European Car and Production Outlook FOUNDATION EDITION January 2013

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

Contents

Introduction and analysis overviews: Individual vehicle manufacturer reviews:

About this report 3 BMW 47 Summary 4 Daimler 54 Implications 12 (incl. ) 59 Overcapacity & Restructuring 15 Ford 65 Demand Side Perspective 20 GM 70 UK VM Summary 21 Honda 75 Production Outlook Overview 24 Hyundai-Kia 76 Country Rankings 36 PSA 79 Alternative Scenarios 39 --Dacia 85 Disclaimer 45 94 Tata – Jaguar Land 95 99 (incl. Porsche) 101 109 112 Mitsubishi 113 SAIC MG 113 Saab-Spyker 113 Other Chinese – Chery and Great Wall 114

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 2

About this report This is the first 2013 Production Outlook report from AutoAnalysis.

The next report will appear in March, followed by bi-monthly reports thereafter. The following reports in 2013 will be much shorter than this “Foundation” report and will focus on the detailed production numbers and specific changes at each VM since the previous report. 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 provide detailed information on future volumes and timings. They 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].

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 3

remain resolutely opposed to further support for weak economies, especially Summary Greece. Moreover, even German consumers are now feeling the pinch economically and are certainly not buying cars in the same numbers as in the Economic recovery still a long way off … European production recent past. and sales continue to decline  Fortunately, although the manifold and deep-rooted economic problems in  Following the 2008-9 economic and financial collapse, the global economy Greece, Portugal, Spain and other troubled economies have not been resolved, recovered somewhat in 2010 and in the early part of 2011, albeit in a very the much-feared contagion effect of these economies has not spread widely uncertain manner in many parts of the world. However, since then it has across Europe. And in early 2013, quite remarkably, a Greek government stuttered at best, especially in Europe where the picture is now rather worrying. bond auction was actually fully subscribed, such has been the perceived Recession looms large in many countries. Despite the hoped-for recovery, the improvements in the country’s finances. While the Greek economy is relatively UK may see only a marginal improvement in its economy at best and is still small and its problems are seen as “manageable”, of much greater concern is close to recession. And at the same time, severe financial problems continue the situation in Spain, or even Italy. Spanish unemployment is currently to afflict the Eurozone. In addition, while the US has temporarily managed to around 25% and in some age groups it is as high as 50%, hardly a recipe for avoid the immediate problems of the “fiscal cliff”, the automatic tax rises and social harmony. Economic indicators in Spain are very poor indeed. cuts in government spending (which would have occurred had there not been Production slowing … the interim agreement between the President and Congress which was finally sealed at the start of January 2013) have been averted for now, but without a  Our provisional total for 2012 European production including Russia is permanent solution. 18.12mn, a fall of over 1mn from 2011. we see a modest rise as still likely in 2013, to 18.68mn, but this will be driven largely by growth in Russia. any  The UK is sticking to its low interest rate policy, as is the rest of Europe; and growth in western Europe will be due to the premium brands from Germany, across the developed world, low interest rates remain the norm and are and JLR//Nissan in the UK and Hyundai-Kia, as well as LCVs from Ford. expected to remain in place for the foreseeable future. Conventional economic and financial theory suggests that a low interest rate environment should  Taking Russia out of the equation, we provisionally have European production encourage companies to invest; however, there is little evidence that the low down at just under 17mn units, a fall of nearly 1.4mn units from 2011. the interest rate environment, allied to the UK’s recent quantitative easing, have modest rise in 2013, to 17.1mn, ie of not much more than 100,000 units will be, actually led any significant renewed dynamism in the economy. as noted above, largely due to the premium brands from Germany, and JLR/Mini/Nissan in the UK and Hyundai-Kia. Most of the traditional volume  During 2012, the European Central Bank said it was thinking of cutting interest brands in Europe will fall in 2013, especially Fiat, , and . rates still further, but what happens when they get to zero has not been Renault and Ford will see continued falls in production for their main models explained. Moreover, although base rates are at all time lows, the real rates of but will be broadly stable overall owing to a couple of niche models coming on interest being paid by consumers and businesses alike are actually much, stream. much higher than the base rate, so the effectiveness or practical impact of cutting rates any further must be questioned. But in Investment in automotive production continues …  Across Continental Europe, Germany excepted, severe problems remain  In the light of all this poor economic news, it is remarkable how the unresolved. Even Germany, for all its financial strength, is feeling the pressure has continued to invest in the UK and plan for the of being Europe’s saviour of last resort. Political pressures within Germany long term. equally, it is remarkable how UK vehicle sales have continued, with

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 4

the UK being the only growth market in Europe in 2012. Quite how UK  In previous reports, in the light of the recent series of investments in UK car consumers are managing to fund these new car purchases is also unclear. manufacturing capacity, we asked whether, given the economic uncertainty in Europe as a whole, the automotive industry was bucking the trend in defiance  In terms of UK manufacturing, the competitiveness of the Nissan plant – of economic reality?. Have other industries accepted the economic solution too evident in how it won several major investments in the past year – and the meekly or are they the realistic ones? Put another way, can the automotive global attraction of JLR’s UK designed and built vehicles have given the UK’s sector lead the economy out of its of despond and into recovery mode? automotive manufacturing sector a great deal of hope for the future. This is especially true for premium brands; in addition to the continued investment at Restructuring under way … finally JLR, the Mini brand goes from strength to strength; we have also seen Nissan decide to make the UK the production location for its first European-made  The decisions in 2012, by GM, PSA and Ford to restructure and start to cut Infiniti, in place of the planned Nissan C-segment model. JLR’s strength and excess European manufacturing capacity over the next few years suggests success was also confirmed early in 2012 when it announced 800 new jobs at that the industry is beginning to face up to reality. These VMs are finally its plant, just a few days after Honda had announced 800 jobs would beginning to address their structural problems; at the same time, other volume go at its Swindon plant owing to declining sales in the mainstream markets in VMs, especially Fiat and Renault, are embarking on restructuring plans which which it operates. seem to exclude plant closures. The job losses at Honda and the switch by Vauxhall from a 5-day to a 4-day week are seen as necessary to “right-size”  The strong export orientation of UK vehicle manufacturing insulates the UK these plants’ capacities on an interim basis while demand slows; but the automotive industry from specifically domestic economic problems to some companies remain committed to these factories in the long run. extent, although it is far from protected from international economic ups and downs, especially those in Europe. This is clear, not just in the decision by  Rather than close any plants, Fiat intends to invest in its Italian operations, to Honda to cut the jobs referred to above, but also in Ford deciding to close its re-organise the production allocation between its four main Italian plants and plant and concentrate production in Turkey. re-focus its product line-up around its premium Alfa and brands and a much slimmed down Fiat range; whether this brave strategy is workable  In addition, the UK has a particular strength in its strong export ratio beyond remains to be seen, but Fiat has clearly recognised the need to change tack. the EU. The premium brands, Jaguar , and Rolls-Royce And late last year, Renault Spain announced initial information on a renewed all export over 50% and in many cases over 75% of their output to markets commitment to its car and powertrain operations in the country, with new beyond the EU: even Mini, which traditionally exports around one-third of its engines committed to the engine plant and two new models committed to the output to beyond the EU, was reporting over 50% non-EU exports in 2012. Palencia factory, alongside the new B-segment SUV which is about to start For JLR especially, China is a key market and belief in the long-term strength production at the Valladolid factory – closures and production cutbacks at of the Chinese market is behind the twin decisions by JLR to build a plant in Fiat and Renault appear to be off the agenda, at least for now. the country and to expand the workforce at its HQ .  By contrast with the problems faced by the volume VMs, at several others,  A further critical factor behind UK vehicle manufacturing is the degree to which especially the Koreans, the VW group, the German premium brands, JLR and many of the cars produced here are only or mostly made here in the UK, ie indeed some of the Japanese, the current economic uncertainty is less the UK is the sole or principal global or European supply point for several problematic. There are always going to be winners and losers – what the models. Although this does not guarantee success, it certainly helps and current situation suggests is that the losers are likely to be the traditional specifically reduces the degree to which UK production is exposed to the risk volume brands whose recent and likely future restructuring may only serve to of relocation to other plants in Europe, something which has clearly affected delay their eventual demise. The path being followed by the Koreans and the several plants in continental Europe in recent times.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 5

premium brands is not entirely easy, but their relative stability and in most Global growth in production expected in 2013 … cases modest growth amidst the prevailing economic uncertainty only reinforces the pressure on the volume brands.  PWC AutoFacts is predicting 2013 will see yet more growth in vehicle production on a global scale. Specifically, it expects global production to reach  Although Mercedes has had to initiate a production slowdown for some of its 83mn units in 2013, and continue to grow thereafter, reaching 107mn by 2019. large car lines during 2012, it actually has a structural shortage of capacity it expects a fall in production within the EU (presumably primarily at the volume for its new A-/B-class range; and in order to overcome this problem it has had VMs), while it expects pent-up demand in north America to result in 2013 to bring on stream additional capacity at a contract manufacturer, Valmet in production rising there from 15.4mn in 2012 to 15.8mn. PWC also expects the Finland. At the same time, it is bringing forward the planned expansion of its BRIC markets to rise with renewed enthusiasm in 2013, with China leading the new Hungarian factory. In parallel, to meet long-run expected demand for way, predicted to be up at 18.9mn, from the 16.4mn provisionally recorded in Minis, BMW has reached agreement with the new owners of the Nedcar plant 2012. in the , to produce up to 100,000 Minis there per year from 2014 – capacity at the Mini plant in Oxford is at its limit.  This continued growth follows on from record global production in recent years. 2010 saw record global production and this was repeated in 2011, despite the No realistic chance of government help … widespread economic uncertainty and the disruption caused by the Japanese earthquake and tsunami.  In the last recession, there was extensive government support across for the industry, especially in France and Germany; this came in the form of  Official, full year figures are not yet available, but OICA data for the first nine scrappage incentives, short-time working labour subsidies and (in France) months of the year shows how production growth continued across the world taking stakes in some strategically important suppliers. In the current in 2012, despite the problems in Europe. For Q1-3, global vehicle production economic downturn, however, such government help for the industry is unlikely was up 6.2%, but for the EU27 it was down by 6.6%. Elsewhere, there was a to be available: European governments are all financially stretched to put it positive picture: for example, over this period, there were rises as follows: mildly, so there is limited room for any of them to provide much support to the o NAFTA: +19.9% automotive industry. The French government has been unable to do much in response to PSA’s plan to close Aulnay and implement cutbacks elsewhere: o Japan: +32.2% initially, the new French government described the decision to close Aulnay as o China: +5% “unacceptable”, but a few months later it was described as “inevitable”! o India: +5.6%.  Admittedly, the French government has also provided some financial  The continued global growth in production is due to the strong recovery in support/guarantees to the finance arm of PSA, and also wants some board North America and continued growth in China, India and Russia, and these level representation in return for this support. The involvement of the French markets’ seemingly never-ending production growth (South America actually government in this manner has, however, caused some concern at GM: GM saw a fall in Q1-3 of around 7.2%). and PSA have formed a “defensive” alliance designed to help each other through the current market downturn and secure their long term future. GM’s  In addition, the increasing production in these markets by the European brands US management certainly appears concerned by the involvement of the in particular highlights the need for suppliers to increase their focus on French government in PSA and the indications are that this has led directly to emerging markets and NAFTA (in view of rising production there by the a slowdown in discussions regarding the long-term form of this alliance (the German brands especially); this geographic refocusing is required both from details of the alliance are provided in the GM/PSA profiles). an engineering and development point of view, but also ultimately in terms of

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 6

following their customers to the widening number of production locations  In our view, the really important message for the UK automotive sector, and for around the world. suppliers, remains, ie that UK vehicle production is on the increase, especially at Nissan, JLR and Mini; moreover, production at these VMs is widely German and UK premium brands and Hyundai-Kia pushed expected to continue to grow despite all the economic uncertainty, especially European production to 19.19mn in 2011 in the Eurozone.  High demand for German vehicles and – in H1/2011 at least – the success of  2012 in particular saw good news from Nissan, JLR, GM and BMW-Mini; as a the French VMs in mid-sized MPVs and LCVs, boosted European production result of these investments, the decision to maximise utilisation of their UK in 2011. For the VMs and models covered in this report, European production facilities by a number of VMs and the strong export orientation of the sector for 2011 was just under 19.19mn units. H2 saw better than expected means we remain confident that the UK’s annual production in the UK should production volumes from the German VMs, and JLR and Mini here in the UK. still be able to reach the highly significant 2mn upa barrier. This may not be possible until 2016/7 and will be dependent on new Nissan and JLR models  2012 was not so good however. Even including Russia (and while we await especially coming on stream, but the direction of travel in terms of production full year figures for 2012), it is clear that 2012 production in Europe will have volumes is clear. been down significantly; our provisional estimate is that Europe will total around 18.1mn units, compared to just under 18.5mn which we had estimated  In 2011, BMW and Nissan confirmed that the next generation Mini and in our last report. However, taking Russia out of the equation, Europe is Qashqai models would be made in the UK, while GM confirmed that Luton will likely to have fallen from c18.4mn in 2011 to a provisional total for 2012 continue with van production until 2025. JLR also gave the UK a major boost in of just under 17mn units. Although we see a modest recovery as possible September 2011 when it confirmed it would build a new engine plant here, its over the next couple of years, much of this is due to growth in production in first (currently engines are sourced from Ford’s UK engine factories). And in Russia, and any net production growth in Europe excluding Russia is likely to 2012, the good news continued: come from the premium brands, Hyundai-Kia and Nissan (who seem to be able to ride out the European economic storm) and also from Ford, but this will  BMW, with further expansion at Mini (£250mn additional investment be mostly in LCVs. announced in July). It should also be noted that production capacity has been reached at the Oxford plant and in the absence of additional spare  More worryingly, as we explain later in this report, there are a number of capacity in Germany, BMW has decided to increase Mini production reasonable scenarios in which this fall could be even greater and longer capacity by contracting some production to the former Nedcar/Mitsubishi lasting. The implications of such an occurrence are very serious. plant in the Netherlands; this will begin 2014 at an annual rate of up to 100,000 units – most of the UK-based Mini suppliers are likely to supply UK’s long term production volumes are still rising and should on this programme too and certainly pressings from Swindon and reach 2mn upa… engines from will be supplied for the Minis made at Nedcar.  Despite the economic gloom across most of Europe, and indeed the UK in  GM, with confirmation that it will keep Ellesmere Port open and make it recent months, the overall picture for UK vehicle production remains positive. the lead plant for the new Astra. Some press reports have suggested The well-publicised closure of the Ford van plant is relatively small in the grand that Ellesmere Port could make as many as 250,000 upa in the long run, scheme of things (the local impact notwithstanding) and the job losses although such a level is perhaps too optimistic at this stage, especially in announced at Honda were almost immediately “cancelled” by a similar number view of Ellesmere Port having switched from a 5-day to a 4-day week at of new jobs at JLR. the end of last year.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 7

 Honda, with the start of production of the latest CRV in September and  Russian production will also help drive future production growth in Europe as a confirmation that represented nearly the end of a significant £267mn whole, with c2.6mn units – and quite possibly more – currently scheduled to be investment in new models, engines and production equipment at the made each year by European, Japanese and Korean VMs in Russia within the Swindon plant; the Swindon plant will make a wider range of Civics next 5 years. (adding the estate and the high performance Type R model) but it will not produce the next Jazz. Recently however, Honda announced some not  The significance of Russia in determining the future direction for many VMs so good news, with the January 2013 news that 800 permanent and 300 and suppliers should not be underestimated. In 2012 and 2013, production in temporary jobs would be lost there owing to a decline in the market for Russia will effectively account for almost all of the net growth in the Civic and CR-V especially. European production.  JLR, with confirmation it is expanding output at its Halewood factory by  Although there will be some growth in the UK, Slovakia, Hungary, Turkey and moving to 24/7 working and that it will build the new F-type . the Czech Republic, this will be “cancelled” out by declines at the volume VMs Regular press reports suggest forcibly that a much wider product range in France, Spain, Italy and indeed Germany. (and higher production volume) will come out of JLR’s UK factories in the second half of the decade, although the exact timing of all the new So is the recent European investment wave at an end as models remains to be confirmed. The good news from JLR continued in restructuring begins in earnest? January 2013 with the confirmation of 800 new jobs at Solihull to meet  2011 had seen continued expansion across Europe’s vehicle manufacturing demand for vehicles for export markets in particular. sector, alongside the start of significant expansion in full manufacturing  And Nissan, with confirmation of not one, but two, new cars for operations in Russia by the European, Japanese and Koreans. Selected Sunderland, one to replace the outgoing Note, and one which will European highlights from 2011 and some of the less good news from 2012 expand the factory’s capacity and portfolio still further; this was due to be include: a C-segment car, effectively the long-run replacement for the Almera, but  Audi expanded in Germany and Hungary and in 2012 it confirmed Mexico late in 2012, Nissan announced it would in fact make the Infiniti compact as the site of its first plant in North America. car there and switch the C-segment model to a factory outside the UK.  Ford announced a reorganisation of its European production footprint to  On the back of this, and the commitment of Toyota to its UK plant (Toyota has make better use of its factories here. That said, Ford ended 2011 by centralised production of the new Auris in the UK), the UK should see a steady announcing a number of production slowdowns and confirmed further rise in production through the period covered by this report – we expect that slowdowns during 2012. the expansion of models offered by JLR and the strong performance of Nissan More significantly, Ford announced substantial losses in Europe for will lead to around 2mn units being made in the UK per year by 2016/7. H1/2012 and its CEO, Alan Mullaly, subsequently spoke openly about the  In the absence of a complete economic collapse across Europe, we expect UK need for the company to address structural problems in Europe, the need production should be able to remain at least at this level for the rest of the for which was made clear when Ford’s global Q3 figures were released, decade – indeed further expansion at one of these VMs, especially now that indicating losses of over €1bn for 2012 in Europe. the GM Ellesmere Port factory appears to have been saved, will help to make These results were clearly linked to the parallel announcement of yet this increased production volume projected here even more “secure”. another reorganisation of the Ford manufacturing operations in Europe: the large car plant in Genk, Belgium will (subject to union consultation) Production in Russia will be increasingly important

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 8

close by 2015, with production shifting to Valencia in Spain (and some  Hyundai and Kia have completed the swapping of production between production from Valencia moving to Germany). their two plants to optimise these plants’ utilisation – they are both close to In addition, Ford will close its small (and somewhat marginal) full capacity utilisation. With faster than expected expansion in Russia and Southampton van plant, along with its stamping plant in Dagenham with the expected addition of another model to its Turkish factory in around future production of Transit concentrated in Turkey. In 2012, we had 2015, we now expect Hyundai-Kia to make c1mn upa in Europe within a noted how the possibility of a Ford European plant closing – or at couple of years. We also expect expansion of the model range made by least substantial cutbacks at a number of plants – was very real Hyundai at its Czech plant. indeed. And now, reality has dawned  Nissan has confirmed two new models for the UK, JLR is expanding its model  Fiat too has been engaged in a seemingly continuous reorganisation of its range and increasing production of the existing range, while BMW is still in the manufacturing operations, moving models between plants on a regular process of expanding production of the Mini range. And because of a lack of basis. For example, it has swapped production of the Panda and capacity at Oxford, it has decided to contract some Mini production to the Ypsilon between Italy and Poland, as well as announcing plans to export Mitsubishi Nedcar plant. The German premium brands are also expanding various models to the US from Italy, Turkey and even Serbia in the long their production footprints outside Europe (notably VW in North America, Brazil run, where production in a completely revamped factory has now begun. and China), but for now (Mercedes’ bringing forward expansion in Hungary apart) we doubt they will be investing further in their European operations – However, the downturn in the Italian car market has had a direct impact on making the most of their existing and recently expanded assets is their production at Fiat and the idea of closing an Italian factory once again immediate task. came to the fore earlier in 2012. Previously, we had noted our doubts over the long run viability of the Cassino factory in southern Italy, although we  With all of the above and earlier investments in new plants by Mercedes also questioned whether Fiat would have the political backing for a plant Hungary and Dacia (which counts as part of Europe from a closure in Italy. In fact, having led the 2012 calls for European VMs to production standpoint) now on stream, as we have noted before, despite all close excess car plants, Fiat has not followed this prescription or taken the the economic and political uncertainty, this remains a very dynamic time medicine it was proposing for others. in European vehicle production and significant opportunities exist for Instead, it will invest in its Italian operations: its home Mirafiori plant will suppliers. Renault has been very active in encouraging suppliers to follow it to focus on increased and Maserati production, Melfi will switch Morocco to supply the new plant as it does not want to have to import all the from Punto production to a new small SUV range, for sale under the Fiat components from mainland Europe. and brands, while Cassino will focus on mid-sized Alfa cars and

crossovers, possibly including Chrysler versions. Pomigliano will remain Clear opportunities for UK suppliers … the focus of Panda production.  Many of these significant opportunities are evident in the UK where not only Fiat will also continue with its plants in Poland, Serbia and Turkey, has JLR awarded substantial new contracts with the start of the Evoque, and although in the case of the first two, it will make somewhat fewer vehicles, will surely do so again with the next round of new models (eg the F-type and and a narrower range of models, than had been anticipated. Fiat will, others yet to be announced); in addition, GM has shown its commitment to UK moreover, continue to operate eight car and van plants across Europe, as suppliers by re-sourcing over £200mn worth of business to the UK, some of well as opening a new factory in Russia. which is for export, for supply to GM plants in Germany and Spain. GM has also committed to doubling the UK content of the next Astra from 2015 and is now in the process of searching out new UK-based suppliers.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 9

 In addition, the centralisation of Auris production in the UK and the continued own potential closure programmes, we would expect further closures to be expansion at Nissan means that the opportunities for UK suppliers are announced over the next year or so. substantial – certainly the prospects for suppliers here, assuming that the VMs can produce what they intend to produce, are far better than they have been Production Outlook summary and alternative scenarios for a very long time. The addition of Mini production at Nedcar is another such Without Russia, our Base Outlook has European production recovering to just over opportunity. 20.0mn units in 2016 versus the 20.3mn projected last time and 21.6mn the time Plant closure announcements have begun – and several plants before. Our reduced projections reflect the slower pace of recovery which we now expect and the increased production outside Europe being put in place by the remain vulnerable to closure across Europe French and German VMs especially – such moves will inevitably reduce the export  In the immediate aftermath of the 2008-9 downturn, two plants (one at GM market opportunities for European car plants, reducing their long run output in Antwerp and one at Fiat in Sicily) closed, albeit actually a year or so after the some cases. Our alternative scenarios address the issue of what would be the depth of the recession; since then Saab has gone out of business and implications of greater falls in various markets, more sustained falls for a longer Mitsubishi finally stopped production in the Netherlands at the end of 2012: the time period across the whole of Europe and also a slower recovery. It is, of course, Saab factory is reportedly due to be re-born as an EV plant (although we impossible to predict which scenario is most likely, but rather the aim of these expect this to be a low volume operation if it actually comes about), while the scenarios is to highlight the scale of the problem which could face Europe if the Mitsubishi plant has been sold to Dutch bus company VDL, and will be current recession is deeper and the ultimate recovery slower and later than we transformed into a contract assembler, with BMW Mini its first customer. currently expect.  The initial structural change as a result of the previous downturn was much This report also includes a number of alternative views in addition to our Base less than many had expected. However, the signs are that this time around, Outlook. We discuss what would be the impact of additional reductions in greater change is under way. Alongside the expansion of vehicle production in production in certain markets and across Europe as a whole – the worst of these the UK, GM has confirmed Bochum will stop production from 2016, and PSA sees the long run volumes (excluding Russia) through to 2016/7 being has confirmed the end of vehicle assembly at Aulnay; it will also cut back around 3.5-4mn units down on our Base Outlook. The implications of such a production at Rennes, its large car plant. Its SevelNord plant in France has, sustained decline would almost certainly be additional plant closures and however, been saved. Toyota will replace Fiat as PSA’s development and significant further industry restructuring. manufacturing partner there. Ford has announced the intention to close its In our Base Outlook, we do not see European production immediately falling as plant in Genk, Belgium, and will also close its UK van plant at Southampton steeply now as it did in the 2008-9 downturn. However, in our Worst Case and the associated stampings plant in Dagenham. scenarios, we describe the conditions, in terms of markets falling, which would be a collapse to the levels seen in 2009. In 2009, excluding Russia, European  These moves follow much recent talk about plant closures. The decision by PSA to close one plant had been long signalled in the press; French politicians production fell to just under 16mn units. At this stage, things are uncertain as we await the final full year numbers for Europe, if the last month or two turn out to have, not surprisingly, described the move by PSA as “unacceptable”, but this was later changed to “inevitable” when the reality of PSA’s situation was finally have been worse than expected, then a fall to around 16.1mn for 2012 could be recognised by the French government. the reality to be faced up to: moreover, the likelihood is that 2013 will be much the same as 2012, and possibly worse. In the event that 2013 and indeed 2014 see a  In our reports at the start of 2012, we had suggested that 2012 and 2013 will continued decline, because the much-vaunted recovery in the major markets indeed see a round of plant closures: the expected closure programmes have especially fails to materialise, then a sustained fall over the next 2-3 years to below begun, and while Fiat and Renault have announced plans to stave off their 16mn is conceivable.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 10

