeep Renegade, which will be crucial to improving production utilisation in Italy; the 500X is expected to play a key role in expanding Fiat’s presence in North America, building on the early, but limited, success of the 500 car. However, together they are only going to represent around 225,000, possibly 250-260,000 units, a year in terms of Italian production and Fiat has lost much more volume than this in recent times in terms of Italian production. In order for Fiat to fully recover its production volumes in Italy, Alfa Romeo needs to be a success in a wider range of segments and with a much broader sales geography than it has had in the past. In North America, the Ram brand will take a wide range of Fiat vans from Europe, including versions of the Doblo and Ducato; however, whether this will make a substantial difference to production volumes remains to be seen. The Alfa brand is undergoing a complete model line-up overhaul; the aim, as has been reported many times, is to get to 400,000 upa by 2018, although this is seen as overly ambitious by many observers. New Alfa range was due to be ready in 2015, but it would now appear the first new Alfas will not appear until 2016, starting with the new Giulia. Two SUVs will follow; one of these will be made, along with a large (E-segment) sedan on a new FCA rear-wheel-drive platform. The Giulia and D-segment SUV will be made in Cassino. Replacement for the Giulietta and an accompanying C-segment SUV will follow in 2017. An SUV, based on the Maserati Ghibli is also due in 2016. Our projections for Alfa and Maserati have been reduced since our previous report owing yet further details to new model launches.

Fiat group production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Italy 792,838 749,429 642,558 591,600 590,963 763,225 789,250 855,000 928,250 936,250 892,250 Poland 533,455 467,760 348,503 295,700 313,933 296,250 264,000 316,500 361,000 367,500 347,000 Serbia 15,000 8,000 30,000 117,000 102,500 95,000 91,000 88,000 85,000 95,000 102,500 Spain 15,500 16,000 14,500 11,500 10,000 9,500 9,000 10,000 10,000 9,000 8,500 Turkey 312,285 313,500 254,750 245,496 228,229 264,500 288,000 291,000 281,000 270,250 258,000 Total 1,669,078 1,554,689 1,290,311 1,261,296 1,245,625 1,428,475 1,441,250 1,560,500 1,665,250 1,678,000 1,608,250

The rise in production in Italy in 2015 is due to the Jeep Renegade and Fait 500X, while the rises in 2017 and 2018 are due to the expected final expansion of the Alfa and Maserati ranges. Further delays may be expected however, and the rise to over 800,000 and then to 900,000 could well be delayed by another year or possibly longer.

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Ford Overview Ford’s European operations’ performance has been a major drain on corporate resources in recent years; its European operations lost $1.6bn in 2013, admittedly an improvement on the $1.75bn lost in 2012. 2014 saw another loss, albeit a smaller loss than in 2013, this time of just over $1.06bn. Ford Europe lost $185m in Q1/2015, but improved this to just a $14m loss in Q2. The company expects break-even in Europe in 2016. Having closed Genk and borne a large part of the costs associated with this in the last year, Ford is predicting an improved performance in Europe in 2015, but no more specific guidance than that (by comparison it is projecting an operating margin in North America of 8-9%, consistent with 2014 results). At a group level, Ford is performing well; its Q3/2015 profits were almost double those of a year earlier, while revenue was up just under 8.5%; its performance in North America was its best ever. While its performance in Europe showed an improvement on its recent past results, much remains to be done to make its European operations profitable once more. Sales were up 14% in units terms but only 1.4% in revenue terms; and crucially it lost US$182m in Q3, having actually reported a profit a year earlier. It is not expecting much more than c1% growth in 2015, although the UK is expected to exceed this, at 2-3%. As with other major car companies, it is concerned with the situation in Russia, expecting a declining economy, affected by reduced oil prices, a falling rouble and geo-political disruption. Unlike GM, which is pulling out of most of the country, Ford will remain in Russia and has recently taken control of its JV with Sollers through additional investment through new preference shares. Recent and expected The Genk plant in Belgium closed in December 2014, with unions claiming total job losses, including supply chain and future production supporting services, could exceed 11,000. Spain and Turkey (LCVs) will see increased role within Ford’s European developments manufacturing network; production of Fiesta and Focus/C-Max continue in Germany with Cologne unions having agreed wide- ranging changes to working practices to keep production in Cologne. Fiesta production rose to 1,950 units a day to meet a spike in early 2015 demand, with additional weekend shifts worked. Meanwhile production of the Focus and C-Max/Grand C- Max at Saarlouis was raised to 1,770 a day for part of H1, although this too was temporary. Ford had been expecting production in Spain to exceed 400,000 units in 2015, but now think it will not meet this target owing to slower than expected ramp-up in sales of the new Mondeo, S-Max and Galaxy. The Valencia plant has completed a $2.6bn expansion, which is claimed to be the biggest ever investment in the Spanish auto industry. With daily capacity of 2,000 units and annual capacity of 450,000 upa, the Valencia plant is actually one of the largest plants within Ford’s global operations. Part of the investment in Spain has been to install a dedicated area to prepare Vignale, high trim versions of the Mondeo and S-Max. Recent economic problems in Russia have seen cutbacks in Ford’s St Petersburg plant; future growth at Ford in Russia likely to come at newer plants in Sollers JV, especially for Fiesta/Ecosport small cars. Production of Fiesta in Russia is necessary to reduce risk of import restrictions and higher import duty or taxes. Production of the new Mondeo has now started in St Petersburg. 2014 had seen the opening of a new small van plant in Turkey, following an investment of €206m and the creation of an additional 110,000 upa of capacity. This new plant, called Yenikoy, is next to the existing plant at Kocaeli. The Ford plant at Craiova (Romania) had been expected to get some production volume for new Fiesta, but Ford negotiated US$400m of cost savings with the unions at Cologne for the period between 2017-21; this agreement kept Fiesta production