On balance, our view is that whatever the actual decline, it will last longer than previously. We also now expect a slower recovery than was seen in 2010. There was an immediate bounce-back in 2010-11 largely due scrappage incentives across Europe. Although such schemes could theoretically be reinstated, given European governments’ financial difficulties, we do not see a repeat of such schemes as particularly likely. In addition, we have to factor in the impact of declining confidence amongst European consumers, especially in markets like Spain and Italy where unemployment continues to rise and disposable incomes are under increasing pressure. In the worst case, European production will be down as low as 16.0mn in 2016 and 16.5mn in 2017: if European production volumes remain at this level for a period of three or more years, it seems inconceivable to us that all the existing VMs could survive in their current forms. Who might actually disappear is a matter for conjecture right now, but something which will need to be considered seriously in the months and years ahead.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 11

motors. Such has been the demand for the new A- and B-class that Mercedes Implications – what does this has had to engage Valmet of Finland to provide short-term capacity to make an additional 100,000 A-class models over the next few years, while plans to raise production at its new factory in Hungary to 300,000 upa have had to be all mean for the automotive brought forward. industry? Japanese VMs committed to UK …  Nissan confirmed investment in another two new models for the UK, the The VM profiles which follow provide details on recent investment plans, but the Invitation (announced at the 2012 ) and a C-segment car following are indicative of the way in which the market is moving. (announced in April); since then, however, Nissan has decided to make its Premium brands moving into smaller cars and EVs … Infiniti compact model in the UK and shift production of the C-segment car to another, as yet unnamed, plant. Although production of the Infiniti model will  Having invested substantially in its Leipzig plant to make the i3 electric vehicle be slightly lower than was proposed for the C-segment car, these new models by 2013, BMW is also introducing a front-wheel-drive version of the 1-series to should still push production at Nissan to well over 600,000 upa by the end of its line-up, reinforcing the move of the BMW brand down into smaller and lower the period covered by this report. A Renault version of the Qashqai should not price segments. It has also confirmed that the larger, hybrid i8 will also be be ruled out in the next few years. Originally, Nissan was going to have the made at Leipzig; this plant has been designated as its centre of electric and Infiniti model made by Magna-Steyr, but decided to make it in-house because alternative powertrain technologies. A wider range of “i” vehicles is expected to of the engineering commonality it will have with the Qashqai enabling the be announced in the next few years, although production of these new Infiniti to be built on the same line. vehicles is unlikely to start before 2016-2017. In 2011, BMW had confirmed  Having modified its UK assembly line for the Auris to make the hybrid version, £500mn of investment for the UK in vehicle assembly, pressings and engine Toyota is also now making make a second hybrid vehicle in France, a version production. It then backed this up with a further £250mn investment in its UK of the new Yaris. All production of the next Auris will be in the UK (giving facilities announced in July 2012 – full details on what this will mean for the added volume to the UK plant and a major boost to UK suppliers) and to individual plants in the UK have yet to be released. However BMW does not compensate the Turkish plant for its loss of Auris production, Toyota will make have enough capacity in the UK to meet what it sees as long-run demand for the Corolla in Turkey instead. A second plant in Russia is still a the Mini; this is why it has decided to contract additional production of the Mini possibility, although in view of the Japanese earthquake and tsunami, the to the former Mitsubishi plant in the Netherlands. timing for this remains open. In the interim, Toyota has added a second shift at  In addition to Mercedes increasing its own small vehicle range. As part of this, its existing Russian plant and is also investing in new production technology it has formed a joint venture in the small car segment with Renault, providing there to increase its degree of vertical integration. the underpinnings for the next and a new range of Smarts; this JV will also include electric versions of these vehicles. A Nissan model using Citroen tries to develop its own premium brand … this joint platform is also possible, but awaits confirmation.  Ahead of its recent problems emerging, PSA had almost doubled its capacity The Renault-Mercedes JV also involves Mercedes supplying engines to Infiniti, to make the DS3, the smallest model in its new premium DS range which is a Renault supplying diesel engines for the new A-class and Mercedes supplying sub-brand of the Citroen brand. The DS range could well be further expanded batteries for the JV’s electric vehicles and Renault will supply the electric with a small DS1 in 2015/6; a large model, DS9, is understood to be on the cards, although this could be made in China. In parallel to Citroen moving up

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 12

market with the DS range, Peugeot is moving more and more to crossovers little to stop the company on its continued growth path, not even the economic and MPVs, exemplified in the recent strong sales of the 3008 and 5008. uncertainty of the present time. However, PSA has numerous financial and structural problems – which have While the pressure mounts on other VMs to cut capacity and close factories at led it into its alliance with GM. Both companies are looking for solutions to many of the volume VMs, Volkswagen’s chief, Martin Winterport, is adamant their many and varied problems. that his company has no need to cut capacity. This echoes similar statements Jointly developed vehicles are still expected from some time after 2016. We in 2011 from Dieter Zetsche of Daimler. The German VMs clearly do not had expected the GM-PSA alliance to include production of vehicles for each intend to cede any ground in the battle for automotive market dominance. other to improve their own factories’ efficiencies and utilisation, but this seems unlikely at the present time, as each company has enough of a challenge with Expansion continues in Russia … dealing with its own unions regarding currently planned capacity productions.  Several VMs have invested heavily in Russia and this pattern will continue. The idea of moving production from PSA to Opel or vice versa may be too Following moves by GM and VW, both Fiat (on its own) and Ford (in a JV with difficult to address right now. Occasional press reports to the effect that PSA Sollers) all adding their own all-new or expanding existing factories in Russia, could buy Opel only muddy the waters still further. While the two companies mostly within the next year or so; Fiat confirmed a Russian bank would be its publicly remain committed to the alliance, some observers, AutoAnalysis partner in Russia, although Fiat’s Russian plant will be somewhat smaller than included, wonder whether the alliance will actually last in the long run: GM originally planned. Collectively these new factories, along with Renault’s especially has a chequered history when forming alliances in Europe, eg with involvement at Avtoframos and AvtoVAZ will mean production capacity in Fiat in the 1990s. Russia for European, Korean and Japanese VMs will be close to 2.6mn upa in Volkswagen short of capacity? 2016/17.  Not so long ago, in 2010, Volkswagen had to recruit in Germany and Slovakia European sales declining … to cope with increased production, including rising demand for large SUVs, Despite the positive production picture for several VMs, European sales are in and has expanded capacity in Belgium to make both the Audi A1 and its decline, as evident in the ACEA figures reported later in this Outlook. The planned SUV derivative, the Q2. 2010-11 were certainly very good production automotive market as a whole will remain tough throughout 2013, with the volume years for the group, but volumes have tailed off somewhat since then, notably manufacturers finding it tough going and most will experience a fall in production at Audi. Capacity cutbacks are off the agenda at the VW group, and indeed and sales this year. Sales at PSA, Renault, Fiat, Ford and GM Opel/Vauxhall were further expansion, especially outside Europe, is planned. all down by between 12-22% in the first 11 months of the year. There is no VW is looking at widening its SUV range and may even add a value brand of realistic prospect of a rapid turnaround in this trend in the next 6 months at least. its won, while Audi is increasing its range of Q models, with the Q4, Q6 and The premium brands appear to be less subject to the economic vicissitudes in possibly a Q8 expected to be confirmed shortly. To make room for these Europe, partly because of their export sales and party because their customer models in Germany, the next Q5 will be mostly made in North America. base appears less affected by the economic climate that the mass volume brands’ Substantial investment in Hungary has also been announced for engine and customers. vehicle production, involving an increase in capacity from 50,000 to 125,000 The economic recovery which started in 2011 has certainly now faltered – PSA upa. Plans have been confirmed for 300,000 upa capacity in Russia, through and Renault were the first VMs to have recognised this, cutting production during a mixture of its own factory and a JV with GAZ. The VW group goes from 2012 to avoid excessive stock build-up. Ford soon followed and announced strength to strength (except perhaps at its SEAT subsidiary) and there seems additional production slowdowns throughout 2012, as well as announcing plans to

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 13

close a number of vehicle and components plants. Honda, Suzuki and Fiat its looming financial crisis and whether it has really avoided falling off its much- followed suit, at least with slowdowns. publicised “fiscal cliff” remains to be seen. As noted in the past, the problem with overall pictures is that they mask immensely Here in the UK, 2012 saw what is likely to have been the final round of quantitative variable situations at the different VMs which occur as a result of their model easing in the UK completed. The amount of money which has been injected into cycles and particular market positions and segment focus. For example, PSA, the UK economy is eye-wateringly large, but the jury remains out on the real Ford and Opel faced a particularly tough 2012, and can expect the same again in impact of quantitative easing on the economy. Much, if not most, of the money 2013, because of their exposure to the B & C segments with vehicles, especially in injected into the economy is thought to have remained within the banking sector, the B segment, due for replacement in the next 2-3 years. These VMs are facing boosting banks’ balance sheets and collective reserves; dissatisfaction with the the double whammy of having most of their sales in segments which face the banks and their widely reported reluctance or even failure to invest in companies in greatest competition and economic threat – and also having to compete in these the “real” economy, especially in manufacturing, has led the government to look at segments with models at the end of their natural life cycles, or at least past their extensive restructuring of the sector and at ways of introducing further competition peak of sales. into the sector. Quite when or indeed if this will actually happen is another of the great unanswered policy questions awaiting an answer. The UK government has But production growth still expected … also spoken, in admittedly rather vague terms, of credit easing to help suppliers Despite the economic uncertainty, given the investment planned over the next 3-5 who cannot get finance from the banks. As one famous economist once said – “in years in Russia and the wide range of new models, including a number of EVs, the long run, we are all dead”; and it is for this reason, above any other, that we which will come onto the market in the short term, we still see some production continue to believe the politicians in the leading global economies will have to find growth in Europe as a whole as the most likely outcome in the long run. a means (no matter how much of an apparent fudge this may involve) to keep their However, as we explain in more detail later in the report, a large part of this economies alive and avoid a total economic meltdown. They will wish to avoid the production growth will be in Russia, where European, Japanese and Korean social breakdown which would follow from a complete economic collapse should brands have been expanding aggressively, but equally we see growth continuing this occur “their watch”. in the UK and in locations such as the Czech Republic, Slovakia, Romania and Hungary. Even so, such will be the downturn in 2012-3, that we now think it will take until 2016 for European (excluding Russia) production to return to its 2007 peak. Our Production Outlook continues to be based on the key assumption that Europe – and indeed the world as a whole – avoids complete collapse, even if according to some data the much feared double dip recession is indeed already a reality in some countries. In reality, despite the insistence by the UK and German governments that no more fiscal stimulus will be allowed, we find it impossible to be believe that European and US authorities will allow their economies to collapse – even if (as seems probably) further problems emerge in banking sector, governments will have to find a solution to these problems without causing a total failure of the economic system and untold social consequences. The US – a key export market for Europe – has only found a temporary solution to

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 14

Put another way, there have been too many factories producing cars in too many Overcapacity & Restructuring shifts; this became evident in the fields and airstrips full of unsold cars before the 2008-9 crash. However, since then Europe has seen continued investment in new In essence, the biggest issue facing the European automotive industry is the plants and – until recently – only limited restructuring of existing plants has actually severely depressed and uncertain nature long-run demand in Europe. In the face taken place. The implication of this is that, given the faltering recovery (and of this, the overcapacity issue remains the most significant structural problem the return to recession in some markets), there is a real risk that there will facing the industry as a whole, with some VMs having greater issues in this area to not be enough long run demand in Europe to absorb all of this production address than others. If European demand does not recover soon and fails to do capacity. A new round of structural change has begun and further change so on a sustained basis, several European VMs will have to make even bigger seems inevitable. It is still not clear how much more change will be required decisions regarding the long-term structure of their European operations than for Europe to reach an optimal balance between capacity and demand. those which they have already taken. Regular readers of our reports will know that Ironically, the overcapacity issue has actually worsened recently with the addition we have had concerns for some time degree of overcapacity for vehicle production of Renault’s capacity in North Africa (we include its new Moroccan plant within the in Europe for some time. Production Outlook because its primary market is Europe and some nearby Post 2008, initial structural change amongst the VMs was much markets which would “normally” have been supplied by European factories); the less extensive than might have been expected … situation could actually get worse if Renault decides to install a full production facility in Algeria). Allied to this, we have seen the expansion in Russia by several Like many analysts, we had expected that the economic turmoil at the end of the VMs, as noted herein. previous decade would quickly result in a major restructuring of the vehicle manufacturing sector in Europe. While some restructuring did take place, the In 2012, the new Mercedes factory in Hungary came on stream and Audi’s actual scale of change was much less extensive than we had anticipated. expansion in Hungary is now complete. The Fiat factory in Serbia has also come into play and the first Chinese factory in Turkey will begin production in 2013, In the initial aftermath of the 2008-9 downturn, the North American VMs took out admittedly somewhat later than expected. With all this new capacity, the long- around 5mn units of annual capacity. By contrast, the amount taken out in Europe term health of the internal EU market is obviously critical, but export markets until recently had amounted to less than 1.25mn units and even some of this will clearly also be crucial to many VMs’ futures. The problem is that many capacity reduction was not permanent as it involved line shut-downs rather than emerging markets have tariff barriers or maximum price points for B and C plant closures. segment cars which make exporting from European at an economically attractive price a challenge. The situation was made worse by the fact that even in the boom times, it was generally accepted that the European automotive industry was suffering from two VMs have been resistant to change: but has an extensive round specific problems: of plant closures now begun?  Firstly, too many vehicle manufacturers, many of which were simply too small to have a realistic chance of making sustainable profits. As noted, the recent structural change in Europe has been somewhat limited. In the past, the volume VMs have proved to be remarkably adept at the keeping their  And secondly, over-capacity in terms of the number of vehicles which could be plants open, switching production between factories where assembly line flexibility made compared to long term levels of demand. The corollary of this is that allows it (as has been the case at PSA and Ford), or cutting shifts, or putting some factories were operating at production volumes which were clearly sub- workers on temporary short time working. Until 2011, only two plants had closed, scale. one at GM Europe, at Antwerp in Belgium, and one at Fiat, on Sicily.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 15

Then, during 2011, Saab stopped production (although plant may be “re-born” as If restructuring is indeed under way, what might happen next? an EV factory) and at the end of 2012, Mitsubishi stopped production under its own name at its factory in the Netherlands: BMW (which does not have enough European VMs are struggling to maintain an even keel financially it is, but if capacity to make Minis) will now contract some Mini production to this plant, European production excluding Russia remains at below 18.75mn units in the long starting in 2014. With Mini production in the Netherlands, any “elimination” of run (ie below the 2008 level), as we suggest is possible in the Alternative capacity here is actually only going to be temporary. Scenarios section later in this report, further plant closures would seem to be unavoidable. Meanwhile at Ford and GM, their European operations continue to lose money, with both expecting to lose over €1bn each when their 2012 figures are announced. What is notable about the current situation is that a number of VMs have begun to With mounting losses during 2012, both companies’ US management teams speak publicly about the need to cut capacity and close factories. The message decided to act. At Ford, Genk and Southampton will close, while GM will stop that VMs cannot sustain the fixed costs of numerous underutilised plants appears vehicle production in Bochum from 2016 and concentrate Astra production in the to have been heard loud and clear. The question is what will happen next? UK and Poland. We believe that the real change will occur at the volume VMs: the German We would not be surprised to see further closures or cutbacks at GM Europe, the premium brands (and Volkswagen) have indicated that they don’t need to close commitment of its management to its new Drive 2022 strategy notwithstanding. In plants and in some cases, notably Mercedes and BMW, have even suggested they 2012, the company had to initiate production slowdowns at Russelsheim and the do not have enough capacity as things stand. engine plant at Kaiserslautern – and in the UK, GM stopped production for more Which plants could be next to close? than a week at both the Luton van and Ellesmere Port car plants, and also moved Ellesmere Port onto a four day week at the end of the year (although stating that it This remains very difficult to predict with any certainty because of the myriad would maintain overall production at the same rate with four longer working days challenges faced by each VM and the specific geo-political considerations facing rather than five standard days – the savings come in the form of reduced heating individual plants. Some car plants are the principal employer and economic driving and other operating costs being saved on the fifth day). force in their immediate region: in Spain for example taking Renault out of Palencia or Valladolid, or PSA out of Vigo could amount to local economic destruction. At PSA, Aulnay will stop vehicle production; rather elliptically, PSA said the plant would be converted for other uses without specifying what these would be. Within Our view is that each of the volume VMs would ideally “like” to close at least one the Aulnay complex, the stamping company Magnetto has an operation of its own, assembly plant, and in many cases two plants, possibly in addition to those supplying PSA and other VMs, so what will happen to this operation remains to be closures already announced. However, a number of factors, company and country seen. Uncertainty remains at PSA’s Madrid factory; for now we retain it in our specific make this much more difficult in practical terms than it may seem in theory. Outlook as it could well be saved, with a new Citroen produced there from 2014. Moreover, which VM(s) will actually (be able to) do this? And indeed, can they afford the costs of closure? Together with earlier shutdowns of specific assembly lines (eg one of the two lines at Toyota Burnaston and two of three lines at PSA Rennes), these closures will AutoAnalysis understands from discussions it has had during 2012 with a number ultimately amount to the removal of more than 1.5mn units of capacity from of banks involved with VMs’ financing and treasury functions that many volume Europe. Some of this, eg the temporarily shut lines, could be re-opened, so until VMs simply do not have the cash flow to afford the substantial “lumpy” payments factories close and the gates are locked, there has not necessarily been a which would be required when closing a plant. The costs of closing Opel at complete removal of capacity. Ford is closing a factory and will expect its Bochum alone have been estimated at more than €1bn, although not all of this remaining plants to be better utilised as a result, but there will still be a lot of slack would have to born by GM itself. It is also questionable whether European in its remaining operations and the same can be said for Fiat. governments have the financial resources to afford the myriad costs which would

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 16

flow from a plant being closure. They would not just have the additional social However, if the new manufacturing and model focus is not a success, and costs arising from the resultant unemployment but also the loss of tax revenues, specifically if the North American market fails to accept European produced , both income and payroll taxes. there may be nowhere else for Fiat to go and once again its European operations will have to face up to the likelihood of major cutbacks. The situation is especially worrying in Spain where unemployment rose strongly in 2012, especially amongst the young. The Spanish government’s finances are Ford arguably the most severely stretched of all the major countries. The social and Ford has spent a great deal of time reorganising its manufacturing footprint in financial costs of closing a car plant and the consequential loss of jobs in the recent years. Its previous reallocation of models between different factories had supply chain and supporting industries will be worrying policy makers in Madrid, not yet been completed before further changes were announced in October 2012. and local governments in the cities and regions which are host to the PSA and Renault plants in particular. Cologne will remain the centre of Ford’s European engineering operations and will also become the sole production source for the Fiesta on the new model in a With this in mind, we now look at each of the volume VMs and assess which of couple of years’ time; similarly, Saarlouis will be the sole Focus factory for Europe their European plants remain vulnerable to closure and why. (Russia has its own plant making the Focus). Kocaeli will be the sole European Fiat Transit van plant and it will also make a small van (based on the Fiesta platform we understand); Craiova in Romania will make the B-Max small MPV, and a In early 2012, Fiat’s CEO, , had suggested that all European second model, as well as increasing volumes of engines. VMs should have a similar “haircut” and should each close at least one plant. Ford, GM and PSA have followed Mr Marchionne’s call, but the Fiat CEO All of these factories appear absolutely core to Ford’s European operations and it shows no signs of taking his own medicine. And at the Detroit motor show in is difficult to see any of them closing without Ford incurring substantial (and January 2013, Marchionne repeated his mantra, calling on the EU to implement a probably currently unaffordable) costs involved in moving production to other co-ordinated plan to restructure the industry. This call follows Fiat’s 2012 that that plants and re-establishing embedded supply chains. rather than close any plants, it will instead invest and reconfigure its four large car The key change at Ford involves the decision to close Genk, with large car plants in Italy. In essence this will result in: production moving to Valencia and C-Max production moving from Valencia back  Mirafiori focusing on Alfa Romeo and . to Germany. The Southampton van plant will also close, with Transit production  Melfi making small SUVs, for Fiat and Jeep, replacing the Punto with a very centralised in Turkey. different style of vehicle. During 2012, we questioned the future of the Valencia and Genk plants,  Cassino focusing on the C/D segment Alfa Romeos, both cars and crossovers, suggesting one would go: Genk is the one chosen for closure. While Ford with the possibility of some Chrysler models alongside the Alfas. implements its recently announced changes, we expect its European operations will be given the chance to make the new strategy and structure work; so, for now,  And Pomigliano remaining the centre of Panda production. we do not expect another plant to close – even Ford, which has spent a lot of time All four plants are likely to see reductions in their nominal capacities to not much and money re-organising its European manufacturing footprint in recent times – more than 200-250,000 upa. For now, so long as the Agnelli family and the banks will need to give itself time for the new organisation to settle down. behind Fiat continue to support the strategy being followed by Mr Marchionne, then Or at least that should be the case in theory – a significant worsening in the market Fiat's Italian plants now appear much more secure than they have been for some could cause Ford to look at again at its European plant network. Any further moves time. Similarly, for now we believe that the Fiat plans in Poland, Serbia and of models between plants will cost Ford money which it arguably does not have. Turkey remain central to Fiat’s new strategy and appear unlikely to close.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 17

On balance, therefore, we think Ford will not close any more plants in the medium combined volumes for both companies should make the plant viable in the long run, term. However, if Ford fails to make a success of the new Mondeo/S-Max/Galaxy assuming that is that both Opel/Vauxhall and PSA can maintain meaningful programmes, then its presence in the D car and MPV segments will once again be presences in the D segment. However it would now seem unlikely as PSA has called into question and the future of the Valencia plant would in turn be up for indicated strongly that it will retain its own D segment car production at Rennes. review. For Russelsheim to operate efficiently, it needs more volume than the recent volumes which Insignia has been operating at – hence our view that it is likely to GM make the Zafira replacement after 2016. GM’s most recent move in restructuring its European operations has taken the PSA form of confirming that Bochum is to close, but not until 2016. For its other plants, it still needs to find ways of increasing output and utilisation at its remaining plants. PSA has confirmed that Aulnay will close and that Rennes will see a cutback in Bringing production to Europe in the second half of the decade is employment and output. We still have concern over the future of the Madrid factory. possible, but far from guaranteed. The German unions have been calling for GM to For now we have taken the optimistic view in the Outlook, ie that it will indeed bring production of the Mokka to Europe, from Korea, but so far GM has resisted receive the proposed Citroen E3/C-Cactus model from 2014, but this is far from this call. The new Drive 2022 plan announced in January suggests that some non- certain. If its losses continue at the current rate, it is questionable whether PSA will Opel models will be made, including for China and some vehicles under the be able to afford to put this into production. Chevrolet brand. It is not clear yet whether these will be different vehicles to those We have also discounted the idea of Madrid becoming a dedicated EV factory for already being made here in Europe, or “simply” re-badged and slightly re- PSA (and its EV partner Mitsubishi); currently PSA imports EVs from Mitsubishi in engineered versions of the currently made. Japan. The relatively slow development of the EV market and Europeans’ current In terms of other plants which could close, attention will focus on Germany; GM preference for hybrids calls into question whether it will be economic in the near has committed to making the next Astra in the UK and Poland and confirmed that term for PSA to build EVs economically in Europe. Some analysts have suggested will be the lead plant for the Corsa. If we take this to mean that the UK, that PSA and Mitsubishi could make up to 40-50,000 EVs annually in Europe, but Polish and Spanish plants are safe for now, the only other car plants in the GM we have to question whether this would be a viable volume given the attendant production network which could be closed are Russelsheim (the company’s home costs of producing EV-specific components, such as batteries, inverters and plant) and its Eisenach factory which is essentially an assembly plant. As with Fiat motors. We also question whether PSA would have the ready funds to invest in and Mirafiori, it is difficult to see GM closing its HQ plant, so if another GM plant is the plant to convert it to EV production. to close it would appear to be Eisenach. For now, under Drive 2022, this plant is On balance we think PSA will try to keep Madrid in operation, but if its overall safe, but if Drive 2022 does not work or is not seen to be producing results, the position worsens during H1, it would not be surprising to see this plant announced idea of cutting a plant such as Eisenach could well be revived. for closure during 2013. The downside of closing Eisenach would be whether GM would have to invest at Renault another plant to enable its new small “premium” model, the Adam, to be made there. Zaragosa would be the most obvious alternative location should Eisenach Renault has a myriad of assembly plants in France and Spain, plus one in each of close, but whether GM will want to concentrate all its small car production in Spain, Slovenia and Turkey and a growing presence in Russia through its controlling especially in view of past problems with the unions is an open question. stake in AvtoVAZ and its long-established link with AvtoFramos; the Turkish plant is unlikely to close because of its much lower cost base compared to the French We had thought that Russelsheim would produce one or more PSA models in and Spanish plants, and because it has recently been allocated increased addition to its own Insignia replacement later in the decade, from 2016 – the production of the Clio. We doubt the Slovenian plant would close because of its