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there; Craiova’s 2014 production was just under 53,000 units, well below the plant’s capacity. A second model is certainly needed to boost utilisation and we think a B-SUV vehicle based on the Ecosport – but hopefully better tuned for the European market – is likely to be added by the end of the decade, but this has not yet been confirmed. Without a second model, as we have suggested previously, it would not be surprising if Ford decided that this plant should concentrate on engine production in the long run. The relatively low volumes made in Craiova could be absorbed by another Ford plant making a similarly sized B- segment vehicle, most obviously at either Cologne or the new Turkish B-segment van plant. Key new models Mondeo, Galaxy and S-Max are all now in production in Valencia, which along with the Kuga and the CV and passenger versions of the Transit Connect, give the plant a six model line-up; other major new models for Europe, Ka, Ecosport, Edge and Mustang will be made outside Europe. New Ka is made in Brazil, replacing current Ka made in Poland by Fiat. Much of Ford’s efforts in the short term will be on the D-segment Mondeo/Galaxy/S-Max range; these vehicles operate in a highly competitive market and one in which a number of players have either exited or reduced their range in recent years. PSA has left the D-segment MPV market and has a very modest presence in D-segment cars; Opel’s Insignia sells similar volumes to Mondeo and far fewer than it once did, while Renault has only just launched a D segment replacements for the Laguna and Espace after the old models had languished unchanged for several years. The D-segment as a whole has re-oriented itself towards premium brands in recent years and companies like Ford have found this a difficult market in which to sustain their presence. To try to rebuild its presence in the D-segment, the company has high hopes for the Vignale high specification versions of Mondeo and S-Max in particular, In addition, Ford’s new European boss, Jim Farley, hopes to sell the Edge crossover model in Europe; whether this will actually manage to attract buyers from Audi, BMW and other premium SUVs remains to be seen. The S-Max and Edge, plus other possible other Vignale variants, represent Ford’s approach to moving up-market, in a similar vein to the DS brand at PSA. PSA has succeeded to a degree, partly because DS has been perceived as – and is now set up as – a brand in its own right; whether Ford can achieve the same with Vignale without the range becoming fully differentiated from mainstream Ford models is doubtful.

Ford production by country, 2010-2020 - (includes Volvo for part 2010)

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Belgium 309,750 174,250 124,000 94,750 86,500 0 0 0 0 0 0 Germany 741,803 729,940 694,004 616,364 674,867 757,000 729,000 722,500 746,000 749,500 735,500 Italy 4,3460000000000 Romania 9,558 7,547 30,591 68,339 52,829 51,000 43,000 34,500 30,500 75,000 105,000 Sweden78,3210000000000 Spain 256,650 230,500 133,500 224,551 282,011 387,250 399,500 387,250 362,750 361,250 362,500 UK 28,270 28,170 28,031 12,989 0 0 0 0 0 0 0 Turkey 251,198 287,000 231,000 275,000 240,000 293,250 296,500 290,500 274,500 267,000 261,000 Total 1,679,896 1,457,407 1,241,126 1,291,993 1,336,207 1,488,500 1,468,000 1,434,750 1,413,750 1,452,750 1,464,000

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GM

Overview Back in GM sold its 7% stake in PSA and scaled back the GM-PSA alliance, cutting plans to jointly develop a sub-compact car and three- cylinder engines. Even so, GM now expects the alliance to generate US$1.2bn in annual savings by 2018, against US$2bn originally projected; plans for small MPV, compact crossover and small CVs remain, alongside some joint purchasing and logistics, but there will be no further growth of this alliance. GM has completed the exit of Chevrolet from Europe and has integrated GM’s remaining Russian business into Opel’s European structure; the decision to close the Chevrolet operations in Europe cost cUS$1bn. The downturn in the Russian market has also led to a deterioration in Opel’s financial position, with CEO Karl-Thomas Neumann having suggested that the situation in Russia will delay returning Opel to profit until 2016. Recent and Key event for 2015 was the production launch of the new Astra at Ellesmere Port in the UK and Gliwice in Poland. Both plants will make expected future the 5-door hatch version with the UK plant adding the estate from early in 2016. production Upgraded Meriva started production January 2014; all new Meriva and replacement for Citroen C3 Picasso to be made at Zaragosa from developments 2016. Mokka added to Zaragosa on SKD basis during H2/2014, with full production from 2017/8, possibly sooner. Initial investment in Zaragosa is c$80m, with more investment to follow when production moves to full manufacture. Mokka volumes have been much higher than initially expected and we would now expect this model to move to full production within the next 2 years. Small B-segment LCV will be made by PSA (based on Berlingo/Partner) at the Vigo plant in northern Spain from 2016/7 (replacing Combo which is currently made by Fiat-Tofas in Turkey). Zafira replacement will be made by PSA; we had thought this would be made at Rennes alongside new , but production will actually be at Sochaux where it will be made alongside the 3008 instead. Buick version of Insignia and a third model – almost certainly an upmarket SUV crossover based on the Monza concept – to be made at Russelsheim; €245m investment at Russelsheim to support these new models. €130m investment at Kaiserslautern engine plant, part of €4bn programme on new models and powertrains due before 2018. The downturn in Russia has led to GM deciding to pull out of its Russian operations almost entirely. It will shutter its own facilities in St Petersburg and largely withdraw from the country. Its only remaining activity in Russia will see some low volume Chevrolet sales. Recent financial GME lost $0.8bn in 2013, an improvement on the $1.9bn lost in 2012. Karl-Thomas Neumann, head of Opel, claims it is on track to be results profitable in 2016, repeating this at the Geneva and Paris motor shows in 2014 and indeed at the Geneva show in 2015. GME lost nearly $1.4bn in 2014, a further improvement on 2013, but how far Russia will set back the company’s European operations in 2015 is open to debate. Most of the restructuring costs associated with closing Bochum have been borne, although some will be attributed to the current financial year. Quarterly losses also widened in Q4/2014 from $365m to $393m. In Q1 and Q2/2015, GME saw continued but much smaller losses – in Q1, the loss-making margin was 5.4% at $200m, with an almost break-even result, and loss-making margin of just 0.9% in Q2. GM Europe was still loss-making in Q3, losing US$0.2bn, but this was an improvement on the loss of US$0.4bn in the same quarter in 2014,

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Key new As noted above, the key new model is all-new Astra now in production in the UK and Poland. Replacement for Agila comes from GM models Korea, called Viva in UK and Karl in Europe. This model was launched at the Geneva motor show in March – at which GME chief, Karl- Thomas Neumann, suggested that if sales of the Karl/Viva exceeded 100,000 upa then production in Europe was a possibility. The Cascada will be made as a Buick and a to boost sales over the last 4 years or so of the model’s life; this is not expected to be directly replaced, although a sporty coupe based on the Insignia or Astra may yet be added at the end of the decade.

GM production by country, 2010-2020 - (totals include Saab for part of 2010) Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Austria 20000000000 Belgium79,2130000000000 Germany 436,849 442,040 387,525 360,561 365,430 250,500 219,750 245,750 273,000 303,000 303,000 France 00000000000 Poland 203,514 178,898 125,479 108,333 88,962 160,750 143,500 176,000 183,500 172,000 161,000 Sweden1,4800000000000 Spain 380,145 365,419 264,975 281,171 319,599 367,250 368,500 436,000 437,000 420,750 402,000 Total 1,281,047 1,196,310 929,482 867,326 895,394 938,500 926,750 1,082,250 1,131,000 1,129,250 1,089,250 the fall in German production in 2015-16 is due to the end of Zafira and Astra production and a pick up in production there is dependent on the new Insignia range and the possible transfer of some Corsa production from Spain – this will only happen once Zaragosa is producing the new MPV/crossover models for Opel and PSA.