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 18

cost competitiveness versus Spain and France, as well as specific tooling having Valladolid and Palencia. Specifically, Palencia will make two new models, in four been installed there for the Twingo and successor models. Such investment would body styles, on a shared Nissan platform. The models details and timing remain to be lost or have to be replaced elsewhere if the Slovenian plant were to close. be confirmed however. Attention therefore focuses on Renault’s plants in France, ie Flins (Paris), Douai, Other VMs Sandouville, Batilly and Maubeuge, plus Valladolid and Palencia in Spain. Flins is At this stage we do not see any of the Japanese (Mitsubishi excepted), Koreans or in the process of being converted into Renault’s main EV plant, for both vehicles German and UK premium brands closing any of their plants in Europe – indeed if and battery production; closure here is unlikely, although production of anything, these VMs are more likely to continue to increase production capacity for conventionally powered cars at Flins will continue to fall. One thing is certain, more reasons outlined in the individual profiles. production will move from Flins to Turkey in the coming years. Douai makes the Scenic and will make the next Laguna and Espace – as such, and given the dedicated supplier network around the plant, it is difficult to see Renault closing this plant, particularly as the Scenic is central to its overall market presence. Sandouville is in the process of becoming a van-only plant, for the Trafic medium van; this will put it on a similar footing to Maubeuge which is dedicated to the Kangoo small van and Batilly which is dedicated to the Master large van. Whether it is realistic for Renault to retain all three plants for van production rather than consolidate production in 2 or even 1 is something it will no doubt be considering. The unions and local government lobbies will be very powerful and we continue to doubt Renault will close a plant in France in the short term; if it were going to close a plant, we had thought it would probably be one of the Spanish facilities. We think that Spanish production of the Megane could be accommodated within Renault’s plant in Turkey and within Douai. Ultimately, some Megane production could also be moved to the new Renault group plant in Morocco which is regarded as part of Europe for production purposes as it is within the tax-free zone in Tangiers, allowing tax-exempt exports to Europe. The other Renault plant in Spain, Valladolid, has been long under threat of closure – in the short term, it will produce the B-segment SUV which will replace the Modus and it will also make the Twizy EV; the Twizy is not actually a car and as such we exclude it from our Production Outlook. We also have severe doubts as to the long term viability of the Twizy programme – in the event that the Twizy falls short of expectations and the B-segment SUV also fails to meet sales expectations, pressure to close the Valladolid plant will only intensify. However, at the end of 2012, Renault Spain announced a new investment plan for its Spanish operations which includes a commitment to long run production at

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 19

Meanwhile, other markets joined Italy, Spain and France with significant falls, ie: Demand Side Perspective  Belgium: -11.3%  Portugal: -37.4% European sales in decline …  Slovenia: -16.3% European sales have been in decline throughout 2012; this is a direct result of the  And Sweden: -9.6%. difficult economic climate in the Eurozone with monthly year-on-year declines And in terms of the VMs, most companies saw a decline in EU sales, reflecting the varying from 3.2% to 10.8%. The market is also still “suffering” from the effect of state of the region economy and highlighting need for them to increase exports car purchases which were brought forward after the 2008-9 downturn when beyond Europe, ie: scrappage incentive schemes were introduced in most European markets. These  PSA: down 12.5%, with Peugeot down 12.8% and Citroen down 12.3% undoubtedly boosted short-term demand, but as was suggested at the time, these schemes brought forward demand and this was evident in the sales figures for  Renault: down 22.3%, and Dacia down 5.6% 2011 and early 2012 in particular. The situation in 2012 has worsened as the  Opel/Vauxhall: down 14.9% Eurozone’s economic travails spread.  Fiat: down 16.2%, with Alfa down 30.7% This led to an overwhelmingly negative picture for Europe as a whole. The first six  And Ford, down 12.1%. months of 2012 saw sales in the EU27 markets down around 6.8% year-on-year. Elsewhere the declines were somewhat smaller, ie Toyota (-1.3%), Honda (-6.3%) EU27 & EFTA combined registrations were down 6.3%, while EU15 and EFTA and Nissan (-5.9%) all fell, but at Nissan and Toyota at least we expect a revival figures were down 6.9%. For the 11 months to November, the market was down during 2013 on the back of new model launches; BMW (-1.8%), Mini (-6.0%) and 7.6% and in November itself it was down by 10.3%. For the next section, we use Volkswagen (-3.7%) were down slightly, but again this is partly due to model EU27 figures, although the other ways of measuring the region produce broadly cycles effects. By contrast, Audi was up 4.5% and JLR was up 27.6% overall, with the same result. The data below covers the first 10 months of the year for cars Land Rover up 35.8%, and Jaguar up 1.7%); and finally Hyundai was up 9.3% and and the first nine months of the year for LCVs. Kia was up 14.7%. Cars Light commercial Vehicles January-November 2012 results: car demand fell by 7.6% in this period; all the January-November 2012 results summary major markets fell, except the UK which grew by 5.4%. The German market was down by 1.7%, but there were much more significant falls in Spain (12.6%), Italy As a whole total European (EU and EFTA) light commercial vehicles sales were (down 19.7%) and France (down 13.8%), while Greece fell by over 40%, a decline down in the first 11 months of the year, by 12.3%, with the falls in the major which was not surprising. As well as the UK, growth occurred in some of the markets as follows: smaller markets, ie:  France: -9.5%  Czech Rep: +1.93%  Germany: -4.0%  Estonia: +14.3%  Italy: -32.9%  Hungary: +14.7%  Spain: -25.7%  Poland: +0.9%  And the UK, unlike the situation in cars: -7.4%.  And Slovakia: + 4.2%

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 20

Admittedly, 2013 did not get off to the best start for Honda, with 800 full-time UK VM Summary jobs being cut and 300 temporary jobs also due to go.  Nissan has confirmed two more new models for Sunderland, first the Production still heading for 2mn pa … Invitation B-segment car which was announced at the Geneva Motor Show, Although the European market has slowed down in recent times and will almost followed by a C-segment car which was announced in April: this has since certainly see further retrenchment in the next year or so, the prospects for UK been replaced by plans to make the Infiniti compact model which had been vehicle production are still very positive. This is the case despite some negative due to be made outside the UK. news, ie last year’s decision to close the Ford van plant in Southampton and the  JLR has confirmed the F-type will be made in the UK, from 2014; it has January 2013 news that Honda will cut 800 permanent and 300 temporary posts. expanded production capacity at Halewood for the Evoque and Freelander and is going to take on an extra 800 workers at Solihull to cope with continued Production is continuing to rise at the two biggest volume producers in the UK, strong demand for the large SUVs made, especially from the USA and China. namely Nissan and JLR, both of which remain on course to produce more than 600,000 vehicles in the UK later in the decade. And at Mini, while capacity is In 2011, the major announcements were as follows: limited by physical constraints of the Oxford plant to no more than c250,000 units  Early March: supply contracts of over £2bn for the new Evoque per year, the sister pressings and engine plants, and Mini suppliers across the UK, were announced for more than 40 UK-based suppliers. will all soon benefit from additional demand of up to 100,000 Minis per year which  Late March: GM confirmed that the Luton van plant will make the next will be made in the Netherlands under contract. generation Vivaro van, for Vauxhall and Opel. Starting in January 2014, this In addition, Toyota is on the up once again, with 200,000 units pa a realistic vehicle programme should secure the future of the Luton plant until at least expectation for this plant in the long run. GM has retained both its car plant at 2025. Ellesmere Port and the van plant at Luton and where combined volumes of close  Mid April: production of the Aston Martin Cygnet started and it was also to 200,000 upa are ultimately achievable. Finally there is Honda which although confirmed that low volume assembly of the MG6 will take place at the SAIC- retrenching at the present time, should still produce in excess of 150,000 upa and MG facility at Longbridge. Development work on MGs to be made in China will quite probably more vehicles a year in the long run. take place at Longbridge, reinforcing the automotive R&D base here in the UK (although production is now most unlikely to be restarted here once again). Significant new investment in UK vehicle production in 2011-12  Late April: Jaguar confirmed investment in Solihull to make the low volume C- 2011 had been a remarkable year in terms of investment in the UK automotive X75 hybrid super car; creating 4,500 jobs in the UK, with 85% UK content, industry. The good news stories continued in 2012, with positive news from BMW, symbolising the high-tech low carbon direction of the company. GM, JLR and Nissan especially:  Early June: confirmation that Aston Martin will transfer production of the  BMW is increasing its commitment to the UK with a further £250mn investment Rapide back to the UK, from Austria, effective from mid-2012. in its Mini assembly, engine and stampings operations.  Early June: Nissan confirmed £192m investment in the UK to design, engineer  GM has confirmed it will make the new Astra in the UK at the Ellesmere Port and build the second generation Qashqai; this will safeguard at least 6,000 factory which has now been “saved”, hopefully until well into the 2020s. jobs in the country – the current Qashqai has 83% UK content, a level which is  Honda started production of the new CRV and Civic, as well as adding a new expected to be repeated and possibly even exceeded on the next model. This to its production line-up, this last move starting in December followed on from the earlier announcements of £420m investment for the 2012. This represents the end of a £267 investment programme at Swindon.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 21

Nissan Leaf, starting in 2013, and the battery plant for Renault and Nissan, Reaching the 2mn upa barrier … starting production in 2012. In spite of the negative news from Honda and Ford, the potential for the UK  Early June: BMW confirmed £500m investment for the new Mini, with to reach 2mn upa remains: the scale of growth beyond this point will depend on expansion at the Mini assembly plant in Oxford, the pressings plant in Swindon a number of decisions yet to be made: and the engine plant in Birmingham.  Now that GM has confirmed it is retaining Ellesmere Port, will it also allocate  Late June: Toyota said its UK plant will export the Avensis estate to Japan. European production of the Ampera to the plant? For now we doubt this will  Late July: Honda confirmed that production of the new Civic will start at happen until after 2016, if it happens at all. Swindon by the end of the year (and indeed that Swindon will be the only  Will the Luton van plant be awarded significant export contracts beyond factory making the five-door version worldwide); and that the next Europe? At the moment this does not appear to be very likely. CRV will go into production in late 2012.  When and if the Toyota plant brings its currently mothballed second assembly These announcements secured at least 4,000 new jobs and the safeguarding of line back into action; Toyota has suggested it will add a couple of new models thousands more at the vehicle plants concerned and throughout the supply chain. to its European production network during the second half of the decade. We In the last four months of 2011, more good new announcements appeared, ie: suspect that at least one of these additional models will be allocated to the UK and this would mean Toyota once again operating two assembly  In September, there was confirmation of the engine plant lines in the UK (one is currently mothballed). and news from Bentley that, with the aid of a government grant, it will expand its model development and all-round R&D activity in the UK.  How quickly and successfully the expected expansion at Jaguar-Land Rover takes place. Our report includes our current view on the timings for these new  The good news from JLR continued in November with the announcement that models and the likely volumes; the timings could change and we have been it will recruit a further 1,000 workers at its Solihull plant to work on the wide deliberately cautious with regard to volumes for the new models. range of new models due to go into production at Solihull in the next few years.  It is worth adding that if JLR sales continue to grow in the BRIC and North  In addition, Toyota confirmed the start of production of the latest Avensis, a American markets at current rates, then the pressure for additional production move which reinforces this model’s position as integral to Toyota’s capacity, outside the UK, in addition to that planned for China (and kit manufacturing strategy in Europe. Toyota will also centralise all European assembly arrangements elsewhere), as well as rumoured for Saudi Arabia, will production of the Auris in the UK from 2012; and Ford is continuing with its become very strong indeed. This may, in turn, limit the long term production substantial investment plans in its powertrain operations in the UK. growth potential for JLR beyond the volumes shown here. Implications of the above Three concerns remain … On the back of existing demand and a hoped-for eventual economic recovery, Of course the mega decisions about what happens to vehicle production in the UK we provisionally have UK car and light commercial vehicle production are made outside the country and this is not going to change. It is up to the UK in reaching close to 1.6mn units in 2012 and approaching and indeed general and the government in particular, to create an environment in which exceeding 2mn units’ pa by 2016/7. Please note that the figures in this report continued investment in manufacturing is the “easy” choice for the auto industry’s were prepared and submitted to the SMMT BEFORE its full year 2012 global decision makers. In this regard, three serious concerns need to be production data had been released and there may be some discrepancy addressed, ie: between the UK figures shown here and those released at around the same

time as this report by the SMMT.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 22

 The lack of R&D undertaken in the UK by the tier 1s. The SMMT, together with the Smith Institute, has begun to identify roadblocks and  Reports from suppliers across the supply chain, from tier 1s through to tiers 3 barriers to such investment and is working closely with the government and banks, and 4, regarding difficulties with raising investment and working capital and hopefully overcome such blockages. The report, available at finance in the UK. http://www.smith-institute.org.uk/file/give%20them%20some%20credit.pdf is a major step down the road towards developing a solution; clearly there is a  And reports from suppliers regarding problems with recruiting enough serious risk of a long term “disconnect” between the needs of the supply base and skilled manufacturing employees and engineers. the willingness of the UK financial sector to support the supply base. How this Although the likes of JCI, Faurecia and Denso have production facilities here in the circle can be squared is unclear at present, but the issue needs to be addressed UK, they undertake little fundamental R&D and project specific development otherwise the scale of opportunity open to the UK will be under exploited and engineering here. This work tends takes place at their facilities elsewhere. Even supplier investment will take place elsewhere, with the consequent loss of jobs and GKN, one of the few major UK-owned tier 1s, undertakes much of its driveline associated wider economic spin-offs. development work outside the UK. Tier 1s have to be encouraged or persuaded to The SMMT has introduced a “Meet the Funder” series of meetings, similar to bring some of their R&D work to the UK – in this regard, Nissan’s commitment to their “Meet the Buyer” programme; here suppliers are introduced to financial developing the new Qashqai in the UK is highly significant as an increase in institutions which have strongly indicated their willingness in advance to support fundamental vehicle R&D in the UK can only help to encourage suppliers to locate automotive suppliers. The success of this programme in making funding more some of their R&D here too. The Automotive Council and government together widely and readily available will be interesting to observe. need to develop a coherent plan to bring this idea to life. In terms of labour and skill shortages, this may appear somewhat counter-intuitive The second issue of suppliers having problems raising finance is something in an era of rising unemployment and with the supposed increased in which we believe will be of increasing importance in the short-medium term. apprenticeships and training schemes. This is potentially a serious issue for the At the SMMT’s 2011 International Automotive Summit in London a number of UK UK automotive industry and economy in general – and something which policy suppliers, small tier 1s and large tier 2s, openly expressed their frustration with the makers need to address. As we noted in previous reports, it would be ironic at UK financial sector and the difficulties in raising working capital, to support specific best and even tragic at worst if the increased willingness of the VMs to capital investment or fund development work on various VM projects. increase sourcing here was met by an inability of UK suppliers actually to be AutoAnalysis heard similar stories from its client base regularly throughout 2011. able to fulfil the orders the VMs want to place here. At the end of the day, This is reminiscent of the frustration which the supplier industry experienced in the there is no doubt that government and industry alike will simply have to train more recession when the government’s Automotive Assistance Programme failed to skilled manufacturing engineering workers – this will not be a quick or easy task, result in any actual financial support for a supplier. A number of UK-based but it will have to happen if the UK is to maximise its chances of benefiting from the purchasing executives at the international VMs have also expressed concerns to recent investment in automotive manufacture. us that some of their potential suppliers have been unable to get financial support During 2012, AutoAnalysis worked for Sunderland City Council, developing its from UK banks putting into jeopardy these VMs’ plans to award new supply strategy for the automotive industry in the city; a key potential barrier identified contracts in the UK. There has been a great deal of talk about this issue, but during this work was rising concern regarding a skilled labour shortage. This is rather little action in terms of making sure that finance is actually available to available at http://www.makeitsunderland.com/CHttpHandler.ashx?id=13131&p=0, suppliers. The worrying thing is that we have been saying this in several reports, along with a short commentary piece highlighting the main findings is also at and the matter is reportedly widely discussed within government and the banking http://www.automotiveworld.com/comment/a-skill-shortage-faces-the-uks- sector, but there is little evidence of the situation changing. automotive-supply-base/.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 23

European production will come in Russia Production Outlook Overview The weak economic outlook, lack of consumer confidence (the UK’s current boom in car sakes notwithstanding) and the progressive shift of production from Europe Introduction to China and the US at several VMs, means that we expect to see a much slower and later recovery than we had projected before. Although European production Our Production Outlook now runs to 2017. It should be noted that while we include has recovered from the hit taken at the Japanese VMs because of the the full manufacturing volumes for the European/Japanese/Korean/American VMs earthquake/tsunami and Thai floods last year, weak demand for most of the major in Russia, we do not include the pure CKD volumes for these VMs. Furthermore, volume European brands is the principal reason behind the fall in production. we do not include the indigenous Russian brands (mostly the original Ladas), which are all slowly being replaced by international models (essentially , Even at the premium brands, there are now some signs of a slowdown; Audi Dacias and ). There is still a lack of information to allow fuller coverage of volumes are likely to be down somewhat in 2012, partly because of a slower than the Chinese VMs; Great Wall has now opened its plant in Bulgaria, while the Chery expected ramp-up of A3 volumes and a slowdown in A4, Q5 and A6 sales. plant in Turkey, which is a JV with Turkish company, Mermerler, will not actually Mercedes also cut production of some of its models, although its new A- and B- start production until late 2013; as before, this report covers limited information class range should the fall in production to not much more than 20,000 units. these companies, plus SAIC in the UK, although a return to UK production for BMW is likely to have grown slightly, but not as fast as we had previously thought. SAIC now appears most unlikely. In Turkey, Chery’s annual production is expected However, it is the production at the volume VMs, especially Fiat, Ford, Opel, PSA to reach 200,000 upa by the end of the decade. and Renault which gives most cause for concern. 2012 volumes will clearly not be Production rose strongly in 2010; this continued in 2011 – but as good as they were in 2011. Specifically: fell in 2012 …  Fiat, which lost c130,000 units in 2011 over 2010, is likely to have seen a further fall of around 250,00 to just over 1.2mn units in 2012, despite the new In our previous reports we had expected Europe, including Russia, to see a rise in Panda, continued strong production of LCVs and the of the new 500L production in 2012, the economic uncertainty notwithstanding. This confidence series. Delays in the launch of various models, especially the new Bravo was based on the continued strength of the German market, strong demand from (which has now been dropped), various Alfas and by consequence delays to China, the USA and other key emerging markets. However, the core European the equivalent Chrysler or Jeep versions explain the fall as much as declining markets themselves weakened considerably in the second half of last year and as demand in Europe. more economic data became available, we progressively reduced our projections accordingly. At the volume VMs, notably Fiat, PSA, Renault, Opel and Ford, the As a result of the economic situation and these programme delays, we do not situation worsened to a greater extent than for the market as a whole, especially in expect Fiat’s recovery in production to reach a significant level until 2015. the second half of the year and here we have cut our projections significantly. Moreover, this recovery will be both smaller in volume terms and take the Our provisional total for 2012 European production, including Russia, is now just group in a different direction to what might have been expected. In addition, over 18.1mn units, around 400,000 units down on our previous view and around this recovery is itself contingent upon US consumers accepting European- 2.1mn units down on our Q2/2012 view; without Russia, we expect Europe to made models and production in Russia, at an all-new plant, being a success. have been just under 17mn units in 2012, down from c17.3mn units projected last As noted elsewhere in this report, Fiat is reorganising the allocation of time and almost 1.4mn down on the c18.4mn units total for last year. Next year, production between its Italian factories, although the full implications of this we expect a modest recovery to nearly 18.68mn units, including Russia, but only change will not be felt for some time. to just over 17.1mn units without Russia. It is clear that the bulk of the growth in  Ford, which we expect will have been down by c190,000 units in 2012 over

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 24

2011. This is largely due to the slowdown in production of its large models an upward curve, at Renault itself the reverse is true; we expect Renault to made in Belgium, the Fiesta (ahead of this an imminent facelift and then an all- have lost around 290,000 units in 2012 and although Nissan will grow slightly new model in the next couple of years) and delays to new models to be made (its big growth will be from 2014 onwards) and Dacia continues to go from in Romania. strength to strength, the Renault brand’s decline means the group as a whole lost around 190,000 units in 2012. Ford also intends to make a major push with its LCV range and develop the Transit into a brand in its own right, with a range of models bearing this name. By contrast, most other brands will likely be shown to be either stable in 2012 or The bulk of the growth in Ford production projected at the end of the period will have seen modest increases in production. The Volkswagen brand itself covered in this Outlook comes from increased LCV production in particular, as should have seen a small rise in production volumes, largely on the back of the well as a general rise in production in Russia rather than significant rises in new Golf, while SEAT will also see a rise in production, but this will actually be due production at its traditional European operations. to the Audi Q3 which is made at SEAT in Barcelona. BMW/Mini should also have seen a modest rise in 2012 production.  Opel/Vauxhall, which lost just over 40,000 units in 2011 compared to 2010, will have seen a further fall of around 260,000 units in 2012, with this loss Turning now to the country picture, we look at the main vehicle production spread across most of its model range. The expectation is that Opel/Vauxhall countries in alphabetical order: volumes will continue to fall for a couple of years ahead of the new Astra and  Belgium: in an earlier 2012 report we had adjusted some of the historic data Corsa which are due from 2015 onwards. The replacement Zafira and Insignia for Opel and this means there are slight differences between the figures now follow soon afterwards. quoted for Opel Belgium and those in much older reports. Having seen over The model cycle timings of the Opel/Vauxhall range could not have come at a 851,000 vehicles made there in 2007, production has fallen steadily since then worse time in terms of coinciding with the economic downturn. This is evident to just over 558,000 in 2011: in the company’s decision to close the Bochum factory. Production o We expect a the full year 2012 figures to shown a fall again to c516,000 arrangements may change depending on the success or otherwise of the first owing to declining demand for the large Fords and the older Volvo models shared model programmes with PSA are finalised. Meanwhile the company made there. has to give its new (parallel)l strategy called Drive 2022 a chance to work. o The one bright spot in Belgium is the Audi plant which will produce close to  PSA, which was stable in 2011 over 2010, is now expected to have lost 200,000 upa by the end of our Outlook period. However, this will not stop around 430,000 units in 2012 and see a further 60,000 decline in 2013 – and the long-run decline in Belgian production which will now take place this is despite the switch to the new and the imminent start of following the decision by Ford to close its Genk factory. production of the 2008; almost all of the PSA range is heading into the o Production in Belgium will now settle back in the range 400-420,000 upa downward phase of their model cycles and facing tremendous competition in and will rely on Audi and Volvo for any future growth. very difficult economic times.  Czech Rep.: production climbed to over 1mn units for the first time in 2010, a Although PSA should recover from 2014 onwards, we still do not see it getting level which was sustained in 2011 and should have been maintained in 2012 back to 2007-8 production volumes – the pressure to close more than one (we still await the official figures for 2012 for the Czech Rep.). The country has factory in Europe will get ever stronger. As noted above, there are likely to be benefited from the success of Hyundai and Skoda in particular – they have further changes to PSA’s production arrangements once the GM alliance more than compensated for falling production at the PSA-Toyota JV. We moves into all-new model programmes but this is unlikely before 2016. expect Skoda and Hyundai to continue to grow and expect and with the PSA-  Renault: although group production, including Nissan and Dacia is largely on Toyota JV to produce a new model line-up in the near future – on the back of