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Honda

Overview UK operations still operating at well below capacity, following recent period of consolidation, with declining production and sales, and job losses announced in early 2013 and again in 2014. European operations not expected to be profitable before the switch to the new Civic in 2018 at the earliest. Production of the Jazz has ended, with the replacement coming from Mexico, while CRV production will stop in 2016/17 with production shifting to Canada. The UK plant will then focus on worldwide supply of the next 5-door Civic, including exports to the US. Production volumes will be around 130-135,000 pa, although Honda has ambitions to get closer to 150,000 and possibly higher. Recent and expected Production of current Civic Tourer at Swindon started in December 2014 and the high performance Civic Type-R was added future production earlier in 2015. The end of Jazz production leaves UK plant with just Civic and CRV, and much excess capacity. Consequently, developments Plant 2 was shuttered in Q4/2014, with all production concentrated on Plant 1. In order to better utilise facilities at Swindon, some suppliers, including the tube supplier Sanoh, have moved their operations inside the Swindon factory, using otherwise free space and reducing transport and logistics costs.

Honda production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 UK 129,798 97,459 165,630 138,632 121,799 115,500 115,000 103,750 129,000 135,000 133,000 Turkey 20,305 12,341 22,500 14,813 11,633 11,000 17,000 18,000 23,500 22,500 20,000 Total 150,103 109,800 188,130 153,445 133,432 126,500 132,000 121,750 152,500 157,500 153,000

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Hyundai-Kia

Overview Preparing for major growth in Europe, targeting 5% market share by 2020 (versus 3.4% share in 2013); 2014 was a year of preparation, with sales growth re-starting in 2015. Now claims 95% of Hyundais sold in Europe are designed and developed in Europe, with 90% made in Czech and Turkey. 2013-14 developments in Production of i10 started in Turkey, following substantial investment to raise capacity to 200,000 upa. Addition of i20 coupe to production Turkish factory line-up. >€500m invested in Europe in 2013, in new test centre in Germany and expansion at factory in Turkey. Recent and expected Production across Czech, Slovakia, and Turkey now exceeds 900,000 upa and should top 1m units from 2018; with Russian future production production, Hyundai volumes in Europe already exceed 1m units pa. Recent growth has been boosted by worldwide exports of developments the i30 and Sportage to Africa and Australia. Turkish production received a further boost with the addition of the i20 3-door coupe model; this is intended to be positioned as a sporty model and is an attempt to move Hyundai into the “fashion” part of the B-segment. A second factory or major expansion of the current factory in Turkey is expected to be in operation by the end of the decade; this explains the rise in production from 2019. This new facility is expected to produce a B-segment SUV and possibly a C-segment sedan targeted at eastern and central Europe.. Kia Venga to be replaced by B-segment SUV to position brand/range better against vehicles such as Renault Captur and . Hyundai ix35 replacement is called Tucson. H350 van shown at the 2014 , with production starting in 2015. Initial projections c30,000, but this could be as high as 50,000. Vehicle positioned against Ford Transit, and in size terms and name suggests plans for a H250 (positioned against Vivaro/Trafic) and H150 (positioned against Doblo etc) could be under consideration. H350 production at (Hyundai’s LCV partner) started in May.

Hyundai-Kia production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Czech 200,010 251,009 303,013 284,392 307,900 343,000 339,000 375,500 370,000 390,500 376,750 Slovakia 229,505 252,200 292,000 313,000 323,500 336,250 330,750 346,500 357,250 380,000 382,000 Turkey 75,495 91,292 85,878 90,278 201,660 236,000 252,250 274,750 326,000 380,000 393,000 Total 505,010 594,501 680,891 687,670 833,060 915,250 922,000 996,750 1,053,250 1,150,500 1,151,750

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PSA Overview Investment by French government (a move described as “industrial patriotism”) and Dongfeng of China confirmed in January 2014, following declining financial performance and decision by GM to sell its 7% stake in the company. Peugeot family claims it will remain at the heart of the company’s decision-making process, although many outsiders regard the late 2014 decision to move the group HQ out of central Paris to a lower-cost location in the suburbs of Paris as a sign that the Peugeot family’s influence is declining. The combined Dongfeng and French government investment is worth €3.1bn, with Dongfeng and the French government each investing €750m for 14% stake, diluting the Peugeot family’s share from 25% to 14%; additional €1.05bn investment from a rights issue. Significantly, the major shareholders cannot increase their own stake without agreement of all the other large shareholders. Alliance with GM has been reduced in scope, now limited to just 3 models, and some purchasing and logistics coordination: B-segment MPV (to be made by Opel in Spain), C-segment MPV/CUV (to be made by PSA in France) and a B-segment LCV (to be made at PSA Vigo in Spain). As noted below, the company appears to be on the rebound following a major change in strategy under new CEO, Carlos Tavares, under the strap line “Back in the Race”. This has focused on improving cash flow, cutting hitherto high inventories, and eliminating unprofitable car lines. In addition, a greater differentiation between Citroen and Peugeot has become evident, alongside the establishment of the DS brand as stand-alone unit. The group’s reliance on Europe is also being reduced, with increased attention to China especially. As evidence of the increasing significance of China in PSA’s future, the alliances with Dongfeng will now encompass co-development of a common platform for small cars for worldwide sale, including an electric version. However, even with the focus on China, production is on the rise in Europe, with the company planning to add 60,000 units to French production during H2/2015 (although this actually did no more than to reduce the scale of the decline in production which was taking place anyway; it did not result in an increase in vehicle production.. 2014/15 Revenue was up slightly at 54.36bn Euros, against 53.92bn Euros in 2013; recurring operating income at 1.12bn Euros was a complete results turnaround from the small loss of 147m Euros in 2013 and represented the company’s first profit in 3 years. Automotive revenue was down slightly at 36.1bn Euros as against 36.4bn Euros in 2014, although adjusting for how Chinese revenue is accounted for allows PSA to claim that automotive revenues including China were up 1.8%. Leaving aside such accounting devices, it does seem as though PSA is moving into a better place financially. In H1/2015, the company was profitable again, with net income of 571m Euros, versus a loss of 114m Euros in H1/2014. Recent and Aiming to produce 1m PSA models in France by 2016 following new labour agreement. However, we doubt this will be achieved before expected 2018 based on known model plans unless more DS models are allocated to French production sooner than we currently expect will future happen. developments Investment of €90m confirmed for Rennes in France to make replacement Peugeot 5008; also originally thought this include the Opel Zafira replacement from 2016, but this model is now likely to be made at Sochaux. Switch of 5008 to Rennes designed to balance production better across PSA’s four main French car plants, although even with the 5008, the Rennes plant will remain under-utilised. Poissy has switched to a single shift operation and this reduced output pattern will be retained when production of the next C3 shifts to Slovakia. Even so, news emerged in early 2015 that €150m is due to be invested in Poissy to improve production efficiencies there over the next three years, primarily for the new DS3. Unions have taken this a positive sign and believe this signals PSA’s commitment to the Poissy factory, even at a reduced production volume, until 2025.

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Production of the C4 Cactus in Spain has been running ahead of expectations, with a further production increase likely in support of the model been launched in China. An expansion of the Cactus or Cactus-like range is also expected by the end of the decade. This will be part of the overall trend at Citroen to more crossovers and SUVs; details on this new range will become apparent during 2016. More positively, the DS brand is now a stand-alone brand within the PSA line-up, with at least three more vehicles to be added to the current DS3/4/5 line-up in Europe. Reflecting its status as a fully-fledged entity in its own right, DS had its own stand at the Geneva motor show, while DS models no longer include Citroen in their badging. The brand also has a new strap line, “Spirit of Avant Garde”, and will be aimed at the fashion-conscious consumer who wants a high level of personalisation of his or her car. The DS line-up will expand in Europe and China, while an entirely new range of Citroen models will be developed. The aim is to move Citroen away from the mainstream, with more SUV/MPV crossovers and visually differentiated vehicles such as the C4 Cactus. With new models like the C4 Picasso, C1 and C3 already or soon to be in production, it will take some time for this new strategy to be fully implemented, but it is clear that over the new 5 years or so a very different Citroen brand will emerge. The bulk of the increase in Citroen brand production from 2017 onwards is due to the new SUV/crossover range which is planned. The existing DS3/4/5 range will be extended to include 2 SUV-crossovers in C and D segments, plus a premium car based on the DS9 concept car shown at 2012 auto shows. The DS6 WR is already in production in China. This is a crossover model and a more conventional DS6 may also appear as an attempt by DS to compete directly with the BMW 5-series and Mercedes E-class. Again this is likely to be made in China, although how realistic taking on the German premium brands is remains open to debate. Like Renault with its plant in Tangier, PSA is also understood to be planning a factory in Morocco; it has said that this plant would be for the local North African market only, but as it due to be built in the same tax-free zone at the Renault plant, exports to Europe would not be surprising. For now we exclude PSA Morocco from our “European” production outlook as this plant is not expected to supply Europe – if plans change here, then we will add it into the report as it would then have a direct impact on output from other PSA plants in Europe. Key new Following the success of the EMP1-based 2008, the other set of important new models are those made on the EMP2 platform, especially models the next generation 308 and C4 Picasso. The next EMP1 model is the Citroen C3, while the next EMP2 models will be the new 3008 and Opel Zafira. Interestingly, the C4 Cactus which was launched at the 2014 Geneva Motor Show and which has been very well-received, is not made on EMP2. In fact, it uses the old B-segment platform despite nominally being a C-segment vehicle. C4 Cactus has effectively saved the Madrid plant which also produced a small number of 207s until mid-2015. Production of the 208 and C3 has been progressively shifted eastwards in recent times, and ahead of new models being confirmed for France, the focus will switch to Spain where the C4 Picasso, C4 Cactus and new Berlingo/Partner and the Opel version are likely to result in more stable production: we do not see PSA’s French production recovering fully to previous volumes, i.e. above 1.2m upa, until after the end of the period under review here.

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PSA production by country, 2010-2020 Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Austria 19,135 19,725 9,828 8,309 6,500 5,250 2,500 0 0 0 0 Czech 212,801 179,917 140,646 118,124 132,105 134,500 125,000 122,250 120,000 115,500 113,250 France 1,293,907 1,361,238 1,118,682 1,009,850 981,400 915,000 804,250 958,250 1,134,500 1,120,500 1,152,000 Portugal 47,397 50,290 43,940 56,717 53,510 45,750 39,750 46,000 60,500 68,500 68,000 Slovakia 204,000 177,000 211,500 249,000 247,000 280,000 313,000 361,000 384,500 371,250 348,500 Spain 516,040 480,825 350,203 437,677 412,250 436,500 435,000 446,250 464,000 463,500 468,000 Total 2,293,280 2,268,995 1,874,799 1,879,677 1,832,765 1,817,000 1,719,500 1,933,750 2,163,500 2,139,250 2,149,750

PSA production by brand (incl. contract production), 2010-2020 PSA group brand 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Citroën 946,144 908,726 689,842 664,495 689,550 677,000 653,250 756,250 842,000 814,750 820,000 DS 68,624 116,186 89,203 117,000 91,000 85,000 75,500 118,000 202,500 231,500 260,000 Peugeot 1,278,613 1,255,560 1,108,429 1,105,190 1,058,218 1,053,250 985,250 1,018,000 1,050,000 1,016,750 1,001,250 Fiat 20,338 19,786 14,250 11,500 9,500 7,500 0 0 0 0 0 Lancia 1,5610000000000 Opel 0 0 0 0 0 0 10,000 58,750 85,000 97,500 98,000 Toyota 0 0 0 3,500 7,500 10,000 7,000 12,500 16,500 17,750 15,500 Total 2,315,280 2,300,258 1,901,724 1,901,685 1,855,768 1,832,750 1,731,000 1,963,500 2,196,000 2,178,250 2,194,750

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Renault (and Dacia)

Overview Renault has spent much effort in recent times building up its presence outside France, especially in Brazil, Morocco, India, Russia and China. However, it has also committed to raising French production to 710,000 units per year by 2016, although we now think that this will not occur until 2017. By this time, full annual production rates will have been achieved for the Nissan Micra and other new models will have come on stream; in addition the Fiat Scudo (based on the Renault Trafic) will also have appeared by then. Significant resources have been allocated to integrating AvtoVAZ and expanding the Dacia network, especially the Morocco plant, which has an international role in supplying parts to other factories within the group. However, the current economic and political uncertainty in Russia calls into question the viability of the company’s focus on Russia. Despite the problems callused by Russia, CEO expects the combined Renault-Nissan Alliance to be the third largest car company in the world by 2018, overtaking GM which is currently ahead of the Alliance by around 1.4m units in annual sales. With the downturn in Russia, it is not quite clear where the group will find the additional sales to overtake GM, but India and a significant increase for the Renault brand in China, where it is currently a very small player, will certainly be necessary. The major development at Renault in recent times has been the increased stake in the company taken by the French government. The move of Renault production out of France has not gone down well with the French government; as a result, it has now taken an increased stake in the company with the aim of restraining the moves which the company has made in the past to reduce its dependence on France. This is similar to the arrangement which the French government has at PSA; in response, Renault is considering adjusting its shareholding in Nissan so that Nissan can have voting rights in Renault so that Nissan can, if necessary, side with Renault management against the French government on major issues! 2014 and Global sales were up 3.2% to 2.7m, while group revenue was up just 0.3% at 41.06bn Euros. Unit prices fell, while operating profit at H1/2015 results 1.61bn Euros, or 3.9% of revenue, was up from 1.24bn Euros, a 3% margin. Similarly, automotive operating profits were up at 858m Euros, from 495m Euros, while operating income was over 1.1bn Euros, compared to a loss of 34m Euros. Nissan made a contribution of 1.36bn Euros, although AvtoVAZ contributed a net loss of 182m Euros. These results allowed the company to state that it had met all the objectives it set itself for 2014 and places it ready for further growth in 2015. Without giving much away, the company said it will see higher unit sales and revenues in 2015, improvements to the operating margin at both group and automotive division levels, and also a positive automotive operating free cash flow. One interesting accounting issue at Renault is that the current economic problems in Russia mean that the consolidation of AvtoVAZ onto the Renault balance sheet will be delayed until the Russian market rebounds and AvtoVAZ’s accounts improve accordingly. H1/2015 results were also broadly positive, with revenue up 12%; operating profit was up from 729m Euros to 1,069m Euros, with a margin of 4.8% versus 3.7% a year earlier. Net income similarly rose from 801m Euros to 1,469m Euros. Recent and Extension of Tangiers production with opening of second assembly line, raising production capacity to c340,000 upa from 2014, expected future following €400m investment. Production on new line focuses on Dacia Sandero and Sandero Stepway, mostly for sale in Europe production replacing much of the Sandero production in Romania. Romania has taken over production of RHD Dusters for the UK/Ireland from developments India. Substantial investment at Douai for Scenic and new Laguna/Espace, with the new Espace shown at the recent Paris motor shows. €420m has been invested specifically for the new Espace which is much more of a crossover rather than a conventional MPV.