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 25

this, we have a broadly positive outlook for production, expecting it to have  Germany: although 2011 saw German production climb to almost 6.13mn reached over to 1.3mn units by the end of the period covered by this report. If units; however, we expect 2012-2014 will see a fall in German production for a Hyundai invests further at Nosovice, as we expect it will, then the 1.4-1.5mn number of reasons for this, including: upa level could be significantly surpassed in the second half of the decade. o A large part of 2011 production was still to absorb brought forward  France: production reached c2.26mn units in 2011, following two years of demand under the erstwhile scrappage schemes and to meet the initial growth; despite the rise in production in 2009-11, the 2011 total was still some burst of recovery demand from North America in particular. way off the 2.5mn units in 2008 and the 2.9mn units of 2007. However, 2012 o Failing short-term production of several models which are due to be saw a steady fall in French production and we expect the official figures to replaced in the next 2-3 years, eg Mercedes C-class, Ford Fiesta, Opel come in below 2mn units for the first time in many years; this fall is in spite of Astra, and the Volkswagen Passat/CC. the expected benefit of the new Peugeot 208, the new Yaris, revised o A shift of some production away from Germany, with the Passat being and the EVs coming from Renault: made in the USA as well as Germany, and the Mercedes A- and B-class o In fact we expect 2012 production in France will have fallen by over seeing some production moving to Hungary. 340,000 to 1.91mn units, a level which we do not expect to be exceeded o A general decline in production in Germany by Opel and Ford. again until 2016; there will be a modest rise from 2016, but with Renault By the end of the period covered by our report however, we expect increasingly orientating itself towards Russia and other emerging markets, o production to have climbed back close to 5.9mn units on a sustained basis, following PSA’s lead, we expect French production will settle down around with a series of new models boosting production; by this time, moreover, the 2mn units mark on an annual basis. we expect the current economic uncertainty to have become a thing of the o By 2015, we expect France will actually fall behind Spain and probably past. also the UK in the battle for 2nd, 3rd and 4th spots in the EU country The continued importance of Germany to European vehicle production will rankings behind Germany. Our Outlook for France assumes that if o remain. All the principal German brands will remain focused on producing French VMs close any of their factories in France, then any replacement vehicles in Germany, although the capacity installed by the premium output from these plants will be re-allocated to other French plants, German brands outside Germany is increasing. although some Clio production will definitely shift from France to Turkey – all in all, the prospects for vehicle production in France are somewhat o Daimler has now started full-scale production at the new Mercedes plant in worse than they had been in our previous reports. Hungary and we now expect production in Hungary to be higher than previously thought; and BMW has said it will establish full manufacturing in o By the end of the Outlook period, production in France, at just over 2.0mn Russia, although this will almost certainly be after the time period with will be around 900,000 units down on the 2007 level, reflecting already which this report is concerned; Daimler will establish a van production JV planned production shifts by PSA and Renault to Slovenia, Slovakia and in Russia, but has said it will not build a car plant there for the time being. Turkey, political pressures from the French government notwithstanding. Audi has expanded production capacity in Neckarsulm in Germany and at The possibility of large car production by PSA moving to Germany o Gyor in Hungary and has confirmed it will build a factory in Mexico with remains and the idea of it moving to China has been denied by PSA – production starting there in 2015. It worth repeating the comment made in officially, for now it remains committed to the Rennes factory where its previous reports that one of the reasons for the expansion of BMW and large cars are currently made. However this could change when the final Mercedes production outside Germany has largely been undertaken in decisions on the location of large car production within the GM-PSA order to free up capacity in Germany and to allow the German factories to alliance are made. produce a wider range of models.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 26

o Audi actually had to add shifts in early 2012 to cope with strong demand. It . And Mirafiori will make a range of other Alfa Romeos and a new set has also had to use SEAT to produce the Q3 SUV owing to capacity of Maserati models. shortages at its own plants in Germany. It is also expanding its product o The effect of this new manufacturing arrangements has yet to be seen, range significantly in the coming years, which will lead to further pressure but our initial assessment is that it will not arrest all of the long run decline on its existing capacity in Europe. in Fiat production in Italy; accordingly, we do not see Fiat volumes in Italy  Hungary: for some years, vehicle production in Hungary had been limited to climbing above 850,000 again during the period covered by this report. Suzuki and a small volume at Audi. However, we can expect to see a steady  Poland: here production reached its peak in 2008 when nearly 930,000 rise in production in Hungary in the years ahead. Audi is adding capacity to vehicles were made; since then production has fallen, and we expect this fall allow production in Hungary of more than 100,000 upa and Mercedes will to continue in 2012-13, at least in the absence of further commitment to its produce some of the new A- and B-class programmes in an all-new plant in plants there from Fiat, VW and GM. The real cause of falling production in the country. We expect the 213,000 units made in 2011 to more than double Poland is Fiat which has transferred the Panda to Italy and which we expect to c568,000 in 2017, with the bulk of this growth coming from Audi and will lose the Ford Ka volumes in the next few years as well: Mercedes. Suzuki’s renewed commitment to its Hungarian operations, announced in late 2012, could see further production growth later in the o Transferring the to Poland has helped to alleviate the loss decade, but we need further details on the company’s plans before of Panda volumes but it far from fully compensates for this loss. Following commenting specifically here. the switch of the new Panda back to Italy, it is difficult to see how the country can return to the 870,000+ units’ annual production which it has  Italy: just as France saw a fall from its 2007 peak, so has Italy experienced seen in the recent past. However, we think c580-600,000 upa is realistic something similar. Production in Italy was over 1.2mn units in 2007, but it fell in the light of known plans for Fiat and GM in Poland and our expectation steadily every year until 2011 when production was just over 751,000 units. that Ford will make the next Ka itself. This decline continued in 2012 and we project full year Italian production will show a further fall to around 629,000: o In addition, Poland has suffered with the loss of Zafira production to Germany – although the Astra is still produced there, the volumes at the The fall in production at Fiat has coincided with a series of major o moment are not sufficient to make up the loss of the Zafira. We now know reorganisations at Fiat, the closure of one plant, in Sicily, and extensive that Opel’s Gliwice factory will be safe within the imminent reorganisation negotiations with the unions about improving the efficiency and cost base of GM in Europe and it could be that once the final decisions have been of its Italian operations. Negotiations with the Fiat unions were far from made regarding the footprint of the new Astra build – and indeed the next simple and at some points in the process the possibility that another plant Zafira (which we currently have in Germany) – future production in Poland in Italy could close was real, but in the end Fiat decided on a strategy could be higher than shown here. That would, in turn, mean reduced which is designed to avoid any plant closures in Italy. production in Germany or the UK. o The details of the latest reorganisation have been provided elsewhere in this report, but the key aspects are that:  Portugal: here production fell from just under 168,000 in 2007 to just under 149,000 in 2010, but rose again in 2011, to c183,000 units – although we now . Pomigliano remains production site for the Panda. expect it to fall steadily over the next few years and we no longer expect . Melfi will make small SUVs for both Fiat and Jeep. Portugal to recover to past volumes. It would not be surprising to see PSA . Cassino will make mid-size/compact Alfa Romeos and possibly some close its Mangualde plant at some point in the future and it is not inconceivable Chrysler versions. that Volkswagen could consider re-allocating its own production to other group plants at some point in the future.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 27

Certainly, we do not expect the VW Eos and Scirocco to sustain the volumes Poland, but it is too late for Fiat to pull out now. of previous years and while we expect the VW Sharan to have a good couple of years with the all-new model, we see volumes here falling; the best days of  Slovakia: production here is very much on the rise, or on the up – due to the the large MPV segment are arguably behind it. We also have doubts as to Volkswagen Up! and its sister models from SEAT and Skoda. In 2007, how long PSA will retain its small plant at Mangualde – we believe that the production in Slovakia was just over 538,000 and after falling in 2008-9, was production volumes here could easily be absorbed within the Vigo factory back to the 2007 level in 2010. In 2011, with growth at Kia (due to the (which also supplies most of its stampings). Sportage and continued success of the cee’d), and the new Touareg at Volkswagen, output climbed to nearly 578,000 units:  Romania: like Hungary, this country should see a rise in production in the On the back of this, and full year production for the Volkswagen Up!, 2012 coming years. While the Dacia factory has reached close its capacity, the o will see a rise of c280,000 units to 855,000 units – the bulk of this will be country has finally seen Ford producing its first all-new model here. The B- due to the Volkswagen Up! and its SEAT/Skoda versions. The expansion Max should be produced at a rate of c100,000 upa from 2013, and we still in this range, the expected continued success of Kia and the widening of believe that Ford will also add a second model here in the next few years. It the Audi SUV range will all help to put Slovakian production close to 1mn has said it will do so, but the fact that it is cutting production in Germany owing upa by 2016. The other model which will boost production in Slovakia this to falling demand for the Fiesta may also cause the timing for the second year will be the new Peugeot 208. Continued growth in production here is model at Craiova to be delayed. due to PSA, VW and Kia. And this growth is not solely down to small, The continued popularity of the Dacia range and the ambitious plans for Ford cheap cars - VW Slovakia had to recruit additional staff in 2010 to cope Craiova (which has been given a new model line-up in Ford’s latest with rising demand for large SUVs. By the end of the Outlook period, reorganisation of its production footprint) explain the increase in production production will be c930-940,000 upa and it is conceivable that volumes between 2007-2015; with the second Ford model (probably at lower volumes could climb above 1mn upa not long after, especially in VW approves a than originally thought) and continued success for Dacia we now expect further expansion at its Bratislava plant. annual Romanian production will be in the region of 480-500,000 upa. The Dacia plant is understood to be close its full capacity – this has led Renault to  Slovenia: here this is just one factory, owned by Renault. Production will fall build a second Dacia factory in Morocco to supply Europe and the near East. this year owing to poor sales for the Twingo and the cutting of one shift; we expect a modest recovery next year but it will need until the new Twingo and  Serbia: ahead of the recent European economic “crisis”, Fiat agreed to take on Smart derivatives from 2014 for production to recover to around the 220- the former Zastava plant in Serbia and received significant EU, Serbian 225,000 upa level. Without this JV, we suspect this plant could well have been government and EIB support. Its initial plans are to make a series of small 5- deemed superfluous to Renault’s needs. and 7-seater MPVs based on the platform; at one point even an SUV version for Jeep was planned (this will now be made in Italy). We had also  Spain: production in Spain was over 2.75mn units in 2007, since when it fell in expected this plant would also make a version of the Uno (project 326) which 2008 and 2009; there was a recovery in 2010 on the back of increased is being made in Brazil, but we now think this has been delayed. production to meet small cars for the various European scrappage schemes. However 2011 saw a slight fall and 2012 is expected to see around 470,000 This plant should make over 100,000 units next year and could well exceed units cut from the country’s annual production total. There will be reduced 300,000 in the second half of the decade depending on which models (eg the production at most VMs in Spain; indeed apart from the Audi Q3, new Seat 326) are allocated to this plant. Whether Fiat would have taken on this plant Leon and the Connect & Kuga (which are being transferred to had it been able to foresee the state of the global car market by 2012 is an Spain over the next two years), production of all other models in Spain interesting question – almost certainly the 500L could have been made in undoubtedly fell in 2012.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 28

o The situation in Spain remains uncertain because of the country’s compared to 2.76mn in 2007. Production in Spain will be sustained by the economic situation and the continued concerns surrounding SEAT’s long , strong LCV/SUVs and Pick-up production by Nissan term viability. Our projections continue to be based on a number of key and the decision by PSA to allocate their emerging markets C-segment assumptions, notably that SEAT will indeed sort out its manufacturing vehicle to Spanish production. These models should, along with the new inefficiencies at Martorell and that none of the major VMs currently Citroen C4 Picasso help Spain to maintain annual output at around the operating in Spain will pull out of manufacturing in Spain entirely. There 2.1mn units range, but this could fall if the decision is taken to close at remain doubts about the long run viability of the PSA plant in Madrid. least one manufacturing facility in the country. o Similarly, VW’s Pamplona plant is expected to produce a wider range of  Sweden: here vehicle production will be much lower than in the past and will models based on the Polo, while Ford is has allocated a number of new stay at a much reduced rate for the foreseeable future. In 2007, Sweden models to Valencia – ie the Mondeo/S-Max/Galaxy which will move from produced just over 340,000 vehicles, but this fell to just fewer than 189,000 in Genk from 2014 onwards; the C-Max will in turn move from Spain to 2011; we expect 2012 will have seen a further fall to 166,000 and we also Germany and the Kuga to Russia. expect to see a further fall in 2013, before a strong model-led and export-led recovery to around 250-260,000 by 2016/17. One variable will be the split of o We now expect Fiesta production to be concentrated in Germany, production between Sweden and Belgium for the S60: Volvo has configured its reducing production in Spain; Opel has designated Zaragosa as the lead factories so that both can make the model according to the demands for other Corsa plant and sole source for the Meriva. Additional capacity for Corsa models at each factory. In addition, some of the provisional increase to and Meriva production is now available at Zaragosa as the Corsa-based 2016 is for production of as yet unnamed models by Volvo which could Combo stopped production at the end of 2011; production of its be shared between Belgium and Sweden so the recovery in Sweden may replacement is taking place at the Fiat-Tofas plant in Turkey. We do not at be slightly less than is shown here. the present time see GM’s Spanish plant as at risk of closure. The reasons for the recent fall in Swedish production are: o In addition, Renault has pulled back from the possible closure of the The end of production at Saab. Valladolid plant; this is now earmarked as one of the core EV plants for o Renault; Valladolid will also make a small SUV-like vehicle. And just as o And the reduction in production in Sweden at Volvo. Volvo Sweden this report was being finalised, Renault Spain confirmed the long term focuses on the larger Volvo models whereas its Belgian plant makes the future of the Palencia plant, as well as investment in its engine and smaller and more popular models – so unless Volvo decides to move parts factories in the country. Renault will not, it appears, some of its smaller vehicles to Sweden, it is difficult to see anything other close a plant in Spain. than a decline in production here. o Even so, production in Spain in 2016 (at c2.17mn units) is likely to be  Turkey: here, apart from a dip in 2009 when production fell to just under c593,000 units lower than it was in 2007; on this basis, we had expected 850,000 units, production has been around 1-1.1mn upa in recent times. at least one plant, or may be two, to close in Spain – the question is which Model life cycle effects and the general economic uncertainty will mean a slight VM(s) will be brave and take the first decision to close a factory. At fall in production in 2012, but the new Chery factory and the new present the most uncertainty surrounds PSA’s factory in Madrid and we should give production a boost to 1.24mn by 2014 and c1.4mn by 2015. This would not be surprised to see this close next year or in 2014. total will be underpinned by the new Ford Transit and the new Ford small van from 2014. All being well, we expect production in Turkey to settle down at o We do not expect to see any significant increase in vehicle production in around 1.3-1.4mn upa for the remainder of the decade. Spain and we now believe it will remain at around the 2.1mn upa level,

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 29

o The Turkish plants of Ford, Fiat, Hyundai and Renault are integral to these  Toyota and Nissan have relatively small operations and they have been joined companies’ European production networks; as such, Turkey has a by PSA and Mitsubishi with their JV – this is being transformed into a full remarkably stable manufacturing portfolio, one which is highly unlikely to production unit and Nissan has committed to expanding production in Russia, move away from Turkey given the centrality of the plants and the models with the new Almera to be joined by the Qashqai in the next few years. Suzuki concerned to the VMs’ overall strategies. will soon open a plant, and Honda will do the same in the near future; even should have an operation of some form in Russia in the coming years. o In addition, the Chinese VMs will soon be manufacturing in Turkey, Both Nissan and Toyota are investing in new press and large injection although not at full rates until at least the end of the period under review. moulding facilities in Russia to bring these plants into line with capabilities at At the moment we project long-run annual production in Turkey in the its other plants around the world. range 1.3-1.4mn units – with a couple of Chinese plants and one or more existing models having a better than expected run, production volumes in  Hyundai has opened a brand new plant capable of making 300,000 vehicles Turkey could easily trend towards 1.5mn units a year and higher. and is well on the way to utilising this capacity. However, the biggest change Production of at least 300,000 more vehicles by the Chinese in Turkey by in Russia involves Renault/Dacia models being made at AvtoVAZ, the the end of the decade is a distinct likelihood. Chery alone expects to manufacturer of Ladas. In 2012, Renault-Nissan took effective management reach 200,000 upa by 2018. control of AvtoVAZ.  UK: production here fell significantly from 1.72mn units in 2007 and 1.62mn  All of these developments means that in 2012 around 1.12mn foreign brand units in 2008 to only 1.075mn units in 2009; 2010 and 2011 were excellent cars will have been made in Russia by these international brands – and by recovery years for UK vehicle manufacture. Production was around 1.44mn 2016 the total will approach 2.6mn units and could quite possibly go higher units in 2011, and when the official figures for 2012 are released, we expect than this from 2017 onwards; the rate at which the old Ladas are replaced by these to have shown a rise to c1.59mn units; thereafter, we expect just under new models based on the platform will be the main driver here. 1.64mn units in 2013, c1.74mn units in 2014, c1.89mn units in 2015 and over 2mn upa in 2016 and 2017, as well as hopefully more thereafter. Details on  Increasing Russian production will clearly underpin European production specific expansions at each of the UK VMs have been provided elsewhere in growth; moreover, for suppliers this means that the need to follow the VMs to this report. Russia is even more pressing than it has ever been. The importance of Russia to European production will be especially evident from 2012 onwards. In addition, we have to consider Russia: In terms of the overall European picture, our views are as follows:  Here we only cover the international brands which have full manufacturing operations in Russia. Back in 2007, excluding the Lada Niva, less than  We project European production including Russia as rising from c19.19mn in 150,000 vehicles were made on this basis, mostly the and the 2011 to c21.45mn in 2015 and just over 22.6mn in 2017. Renault Clio which was made at Avtoframos. Since then, VW has opened a  Russian production of full manufacture international brands is projected to plant at Kaluga, Ford has added the Mondeo and is expanding its have risen by c310,000 units in 2012, ie from nearly 800,000 to 1.12mn units. manufacturing line-up in Russia, GM has opened its all new plant at St Even with this boost from Russia, and indeed strong growth in Slovakia and Petersburg and several other VMs have also started full production in Russia. the UK, total European production is likely to come in 2012 at 18.12mn down GM and VW have also established JVs with GAZ, while Fiat is opening its own from by more than 1mn in 2011. plant, backed by the Russian bank Sberbank, although its production volumes

will be somewhat lower than originally suggested.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 30

European Production Outlook to 2017, by VM and major brands – Base Outlook Production Production Production Production Production Production Group Marque 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

BMW BMW 1,097,076 988,949 874,520 973,046 1,028,700 1,038,250 1,046,000 1,130,500 1,186,500 1,285,750 1,294,750 BMW MINI 237,709 235,019 213,670 241,043 294,117 310,250 330,000 369,750 388,750 386,500 384,000 BMW Rolls Royce 1,009 1,247 870 3,215 3,685 3,250 3,500 3,750 3,850 3,700 3,550 BMW ALL 1,335,794 1,225,215 1,089,060 1,217,304 1,326,502 1,351,750 1,379,500 1,504,000 1,579,100 1,675,950 1,682,300 Daimler Mercedes‐Benz 1,279,654 1,202,414 924,352 1,207,929 1,254,072 1,233,100 1,339,500 1,363,100 1,323,400 1,437,750 1,394,850 Daimler Smart 102,660 139,964 115,469 97,435 103,560 105,500 98,000 83,500 137,500 157,000 161,500 Chrysler Chrysler 41,811 12,926 2,146 3,002 0 0 0 0 0 0 0 Chrysler Jeep 29,213 16,781 3,230 2,495 0 0 0 0 0 0 0 Daimler Maybach 320 317 205 157 200 0 0 0 0 0 0 Daimler & Chrysler 1,453,658 1,372,402 1,045,402 1,311,018 1,357,832 1,338,600 1,437,500 1,446,600 1,460,900 1,594,750 1,556,350 Fiat ,483,731 1,433,011 1,438,865 1,376,723 1,217,989 1,038,830 993,250 1,082,000 1,168,000 1,289,000 1,302,000 Fiat Alfa Romeo 151,499 109,428 104,022 120,068 136,121 91,000 109,000 169,250 202,250 225,750 212,500 Fiat Lancia 117,864 113,298 113,796 97,963 108,172 76,403 59,500 54,000 49,500 45,000 40,500 Fiat Chrysler/Jeep 0 0 0 0 0 0 0 5,000 15,000 30,000 30,000 Fiat 6,561232,548 6,722 0 6,213 0 6,627 0 7,314 0 6,250 0 67,500 0 6,250 0 5,900 0 5,550 0 5,550 0 FiatFord Maserati Mazda 7,66914,235000 9,294 4,041 5,842 6,161 0000000 5,850 6,250 19,000 42,000 51,750 57,250 FiatFord ALL ALL 1,767,3242,709,524 1,671,753 2,198,837 1,666,937 1,764,427 1,607,223 1,760,286 1,475,757 1,555,274 1,218,333 1,361,250 1,235,500 1,388,000 1,335,500 1,534,000 1,482,650 1,690,000 1,647,050 1,757,750 1,647,800 1,764,500 FordGM Ford Opel 1,920,173b 1,653,800103,266 1,842,089 1,409,681 156,587 1,470,319 1,084,126 65,240 1,557,907 1,234,783 183,087 1,555,274 1,191,427 204,110 1,361,250 284,500931,250 1,388,000 340,500829,500 1,534,000 371,500814,000 1,690,000 443,500919,500 1,757,750 1,046,000 479,500 1,764,500 1,080,250 473,750 FordGM Volvo Saab/CadillacExcludes kits488,756 assem 119,912 356,748 86,480 294,108 20,685 202,379 1,482 0 0 0 0 0 0 0 0 0 0 0 0 0 0 FordGM Jaguar ALL 53,8120001,876,978 1,652,748 1,170,051 1,419,352 0000000 1,395,537 1,215,750 1,170,000 1,185,500 1,363,000 1,525,500 1,554,000 FordHonda Land Rover Honda 263,435 280,516 93,847 150,103 109,800 189,237 197,750 211,000 208,500 213,000 211,000 Hyundai‐Kia Hyundai Turkey 90,190 80,682 52,082 75,495 91,866 87,665 104,500 177,500 208,500 204,750 198,000 Hyundai‐Kia Kia 156,465 200,823 160,182 229,505 252,200 301,287 304,500 326,750 324,750 322,500 317,500 Hyundai‐Kia Hyundai 0 11,004 116,200 200,010 377,136 509,000 512,000 521,500 530,000 541,000 535,500 Hyundai‐Kia ALL 246,655 292,509 328,464 505,010 721,202 897,952 921,000 1,025,750 1,063,250 1,068,250 1,051,000 LDV LDV 10,418 9,308 40 0 0 0 0 0 0 0 0 SAIC MG MG 0 468 88 0 1,315 0 0 0 0 0 0 Mitsubishi Mitsubishi 66,433 63,135 50,620 52,275 52,772 43,047 28,000 35,000 40,000 45,000 40,000 PSA 1,174,855 1,125,641 995,343 1,051,806 1,069,416 859,100 795,750 789,000 834,500 930,250 948,000 PSA Peugeot 1,502,828 1,352,227 1,242,968 1,325,329 1,310,011 1,088,000 1,092,000 1,151,000 1,147,450 1,148,750 1,159,750 PSA ALL 2,677,683 2,477,868 2,238,311 2,377,135 2,379,427 1,947,100 1,887,750 1,940,000 1,981,950 2,079,000 2,107,750 Renault‐Nissan Renault 1,745,311 1,482,313 1,377,999 1,495,692 1,468,830 1,180,500 1,217,500 1,284,000 1,331,500 1,390,000 1,363,500 Renault‐Nissan Nissan 546,415 522,298 386,205 529,377 663,985 685,350 664,750 796,750 915,000 942,000 933,000 Renault‐Nissan Dacia 361,402 357,029 345,663 428,147 466,839 521,695 658,000 783,000 869,500 865,000 867,000 Renault‐Nissan AvtoVAZ 0 0 0 0 0 20,000 125,000 185,000 261,500 395,000 433,000 Renault‐Nissan ALL 2,653,128 2,361,640 2,109,867 2,453,216 2,599,654 2,407,545 2,665,250 3,048,750 3,377,500 3,592,000 3,596,500 Suzuki Suzuki 246,786 286,007 186,049 178,897 172,874 143,000 133,750 165,000 220,500 237,750 229,500 Toyota Toyota 805,736 686,731 516,435 476,763 478,087 486,750 596,500 682,000 792,000 782,500 746,000 Volkswagen Volkswagen 2,026,602 2,054,283 1,835,493 2,124,741 2,369,789 2,431,050 2,491,000 2,475,500 2,560,250 2,537,750 2,511,000 Volkswagen Audi 974,706 1,019,616 931,007 1,148,683 1,349,747 1,094,300 1,131,400 1,166,750 1,265,000 1,310,000 1,312,750 Volkswagen Seat 412,937 379,834 293,548 344,162 370,794 392,000 371,500 396,000 384,250 376,500 386,000 Volkswagen Skoda 621,626 614,999 541,189 558,735 583,000 622,400 638,800 639,000 687,500 741,250 733,500 Volkswagen 2,5807,373 2,424 6,487 1,253 2,475 1,227 4,201 1,738 4,427 2,250 3,775 2,750 3,825 3,300 4,900 4,000 5,450 6,500 5,025 6,250 7,850 VolkswagenChery Bentley Chery10,000 0 7,692 0 3,596 0 4,792 0 7,528 0 9,700 0 9,525 5,000 40,0009,200 10,350 70,000 10,750 86,000 11,100 95,000 VolkswagenGreat Wall PorscheGreat Wall 107,1700 96,721 0 75,637 0 95,529 0 127,165 0 147,500 7,500 162,168 32,000 207,900 42,500 212,350 44,000 233,250 47,500 230,500 50,000 VWTotal ALL Total 20,276,5464,155,621 19,022,0364,175,569 16,102,1423,681,723 18,228,0704,277,869 19,188,3334,809,761 18,120,0124,699,200 18,680,9684,807,143 19,950,6504,897,650 21,452,7505,123,700 22,664,0255,216,000 22,624,4005,191,100 Tata Jaguar 0 72,696 41,765 56,456 49,932 56,750 71,750 98,000 110,500 175,250 176,250 Tata Land Rover 0 188,147 116,581 185,096 241,099 319,925 314,250 311,000 340,500 420,500 433,000 Tata Tata JLR 0 260,843 158,346 241,552 291,031 376,675 386,000 409,000 451,000 595,750 609,250 EUROPEAN CAR ANDSaab LCV Sypker PRODUCTION Saab OUTLOOK0 REPORT 0 0 30,763 13,555 0 0 0 0 0 0 January 2013| Page 31 Volvo 0 0 0 165,103 443,526 432,548 406,500 443,500 499,250 495,250 484,500 Aston Martin Aston Martin

European Production Outlook to 2017 by VM Group – Base Outlook

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 BMW 1,335,794 1,225,215 1,089,060 1,217,304 1,326,502 1,351,750 1,379,500 1,504,000 1,579,100 1,675,950 1,682,300 Daimler 1,453,658 1,372,402 1,045,402 1,311,018 1,357,832 1,338,600 1,437,500 1,446,600 1,460,900 1,594,750 1,556,350 Fiat 1,767,324 1,671,753 1,666,937 1,607,223 1,475,757 1,218,333 1,235,500 1,335,500 1,482,650 1,647,050 1,647,800 Ford 2,709,524 2,198,837 1,764,427 1,760,286 1,555,274 1,361,250 1,388,000 1,534,000 1,690,000 1,757,750 1,764,500 GM 1,876,978 1,652,748 1,170,051 1,419,352 1,395,537 1,215,750 1,170,000 1,185,500 1,363,000 1,525,500 1,554,000 Honda 263,435 280,516 93,847 150,103 109,800 189,237 197,750 211,000 208,500 213,000 211,000 Hyundai-Kia 246,655 292,509 328,464 505,010 721,202 897,952 921,000 1,025,750 1,063,250 1,068,250 1,051,000 Mitsubishi 66,433 63,135 50,620 52,275 52,772 43,047 28,000 35,000 40,000 45,000 40,000 PSA 2,677,683 2,477,868 2,238,311 2,377,135 2,379,427 1,947,100 1,887,750 1,940,000 1,981,950 2,079,000 2,107,750 Renault-Nissan-Dacia 2,653,128 2,361,640 2,109,867 2,453,216 2,599,654 2,407,545 2,665,250 3,048,750 3,377,500 3,592,000 3,596,500 Suzuki 246,786 286,007 186,049 178,897 172,874 143,000 133,750 165,000 220,500 237,750 229,500 Tata JLR 0 260,843 158,346 241,552 291,031 376,675 386,000 409,000 451,000 595,750 609,250 Toyota 805,736 686,731 516,435 476,763 478,087 486,750 596,500 682,000 792,000 782,500 746,000 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100 Geely Volvo 0 0 0 165,103 443,526 432,548 406,500 443,500 499,250 495,250 484,500 Others 17,791 16,263 2,603 34,964 19,297 11,275 40,825 87,400 119,450 138,525 152,850 Total 20,276,546 19,022,036 16,102,142 18,228,070 19,188,333 18,120,012 18,680,968 19,950,650 21,452,750 22,664,025 22,624,400