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The Spanish-built Captur has been a great success, with production running at more than 200,000 upa at the Valladolid plant, substantially more than had been expected initially. The success of Captur has been boosted by the addition of a Samsung version for the Korean market. The new Kadjar, a C-segment crossover also made in Spain at the Palencia plant, finally gives Renault a model comparable to the Qashqai. Renault has high expectations of this model, and global sales of up to and possibly over 200,000 pa at least can be reasonably expected. This total would include planned production in China, as well as in Spain. Renault spokesmen have claimed a very high degree of commonality with the Qashqai, talking about the model giving it “a scale advantage no one can match”. Key new models In addition to the Kadjar, other models which Renault launched in 2015 were the new Twingo and the Talisman sedan/estate. These will be joined in the near future by a pick-up made by Nissan in Spain (the first in the modern era for the brand), a model which is said to be Renault’s equivalent to the Citroen C4 Cactus and a Renault equivalent to the Nissan X-Trail, this latter model probably made in Japan. In addition, Renault plans to make 3-5,000 sports cars with Alpine a year, although timing for these new models remains to be confirmed. Van production was introduced at in Sandouville from H2/2014, with full production rates from early 2015; as well as the Renault Trafic, which will represent the bulk of production, the Sandouville plant will also produce a Nissan version (NV300), a version for Fiat (to replace then Scudo) and a small volume for Opel/Vauxhall (primarily the high roof versions which cannot be made in Luton).

Nissan Overview Continued strong performance at UK plant (which now represents c30% of total UK vehicle output), with further expansion still possible, although the current focus is on making sure current investments are brought through successfully Nissan Spain had been expected to see a steady rise in output following the production launch of the Pulsar, but volumes for this model have not met initial expectations. Recent and >500,000 units produced in UK in 2013 for second time and again in 2014 the 500,000 units barrier was just exceeded; production may expected future dip below the 500,000 level in the UK owing to model cycle effects but once the Q30 and QX30 are at full production rates, output will developments climb back over the 500,000 level, towards 550,000 upa. A direct replacement for the Note is not expected, but other models are expected by the end of the decade. €167m has been invested in St Petersburg to raise Nissan capacity there to 100,000 upa to the make Qashqai there from late 2015 or early 2016.. Nissan has also made significant investment (€430m) at Barcelona for vans, a new pick-up and small cars; at Avila for heavy-duty and Cantabria for machining capacity. Nissan’s plant in Barcelona will make a new pick-up for sale under the Nissan, Renault and Mercedes brands from 2017/18; Renault’s plant in Argentina will do the same. This is the latest example of shared model development and production arrangements between Renault-Nissan and Daimler which now encompasses vehicles from the Smart/Twingo all the way through to 3 tonne trucks in Japan.

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Renault-Nissan-Dacia production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 France 636,789 652,292 541,517 495,908 533,164 607,350 659,000 722,500 713,000 701,000 674,000 Morocco 0 0 114,731 172,744 231,844 343,000 385,000 405,000 397,000 386,500 377,000 Romania 341,299 327,620 306,071 349,586 338,593 355,250 342,500 319,750 332,500 337,500 331,500 Slovenia 212,493 157,183 130,949 93,733 118,591 165,000 173,000 161,000 151,000 145,000 132,000 Spain 430,442 485,590 400,788 417,607 449,302 592,000 615,250 653,000 659,500 658,500 625,000 UK 423,262 480,485 510,122 501,756 500,238 484,500 525,000 555,500 555,500 552,750 552,250 Turkey 307,083 343,288 291,614 330,546 318,198 328,500 342,000 336,000 320,500 313,000 291,000 Total 2,351,368 2,446,458 2,295,792 2,361,880 2,489,930 2,875,600 3,041,750 3,152,750 3,129,000 3,094,250 2,982,750

Renault-Nissan-Dacia production by marque, 2010-2020

Renault group brand 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dacia 341,299 327,620 408,854 517,185 570,437 698,250 727,500 724,750 729,500 724,000 708,500 Mercedes-Benz 0 0 14,311 17,687 0 25,750 24,000 25,000 26,500 29,000 30,000 Nissan 514,377 624,985 634,740 655,310 605,974 596,500 690,500 805,500 832,500 858,750 836,750 Renault 1,495,692 1,493,853 1,237,887 1,171,698 1,313,519 1,505,100 1,546,750 1,545,500 1,493,000 1,438,500 1,366,500 Smart 0 0 0 0 0 50,000 53,000 52,000 47,500 44,000 41,000 Total 2,351,368 2,446,458 2,295,792 2,361,880 2,489,930 2,875,600 3,041,750 3,152,750 3,129,000 3,094,250 2,982,750

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Suzuki

Overview European plant in Hungary has yet to be fully utilised; recently upgraded S-Cross and new Vitara are expected to push output over 200,000 in 2016, but we are doubtful if these models will fully utilise the plant’s 300,000 upa capacity now that Opel and Fiat production arrangements have come to an end. Recent and expected Opel and Fiat contract production in Hungary finished in 2014. In 2014, the plant ran on one shift, but added a second shift in future production 2015 when production of new Vitara started. developments 150m Euros have been invested in Esztergom for the new model, with total production in 2015 expecting to be at least 180,000. Russian production start delayed, with timing uncertain now due to political and economic crises. Key new models New Vitara, a B-segment model, positioned below S-Cross (old Vitara was a C-segment vehicle). New Swift and another new small hatchback car from 2016/7 should push production towards 260,000 upa, but this would still be below plant capacity.

Suzuki production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Hungary 178,897 168,555 159,750 150,040 157,490 186,500 240,000 255,000 247,000 235,500 222,000 Total 178,897 168,555 159,750 150,040 157,490 186,500 240,000 255,000 247,000 235,500 222,000

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Tata Jaguar Land Rover Overview Currently amidst a major expansion programme, with new models expected to push UK production to c700,000 pa by the end of the decade. Since the last report, JLR has confirmed production of low volume models, believed to be electric versions of current UK-made models, in Austria; we expect this to start in 2017. In addition, subject to final confirmation later this year, JLR will open a plant in Slovakia in 2018. This plant will ultimately have capacity of 300,000 upa, but it will take into the 2020s for production to reach this level. A further boost to UK production was confirmed in early 2015 with news of the F-PACE crossover model, the second vehicle to be made on the iQ/D7a platform in the new Solihull assembly hall. A Range Rover version is also expected, boosting output from this new facility. Earlier, JLR had opened a factory in China which produces Range Rover Evoque and Discovery Sport; both models will also be made, essentially as kits, with around 30-40% local content, in a new small plant in Brazil. This factory has a 24,000 upa capacity, following a £250m investment in Rio de Janeiro state. Last year, a senior JLR executive was quoted suggesting that JLR’s target was to be half the size of Mercedes-Benz – currently Mercedes makes over 1.5m cars pa worldwide, implying at least 750,000 units for JLR; however, Mercedes is growing fast, towards 2m, so JLR may well have more ambitious targets, in which case further expansion in the UK and elsewhere, ie Austria, Brazil, China and Slovakia, is certainly going to be required. Other possible Official opening of new UK engine plant following investment of >£500m; still in process of recruiting c600 people over the next four years production as production ramps up. Press reports have suggested that JLR has acquired additional land next to the engine plant at Wolverhampton, developments with a view to expanding engine production significantly – this would certainly seem logical in view of the plan to add a vehicle plant in Slovakia, which would need a further 300,000 engines in the long run. Capacity at the Wolverhampton engine plant will now be doubled, although the timing for this and the exact balance and configuration of diesel and petrol engines to be made there remain to be confirmed. Press reports have indicated serious consideration has been given to a JLR factory in the USA; this would be logical given rising sales volumes there and the strength of US SUV market. Moreover, all of JLR’s major competitors – Audi, BMW, Mercedes and even – all produce some vehicles in NAFTA and so JLR needs to consider this seriously. However, a decision regarding a potential US factory was described as “due in three years” by CEO Ralf Speth at the 2015 Geneva Motor Show. Speth added that JLR only had the resources to handle one major new plant at a time. At this stage, we do not expect such a plant before the early-mid 2020s, if not later, ie once the new Slovakian plant is up and running. 2014-15 For the 2014-15 financial year, revenue was up £2.5bn at £21.9bn, with an EBITDA margin of 18.9%, at £4.1bn. This came from 462,209 results retail sales globally, a company record, up 6.4%, although while Land Rover was up nearly 9% at 385,3000, Jaguar was down 4.5% at just under 77,000 owing model cycle issues, with the XE not yet having started production and the XF also coming to the end of its cycle. Sales divided UK (19%), North America (17%), China (25%), Europe (19%), Asia Pacific (6%), and the rest of the world (19%). 2015-16 has been a challenging financial year so far for JLR; as well as bearing significant investment and launch costs (for the expansion at Castle Bromwich and the launch of the XE/XF and other models), it has also taken a £245m exceptional charge to its accounts in the quarter to September 30, to cover the damage to just under 6,000 cars which were affected by the chemical factory explosion and resultant fire at the Chinese port of Tianjin. Before this charge, the company had made a pre-tax profit of £88m, on revenue of £4.8bn for the quarter. Unit sales, at 110,000 were broadly similar to those of the previous year, with UK demand up 9%, Europe up 34% and North America up 23%, compensating for a slowdown in China.

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Key new New Jaguar range based on D7a all-aluminium platform; along with the expected 4th Range Rover model, this platform could produce as models many as 300,000 units in the UK by the end of the decade. The first D7a models, the Jaguar XE and F-PACE, are now in production, and are expected to be joined by a further Range Rover model which is expected to be officially announced in early 2016. The XE and other models made on D7a will be the key to Jaguar’s future success. Pitched firmly in the 3-series market, Jaguar’s volume ambitions appear modest, with initial reports suggesting around 60,000 units pa; BMW’s 3-series by contrast tops 0.5m a year, worldwide, so the potential for a Jaguar which matches the 3-series’ standards is clear. XE should do more than 70,000 pa in the near term, with the F-PACE dosing even better than this. The new XF is also made on the same platform. Initial targets for XF are c50-60,000 upa, although we think that in the longer run around 80,000 units should be possible, and even such volumes would be modest by comparison with BMW 5-series which runs at 300,000 pa on average The F-PACE will be targeted at the Porsche Macan and BMW X4. Volumes should be slightly higher than the XE. In addition to the conventional powertrains for the F-PACE, JLR is understood to be working on a fully electric version, with the intention of sharing EV technology between a Jaguar and a Range Rover version. Freelander replacement, called Discovery Sport, is now in production, following launch at the 2014 Paris motor show. Like Evoque, this has given a major boost to the UK supply chain with c£3.5bn of new contracts awarded to 55 UK suppliers. Evoque Convertible has been confirmed for 2016. Defender replacement was due in 2016/17, but this will not now be made until 2018 in the new Slovakian plant. The new Discovery has been delayed one year to 2017. Finally, we expected several additional small models expected, to fit below Discovery Sport and Evoque, and possibly below XE, but their timing remains to be confirmed. these would be made on the D7a platform at the new factory planned for Slovakia.

Tata Jaguar Land Rover production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Austria 0 0 0 0 0 0 0 10,000 20,000 25,000 22,000 Slovakia 0 0 0 0 0 0 0 0 30,000 55,000 80,000 UK 241,552 291,031 367,664 429,026 460,906 503,750 550,000 611,750 679,250 698,000 676,750 Rover Total 241,552 291,031 367,664 429,026 460,906 503,750 550,000 621,750 729,250 778,000 778,750

Model level detail has been provided earlier in the section on the UK, pp 23-25 above.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 59

Toyota

Overview Corporate focus has recently been away from Europe, especially Asia and US, although plans for Turkey and the probable introduction of the TNGA platform in the UK shows that Europe is once again at the forefront of Toyota’s mind. Recent and expected French plant in Valenciennes started shipping Yaris to North America in May 2013, boosting production to close to capacity future production (c220,000 upa when at full production rates) on a two-shift basis. Long-term production target of >250,000 pa in France would developments involve permanent switch to three-shift operation and is unlikely until next Yaris is introduced and additional export markets are allocated to the plant. However in 2014, Toyota France took on 500 extra staff and will work on a three-shift basis for the next year or two. At three shifts a day, the plant can make 1,100 units a day, against 840 a day on two shifts. The key production development in the UK in 2015 was the simultaneous production launch in May of the revised Auris and Avensis – this was the first time that any Toyota plant worldwide had launched two new vehicles at the same time. The success which the plant has had with this double launch is the primary reason why production is projected at over 200,000 for 2015. We expect a new Toyota platform, the Toyota New Global Architecture (TNGA), will be adopted in the UK plant for models made from 2018. Reports from Turkey have suggested Toyota is planning to invest up to $500m at its plant in the country; we expect this would be for the forthcoming B-segment SUV.