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 32

European Production Outlook to 2017 by VM Group – Base Outlook

European car and LCV production by VM group, 2007-2017

Others

25,000,000 Geely Volvo

Volkswagen Group

Toyota 20,000,000 Tata JLR

Suzuki

15,000,000 Renault-Nissan-Dacia

PSA

Mitsubishi 10,000,000 Hyundai-Kia

Honda

5,000,000 GM Ford

Fiat

0 Daimler 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 BMW

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 33

Country review In terms of country trends, the following table shows the expected trend in country production (please note that we now include Renault’s Moroccan factory in the Outlook – hence the appearance of Morocco in this table and chart): European Production Outlook to 2017 by country – Base Outlook 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Austria 202,014 129,098 60,411 90,440 131,838 118,380 109,750 99,500 103,000 129,750 134,500 Belgium 851,330 736,185 559,570 571,387 558,533 516,548 490,500 442,500 418,500 424,500 428,000 Bulgaria0000075003200042500 44000 47500 50000 Czech Rep 931,853 934,267 973,890 1,049,583 1,105,689 1,137,700 1,151,050 1,161,250 1,277,250 1,359,750 1,343,750 Finland 23,026 16,145 10,414 6,385 2,015 0 19,000 29,000 25,000 23,500 0 France 2,931,425 2,504,298 2,006,002 2,186,643 2,259,868 1,914,100 1,895,000 1,904,500 1,877,450 2,001,000 2,028,750 Germany 5,740,191 5,527,096 4,989,595 5,690,798 6,126,306 5,580,740 5,457,568 5,454,000 5,573,500 5,830,750 5,861,600 Hungary 298,704 341,203 218,103 217,428 212,582 235,850 361,750 483,500 537,750 575,750 568,750 Italy 1,233,763 966,361 810,762 798,411 751,167 628,833 661,500 759,300 793,150 869,050 841,550 Morocco0000052,000135,000225,000 300,000 325,000 340,000 Netherlands 61,692 60,305 50,620 48,025 40,772 27,047 0 40,000 75,000 85,000 89,500 Poland 788,746 929,437 870,891 886,169 823,659 646,250 560,000 495,000 512,500 582,250 609,000 Portugal 167,806 155,460 131,480 148,681 183,390 158,250 138,000 121,500 126,500 129,000 124,500 Romania 292,161 284,311 296,312 350,857 335,167 342,695 425,000 482,000 506,000 494,500 477,000 Russia 170,215 272,353 185,421 456,737 798,465 1,123,000 1,567,750 1,900,000 2,325,500 2,593,750 2,617,500 Serbia 0 0 15,000 15,000 8,000 29,000 96,750 123,500 137,500 131,000 129,500 Slovakia 538,288 520,953 521,853 539,101 577,907 855,787 875,000 911,750 945,250 947,000 935,000 Slovenia 200,157 198,094 212,680 212,493 173,782 105,500 104,250 195,500 225,000 221,000 221,000 Spain 2,758,555 2,494,012 2,139,857 2,368,832 2,342,751 1,873,750 1,750,750 1,905,750 2,115,250 2,165,500 2,139,750 Sweden 340,311 252,647 126,158 174,656 188,869 166,500 142,000 194,000 263,750 265,750 252,500 Turkey 1,028,581 1,083,227 848,015 1,049,652 1,124,753 1,011,415 1,069,500 1,238,000 1,377,500 1,403,000 1,389,750 UK 1,717,728 1,616,584 1,075,108 1,366,792 1,442,820 1,589,357 1,638,850 1,742,600 1,893,400 2,059,725 2,042,500 Total 20,276,546 19,022,036 16,102,142 18,228,070 19,188,333 18,120,202 18,680,968 19,950,650 21,452,750 22,664,025 22,624,400

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 34

European car and LCV production by country, 2007-2017 UK Turkey Sweden 25,000,000 Spain Slovenia Slovakia Serbia 20,000,000 Russia Romania Portugal 15,000,000 Poland Netherlands Morocco Italy 10,000,000 Hungary Germany France Finland 5,000,000 Czech Rep Bulgaria Belgium 0 Austria 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 35

For example, the success of the recently announced investment by Renault Spain Country Rankings could push Spain’s production total further ahead of France; and if PSA decides to make Madrid into its EV plant for example, the picture for Spain could be better than shown here, while further transfer of production by Renault to Turkey is The battle for second place intensifies possible, worsening the possible picture for both countries, but for France The position of Germany as the largest vehicle production country is well- especially. As noted previously, the other variable in determining French established and will continue. In 2011 Germany saw car and LCV production production volumes – and possibly even some of Spanish production – will be the climb above 6mn units, due to strong demand from the premium brands and eventual agreement reached on production locations for new models from the Volkswagen in particular. The picture in Germany would have been even better PSA-GM alliance. This will, however, not become apparent until at least 2016. had Ford not experienced a decline owing to the switch of C-Max production to However, it is the future position of the UK and Russia which pose the biggest Spain and a general decline in production of its other models made in Germany. challenge to France and Spain. Russia is something of a unique case in that C-Max production will actually return to Germany some time within the period almost all of the production growth there is for the local market and because of covered by this Outlook as large car production at Ford moves from Belgium to import duties, it is extremely unlikely that Russian demand could have been met Spain, highlighting the ever-changing nature of European vehicle production. from core European production sites in the long run. So, while we expect to see All other VMs actually recorded a rise in production in Germany in 2011, including Russian production of international brands reach 2.6mn units by 2016/17, and Opel which benefited from the switch of Zafira production from Poland to Bochum almost certainly more than this in due course, it is the changing position of the UK and the temporary addition of Astra production at Russelsheim – such moves will which is most relevant to the discussion of country rankings. now be relatively short-lived. In 2012, total production in Germany was down, The planned new model programmes and the continued growth at Mini, JLR and largely due to declining volumes at Ford and Opel, but also because of model Nissan (despite the economic climate) are very positive for the UK. In addition, we cycles effects at the premium brands, most notably at Audi which had experienced have the return to production health of Toyota, plus the confirmation that GM will what now seems an artificial high in 2011, with the A4, A6 and Q5 having been at retain both of its vehicle plants in the UK. All of this means we can expect UK peak sales volumes at the same time vehicle production to rise from almost 1.6mn units in 2012, on a steady path Below Germany, the position of different countries is changing. For many years thereafter, to over 2mn upa by the middle of the decade. On this basis, we expect France has been the clear no.2 and Spain the clear no.3 in terms of production to see the UK producing similar production volumes to Spain and France. volume ranking. In 2007, France produced c2.9mn units and Spain c2.76mn – It also seems reasonable to expect the UK to produce more vehicles in the both have declined significantly since then and their positions have actually long run that both Spain and France, cementing its position in the core reversed; in 2011, Spain made c2.34mn units and France c2.26mn. For 2012, we European country rankings in second place behind Germany. It may take provisionally project both Spain and France falling below 2mn, but still maintaining until after 2017 for the UK to establish itself clearly in second place; the key their positions relative to each other. factors will the timing for new models at JLR and the success of the next Our Base Outlook sees France declining slightly in the years ahead, first to around Opel/ and how much production is allocated to the UK. 1.9mn units, before settling back around the 2mn level; Spain too is projected to Further evidence of the changing focus of vehicle production in Europe comes fall below 2mn for three years, before recovering somewhat to c2.1mn units. from the rise in production in the Czech Republic and Turkey (both now well over Provisionally, we have Spain ahead of France in the future, but the actual volumes 1mn upa and rising) and Slovakia which is also trending towards 1mn upa. Italy by made in France and Spain will be subject to change depending on key decisions contrast is unlikely to get back to its historic production levels above 1mn units, regarding the final allocation of models to PSA and Renault’s French/Spanish sites. certainly not within the period covered by this Outlook.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 36

During the period 2011-2017, we expect to see production rises as follows:  Czech Republic, +22%; Hungary, +168%; Romania, +42%  Slovakia, +62%; Turkey, +24%; and the UK, +42% The position of Germany relative to the other major European vehicle production companies is shown on the following chart. The distance between Germany and the other countries is especially clear. The chart also makes it clear how close the battle is for second place between the UK, Spain, France and Russia.

Base Outlook Major Countries

7,000,000

6,000,000 Czech Rep France 5,000,000 Germany 4,000,000 Italy Russia Units 3,000,000 Spain Turkey 2,000,000 UK

1,000,000

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Years

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 37

The following chart replicates the data from the preceding chart but takes out Germany to highlight more clearly the changes in the relative positions of the different countries and shows in particular how the UK will overtake France and get very close to the production volumes in Spain too by the end of the period covered here.

Base Outlook Major Countries, excl. Germany

3,000,000

2,500,000 Czech Rep

2,000,000 France Italy 1,500,000 Russia Units Slovakia 1,000,000 Spain Turkey 500,000 UK

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Years

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 38

Alternative Scenarios In this section we look at a number of alternative scenarios for European production – these have been prepared in order to provide readers with some alternative perspectives on how the Outlook could vary in the current uncertain economic climes. These have been produced on similar lines to the scenarios in our last three reports. The implications for European vehicle production in the event of our worst case scenarios coming to pass are rather worrying. The Base Outlook The Base Outlook presented above and in the individual VM profiles is our most likely scenario, taking into account our judgement of the regional and global economic climate, consumer and business confidence and the short and medium product and manufacturing plans of the VMs themselves. It is also crucially based on the assumption that there is no further substantial economic collapse. In the Base Outlook, we provisionally have European production in 2012, including Russian production of international brands, totalling just over 18.1mn units – this would be a fall of over 1mn units from 2011; also in the Base Outlook, we see a modest overall recovery in 2013 to 18.68mn units, although most of this “recovery” is due to continued expansion of the international brands in Russia rather than due to an improvement in the core European market. The new Base Outlook shows a much worse position than we had projected in our last report; back in May 2012 we had projected a rise in total European production to over 20.1mn units, admittedly also largely driven by Russia. We need to emphasise that our Base Outlook takes into account current rates of European sales volumes (and current expectations of continued decline); we also take into account already announced plant shutdowns and reliably expected closures or temporary shuttering (Opel Bochum, Mitsubishi Netherlands, PSA Aulnay and possibly Madrid). On this basis, we see production, excluding Russia, declining from c18.39mn in 2011 to just under 17mn units in 2012, a fall of around 1.4mn units. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total inc. Russia 20,276,546 19,022,036 16,102,142 18,228,070 19,188,333 18,120,202 18,680,968 19,950,650 21,452,750 22,664,025 22,624,400 Total exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,997,202 17,113,218 18,050,650 19,127,250 20,070,275 20,006,900 Our Base Outlook, moreover, assumes the recovery across Europe will occur from H2/2014; for 2014, we expect total production to reach 19.95mn units including Russia; continued growth in 2015 and 2016 is then projected. All this assumes that the current economic uncertainty (and depression or stagnation in some markets) is resolved and complete economic meltdown across Europe is averted. However, because of the myriad of complexities affecting the industry right now and the economic uncertainty, we need to provide some overall insight as to what might happen if things turn out to be worse than currently expected. Alternative views However, the uncertainty in the Eurozone in particular means that more pessimistic views need to be considered. We present a range of scenarios, all variants on the Base Outlook, and with options including Russia and without – most of the Russian production of international brands is for the Russian market.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 39

Scenario 1 Here we look at what could happen if production in Spain, Italy and France fell by between 2-5% pa more than projected in the Base Outlook between 2012-2016, with the bulk of the worse performance having occurred in 2012 and also expected in 2013. The reason for looking at this scenario is that these three countries produce mostly in the A/B/C segments which are the most prone to major volume impacts in a worsening economic climate. In addition, the volume VMs in these countries are especially vulnerable to the increasingly competitive Koreans and the move into the C segment especially by the premium brands (who appear to be less affected by the current economic situation than the volume brands). It is worth noting that in late 2012, French ministers recently called for an EU investigation into Korean VMs, as the French clearly feel they are being undercut on prices, especially in France. In this scenario, including Russia, we see provisional European production having fallen to below 18mn units in 2012, to c17.9mn units, before recovering along a similar line as in the Base Outlook – albeit with lower annual totals. Taking out Russia, European production falls from 18.39mn in 2011, by over 1.6mn units to 16.78mn units in 2012 – more significantly, this means that, taking Russia out of the equation, European production does not recover to its 2007 peak until after 2017. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total inc. Russia 20,276,546 19,022,036 16,102,142 18,228,070 19,188,333 17,899,368 18,477,444 19,859,259 21,357,033 22,512,959 22,624,400 Total exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,776,368 16,984,001 17,959,259 19,031,533 19,919,209 19,856,599 Scenario 2 Here we look at what could happen if, in addition to the falls in France, Spain and Italy noted above, German production sees a fall of between 1-4% per year more than projected in the Base Outlook. While this extra fall would be spread across 2012-2016, most of the fall would still be in 2012-2013. The impact of this would be that Europe (excluding Russia) would have lost over 1.5mn units in 2012, rather than the 1.29mn units lost in scenario 1. This scenario specifically excludes any further allowance for a fall in production in the UK, Slovakia, the Czech Republic, Hungary and Romania where significant investment is now coming on stream, producing new models from highly competitive VMs. In this scenario, total European production, including Russian production of international brands, would have at c17.67mn units in 2012 and just over 18mn in 2013. Taking Russia out of the equation provisionally has European falling by nearly 1.8mn units in 2012 to 16.55mn units. As in scenario 1, this would mean that Europe would take until after 2017 before it again reached its earlier 2007 peak. Scenario 2 = scenario 1, plus Germany down 1-4% pa 2012-2017 compared to Base Outlook 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total inc. Russia 20,276,546 19,022,036 16,102,142 18,228,070 19,188,333 17,676,138 18,005,994 19,804,719 21,245,563 22,454,651 22,624,400 Total exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,553,138 16,438,244 17,904,719 18,920,063 19,860,901 19,797,983

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 40

Scenario 3 Here we look at what would happen if all European production countries, except Russia, saw a fall of between 2-5% pa beyond the Base Outlook. This results in European production, including Russian production of international brands, provisionally having fallen to c17.3mn units in 2012. Taking Russia out of the equation means there would have been an even bigger fall in European production, from 18.39mn units to 16.15mn units, a fall of c2.24mn units. Scenario 3 - whole market, except Russia, down 2-5% pa 2012-2017, compared to Base Outlook 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total inc. Russia 20,276,546 19,022,036 16,102,142 18,228,070 19,188,333 17,270,342 18,167,571 19,589,637 21,070,205 22,061,917 22,624,400 Total exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,147,342 16,599,821 17,689,637 18,744,705 19,468,167 19,406,693 The data in the above table is now shown graphically below, first with Russia and then without.

European Production - Base Outlook and 3 alternative scenarios 24,000,000

23,000,000

22,000,000

21,000,000 Base Outlook Scenario 1 20,000,000 Scenario 2 19,000,000 Scenario 3 Units 18,000,000

17,000,000

16,000,000

15,000,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Years

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 41

The following chart shows the Base Outlook and three alternative scenarios without Russia.

European Production Excl Russia - Base Outlook & 3 alternative scenarios

22,000,000

21,000,000

20,000,000

Base w/o Russia 19,000,000 Scen 1 w/o Russia Units 18,000,000 Scen 2 w/o Russia Scen 3 w/o Russia 17,000,000

16,000,000

15,000,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Years

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 42

And if things were even worse than this? A fall of up to 5% more than our Base Outlook would be bad enough, but in view of the current economic climate, we need to recognise that in reality, things could be worse! With this in mind, we have constructed three further scenarios for European production excluding Russia. These are discussed below. Whereas scenarios 1-3 with and without Russia are predicated on a reasonable recovery through to 2016 (including continued export growth, eg of /Jeeps to North America and of JLR and German premium brands to North America, China and the Middle East), scenarios 4-6 have been designed to reflect the potential impact of significant stagnation in Europe and a failure of the export-led strategy of Fiat and the premium brands to counter reduced sales in Europe. While we clearly cannot say which scenario is the most likely, the point of preparing these alternative views is to present the reader with a macro view of what the market could look like in the event of a worsening of the global economic situation, for example a serious slowdown or retrenchment in China and/or the USA failing to resolve its long term fiscal problems. Scenario 4 assumes that from 2012 the market is 5% worse than the Base Outlook throughout the Outlook period. Then in scenario 5, we assume the 5% decline in 2012 is followed by a further decline of 2.5% in each of 2013 and 2014, before a recovery in 2015 of 3.5% and then 7% in 2016. Scenario 6 assumes the same as in scenario 5 for 2013 and 2014, but then assumes a smaller rate of recovery, ie just 1.5% in 2015 and 3% in 2016. The results of these declines and recovery profiles are summarised in the table below. Scenarios 4. 5 and 6 versus European Base Outlook, without Russia 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Base Outlook exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,997,202 17,113,218 18,050,650 19,127,250 20,070,275 20,006,900 Scenario 4 exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,147,342 16,257,557 17,148,118 18,170,888 19,066,761 19,006,555 Scenario 5 exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,147,342 15,743,658 15,350,067 15,887,319 16,999,432 18,189,392 Scenario 6 exc. Russia 20,106,331 18,749,683 15,916,721 17,771,333 18,389,868 16,147,342 15,743,658 15,350,067 15,580,318 16,047,727 16,529,159 The data above is also shown graphically overleaf. The implications of these scenarios are that European production excluding Russia by 2017 will not have returned to its 2007 levels and in the worst case scenarios may only just get back above the 2009 trough. The long-run implications for the structure of the European vehicle manufacturing sector are ominous. As this report was being finalised, the head of Fiat-Chrysler, Sergio Marchionne, revived his call for a pan-European, EU-led restructuring plan for the industry. He made a similar call early in 2012, but also failed to follow his own prescription of cutting capacity at Fiat. Perhaps it will take a decline along the lines of scenario 6 for such calls to receive the kind of response which Mr Marchionne believes is required. Although plant closures have been announced and we feel sure more may well follow, we are also sure that European VMs are still doing all they can to avoid closing any more car plants, at least unless the economic situation worsens significantly and for a sustained period. This would be the case if the production volumes for Europe excluding Russia turn out to be something in the range shown in scenarios 5 and 6. Moreover, if these levels were maintained in the long run, then widespread plant closures would surely be inevitable – and the loss of one of the major names in European car production would be a distinct possibility. European VMs are struggling to maintain an even keel financially as it is, but if production remains at below 18.75mn units in the long run (ie below the 2008 total), plant closures would then seem to be unavoidable. Core European market sales were down in 2012 and they are expected to fall again in 2013: although export growth, emerging markets and the buoyancy of the German economy have maintained production volumes at some VMs, the pinch is now being felt across all markets and we can expect a fall in production at several VMs as a result.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 43

What is notable about the current situation is that a number of VMs have begun to speak publicly about the need to cut capacity and close factories. The message that VMs cannot sustain the fixed costs of numerous underutilised plants appears to have been heard loud and clear. Ford, PSA and GM have begun to act – the question is who will be next? Base Outlook versus worst scenarios (4, 5 and 6)

European Production Excl. Russia - Worst Scenarios

24,000,000

23,000,000

22,000,000

21,000,000

20,000,000 Base Outlook

Units 19,000,000 Base w/o Russia Scen 4 w/o Russia 18,000,000 Scen 5 w/o Russia 17,000,000 Scen 6 w/o Russia

16,000,000

15,000,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Years

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 44

Disclaimer As noted at the outset, 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 many cases, the vehicle companies do not provide official information on which models will be made at which plants, nor do they provide detailed information on future volumes and timings. They 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].

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 45

Vehicle manufacturer reviews

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 46

BMW Financial results for the full year have not been released yet; they will be summarised next time. for reference, we repeat the data provided last time for Q3, Key recent developments: the global economic uncertainty does not appear to as follows: be affecting BMW unduly. The company posted its highest ever sales in 2012 and continues to invest in new models and its production facilities, both here in Europe  Revenue was up 13.7% to just over €18.8bn, with the year-to-date total at and further afield. Plans for a BMW plant in South America have been confirmed €56.3bn, an 11.7% rise. and the company has also intimated that another all-new manufacturing plant was  Group EBIT was up 13.8%, with a margin of 10.6% being retained from a year under consideration. earlier. 2012 was a record year  Automotive revenue rose 12% in Q3, but automotive EBIT was down by 9.3% in the quarter, lowering the year-to-date margin from 9.6% from 11.9% After two record years in 2010 and 2011, the company continued to grow in 2012.  Year-to-date automotive revenue was up 9.3%. Unit sales were up 10.6% at 1.845mn, with all three group brands, BMW, Mini and Rolls-Royce posting record sales. The company thereby claims to have reinforced Commenting on these figures, BMW chairman, Norbert Reithofer, outlined the its position as the leading premium brand supplier worldwide. The company company’s strategic direction, emphasising: already predicts another rise and set of sales records for 2013.  The development of the “i” brand which is seen as leading the company into “a BMW brand sales were up 11.6% to 1.54mn, with the bulk of the growth coming new world of individual mobility” from the 1-series, X1, 3-series and X3. Mini brand sales rose above 300,000 for  How BMW will have halved its CO2 emissions by 2020 (compared to the mid- the first time, up 5.8%. this strong growth is expected to continue in 2013 with the 1990s), as a direct result of its Efficient Dynamics programme launch of the Paceman and the new Mini. Rolls-Royce sales, at 3,575, were also  The increase in production in China, to 400,000. the highest ever achieved by the brand.  Expansion of the Mini production network in the UK and signing an agreement In geographic terms, BMW even managed a modest (0.8%) increase in Europe, to with VDL Nedcar to make Minis in the Netherlands from 2014 almost 865,000, with the UK reporting record sales. Russian sales were up 33%, while in Asia sales rose by almost 32%. China saw over 326,000 sales, a rise of  And the opening of BMW’s first factory in South America; this will be in Brazil over 40%, while in South Korea sales were up over 22% and Japan they rose by and will open in 2014, with an initial capacity of 30,000 units, following an nearly 19%. US sales rose by almost 14%, with BMW again claiming the no.1 investment of €300mn. premium brand position. The positive sales figures were also reflected in the Q1 financial results for which These strong sales in 2012 come after record sales in 2010 and 2011. In 2011, BMW reported record sales, revenue and earnings figures; BMW reported a rise in group sales for all three brands – BMW, Mini and Rolls-Royce – had risen by over revenue of over 14% in Q1 to just over €18.3bn. Gross profits were up by just over 14% to almost 1.67mn units; despite the economic uncertainty prevailing at the 17%, resulting in a very healthy gross profit margin of nearly 21%. Similarly time, December alone witnessed a rise of nearly 12%. At the end of 2011, BMW impressive results were reported at the pre-tax level, with Q1 pre-tax profits up said it was expecting a strong 2012, largely driven by the new 3-series coming on nearly 22% at just over €2bn. The group’s net income for the quarter was nearly stream and the completion of the changeover in the 1-series to a new platform. €1.35bn, a rise of just over 18% compared to Q1/2012. The early signs are that this prediction is coming true. However, Q2 earnings were not as impressive, owing to a variety of product development and investment costs being booked this quarter; Q2 revenue was up 7.3% year-on-year, but the major profit measures were all down, ie:

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 47

 EBIT was down 7.3% to continue to invest – as this was especially clear in the mid-2012 announcement  Pre-tax profits were down 25.4% that it will increase investment in the UK by a further £250mn to expand and upgrade Mini production facilities. This investment will take place through to 2015  And net earnings were down 28.1%. and it will include expansion at the Mini assembly plant in Oxford, the pressings Despite the problems in Q2, BMW was confidently is predicting a stable second plant in Swindon and the engine plant near Birmingham. half of the year, and projections made earlier in the year are still regarded as on As noted last time, the company has had to address the need for permanent target. In a presentation to financial analysts in early 2012, BMW had set out a additional production for Minis away from Oxford; although improvements to the number of key targets for 2012 and beyond, ie: paint shop will allow for a modest increase in capacity at Oxford, the lack of  Global sales in 2012 of c1.6mn (this has recently been revised upwards, as physical space to expand there means that the Oxford plant is, even allowing for noted below). the recently announced investment, effectively at the limit of how many cars can come off the production line there. BMW has been using Magna in Austria as a  Automotive ROCE of over 26% and automotive EBIT of between 8-10%. contract manufacturer for the for some time, and while this  Increase R&D expenditure (back to 5%) and an increase in the capex ratio to arrangement will continue for the foreseeable future, additional Mini production close to 7%. capacity is required.  Improved purchasing and engineering efficiency through the increased use of Until last year, the general expectation had been that Mini production would be modules and materials cost reduction. added to Leipzig, where BMW has the space to grow, but this idea appears to The Q3/year-to-September figures suggest that these targets are still within have fallen out of favour; we now think that BMW wants to give itself flexibility in BMW’s reach. In addition, it is worth noting that, having had a very good start to terms of how it uses the Leipzig plant, especially in the event of better than the year, especially with increasing sales outside Europe, BMW now expects to expected growth in the “i” range of electric vehicles. achieve 2mn unit sales in 2016, rather than the earlier target of 1.6mn units by this Instead, BMW will now use the Nedcar plant in the Netherlands to make Minis from date. If the company can continue to break its own records on a consistent basis, some time in 2014, with working starting in January 2013 to ready this plant for these targets may well be met even sooner. Mini production. Only limited details on this plan have been released so far and our New 3-series to boost production numbers for Dutch Mini production are accordingly provisional estimates for now. The switch to the new 3-series gave a boost to BMW’s production especially in the Partnerships to play an important role in BMW’s strategy second half of 2012; given the strength of the 1-series and strong sales outside Despite the company’s many strengths and rapid pace of model renewal, it cannot Europe, we provisionally have European production for the BMW brand at nearly do it all alone. Selective, technology-specific partnerships are increasingly 1.04mn units this year, a slight rise on the figure for 2011. although at one point, common across the automotive industry these days and BMW is very much party we had expected a slight fall because of a combination of the 5-series, 7-series to this way of working. For example, the existing BMW and PSA JV in small petrol and X1 having passed their early life cycle sales peaks. However, initial figures for engines was expanded into hybrid and electric vehicle technology. However, this the 1- and 3-series, plus continued strong sales of the X1, meant that 2012 has will be a short-lived arrangement as the PSA partnership appears to have come to turned out to be a better year than we had expected. end the GM-PSA alliance and GM taking a stake in PSA. BMW is clearly annoyed The strong recent sales performance at BMW follows on from extensive recent at this turn of events and in October reports emerged that it would be seeking restructuring and a very dynamic new model programme. All this has taken place damages from PSA which is the “guilty” party in terms of ending the JV. That said, despite the economic uncertainty around the world. What is more, BMW is willing we were not entirely surprised that this JV has come to a premature end – BMW