Toyota production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Czech 82,911 90,788 74,269 67,000 71,000 69,500 66,000 63,500 61,000 60,000 57,500 France 158,512 149,153 200,000 191,000 209,500 225,000 219,000 240,000 251,000 249,000 244,000 UK 137,054 128,146 109,429 179,233 172,215 202,000 205,000 188,000 185,000 191,000 201,000 Turkey 83,286 95,500 75,000 102,260 131,500 114,500 137,000 217,500 228,000 214,500 194,250 Total 461,763 463,587 458,698 539,493 584,215 611,000 627,000 709,000 725,000 714,500 696,750

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Volkswagen Group In September 2015 the Volkswagen emissions ‘scandal’ broke. The long-term implications of this remain to be seen, and the company’s strategy is undoubtedly going to change significantly in the next few months. For example, just as the previous report was being finalised, the company announced a $1bn cut in annual development spend and that the next Phaeton would be an all electric vehicle only. The volumes concerned here are small and the announcement of this programme switch was arguably more symbolic than anything. In addition, ahead of the emissions scandal, the company had embarked on a restructuring of its many brands, a strategy which is designed to give each brand more independence. We believe this process will now accelerate and there will be a regular flow of announcements on the company’s plans in the coming months, especially once the recall to fix the emissions problem actually begins; this will now begin in early 2016 and may take a year or more to complete. In view of the likely constant and extensive changes at the company, for this report and the probably the next, we are adopting an abbreviated format for the company and focus on the overall numbers in the tables which follow. The company’s Q3 results to September 30th do not yet fully reflect the impact of the diesel scandal; these shown an increase in revenue of 5.3% although there was also a small (0.7%) fall in operating profit before special items. The company took an initial 6,685mn Euros charge in its Q3 accounts to cover some of the initial costs of the scandal; one thing is certain here – this will not be the last such charge on VW’s accounts as a result of the diesel test rigging scandal. Expected VW: €800m has been invested in Spain to widen Polo range, although the Polo SUV is actually expected now to be made at Setubal in future Portugal where MQB platform technology has been installed. Tiguan SUV production to be shared between Hanover and Wolfsburg, to production maintain utilisation at Hanover and ease pressure on Wolfsburg capacity. Construction of the van factory in Poland is now under way, with developments production due to start in H2/2016.. Next Phaeton will now be only electric, due in 2019. Audi: A3 sedan production now under way in Hungary, alongside new TT and A3 cabrio. Third shift to be added in Hungary to raise production capacity to 160,000 upa and to allow for addition of the expected SUV/crossover based on the TT. Q1 to be made in Germany, from 2016. Q8 expected to be added to production at VW Slovakia, although it could also be made in Germany. A1 due to move from Brussels to Spain and to be replaced probably by the Q6 e-tron, a higher value vehicle but which will be made in much reduced volumes compared to the A1. Skoda/SEAT: Both brands will have a three SUV line-up in the long term, with 2 models made by Skoda for each brand, one made by each brand on its own. Porsche: started production of Macan, following €500m expansion of Leipzig plant, especially in the body and paint shops. €300m investment at Zuffenhausen in new engine plant. From 2016, 20,000 Cayennes a year will be assembled at VW Osnabruck to ease pressure on Leipzig. €400m is being invested at Zuffenhausen to allow Boxster and Cayman production to move there from Osnabruck. A sub-Panamera four-door sedan is expected by 2019, probably to be called Pajun Bentley: now the group centre for W12 engine production. Bentayga SUV body to be welded in Slovakia and shipped to Crewe for painting, trim and final assembly. It is now expected that a smaller SUV in addition once Bentayga will be added at the end of the decade as well as a 2-seater competitor to Aston Martin based on the concept car shown at the 2015 Geneva motor show; this is expected to go into production by 2018/19.

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Volkswagen group production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Belgium 83,939 117,566 127,111 120,520 115,377 109,000 101,000 28,000 7,500 24,500 29,000 Czech 553,861 583,975 656,306 639,889 735,951 678,500 721,750 763,000 802,500 822,000 795,250 Germany 2,448,351 2,786,147 2,396,431 2,426,930 2,506,592 2,480,488 2,463,500 2,375,350 2,314,650 2,329,750 2,355,550 Finland6,3852,015000000000 Hungary 38,526 39,558 38,052 34,108 128,621 127,000 126,750 126,750 136,250 143,000 138,750 Italy 1,227 1,738 2,197 2,189 2,604 2,750 3,000 4,750 6,250 6,500 7,000 Poland 149,200 177,001 161,997 170,375 175,521 195,250 186,500 223,500 225,500 229,750 221,500 Portugal 101,284 133,100 112,550 91,200 101,250 104,000 107,000 169,500 186,750 195,500 186,500 Slovakia 105,596 148,707 336,804 345,909 337,572 318,750 306,500 298,000 316,000 371,500 409,000 Spain 699,807 706,007 649,956 675,795 751,220 691,500 647,000 683,000 740,000 795,750 792,500 UK 4,792 7,528 9,108 10,329 10,614 11,025 14,775 14,650 17,475 18,450 20,225 Total 4,192,968 4,703,342 4,490,512 4,517,244 4,865,322 4,718,263 4,677,775 4,686,500 4,752,875 4,936,700 4,955,275

Volkswagen group production by brand, 2010-2020

VW group brand 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Audi 1,158,834 1,375,697 1,163,460 1,168,010 1,262,382 1,260,650 1,266,000 1,170,850 1,205,750 1,258,750 1,290,500 Bentley 4,792 7,528 9,108 10,329 10,614 11,025 14,775 14,650 17,475 18,450 20,225 Lamborghini 1,227 1,738 2,197 2,189 2,604 2,750 3,000 4,750 6,250 6,500 7,000 Porsche 95,529 130,920 151,267 165,622 203,097 199,338 192,500 203,750 213,150 220,750 228,050 Seat 344,054 352,640 322,339 352,831 377,177 351,250 315,500 300,000 298,500 351,000 366,500 Skoda 558,735 584,500 692,993 682,860 777,925 720,000 760,750 793,000 847,500 872,000 847,250 Volkswagen 2,029,797 2,250,319 2,149,148 2,135,403 2,231,523 2,173,250 2,125,250 2,199,500 2,164,250 2,209,250 2,195,750 Total 4,192,968 4,703,342 4,490,512 4,517,244 4,865,322 4,718,263 4,677,775 4,686,500 4,752,875 4,936,700 4,955,275

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Volvo

Overview Relationship with Geely has become closer, with joint Compact platform (CMA) confirmed. First new SPA platform model, XC90, now in production, with S90 and V90 due to follow in 2016. Full production at all-new vehicle plants in China now under way. Production of new 4-cylinder engines also under way in Sweden, with production in China also having started in 2015. US factory in South Carolina has been confirmed and will make the next S60 and XC60. Some reports have suggested all S60s could be made in the US, including those for sale in Europe but at this stage we think Gothenburg will make S60s for European demand but this is subject to change. Recent and Investment programme nearly complete at Volvo Gothenburg for new SPA platform, the first model from which is the new XC90. expected future Second new platform, CMA (for compact vehicles in B and C segments, ie of V40 size and below) confirmed, to be developed jointly production with Geely. B segment vehicles unlikely to appear under Volvo brand. Development centre for CMA is in Gothenburg. Until the new developments range of models to be made on the CMA platform come on stream, production at Ghent will fall in 2017/18; in order to keep production up at Ghent, it is possible Volvo could use this plant to make old S60s, overlapping with the new model, and sell the old model in emerging markets. Production started in first of two new car plants in China (S60L) with second plant having started production of old XC90 during Q2 2015 – this will be for the Chinese market only. All new XC90s will be made in Sweden. Final production allocation between the US, China and Sweden for the new range of 60 and 90 models still being clarified; we now know that the US plant will make S60 and XC60, with China making S90 and other models to be confirmed. Sweden will make XC90, XC60 and S90/V90, and others, according to demand. A third shift has been added at Gothenburg to help fill the XC90 pipeline. A cross country version of the current S60 will be added during 2015 and made in Belgium. A CC version of the current V60 is also expected and will be made in Sweden. CC versions of the new 60 and 90 series models will also be produced. Chinese car plants could reach 400,000 by end of decade, although it is probably going to be into the 2020s before this total is reached. Chinese factories will be used for export beyond China, with initial exports to include some for the US. China is already supplying the US with the S60 Inscription (the long-wheel base version), but other export markets and models for Volvo China have not yet been confirmed. 2014 and H1/2015 Operating profit for 2014 rose 17%, reflecting the success of the expansion in China and the signs of recovery taking hold in Europe. results The company made 2.25bn kronor (US$271m) operating profit in 2014, up from 1.92bn kronor in 2013. Further increases in profits can be expanded as the company benefits from the current round of major investment. In H1/2015, the company reported a profit of 1.67bn kronor, versus 968m kronor a year earlier. This profit was achieved on revenue for the period of 75,215m, up from 66,982m kronor

Volvo production by country, 2010-2020

Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Belgium 98,485 266,717 257,302 252,761 263,782 221,000 210,500 138,500 168,250 225,500 224,500 Sweden 66,618 176,809 162,814 161,080 154,174 151,250 181,250 249,000 293,000 294,000 278,000 Total 165,103 443,526 420,116 413,841 417,956 372,250 391,750 387,500 461,250 519,500 502,500 Note: in the first few months of 2010, Volvo production counted as part of Ford; part 2010 @ Ford = 202,379 (Volvo total in 2010 = 367,482).

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Aston Martin  Signed tie-up with Daimler to develop V8 engines for Aston Martin, as well as electrical/electronic components. Daimler will take 5% stake in Aston Martin. New CEO, Andy Palmer, has come in from Nissan to oversee the next phase of the company’s growth.  At the Geneva motor show, the company announced plans for a SUV crossover, which will almost certainly draw on Daimler for some of its key engineering. This was shown in concept form as the DBX. Aston Martin is understood to be committed to announcing the production location for this model by the end of 2015; locations in , the Midlands and indeed the US are under consideration. There have been no clear signals as to where it will be made – for now we are assuming it will be the US because the vehicle will share a platform with the Mercedes SUVs made in Alabama and there has been talk of it being efficient to share suppliers which are located out there. Clearly it would be a major boost to the UK vehicle manufacturing sector if a decision in favour of the UK were to be made.  Aston Martin has secured £150m in new financing, a mix of new equity or bonds, to fund the development of new models. This is in addition to £500m investment in new models already announced in 2014.  Small car programme, Cygnet, has ended, but a major investment programme is now under way, including the SUV crossover referred to above, plus a luxury sedan, to be called Lagonda Taraf. The Taraf names reflects its positioning as a low-volume model designed for the Middle East (Taraf is understood to mean “success” in Arabic), but this model will be also be made in right-hand-drive and a small number of the 200 due to be made will be sold in the UK. The Taraf will be hand-built at the Gaydon HQ using a carbon-fibre body.  Ahead of an entire range renewal, the company is maintaining its market profile with a range of low volume special editions, including the Taraf mentioned above. A second example is the Vulcan, priced at between £1.5-2m according to different press sources and limited to just 24 units. Again this will have a carbon fibre body and will be a track car, with Aston Martin providing transport facilities for customers to move their car to a track for track day driving.  The DB9 will be replaced by the DB11 in 2016, followed by new versions of the Vantage (2018), Vanquish (2020) and an expected replacement for the Rapide (date to be confirmed), along with other low volume special editions.

Aston Martin Production by country, 2007-2020 Country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Austria1,49885338000000000 UK 2,703 3,574 3,313 3,828 3,966 3,025 2,475 4,575 6,450 6,425 6,625 Total 4,201 4,427 3,693 3,828 3,966 3,025 2,475 4,575 6,450 6,425 6,625

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Other VMs Mitsubishi: no longer producing in Western Europe but has a share of a plant in Russia with PSA: produces Outlander SUV (and PSA versions) and, since later 2013, the Pajero Sport; maximum total Mitsubishi capacity in Russia = 40,000 upa. Production here has been suspended and it is not clear when it will restart.

Chinese producers:  Brilliance: reports from Italy have suggested that Brilliance is considering re-opening the former Fiat plant at Termini Imerese on Sicily.  Chery: we now do not expect this plant to open until 2020 at the earliest.  Great Wall: in addition to pick-up/LCV plant in Bulgaria, Great Wall is in the process of building a full manufacturing facility in Russia which would be the first full manufacturing operation for a Chinese component in Russia – all other Chinese VMs’ activities in Russia are CKD operations.  SAIC: engineering centre in UK continues and small volumes of MG models are assembled in the former Rover Longbridge facility; we expect this to continue at low volumes, <10,000 pa.

We plan to add coverage of Lotus, McLaren and the London Taxi Company in 2016.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 65