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 48

had announced an investment of €125mn in EV parts production on its own, with Asian markets which will receive cars from BMW South Africa is China which is no specific reference to PSA. BMW has also decided to bring its hybrid now expected to account for as much as 10% of the output from BMW South development work entirely in-house. For now, we assume that the small engine Africa, this factory having been granted a permission to export to China. JV arrangements will continue, but this too could end sooner than planned. This news from South Africa followed on BMW’s announcement in January that it While the arrangements with PSA are under review, BMW is developing its links would increase its commitment to its US factory by investing nearly US$900mn with Toyota; specifically: there to make another SUV, the X4, a coupe-style version of the X3, similar to the  BMW and Toyota have signed a memorandum of understanding regarding X6’s relation to the X5. And, albeit on a much smaller scale, BMW has confirmed a lithium-ion batteries. 30,000 upa plant for Brazil, which goes into production in 2014. This will be the pre-cursor to a full production facility later in the decade; and speaking at the  BMW has also agreed to supply Toyota Europe with 1.6 and 2.0 litre diesel SMMT’s International Summit in London earlier in the year, BMW’s Ian Robertson engines from 2014. It has not been confirmed which model(s) will feature suggested that the assembly arrangements in Russia (with in Kaliningrad) BMW engines. Nor is it entirely clear what the diesel engine deal means for the will see a gradual increase in local content, with full manufacture there a distinct Toyota engine plant in Poland which makes diesel engines. possibility in the long run – no specific timing was given for this however.  And this summer, news emerged that the two companies would collaborate on In addition, reports have emerged that BMW is looking at Mexico for a possible the development of a new sports car, although the timing and exact positioning second North American factory, to make the FWD version of the next 1-series and of this model remain to be confirmed. also the 3-series for the North American market; again, nothing official has been In May 2012, news emerged of a possible collaboration between BMW and said on this, but given the decision by Audi to build a plant in Mexico, rising Hyundai in future engine development, although at this stage no firm details have Volkswagen production in the US, and the decision by Mercedes to add some C- been released. Discussions with GM regarding possible co-development work in class production to its US factory, it would be entirely natural for BMW also to fuel cells appear to have come to an end. make cars in the region, rather than import them all from Europe – the US market is a strong one for the premium German brands and eliminating exchange rate risk Manufacturing news: as we have reported before, BMW has been expanding its when importing from Europe is clearly another important factor behind recent production activities outside Germany for some time as it seeks to reduce its decisions to increase North American production. Just as this report was being dependence on its home market factories. There have not been any significant finalised, Ian Robertson spoke of the likelihood of another all-new plant “within a changes to production arrangements at the core BMW factories in Europe in few years” – we would expect this to be in North America, recent months and we do not expect any in the medium term. The long-established factories in the US and South Africa have exported vehicles, The one uncertainty in Europe had surrounded where any future additional Mini worldwide, for some time – for example 70% of the output from Spartanburg was production will take place: this has been addressed an as noted above, additional exported in 2011, although the fact that the X3/X5/X6 are only made in the US Mini production will be added in the Netherlands from 2014, while existing Mini largely explains this; it is also worth noting that the kits for these models production at Magna Austria will continue. assembled in various locations around the world are made largely from parts However, continued change, or rather expansion, outside Europe can be expected. supplied from the US. For example in February, BMW South Africa announced it would implement a third Until recently, production at BMW’s Chinese factory has been for the local market shift by the end of 2012, raising production there to over 90,000 upa; this will in only, but in late 2011, reports emerged that BMW would export Chinese-made 5- turn result in a doubling of exports from South Africa, with output destined for North series sedans, the first time a premium or luxury marque has exported cars from America, Japan, Australia, New Zealand and various Asian markets. One of the China. Although the company admitted it was struggling to meet even local

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 49

Chinese demand from its Chinese factory, it wants to test the market’s acceptance The new Mini shares a platform, UKL1, with the next 1-series; Autocar has recently of Chinese-made vehicles and expects to export some its Chinese production, to repeated how as many as 23 models will come off the UKL1 platform, although not the Middle East or developing Asian markets in general. Exports started in low all of these have been confirmed, nor timing confirmed. The possible 23 models volume at the end of 2011. 2012 saw an expansion of the model range made in are: China, with the X1 SUV added to the production line-up there. Production at BMW’s plant in Shenyang is expected also to include the next 3-series and also  1-series: GT, GT LWB, Touring, saloon, 3-door hatch, 5-door hatch, X1 Chinese-made TwinPower Turbo engines.  2-series: Z2 , coupe, , 4-door GranCoupe, X2 As noted previously, one of the key reasons behind the expansion in China  Mini: 3-door hatch, 5-door hatch, coupe, cabriolet, roadster, saloon, and the USA in particular is BMW's long term aim of equalizing production Countryman, Paceman, Clubman, Traveller MPV and Clubvan between Germany and locations outside Germany. New models: BMW has also said that any further increase of production of the 3-series outside Germany (it could be added to the US factory as well) would be to allow other The key model programmes are the 1-series and 3-series which are in the middle models to be added to German production facilities, e.g. the i3 in Leipzig and of a major line-up renewal and extension. The company started production of the possibly future Minis (although as noted above, we think BMW would like to find a new 1-series range in late 2011 and in 2012 it started production of the next 3- different long term location for additional Mini production rather than Leipzig). series. As part of these programmes, BMW will introduce two new nameplates, ie the 2-series (for the sporty versions of the 1-series) and 4-series (for the sporty At Mini, a major expansion in the range is now under way. In 2011, BMW versions of the 3-series). confirmed a £500m investment in the UK for the new model, with the investment spread across the Mini assembly factory in Oxford, the pressings plant in Swindon More specifically, for the new 1-series, the complete model plan is as follows: and the engine plant in Birmingham. This investment should safeguard as many  The five-door appeared in September 2011, followed by the three-door in early as 5,000 jobs in the UK. Re-tooling for the new Mini at Oxford is now well under 2012; these are rear-wheel-drive, and will be followed by two front-wheel-drive way for production of the new model later in 2012. The investment at Mini is being models in 2013-14, a GT version and a small estate. increased by a further £250mn, with this extra investment spread across the three  The front-wheel-drive models will share technology with the next Mini. They UK plants, notably for body panel production. will also be the start of even greater change, from 2018, when the third Speaking at the announcement of the new Mini, the head of BMW, Norbert generation 1-series will appear, which is likely to switch entirely to FWD. Reithofer suggested that there could be as many as 10 Mini variants once the Mini  4WD models will be available, although possibly not in right-hand-drive form. 3 was in full production.  Coupe and cabrio models, which will use the 2-series name, will appear during A coupe and roadster version of the current Mini are already in production and 2013. These will be rear-wheel-drive. press reports have even suggested a notch-back (booted) version which will For the 3-series, which will feature an all-new range of 11 turbocharged diesel and provide the Mini designers with an interesting challenge – how can a booted Mini petrol engines, we understand that the plan is as follows: stay true to the established Mini design heritage? At the Geneva motor show in  Saloon (F30) and touring (F31) models in Q2 and Q4 2012 respectively. March, BMW also confirmed an additional Mini variant, the Clubvan – which will undoubtedly be a low volume “premium” small van for urban delivery work where a  Coupe (F32), Cabrio (F33), GT (F34) and 4-door coupe (F35), from early 2013 Mini could be seen as adding cachet or status to the company concerned. to early 2015 – these will be the models which will adopt the 4-series name.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 50

It has also been reported that BMW is already working on the following 3-series, At Mini too, a significant expansion in the range is also planned; we understand for 2020; this will be a super-lightweight, high fuel economy vehicle with advanced the product plan is likely to involve the following: aerodynamics and potentially a 9-speed automatic gearbox.  Late 2012 – The Mini Clubvan, low volume production of which started in late BMW is also close to launching its new “i” sub-brand of electric cars; the first 2012. will be the i3 and i8 which, as noted above, will feature extensive use of carbon-  2013 – The first new Mini, F56, a direct replacement for the main volume 3- fibre parts. The i3 is due to be launched in 2013, with initial production of around door model production of which also started in 2012. 30,000-40,000 upa. The i3 and the larger i8 were shown in near ready production  Late 2013 – New Mini cabrio, F57. format at the Frankfurt motor show in September 2011. BMW has released the  Late 2013 – Mini Countryman Coupe (Paceman); this will be a coupe version following details on the “i” series, as follows: of the Countryman and will be built in Graz by Magna Steyr.  The i3 will be built on what BMW calls its LifeDrive architecture, which features  From 2014 onwards, timing to be confirmed: both CFRP panels and other lightweight materials. The interior will be made o Mini Clubman 2, using the same platform as the current Mini from a range of natural fibres and renewable materials. Countryman.  The i3 will be a pure battery electric car, while the i8 will be a plug-in hybrid. o Mini Traveller – an MPV also based on the Clubman/Countryman  The i8 which will have a 2+2 seater with a modified version of the electric drive (UKL1) platform. system from the i3, mated to a 3-cylinder turbo fitted at the rear (the electric drive will be fitted at the front). An i8 concept version, a plug-in hybrid Spyder open top car, has recently been put on show. This features a range of innovative technologies, including upwardly swivelling, window-less doors and the latest iterations of BMW’s connected car technologies. The Spyder plug-in hybrid has a 131hp on the front axle working in tandem with a turbocharged 3-cylinder petrol engine generating 223hp to the rear axle; the electric motor and the petrol engine are both in-house developments. On a fully charged battery, the Spyder covers 39km/19 miles. The engines for i8 will be made at BMW’s UK engine plant at Hams Hall, near Birmingham. Press reports have suggested there could be a smaller i1 and an i5 to sit between the i3 and i8; the idea of a complete range of “i” models was described as “reasonable speculation” by a BMW respondent at the Geneva motor show – however, at this stage it would be unreasonable to expect these to appear until after 2016. The new 1-series and 3-series will feature new engines as noted above, specifically a three-cylinder 1.5 litre turbo diesel (N37) and petrol (N30) – and the 3-cylinder petrol unit will be the engine fitted to the i8.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 51

The timing for these new models and others are summarised below: 2012 2013 2014 and beyond 2015-2016 3-door RWD 1-series Front-wheel-drive 1-series 2-series coupe/cabrio (F22/23) New 7-series (2015) New 3-series saloon and estate (F30/F31) – 4-series coupe/cabrio/3-series GT Others to be confirmed, incl. New X1 (2015-16) production having started in 20111 (F32/33/34/35) widening of the Mini range, incl. Mini New 5-series (2016) 6-series 4-door coupe/GranCoupe (competitor to 3rd gen Mini Traveller & Clubman Mercedes CLS) Mini Paceman Rolls-Royce Ghost coupe and cabrio Mini roadster i3 electric car (one of these could be 1 year Mini Clubvan Rolls-Royce stretched Ghost earlier) Hybrid i8 The expansion of the Mini and 1-series ranges shows how BMW is looking to reduce its traditional dependence on sales of its larger vehicles. The market is undoubtedly shifting towards smaller cars as a whole and the wider the range of Minis and the FWD version of the 1-series will help position the company better against Audi, and especially the A1 and A3. Long term, we expect the Mini range to account for around one-third of BMW Group’s European production, up from 20% in 2010, although the actual proportion will also depend on how far and fast the new 1-/2-series ranges expand as well; in practice, because of the widening 1-/2-/X series which is being made in Europe and the widening of the 1-series, we think this ratio will not now be achieved until after 2016. In the Production Outlook table which follows, we provisionally have the BMW brand producing just over 1mn units in Europe in 2012 and project it to climb steadily to close to 1.29mn by 2017; our projection for BMW in Europe is tempered somewhat by the decision to expand production in the USA and China, and in South Africa to a lesser extent. Moreover, kit production in Russia, various Asian markets and indeed in Brazil in the near future will also take a small proportion of production volume away from Europe, although parts for the CKD kits will, by and large, be produced in Germany. In the short term, we see BMW largely bucking the trend in terms of European production – while the volume manufacturers are clearly feeling the pinch, the success of the 1- and 3-series, and the rising popularity and expansion of the Mini range, will result in continued growth.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 52

BMW Production Outlook to 2017 Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

BMW BMW Active Tourer (Sub‐1‐series) Pass C UKL1 Leipzig DE H2 13 2013 0 0 0 0 0 0 7,500 65,000 87,500 102,000 97,500 BMW BMW 1 series Pass. C E87 Regensburg DE Q3 04 2011‐2012 133,109 115,543 127,915 108,685 59,500 000000 Q3/04 & BMW BMW 1 series Pass. C E81/82/88 (L2) Leipzig DE 2011‐2012 49,116 112,570 97,301 76,669 82,000 6,500 0 0 0 0 0 Q2/07 BMW BMW 1‐series Pass. C L7/F20/F21 Regensburg DE H2 11 0 0 0 51 65,000 92,000 97,000 84,500 79,000 74,500 71,000 BMW BMW 1‐series Pass. C L7/F20/F21 Leipzig DE H2 11 0 0000 106,250 131,000 126,500 117,500 111,000 109,000 BMW BMW 2‐series coupe and cabrio Pass C L7/F20/F21 Regensburg or Leipzig DE H1 13 0 0 0 0 0 0 0 15,000 62,000 76,500 74,500 BMW BMW 3 series Pass. D E90 Leipzig DE Q1 05 108,834 34,415 29,682 7,752 0 0 0 0 0 0 0 BMW BMW 3 series Pass. D E90 Munich DE Q2 05 H2 12 219,636 223,394 217,531 206,039 167,000 000000 BMW BMW 3 series Pass. D E90 Regensburg DE Q2 05 H2 12 170,657 158,254 93,653 113,546 128,000 26,500 0 0 0 0 0 BMW BMW New 3‐series and 4‐series Pass. D L7/F30 Munich/Regensburg DE Q4 11 2019 0 0 0 0 7,000 329,500 335,000 309,000 292,000 282,500 279,500 BMW BMW 3‐series MPV/GT Pass. D L7 Regensburg DE H1 12 2010 0 0 0 0 0 500 39,500 63,000 60,000 58,000 56,250 BMW BMW i3 electric vehicle Pass. C New Leipzig DE Q4 13 or Q1 14 2013/14 0 0 0 0 0 0 2,500 30,000 39,000 45,000 45,000 BMW BMW 5 series Pass. E E60 Dingolfing DE Q3 03 2010/2011 237,356 205,798 144,654 10,599 0 0 0 0 0 0 0 BMW BMW 5 series Pass. E L6/F10/F11 Dingolfing DE Q2 10 2016 0 0 590 185,530 242,000 240,000 205,000 183,500 169,000 219,000 227,500 BMW BMW 5‐series MPV/GT Pass. E L6/F07 Dingolfing DE Q3 10 2009 0 25 10,147 28,714 23,000 21,000 19,500 18,250 17,500 17,000 16,500 BMW BMW 6 series Pass. E E63/E64 Dingolfing DE Q1 03 2011 21,199 15,915 5,126 3,272 50 0 0 0 0 0 0 BMW BMW 6 series Pass. E L6/F12/F13 Dingolfing DE Q1 11 0 0 7 555 17,000 13,500 13,000 11,500 10,500 10,000 9,500 BMW BMW 6 series 4dr GranCoupe Pass E L6/F06 Dingolfing DE Q4 12 2012/3 0 0 0 0 150 14,250 16,000 15,250 14,500 13,250 13,000 BMW BMW 7 series Pass. F E65/E66 Dingolfing DE Q1 05 Q3 08 2008 45,410 27,088 0 0 0 0 0 0 0 0 0 BMW BMW 7 series Pass. F L6/F01 Dingolfing DE Q3 08 2015 94 12,873 56,384 66,650 75,000 58,750 63,500 68,750 74,500 78,500 77,500 BMW BMW i8 Pass E? New Leipzig DE Q4 14 2014 0 0 0 0 0 500 3,500 6,000 7,250 6,500 6,000 BMW BMW Additional "i" series models Pass B/D New Leipzig DE Q3 15 2015 0 0 0 0 0 0 0 0 5,000 15,000 25,000 BMW BMW Z2 Pass Sports UKL1 Leipzig DE Q2 15 2015 0 0 0 0 0 0 0 0 7,500 15,000 19,500 BMW BMW Z4 Pass. Sports E89 Regensburg DE Q4 08 2015 0 211 28,902 21,700 18,000 16,250 15,500 14,250 12,250 11,000 11,000 BMW BMW X1 Pass. SUV L2 Leipzig DE Q1 10 2015/6 0 0 16,655 111,547 145,000 112,750 97,500 90,000 86,500 79,500 79,500 Graz (Magna‐Steyr BMW BMW X2 Pass. SUV L2 AU H2 16 2016 0 0 0 0 0 0 0 0 0 25,000 35,000 factory) BMW BMW X4 Pass. SUV X3 TBC‐ possibly Leipzig DE H1 14 2014 0 0 0 0 0 0 0 30,000 45,000 46,500 42,000 Graz (Magna‐Steyr BMW BMW X3 Pass. SUV E83 AU Q2 03 Q4 09 2009 111,665 82,863 45,973 31,737 0 0 0 0 0 0 0 factory) BMW BMW Total 1,097,076 988,949 874,520 973,046 1,028,700 1,038,250 1,046,000 1,130,500 1,186,500 1,285,750 1,294,750 BMW MINI MINI Pass. C R50 Oxford UK H1 01 Q3 06 2006 32,523 20,184 0 0 0 0 0 0 0 0 0 MINI Countryman SUV and Graz (Magna‐Steyr BMW MINI Pass. SUV R60 AU Q3 10 2010 0 0 0 24,741 102,643 99,500 93,000 84,500 78,000 74,000 72,000 Paceman factory) TBC, after BMW MINI MINI Coupe/Roadster Pass C R55 Oxford UK 2011+ 0 0 0 0 9,200 25,000 31,500 30,250 29,000 26,500 25,500 2011 BMW MINI MINI 2nd gen Pass. C R55 Oxford UK Q3 06 Q4 12 2013 205,186 214,835 213,670 216,302 182,274 185,000 0 0 0 0 0 BMW MINI Mini Clubvan Comm.CR55OxfordUkH2 12 2012 0 0 0 0 0 250 7,500 10,000 9,250 8,500 7,500 BMW MINI MINI 3rd gen Pass. C UKL1 Oxford UK Q1 13 0 0 0 0 0 500 198,000 205,000 197,500 192,500 189,500 MINI various models: line‐up to be BMW MINI Pass. C UKL1 Nedcar NL Q3 14 0 0 0 0 0 0 0 40,000 75,000 85,000 89,500 confirmed BMW MINI Total 237,709 235,019 213,670 241,043 294,117 310,250 330,000 369,750 388,750 386,500 384,000 BMW Rolls Royce All Pass. F Goodwood UK 1,009 1,247 870 3,215 3,685 3,250 3,500 3,750 3,850 3,700 3,550 BMW Rolls Royce Total 1,009 1,247 870 3,215 3,685 3,250 3,500 3,750 3,850 3,700 3,550 BMW ALL Total 1,335,794 1,225,215 1,089,060 1,217,304 1,326,502 1,351,750 1,379,500 1,504,000 1,579,100 1,675,950 1,682,300

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 53

Daimler compared to BMW and VW, especially with regard to the lowering of earnings expectations. Key recent developments: 2011 was, as noted in previous editions, a generally good year for Daimler and especially for the Mercedes car division. The positive For the full year, the car division is expected to contribute €4.4bn of profits sales picture from 2011 continued in 2012, although there was some slowdown compared to €5.2bn in 2011, while EBIT contribution from is expected to fall around mid-year. That said, in mid-December, the company announced that to €1.7bn from €1.9bn. Mercedes was expected to turn in a record production volume worldwide, with According to Automotive News, Daimler’s problems relative to Audi and BMW are brand output of over 1.34mn cars and vans. Although this is clearly positive, by global; for example, it has only seen Chinese deliveries rise this year by 6.7%, some measures, Daimler/Mercedes is not growing as strongly as BMW or Audi whereas BMW and Audi have seen rises of 30%. and this is something which the company will need to address. Mercedes’ H1 results had been a record too The key structural development in Europe was the start of production at the Kecskemet plant in Hungary and such has been the early success of the models Although June sales were almost flat, recording a rise of just 0.9%, the figures for coming out of this factory and its sister plant, Rastatt, that the planned expansion the Mercedes-Benz brand for the whole of H1 were another record; global sales of Kecskemet has been brought forward. Investment in production modernisation were up 6.9% to almost 653,000 units. Taking in the Smart and Maybach brands, and improving efficiency at the other German plants continued, with more than total sales were up 6.5% to over 708.000 units. €3bn invested in 2012. In financial terms, Q2 saw a decline in EBIT of 13.1% which offset the gain made High capacity utilisation in Q1, meaning H1 overall saw a decline in EBIT of 5.2%. Group revenue rose 9.7% in Q2 and 8.5% in H1 overall, to €51bn. The fall in EBIT was reflected in a While many volume manufacturers struggle with low capacity utilisation, this is not fall in net profits, of 11.1%, with these falls attributed by Daimler to a combination a problem for Mercedes – in fact for the A-class in particular the problem is a of factors in the different divisions. shortage of capacity (which is why 100,000 A-class models will be made by Valmet of Finland from next year). For example, although revenue from cars rose by 4.9% in Q2, and 6.3% in H1, EBIT fell in Q2 by 16.1% and by 10.1% for H1; this was attributed to a less Full year financials are not yet available, so for now we repeat the information last favourable model mix, booked expenses for expanding production facilities, rising time up until Q3. materials costs and additional up-front expenditure on a range of new technologies. Excellent start to 2012 followed by difficult Q3 Despite these problems, the company is positive that new model launches in H2 Daimler reported continued revenue and sales growth in Q3, but at the same time (and the full ramp-up in recently introduced models) will have a positive impact on reported a decline in EBIT and net income. Q3 saw a fall of 11.4% in net profit H2 results. That said, Daimler has been very limited in its guidance to analysts, which also led to a fall in the year-to-date EBIT earnings by 2.5%. Daimler had with Daimler chairman, Dieter Zetsche saying that the company aims (or hopes?) previously warned that it will not achieve better earnings in 2012 compared to 2011, for an EBIT result “from ongoing business in 2012 … in the magnitude of the prior although unit sales are still expected to rise. It also suggests that 2013 will be a year.” He added, somewhat elliptically, that “economic uncertainty and risks exist very challenging year. in nearly all segments …”; quite what Daimler will achieve in H2 is clearly something the company’s best internal analysts can’t predict at the present time. Daimler’s results have been impacted by the investments it has made in its new range of small cars (A- and B-class and derivatives) and the new S-class/S-coupe. H1 2012 saw record car sales Some city analysts were unimpressed at Daimler’s relatively poor performance In terms of H1 results, the key highlights are as follows:

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 54

 Record car sales, up 6.5% to just over 708,500; June sales were up just 0.2% Certainly, the company is confident it can achieve these lofty ambitions; in to 131,000 suggesting the first signs of a slowdown December 2011, it announced it planned to make more than 1.25mn Mercedes  The US saw the greatest growth, with a rise in sales of nearly 16% to over cars in 2012 and in preparation for this that its production plants were operating 128,500; meanwhile China saw sales rise by 7.8% and Russia saw a rise of close to full capacity in late 2011, with most plants working extra shifts to cope with over 27% demand. In fact, it sold over 1.26mn units in 2011. The total for Mercedes, Smart and Maybach for 2011 was actually over 1.36mn, a record for the company. In  Even Germany saw a rise in H1, of 4.5% to 128,500 (ie the same volume as fact the last quarter sales of over 341,000 units were also the best quarterly sales sold in the US), but in June, sales fell by 2.9%. ever which the company had recorded.  Interestingly, sales at the smart brand rose 1.4% in H1, although they fell 7% The table for Daimler production which follows shows that we provisionally have in June – smart is now on sale in China and Mexico, as well as the US, as 2012 Mercedes production in Europe alone exceeding the 1.25mn target, but this Daimler looks to reduce the brand’s depended on European sales. includes vans and passenger versions thereof; without vans, the total is 1mn for 2011 was a record year Mercedes or just over 1.1mn if smart is included. In the long run, the launch of the entire A- and B-class range and the renewal of the smart programme means that In 2011, Daimler reported record revenue, net profit and EBIT. Admittedly there Daimler’s aim for 1.25mn cars should be achievable. was some margin decline, but overall the financial performance of the group was very strong. Total revenue for 2011 reached over €106.5bn, a rise of 9% on the New model offensive under way 2010 figures; EBIT from ongoing business rose from €7.2bn in 2010 to almost As noted already, the company has a major new model offensive in hand; the €8.98bn in 2011. The company had suffered some financial impairment as a result Geneva motor show showed the new A-class, and production of this model and of the Japanese tsunami/earthquake and consequential supply chain disruption – the slightly larger new B-class is now under way. Other new models under way this was at a cost of around €80mn. include entries into a number of new niches, including the coupe-style SUV market The group’s best ever results came from across all its divisions; and with the new with a version of the ML (to be made in the US) and the shooting brake estate-like model offensive under way at the moment and the expansion of its production version of the CLS and also a wide range of vehicles based on the new A-/B-class network, it seems likely that 2012 will see another year of good results, although platform. as noted above, Q2 has seen a decline in EBIT although the company is still Numerous joint ventures to play a significant role in long term future profitable. Daimler has a number of joint ventures, notably between Renault and Daimler in Daimler has already cautioned against expecting too much growth in 2012; it small cars and the JV with Bosch in electric motors. Readers are referred to expects rising revenue and unit sales, but expects EBIT to be broadly unchanged, earlier reports for full details thereon. suggesting significant additional costs are likely to be booked this year. Indeed the decline in Q1 EBIT for the car division confirms this is likely to be the case. We understand that Mercedes will supply the underpinnings for a new premium Renault model, from 2016 or slightly later. Details on this have still not been Also, in 2011, Daimler’s CEO, Dieter Zetsche, spoke of the company’s strategy, released officially and at this time we have not included such a model in our specifically of being no.1 in profitability and sales in the premium segment – with Outlook. We will monitor this situation in future issues. While exact details have the specific volume target of 1.35mn Mercedes brand car sales per year, and of yet to be confirmed, it has been confirmed that Mercedes will supply engines to outselling Audi in particular. As we have noted before, given the range expansion Nissan’s Infiniti range from 2012/13. In reverse, the Renault JV is being widened planned by Audi in the coming years and its great success in China, achieving this to include Renault supplying 1.5 litre diesel engines for the A-class; these will be will be a challenge. built at Renault’s plant in Valladolid in Spain. This contract is now under way.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 55

Previously, we had reported that Infiniti could use a Mercedes platform and we had However, despite all this, it is clear Daimler will remain committed to its speculated that this could be based on the next C-class, with production in North manufacturing operations in Germany; for example in late November it confirmed a America. In fact this Infiniti will be partly based on the new MFA platform which €980mn investment in its Unterturkheim factory for 2012, building on the €670mn underpins the new A- and B-class models and partly based on the Nissan invested there in 2011. the company also invested a total of €3bn in its German Qashqai: Nissan will make this model itself in Sunderland – originally the plan had operations in 2012. been for this to be made by Magna Steyr in Austria from 2013 (the production The investment at Unterturkheim specifically is for axles, transmissions and engine volumes for this are included in the Nissan section). production for the new A- and B-class range. Around 25% of the investment will The Maybach brand has been phased out, with production of the Maybach having be for the production of dual-clutch transmissions, with the expansion also finished in June 2012, several months earlier than planned; and Mercedes’ covering foundry and forging operations including the production of new presence in this super-luxury market will be covered by extending the S-class turbocharging housings in a new casting process. platform. New models: Mercedes has confirmed details of the four-door coupe be built in Manufacturing news: production had run at record levels in Germany for much of Hungary, the CLA – this has even revealed in full production format at the 2013 2011, with several plants working extra shifts at several plants, especially those Detroit motor show; visually this will resemble a small or junior version of the CLS, making the C-class. We have previously noted the expansion in capacity in North ie a four door coupe style vehicle. There will also be a shooting brake version of America, with the C-class and a coupe version of the M-class due to be added in this model. The CLA will be targeted at the Audi A3 and new BMW 1-series 4-door the near future. Expansion in China is also planned, with the company wanting to version. Interestingly this new model will be cheaper than the C-class, but it will double production there, to close to 200,000 upa. It is likely that a new factory will also be slightly longer and wider. be added here in the next couple of years and press reports have suggested that This will be followed by the GLC SUV based on the B-class from 2013 and a Daimler is actively seeking an investor partner in China for this second plant. roadster, probably called SLA from late 2013/early 2014 Production in Hungary is now running at full rates. Indeed, Daimler is planning to The all-new GLK in 2016 will finally include a right hand drive version; and in the raise production at the new Hungarian factory to 300,000 upa by the middle of the US a coupe version of the M-class, to be called MLC will appear in 2016, to decade. Moreover, as noted, demand for the A-class has been far better than compete against the BMW X6 and forthcoming Audi Q6. The new S-class will expected and Daimler has decided it cannot wait for the expansion in Hungary to include a WB version, a coupe, a cabrio (the first cabrio of this size in the meet this demand – it has contracted with Valmet of Finland to make 100,000 Mercedes range and ultimately a 4-door coupe as well. extra units of the A-class between 2013 and 2016. Mercedes had also confirmed in 2011 that it will have hybrid versions of most of its Mercedes production outside Germany will increase, both within Europe and large cars, from the C-class upwards, on the road by 2013. The first of these will outside. For example, there will be: be the C- and E-class, followed by the S-class hybrid in 2014. Although it has  The addition of A-class production in Finland. confirmed these hybrid models, Daimler has also stated that it sees fuel cells as  Faster ramp-up and greater than expected expansion in Hungary. a key technology for the future, and a senior engineer at the company has gone so far as to say that the company expects fuel cells to be cheaper than EVs  The expansion of the model line-up made in the US. within a five year period. The B-class will be Mercedes’ first production vehicle  Kit assembly of US-made models in Asia, including the M-class in India. with a fuel cell option.  And the planned expansion of production in China.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 56

The key new model highlights are as follows:

2013 2014 2015-2016 New C-class (W205) New Smart ForTwo, incl. EV version New GLK A-class 4-door coupe (CLA), B-class SUV (GLC) New Smart 4-seater (made by Renault) New E-class (W213) New S-class B-class plug-in hybrid S-class cabrio, Pullman and 4-door coupe New V-class/Viano New Sprinter (possibly 1 year earlier) New G-Wagen New C-class range completed Shooting brake version of CLA A-class roadster SLA New S-coupe replacing CL

The Production Outlook table which follows shows a continuous rise in production for the next few years – this is partly due to A/B-class volumes growing faster than previously thought; the bulk of the growth at Mercedes from just over 1.2mn units in 2010 to almost 1.4mn units to be in Europe in 2017 will be due to the extension of the new A- and B-class range.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 57

Daimler Production Outlook to 2017 Vehicle Country Segment Start Prod'n Prod'n End Next new Production Production Production Production Production Production

of

type Series (platform) Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production

model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Daimler Mercedes‐Benz A‐Class Pass. C W169 Rastatt DE Q3 04 2011 148,836 131,276 108,254 120,102 92,500 000000 Daimler Mercedes‐Benz B‐Class Pass. C MPV W169 Rastatt DE Q1 05 2011 133,682 121,062 100,054 118,284 85,000 000000 Daimler Mercedes‐Benz New A‐class Pass. C W176 Uusikaupunki (Valmet) FIN H2 13 0 0 0 0 0 0 19,000 29,000 25,000 23,500 0 Daimler Mercedes‐Benz New A‐class Pass. C W176 Rastatt DE H1 12 2019 0 0 0 0 250 79,500 129,500 107,500 96,500 92,500 89,500 Pass C W176 Rastatt DE H1 12 2012 0 0 0 0 0 110,000 85,000 69,000 52,000 43,500 42,250 Daimler Mercedes‐Benz New B‐class Daimler Mercedes‐Benz A‐class roadster SLA Pass C C117 Rastatt DE H2 12 2019 0 0 0 0 0 0 3,500 12,000 16,500 16,000 14,750 Other variants on A‐/B‐class Daimler Mercedes‐Benz Pass C W246 Rastatt DE H2 14 0 0 0 0 0 0 0 35,000 50,000 65,000 65,000 platform Daimler Mercedes‐Benz New B‐class Pass. C W246 Kecskemet HU H1 12 2019 0 0 0 5 150 42,500 72,000 69,000 59,500 50,500 46,500 Daimler Mercedes‐Benz B‐class SUV GLC Pass C SUV W246/X256 Kecskemet HU H2 13 2019 0 0 0 0 0 0 5,000 59,500 57,000 55,500 53,500 CLC (4‐door coupe and shooting Daimler Mercedes‐Benz Pass C W246/S117 Kecskemet HU H2 14 2020 0 0 0 0 0 600 74,000 84,000 80,000 72,000 67,500 brake) /B‐class Other variants on A‐ Pass C W246 Kecskemet HU H2 14 0 0 0 0 0 0 0 15,000 45,000 85,000 95,000 Daimler Mercedes‐Benz platform Daimler Mercedes‐Benz C‐Class Pass. D W203 Bremen DE H2 06 2007 43,210 0 0 0 0 0 0 0 0 0 0 H2 2013 to Daimler Mercedes‐Benz C‐Class Pass. D W204 Bremen DE H2 06 113,639 170,781 89,120 91,569 83,500 84,000 14,250 0 0 0 0 W205 Daimler Mercedes‐Benz C‐Class Pass. D W205 Bremen DE H2 13 2013 0 0 0 0 0 0 219,000 203,500 189,000 177,500 174,500 Daimler Mercedes‐Benz C‐Class Pass. D W203 Sindelfingen DE H2 06 2007 432 0 0 0 0 0 0 0 0 0 0 Daimler Mercedes‐Benz C‐Class Pass. D W204 Sindelfingen DE H2 06 H2 13 121,984 112,000 117,172 149,168 182,500 163,500 0 0 0 0 0 Daimler Mercedes‐Benz C‐Class Sports coupe Pass. D CL203 Sindelfingen DE H2 06 2007 11,987 0 0 0 0 0 0 0 0 0 0 Daimler Mercedes‐Benz ‐CClass‐class coupe Pass.Pass E D W211C204 Sindelfingen Bremen DE DE Q1 H1 02 11 H2 08 2008 2011 193,487 0 159,153 0 10,450 0 0134 35,000 046,250 0 39,500 0 32,000 0 28,500 0 27,000 26,500 DaimlerDaimler Mercedes Mercedes‐Benz‐Benz E‐EClass (2016 = W213) Pass. E W212 Sindelfingen DE H2 08 2016 0 1,189 168,495 240,583 203,000 180,000 174,000 165,500 149,500 235,000 228,500 Daimler Mercedes‐Benz E‐class Coupe/Cabrio Pass. E C207/A207 Bremen DE H1 09 2017 0 0 33,402 71,261 56,000 49,500 43,500 41,000 38,000 45,000 46,500 Daimler Mercedes‐Benz CLS Pass. E W211/C219 Sindelfingen DE Q1 05 2010‐11 30,437 22,692 6,386 10,516 0 0 0 0 0 0 0 CLS, incl. estate version to compete Daimler Mercedes‐Benz Pass. E W212/C218 Sindelfingen DE H1 11 0 0 0 2,329 38,000 40,250 37,000 32,500 29,500 27,500 26,500 vs. 5‐series GT 2012 to Daimler Mercedes‐Benz S‐Class Pass. F W221 Sindelfingen DE Q1 06 87,206 77,907 40,437 71,521 76,500 44,000 0 0 0 0 0 W222 2,400 75000000 Daimler Mercedes‐Benz CL Pass. F W221/C216 Sindelfingen DE H2 06 2013 11,590 6,984 1,672 2,778 S‐Class, incl. S‐coupe replacement 2012 to Daimler Mercedes‐Benz Pass. F W222 Sindelfingen DE Q1 12 0 0 0 0 0 20,000 88,000 95,000 100,000 105,000 102,000 for CL when switch to W222 W222 Daimler Mercedes‐Benz SLK Pass. Sports W203/ R171 Bremen DE Q4 03 2011 30,859 29,853 12,090 13,216 0 0 0 0 0 0 0 Daimler Mercedes‐Benz SLK Pass. Sports W204/ R172 Bremen DE Q1 11 2011 0 0 0 490 37,500 26,000 23,500 20,500 19,000 18,000 17,250 Daimler Mercedes‐Benz CLK Pass. Sports C209 Bremen DE H2 07 2007 21,343 16,460 0 0 0 0 0 0 0 0 0 Bremen/ Osnabrück Daimler Mercedes‐Benz CLK (cabrio) Pass. Sports A209 DE H2 07 2007 19,267 15,373 4,056 0 0 0 0 0 0 0 0 (Karmann) Daimler Mercedes‐Benz SL Pass. Sports R231R230 Sindelfingen Bremen DE H2 11 DE H2 01 2010 0 9,817 000 15,401 4,609 4,864 500 2,500 14,000000000 11,000 10,000 9,250 8,250 8,000 DaimlerDaimler Mercedes‐Benz Mercedes"Baby‐Benz SLS" SL (incl. SSK) Pass SportsPass. SportsSLSW212/ Sindelfingen DE H2 15 0 0 0 0 0 0 0 0 1,500 3,000 3,000 Daimler Mercedes‐Benz SLS/SLC Pass Sports SLS Sindelfingen DE H2 10 2010 0 0 141 4,807 3,250 2,250 2,000 1,850 1,650 1,500 1,350 Daimler Mercedes‐Benz GLK Pass. C‐SUV W204 Bremen DE H1 08 2015 0 23,537 63,518 76,795 96,000 86,000 74,500 70,000 53,500 65,000 68,500 Daimler Mercedes‐Benz Viano/Vito Comm.Van W639 Vitoria SP Q2 02 2013 97,103 102,494 54,601 70,248 78,000 58,250 50,000 47,500 0 0 0 Daimler Mercedes‐Benz Viano/Vito Comm.Van W640 Vitoria SP H1 13 0 0 0 0 0 0 0 2,500 75,000 80,000 78,000 Düsseldorf/ Daimler Mercedes‐Benz New Sprinter Comm.Van NCV3 DE Mid 06 2015‐6 124,482 118,754 73,943 113,829 132,500 138,500 122,000 107,000 95,000 90,000 87,750 Ludwigsfelde Daimler / Freightliner Sprinter Comm.Van Dusseldor f DE 2006 25,984 18,009 1,906 5,023 1,900 0 0 0 0 0 0 Düsseldorf/ Contract runs to Daimler VW Crafter Comm.Van DE 2006 49,867 54,008 30,133 35,103 40,000 33,500 27,500 25,000 21,000 18,500 17,500 Ludwigsfelde 2016 Daimler Mercedes‐Benz Sprinter Comm.Van GAZ RU 2012 0 0 0 0 0 5,000 17,500 22,000 25,000 26,750 29,000 Graz (Magna‐Steyr Major FL Daimler Mercedes‐Benz G‐Wagen Pass. SUV AU 4,442 5,481 3,913 5,304 7,122 8,750 8,250 7,250 6,500 6,250 6,000 factory) 2013 Daimler Mercedes‐Benz Total 1,279,654 1,202,414 924,352 1,207,929 1,254,072 1,233,100 1,339,500 1,363,100 1,323,400 1,437,750 1,394,850 Daimler Smart ForTwo Pass. A A451 / C451 Hambach FR Q1 07 2012 102,660 139,964 115,469 97,435 103,560 105,500 98,000 70,000 0 0 0 Daimler Smart New ForTwo Pass A Renault JV Hambach FR H1 12 0 0 0 0 0 9,000 102,500 112,000 115,000 Daimler Renault Renault version of ForTwo Pass. A Renault JV Hambach FR H1 12 0 0 0 0 0 0 0 4,500 35,000 45,000 46,500 Daimler Smart Total 102,660 139,964 115,469 97,435 103,560 105,500 98,000 83,500 137,500 157,000 161,500 Chrysler Pass. Sports W202/ R170 Osnabrück (Karmann) DE H2 03 2008+ 716 0 0 0 0 0 0 0 0 0 0 Chrysler Chrysler Crossfire Roadster Pass. Sports W202/ R170 Osnabrück (Karmann) DE H2 04 2008+ 1,398 0 0 0 0 0 0 0 0 0 0 Chrysler Chrysler 300C Pass. E Hemi Graz (Magna)(Magna) AU AU Q3 05 H2 06 2010+ 2006 19,078 20,619 11,426 1,500 2,146 0 3,002 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ChryslerChrysler Chrysler / Total Grand Voyager Pass. MPV RS Graz 41,811 12,926 2,146 3,002 0 0 0 0 0 0 0 Chrysler Jeep Grand Cherokee Pass. SUV WK Graz (Magna) AU Q1 05 22,540 14,318 3,041 2,495 0 0 0 0 0 0 0 Chrysler Jeep Commander Pass. SUV WK Graz (Magna) AU Q3 07 2010 6,673 2,463 189 0 0 0 0 0 0 0 0 Chrysler Jeep Total 29,213 16,781 3,230 2,495 0 0 0 0 0 0 0 Daimler Maybach Maybach Pass. F W220 Sindelfingen DE H1 2012 320 317 205 157 200 190 0 0 0 0 0 Daimler Maybach Total 320 317 205 157 200 0 0 0 0 0 0 Daimler & Chrysler Total 1,453,658 1,372,402 1,045,402 1,311,018 1,357,832 1,338,600 1,437,500 1,446,600 1,460,900 1,594,750 1,556,350

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 58

Fiat (incl. Chrysler from 2010) through to 2016. It also gave some, but not complete, insight into its future manufacturing footprint. Key recent developments: at the end of October last year, Fiat announced a new model and manufacturing strategy for Europe, including moves which have At the Geneva Motor Show in March 2012, Fiat CEO Sergio Marchionne had significant global implications. These are explained below. suggested that “everyone” should cut capacity in Europe. However, seeing only limited action from PSA, GM and Ford, Fiat has clearly decided not to follow its Since our last report there has been limited all-new developments at Fiat, other own prescription, at least not for now. Rather Marchionne now claims that Fiat had than Fiat planning to increase its stake in Chrysler, through exercising an option to already done its share of capacity cutting already, having closed its plant on Sicily buy a further 3.3% stake in the company from the VEBA trust fund affiliated to the at in 2010. interestingly, the idea of a co-ordinated European UAW. It is already in the process of acquiring another 3.3% stake, and once both reduction in manufacturing capacity has been repeated by Mr Marchionne at the acquisitions have gone through Fiat will own over 65% of Chrysler. Detroit motor show. PSA and Fiat will also continue with their large van JV in Italy through to 2019 at Instead of retrenchment, Fiat will undertake a programme of significant least, while the mid-size van JV in France has come to an end, with Toyota reorganisation and investment in its Italian production facilities. Marchionne replacing Fiat as PSA’s partner. The small van JV in Turkey with PSA currently described this policy as follows: “[Our] position not to take out capacity but runs until 2015, but we have assumed for now that this will continue. effectively retool the organisation is the best economic alternative.” Clearly Financial summary the costs of plant closure, in Marchionne’s analysis, are too high. Interestingly, one of the reasons given by Marchionne for this investment is his personal confidence Full year results are not yet available and these will be addressed next time. For in the new strategy being followed by the Italian government under Mario Monti: now, for reference we repeat the information from last time through to Q3/2012. Marchionne told analysts during the Q3 results conference call he now saw “a Fiat-Chrysler reported global group profits in the nine months for September, but different Italy from the one I have seen in recent years (and) it’s one that’s worth these good results come from north America and Brazil in the main. In Europe, betting on.” Fiat reported a set of poor results, ie: The Fiat group will move in a very different direction and its core brands will  Q3 unit sales down by 15% year-on-year develop new market positions. Specifically, within Europe, which is at the heart of  Revenue was down 13%, while the EBIT loss almost doubled to €219mn the new strategy, the Alfa Romeo, Jeep and Maserati ranges will grow, including the production of Jeep products in Italy. The Fiat range will experience a sea-  Nine-months sales unit sales were down just over 14% change in line-up and focus, while the Lancia brand will continue, but in a much  And nine-months revenue was down nearly 9%, with EBIT losses slightly reduced format – one day, it would not be surprising to see Lancia disappear from improving, from a negative €652mn to a negative €573mn. anything pertaining to be a volume segment. With this poor set of results and not much sign of a change in fortunes in Europe There are five core elements behind the new Fiat strategy, ie: on the horizon, a new direction was clearly required. The new direction for Fiat is summarised below. Strategic move Model focus Comment The new Fiat manufacturing and model strategy Focus the Fiat 500 & Panda to be “pillar” Fiats in the C-segment brand vehicles, ie “brands within a and above are a thing Alongside its latest financial results, announced at the end of October, Fiat brand”; Fiat will “derive all future of the past released significant detail on its new strategy and new product introduction timing [Fiat] products” from these models

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 59

Strategic move Model focus Comment to be with something different, something new. The proposed Punto replacement is clearly not production-ready, most new model development work having been Reduce, even Keep Ypsilon for now; use Long term, Lancia put on hold in the last year or so, so a facelift of the existing model is definitely curtail “Lancia Chrysler models from North brand will be kept only required in the interim. exposure” America to maintain Lancia brand if found to be in Europe “economically viable” Other brands Expand Alfa New line-up (see below) Positioned at directly Meanwhile, Alfa will see no less than nine new models between 2013-2016; and Romeo and opposite end of the there will also be six new Maseratis and six new Jeeps in the same period. While Maserati line-up market to the the Punto replacement is clearly important for Fiat, in order to staunch losses 500/Panda ranges which some reports have suggested are as high as £12mn a day, Fiat has Expand Jeep “Appropriate products” for Europe All bar one model to be recognised that it needs higher margin, higher value products – hence the focus on range in Europe imported from USA Maserati and Alfa Romeo. It has seen the profits made by BMW, Porsche and Audi for example and clearly sees the sustained success of premium brands as Develop/maintain Small vans in Turkey, larger vans Existing collaborations the route to long-term financial salvation. leading position in Italy with PSA will continue in LCVs until 2017 at least At Alfa, the new product plan should pan out as shown in the following table: This expansion plan requires explanation; based on various documents released Year Main model action Secondary model action(s) by Fiat, Marchionne’s comments during the conference call and AutoAnalysis’ own 2013 4C coupe, 2-seater; likely to be the Facelifts for existing MiTo and research, we believe the strategy will involve the following: brand’s introductory model for the Giulietta models Fiat brand US 2014 Giulia saloon, to take on the Audi Cross-over/SUV version to The Fiat brand will retrench, focusing on two core models, the 500 and the Panda. A4 and BMW 3-series; expected to compete in the BMW X3/Audi Q5 Fiat calls these “pillar” vehicles, around which a new brand strategy will be based. be essentially a stretched Giulietta segment. Long-term, this could The Punto will change and become an SUV-like product in its next iteration, with spawn a Jeep--badged version if Jeep versions made alongside the Fiat model at the Melfi factory. These new successful models will be derived from the 500/Panda architecture, rather than coming off their own platform. Anything bigger than a Punto will soon be a distant memory for 2015 Sport-wagon version of the Giulia; Five-door version of the MiTo, those looking for Fiat badges – no more Bravos, Multiplas, Cromas, Ulysses et al. Japanese-made Spider, based on cabrio version of 4C the next Mazda MX5 The Punto replacement – which will take the Fiat brand into a new direction (quite probably with something along the lines of Nissan’s Juke) – will be one of four new 2016 GTV sporty extension of Giulia, to As with A5, a cabrio version is Fiats expected between 2013 and 2016. Fiat will also have four product facelifts, take on the Audi A5 likely; possible Alfa version of the including a revision to the existing Punto while the “new direction” Punto is Maserati Levante prepared. This is a bold strategy and is designed to ensure Fiat’s Italian plants are full; more Fiat has recognised it cannot simply act as another me-too player in the volume specifically, Fiat wants to utilise its European production base “to develop our segments and that if remains in or around the traditional B-segment, then this has global brands”. These brands are specifically Alfa Romeo, Maserati, Jeep and the

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 60

Fiat 500 “family”: the Lancia name is all too noticeable for its virtual absence from Country Plant Model line-up Comments the strategic direction set out by Fiat. Poland 500 and small Possible versions of existing Once the new model line-ups have been completed, we envisage model-plant derivates thereof; Punto for East European markets allocations to be as set out in the table below; whether the volumes ultimately Lancia Ypsilon Lancia Ypsilon, if retained in next achieved by the models to be made in Cassino and Mirafiori will really utilise all the model cycle, could switch to capacity installed at these plants is another matter. Panda platform and move back to The exact allocation between these plants remains to be confirmed, but our Italy current understanding of what will happen is set out in the table overleaf. Serbia Kragujevac 500L and 500XL 5- and 7-seater mini-MPV models Fiat Italy: future model-plant mix which may also have Chrysler badged versions for NAFTA Plant Main production role Comment Turkey Tofas Small vans and Linea/Punto models for Turkey & Pomigliano Panda and derivatives Long term possibility that Lancia vehicles based on for Eastern Europe, Russia & Ypsilon could move back here if the Linea and/or former CIS markets, and Near retained at next model change Punto East markets Cassino Alfa Giulietta, plus Chrysler Longer term, Lancia version Launching its new strategy, Fiat also confirmed it had committed to its unions that version, at least in short term; remains a small possibility (not it would “maintain production capacity in Italy”, ie that it would not close any plants new Giulia currently planned) and emphasised “its intention not to reduce headcount”, but adding the caveat that Melfi Replacement for Punto, plus Expect Fiat models to be badged this assumed that there would be “continued availability of temporary lay-off Jeep version 500X or similar, as Fiat looks to benefits provided under law”: in other words, if demand does not pick up on a create the 500 sub-brand sustained basis, there will be more downtime at some or all of the Italian plants. Fiat also emphasised to the unions how its “strategic choices, which represent a … Expanded Alfa Romeo MiTo Mirafiori Could envisage all Giulias made significant commitment in the current economic environment, require full and all-new unnamed Alfa at Mirafiori, for efficiency implementation of conditions for competitiveness agreed with the unions models; Maseratis TBC reasons, although in the short that signed the collective labour agreement with … Fiat”. term Cassino plant will make this model Although Fiat does not officially intend to reduce headcount in Italy, this plan does not seemingly apply in Poland; in December, Fiat announced that 1,500 workers Grugliasco Alfa 4C, Maserati Levante Assumed that Levante SUV will be would be laid off there – according to Fiat production in Poland will fall to below made in Europe, having originally been due to be made in North 300,000 in 2013 (our Outlook has Fiat/Lancia models at c275,000), so the job America (Fiat’s new model chart losses are entirely consistent with projected production cutbacks. shows all Maseratis to be made in The new Fiat strategy will involve total investment of not far short of €20bn in Europe) 2013-2014. One side-effect of this is that Fiat had been thought to be that Fiat would not buy any more shares in Chrysler, with its cash resources allocated to the And outside Italy, the European production allocation is expected to be as follows: expansion in Europe. During a conference call with the press and analysts, Marchionne said: “this is truly not for the faint-hearted”, adding that “we have not

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 61

shied away from a fight.” Certainly, keeping four large Italian car plants open, alongside a van plan ( Sud), a specialist low volume plant (Grugliasco) and three major plants outside Italy (Poland, Serbia and Turkey) and investing the sums planned is a big call. It is also one which, if it fails, will produce many broken hearts, as opposed to merely faint hearts. However, if Fiat succeeds and it returns to at least break-even by 2015-2016, Marchionne will deserve all the plaudits he would get. He wouldn’t be so much a local hero in Turin, but a global turnaround superstar. However, as noted above, Fiat is actually still intending to buy two 3.3% stakes in Chrysler. The Production Outlook which follows shows a decline in production in 2011, owing to the ageing of a number of models and the comparatively slow introduction of their replacements. However, despite the economic uncertainty, the new model launches at Fiat should actually result in a modest revival in production volumes in 2012, especially with expected exports to the US beginning soon. The dispute in early 2012 and the generally poor market conditions meant that 2012 production recovery will be slower and less pronounced that we had previously expected. Production of the new Panda and the 500L will prevent a complete collapse in Fiat brand production volumes in 2012; in the absence of a complete economic collapse, and assuming we do see an eventual recovery in Europe, by 2015-6, we expect to see Fiat production reach nearly 1.5mn – although this is dependent on the Bravo being retained in the long term plans, as well success for the next Punto and 500 & derivatives, allied to the introduction of new MPVs in Serbia and, crucially, the opening of the new factory in Russia. It is also important to note that most of this growth in Fiat production will be in Serbia and Turkey, and not in Italy. Alfa’s long term target of reaching 400,000 units remains, in our view, well beyond the capabilities of European production alone, especially if the Giulia moves to the US. This target may be achieved with Alfa badged versions of SUVs made in the US. The production of some Chrysler and Jeep brand vehicles in Europe in the next few years will also help push group production up to the 1.5- 1.6mn upa level by the end of the period covered by this Outlook. Please note there are some cells in the following table which are coloured yellow; these highlight the provisional nature of these figures.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 62

Fiat Group Production Outlook to 2017 – Fiat brand detail and other brand totals Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Fiat Fiat Seicento Pass. A 187TychyPL 35,97625,16610,7949,1520000000 Fiat Fiat New City Car (sub 500) Pass. A 312 Tychy PL H1 13 2013 0 0 0 0 0 0 0 0 20,000 50,000 53,000 2012 FL, Fiat Fiat 500 Pass. A 312 Tychy PL Mid 2007 65,116 201,825 184,143 185,102 157,233 149,000 136,500 115,000 125,000 150,000 148,000 new 2015 Fiat Ford Ka Pass. A 312 Tychy PL Mid 2008 2008 0 19,046 112,493 92,927 67,204 54,500 49,000 35,000 12,500 0 0 Fiat Pass. A 169 Tychy PL H1 03 2011 260,775 246,849 298,020 246,067 205,765 93,500 42,000 22,500 10,000 0 0 Fiat Fiat New Panda Pass. A Pomigliano IT H2 11 0 0 0 0 3,159 110,000 119,000 135,000 128,000 119,000 109,000 Fiat Fiat Grande Punto Pass. B Corsa/199 Melfi/ Mirafiori IT H1 06 2013 339,737 226,565 274,781 236,588 224,565 142,000 131,000 95,000 20,000 0 0 Fiat Fiat Grande Punto Comm.Van 179/188 Mirafiori IT H1 06 9,302 8,841 5,911 6,748 9,603 5,500 3,500 2,500 0 0 0 Fiat ‐ SUV like version Pass B‐SUV 500L Melfi IT H2 14 2014 0 0 0 0 0 0 0 80,000 105,000 125,000 121,000 Fiat Jeep B‐SUV ‐ version of 500X Pass B‐SUV 500L Melfi IT H2 14 2014 0 0 0 0 0 0 0 25,000 55,000 88,000 84,000 Fiat Fiat Punto Pass. B 179/188 Mirafiori IT 2006 82,562 37,483 60,465 31,695 0 0 0 0000 Fiat Fiat Punto Comm.Van 179/188 Mirafiori IT 2006 7,078 4,068 1,975 1,437 0 0 0 0000 Fiat Fiat Punto Pass B 179/188 Zastava Serbia H1 13 0 0 15,00015,0008,0002,00000000 Fiat Pass. B‐MPV 188/350 Mirafiori IT H2 03 2011 23,206 13,227 9,488 5,864 5,874 2,380 0 0000 Fiat Fiat Idea Comm.Van 188/350 Mirafiori IT H2 03 2011 232 189 66 39 0 0 0 0000 Fiat Fiat Stilo Pass. C 192 Cassino IT 2006 12,507 281 0 0 0 0 0 0000 Fiat Fiat Stilo Comm.Van 192 Cassino IT 2006 812 21 0 0 0 0 0 0000 Fiat Fiat Bravo Pass. C 198 Cassino IT End 2006 2011 115,328 86,051 63,785 44,685 30,065 16,000 4,500 0000 Fiat Fiat Bravo Comm.Van 198CassinoIT 047247850062620000000 Fiat Fiat New Bravo CANCELLED Pass C 317 Cassino IT H1 130 000 0000000 Fiat Pass. D Vectra (Epsilon) Cassino IT H2 05 2012 24,992 26,722 11,363 9,328 0 0 0 0000 Fiat Fiat Croma Comm.DVectra (Epsilon) Cassino IT H2 05 2010+ 18 10 0 0 0 0 0 0000 Fiat Fiat Multipla Pass. C‐MPV 186 Mirafiori IT 2009 19,771 16,015 9,802 7,835 0 0 0 0000 Fiat Fiat Multipla Comm.Van 186 Mirafiori IT 2009 450 390 194 72 0 0 0 0000 Fiat ‐ new 5‐ & 7‐seater MPVs Pass B‐MPV L0330 Zastava Serbia H1 12 0 0 0 0 0 27,000 96,750 123,500 137,500 131,000 129,500 Valenciennes (Sevel Fiat Fiat Ulysse Pass. MPV VF FR Q1 02 2011 4,504 2,688 1,717 888 0 0 0 0000 Nord) Valenciennes (Sevel Fiat Fiat Scudo Comm.Van U FR Q1 02 2012 41,008 35,856 17,837 19,450 19,786 14,750 12,500 10,500 7,500 2,500 0 Nord) Fiat Comm.Van X250 Val di Sangro (Sevel Sud) IT H2 06 2016 136,440 140,036 70,674 105,548 125,944 111,000 95,000 92,500 90,000 101,000 105,000 Fiat Daily Comm.Van Brescia IT Pre 2002 2010+ 51,054 42,982 23,455 30,013 30,665 33,000 34,500 32,000 30,000 28,500 28,500 Fiat Comm.Van Valladolid SP Pre 2002 2010+ 40,329 30,799 12,334 15,500 16,000 13,750 13,000 14,500 16,000 15,500 15,500 Fiat Pass. B 178 Bursa (Tofas) TR 2009+ 3,101 2,161 1,771 1,628 1,000 000000 Fiat Fiat Palio Comm.Van 178 Bursa (Tofas) TR 2009+ 1,400 163 122 0 0 0 0 0000 Fiat Pass. B 178 Bursa (Tofas) TR 2012/3 28,896 27,353 12,009 23,041 10,000 Included in Linea from 20120000 Fiat Fiat New B Pass B 326 Bursa (Tofas) TR H2 14 2014 0 0 0 0 0 0 0 25,000 105,000 165,000 189,000 Fiat Pass. B‐C D200 Bursa (Tofas) TR H2 07 2014 23,147 18,043 14,065 21,650 35,000 44,250 37,500 25,000 10,000 0 0 Fiat Fiat and PSA Fiorino/Nemo/Bipper Comm.Van Bursa (Tofas) TR H2 08 2015/6 10,639 111,810 99,069 123,635 0 0 0 0000 Fiat Fiat and PSA Fiorino/Nemo/Bipper Pass. Van Bursa (Tofas) TR H2 08 2015/6 0 0 48,909 43,682 0 0 0 0000 Fiat Fiat and PSA Fiorino/Nemo/Bipper All Van Bursa (Tofas) TR H2 08 2015/6 0 0 0 0 139,000 102,500 99,000 96,500 92,000 87,000 84,500 Fiat Fiat Doblo Comm.Van 178/223 Bursa (Tofas) TR 2009 98,108 78,768 59,720 0 0 0 0 0000 Fiat Fiat Doblo Pass. Van 178/223 Bursa (Tofas) TR 2009 40,235 27,259 18,425 0 0 0 0 0000 Doblo, inc Ram versions for US incl. in Doblo Fiat Fiat Pass. &Van 199/263 Bursa (Tofas) TR H2 09 2009 0 0 98,649 118,000 89,000 94,500 105,000 109,000 106,500 103,500 from 2013 above 178 FIat Opel New Combo based on Doblo Comm.Van 199/263 Bursa (Tofas) TR H2 11 0 0 0 0 10,500 28,500 25,000 22,500 20,500 20,000 16,500 Fiat Fiat Other Pass. Bursa (Tofas)TR 7,0081,87200 0000000 Various Fiat/Iveco vans and Jeep Fiat Fiat/Jeep Var Various New Russian plant RU H2 13 0 0 0 0 0 0 0 25,000 75,000 100,000 115,000 SUVs Fiat Fiat Total 1,483,731 1,433,011 1,438,865 1,376,723 1,217,989 1,038,830 993,250 1,082,000 1,168,000 1,289,000 1,302,000 Fiat Alfa Romeo Total 151,499 109,428 104,022 120,068 136,121 91,000 109,000 169,250 202,250 225,750 212,500 Fiat Lancia Total 117,864 113,298 113,796 97,963 108,172 76,403 59,500 54,000 49,500 45,000 40,500 Fiat Chrysler/Jeep Total 0 0 0 0 0 0 0 5,000 15,000 30,000 30,000 Fiat Ferrari Total 6,561 6,722 6,213 6,627 7,314 6,250 67,500 6,250 5,900 5,550 5,550 Fiat Maserati Total 7,669 9,294 4,041 5,842 6,161 5,850 6,250 19,000 42,000 51,750 57,250 Fiat ALL Total 1,767,324 1,671,753 1,666,937 1,607,223 1,475,757 1,218,333 1,235,500 1,335,500 1,482,650 1,647,050 1,647,800 Fiat’s other brands’ production volumes are shown in the next table, overleaf:

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 63

Fiat Group Production Outlook to 2017 – other brands Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Fiat Fiat Total 1,483,731 1,433,011 1,438,865 1,376,723 1,217,989 1,038,830 993,250 1,082,000 1,168,000 1,289,000 1,302,000 Fiat Alfa Romeo Mi.To Pass. B 955 Mirafiori IT H2 08 2012‐13FL 0 24,759 65,342 50,391 41,077 24,500 30,000 42,000 46,500 50,000 45,000 Fiat Alfa Romeo 147 Pass. C 937 Pomigliano IT 2009 57,441 30,906 12,281 4,036 0 0 0 0000 Fiat Alfa Romeo Giulietta Pass. C 940 Cassino IT Q4 09 2009 0 0 0 46,619 82,236 66,500 72,000 76,500 82,500 85,000 81,000 Fiat Alfa Romeo Torino CANCELLED Pass. C 940 Cassino IT H2 10 2010 0 0 0 0 0 0 0 0000 Fiat Pass. D 939 Pomigliano IT Q3 05 2011 70,822 42,129 22,514 14,469 12,808 0 0 0000 Fiat , incl. Crossovers Pass. D 940 Cassino IT H2 13 2013‐14 0 0 0 0 0 0 5,000 45,000 55,500 62,000 60,000 Fiat Alfa Romeo GT (159) Pass. D 947 Pomigliano IT Q1 04 2011 FL13,3225,3051,2591,2370000000 Fiat Alfa Romeo 166 Pass. E 936 Mirafiori IT 2011 632 0 0 0 0 0 0 0000 Fiat Alfa Romeo "169" ‐ name unknown yet Pass. E 936 Mirafiori IT H2 12 2013 TBC 0 0 0 0 0 0 0 3,000 8,000 7,000 6,500 Fiat Alfa Romeo Brera Pass. Sports 946 Grugliasco () IT H1 07 2013 4,755 3,770 1,661 1,718 0 0 0 0000

Fiat Alfa Romeo Brera Spyder Pass. Sports 938 Grugliasco (Pininfarina) IT H1 06 2013 4,527 2,559 965 1,598 0 0 0 0000 Fiat Pass Sports Modena IT H1 13 2013 0 0 0 0 0 0 2,000 2,750 2,250 1,750 1,250 Fiat Alfa Romeo High‐end SUV Pass SUV Maserati Levante Grugliasco IT H2 12 2012 0 0 0 0 0 0 0 0 7,500 20,000 18,750 Fiat Alfa Romeo Total 151,499 109,428 104,022 120,068 136,121 91,000 109,000 169,250 202,250 225,750 212,500 FL 2006, all Fiat Lancia Ypsilon Pass. B 188/843 Termini Imerese IT Q2 03 76,14955,86150,99948,85936,876000000 new 2009+ Fiat Lancia Ypsilon/Deltina Pass. B 199/846 Tychy PL Mid 2011 2009 0 0 0 207 37,558 49,500 48,000 46,500 44,500 42,500 40,500 Fiat Pass. B‐MPV 188/350 Mirafiori IT Q3 04 2011 36,592 32,220 31,142 24,138 15,642 14,403 0 0000 Fiat , incl. Chrysler version Pass. C 844 Cassino IT H2 08 2008 0 20,638 29,568 23,198 18,096 12,500 11,500 7,500 5,000 2,500 0 Fiat Pass. E 841 Mirafiori IT 2007 885 511 91 0 0 0 0 0000 Valenciennes (Sevel Fiat Lancia Phedra Pass. MPV VL FR Q1 02 2011 4,238 4,068 1,996 1,561 0 0 0 0000 Nord) Fiat Lancia Total 117,864 113,298 113,796 97,963 108,172 76,403 59,500 54,000 49,500 45,000 40,500 Fiat Chrysler C/D Seg cars/Cross‐overs Pass. C Various Cassino IT 2014/5 0 0 0 0 0 0 0 5,000 15,000 30,000 30,000 Fiat Chrysler/Jeep Total 0 0 0 0 0 0 0 5,000 15,000 30,000 30,000 Fiat Ferrari Ferrari Pass. Sports All Maranello IT 6,561 6,722 6,213 6,627 7,314 6,250 67,500 6,250 5,900 5,550 5,550 Fiat Ferrari Total 6,561 6,722 6,213 6,627 7,314 6,250 67,500 6,250 5,900 5,550 5,550 Fiat Maserati "Entry" E segment models Pass. E Mirafiori IT TBC 0 0 0 0 0 0 0 3,000 7,500 10,000 12,500 Fiat Maserati Levante Pass SUV Grugliasco IT 2014‐5 0 0 0 0 0 0 0 5,000 12,000 15,000 16,500 Fiat Maserati Ghibli Pass. F M156 Modena IT H1 2014 0 0 0 0 0 0 750 4,000 11,000 12,500 13,000 Fiat Maserati Quattroporte Pass. G ModenaIT 5,3343,7061,2541,4111,5921,5005000000 Fiat Maserati New Quattroporte Pass. G M157 Grugliasco IT H2 2013 0 0 0 0 0 0 1,500 4,500 7,500 8,500 9,000 Fiat Maserati Coupe / GT / Gran Cabrio Pass. Sports Modena IT 2,335 5,588 2,787 4,431 4,569 4,350 3,500 2,500 4,000 5,750 6,250 Fiat Maserati Total 7,669 9,294 4,041 5,842 6,161 5,850 6,250 19,000 42,000 51,750 57,250 Fiat ALL Total 1,767,324 1,671,753 1,666,937 1,607,223 1,475,757 1,218,333 1,235,500 1,335,500 1,482,650 1,647,050 1,647,800

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 64

Ford ensue from the closure of its last UK vehicle assembly plant. However the mounting losses from its European operations mean that a marginal and low Key recent developments: 2012 was not a good year for Ford in Europe, with volume plant like Southampton could no longer be justified. significant losses in the first nine months and confirmation that two vehicle assembly and one component plant will close. Consequently, yet another  The net effect of these closures will be to take around 350-370,000 units of reorganisation of its manufacturing operations is under way. More specifically: annual capacity out of Ford’s European operations, although long term Ford expects to produce more vehicles in Europe than it has for some time – and to  Ford posted global profits of US$1.63bn in Q3, including record results for its achieve this by utilising its remaining plants far more efficiently. North American operations of $2.16bn pre-tax operating profits. Since then, the company has also confirmed record utilisation levels in North America and  Ford hopes that these moves will enable it to return to break-even in Europe announced it has to increase its workforce there to cope with rising demand. by mid-decade, although the redundancy costs of at least US$100,000 per person (with over 6,000 jobs being cut) mean that the costs of this latest  However, these record results were partly offset by the mounting losses in reorganisation is far from insignificant. Europe – with revenue falling 26% in Europe in the nine months to September and a general decline in the European market, Ford is expected to have lost at Ford CEO Alan Mullaly said that the company had to move decisively to address least $1.5bn in Europe in 2012 when the full year results are released. these losses and to allow for investment in new products. The costs of this exercise have been estimated at as much as US$1.5bn – but Ford expects annual  These losses had been anticipated for much of the year – and indeed they savings in the region of $450-500mn. were signalled in the H1 results.  What may not have been expected by many outsiders was the immediate Ford’s quick decision-making has been praised by some financial analysts, reaction of Ford management to embark on another round of reorganisation of especially in North America, where commentators have also noted the speediness its European operations. The decision to confront the losses, and the of Ford’s decision-taking in Europe with the slowness of GM in addressing its associated overcapacity in its European operations, should not have come as problems. While GM has been loss-making in Europe for many years, Ford had a surprise to readers of this report. In our previous reports we had suggested been profitable until recently – as noted below H1/2012 was significantly loss- that at least one major Ford plant would close in Europe and this is what has making and with no sign of this being turned around quickly, Ford decided to act. happened – and in fact Ford has gone further than just closing one plant. Poor financials in H2 2011 and H1 2012 presaged the current restructuring  In summary, Ford plans – subject to agreement with the unions – to close its Ford lost US$404mn in Q2, compared to a modest profit in Q2/2011; effectively large car plant in Genk, Belgium. Production of the new Mondeo, S-Max and this amounted to a worsening of around $500mn in Ford’s European performance Galaxy will move to Valencia; in order to create space for these models in in a year, a situation the company attributes to tough economic conditions, rising Valencia, production of the C-Max will move back to Germany. The closure of material prices and declining sales. the Genk plant will be effective at the end of 2014.  In addition, Ford will close its low volume van plant in Southampton and the Losses for H1 reached $553mn, versus a profit in H1/2011 of $469mn – clearly the pressings plant at Dagenham (which largely exists to supply Southampton) situation worsened significantly in Q2 and the company is expecting a full year loss later this year. Production of the Transit van will hereafter be concentrated in of around $1bn, although this could be an underestimate. Kocaeli in Turkey where Ford has substantial capacity and operates from a The loss-making situation in Europe is a continuation of a trend which started in much lower cost base. In reality, closure of the Southampton plant has been Q2/2011 – at this point earnings started to fall, by US$146mn, from US$322mn to on the cards for some time – we think that Ford had avoided this issue for US$176mn. At the time, Ford attributed the fall in European earnings to rising many years because it did not want the brand image damage which could commodity prices and a number of structural costs, as well as dealer costs

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 65

associated with the end of various scrappage schemes. By Q3 last year, the Connect. However, the reality of the sustained economic downturn in Europe and declining profits had turned into losses when Ford reported a pre-tax loss of the increasing competitiveness of other brands mean that Ford’s position in under $306mn, much worse than the loss of US$196mn a year earlier. increasing threat in its traditional European markets. This poor financial story then continued into Q4/2011; and when the full year Faced with manifold problems in the European, Ford intends to accelerate its figures were released; Ford reported a pre-tax operating loss of US$190mn for model launch plans for Europe, increase the range of LCVs and also continue to Europe, leading to a full year loss (after the profits in Q1 and Q2) of US$27mn. look at Russia for salvation. It has a well-established production operation in The company as a whole was profitable, reporting total operating profits of Russia, making the Focus and the Mondeo, and is now being expanded through a US$8.8bn and a full year net income of US$20.2bn, after a one-off non-cash item JV with Sollers; this will make the Explorer SUV, Transit van and probably the gave a technical gain of US$12.4bn in Q4 – this was due to revaluation of net Fiesta small car. deferred tax assets. Certainly, Ford is banking on its new Russian JV operations with Sollers to give its Production slowdown in 2012 production volumes a boost. These will be aided by the new Focus from mid- decade; also, the new Fiesta will help reduce the average age of Ford’s model With the financial results turning red, it was not surprising when the head of Ford line-up; including Russia, production could ultimately get back to around 1.7-8mn Germany announced that production will be slowed at its two German factories upa in Europe which would still be below its 2007 peak, which largely excluded during the first half 2012; in 2011, production cuts for 2012 had been announced in Russia. advance for Spain, especially of the Fiesta. Ironically production in Spain actually received something of a boost in 2012 with the transfers of the Transit Connect The challenge facing Ford, simply to maintain its current position is clearly a major and Kuga models to Valencia. one – however the company has acted to restructure its operations, cutting capacity and costs, and introducing a range of new models; details of the new Previously we had projected that Ford production this year would fall from 1.55mn models planned for Europe are provided at the end of this profiles. to just under 1.42mn units; however, this we now think the 2012 total will be much lower, at 1.36mn, despite rising production in Russia and the addition of the new Developments in Russia B-Max in Romania. Production in Russia however has also slowed, with Mondeo As with many other VMs, the one bright spot in Europe for Ford is Russia, although and some production at the Sollers JV stopped through December last year to even here Ford has experienced a slowdown at the end of last year. After avoid excessive stock build-up producing at its own plant in St Petersburg for many years, Ford announced a We actually expect Ford to reverse its production decline next year, because of the manufacturing JV in Russia with Sollers in 2011. This will involve the production of boost given by full year production of the B-Max and new Transit van, plus further cars and SUVs, plus engines and stampings for Russian-made models. The JV will production rises in Russia. the 2013 production outlook shows a marginal rise to operate under Decree 166 which sets out the Russian’s government’s 1.39mn. a bigger rise is projected for 2014 and beyond because of the widening of requirements for local content and other incentives/support for local manufacturing the LCV range, including a small van to be made in Turkey and then the all-new operations. Fiesta and Mondeo/S-Max/Galaxy ranges, as well as increased production in The first model definitely to be made in the Sollers plant is the Explorer SUV Russia. which hitherto has only been made in the US. This is being followed by the Transit Geography of production re-focusing to Russia van and will be accompanied by increased production of the Focus and Mondeo at Ford’s existing plant in St Petersburg. We also believe that the Fiesta will be A year or so ago, we had suggested that 2012 could be the start of better days for added to the Sollers production arrangement, although whether this will see Ford in Europe, with the start of production of the new B-Max, Transit and Transit production by Ford in St Petersburg or by Sollers itself is not yet clear. The split of

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 66

production between Sollers and the additional production in St Petersburg has yet Transit to become a global brand to become clear – some of the volumes we note in the Production Outlook as Ford’s new product strategy includes a significantly greater focus on light taking place in the Sollers JV could actually be production in St Petersburg. commercial vehicles than in the past. At the heart of this is the intention to make The JV will also involve annual production of 180-200,000 engines in Russia, Transit into a brand of its own. some of which may be exported back to Europe, although the vast majority are In essence this will involve the following: likely to be needed by the JV’s production facilities. Sollers’ CEO, Vladim Shvestov, has also told the press that he expects the JV to involve exports of cars  The Transit van will remain at the heart of this strategy and will include a one- and engines to Europe, although vehicle exports to Europe seem rather unlikely. tonne Transit Custom van and the Tourneo minibus version. As well as being Manufacturing news: the Genk and Southampton plant closures announced in manufactured in Turkey, the Transit is expected to be made in North America. October will result in a number of changes to the geography of production across  The Transit Connect small van which is currently made in Spain and which will Ford’s European operations. We now expect the model-plant allocation to be as include a passenger versions as well, to be called Tourneo Connect. follows: Production in North America is also planned.  Cologne: sole EU production site for Fiesta; expected also to produce  A small, microvan, the Transit Courier, based on the Fiesta platform; again this replacement for Ka when current Fiat-built model comes to an end. this plant will include a passenger, mini-MPV version, to be known as Tourneo Courier. could also make a sporty model, a long-awaited Puma replacement, but this would probably not appear until the second half of the decade. Fiesta In total, Ford hopes this widening range will achieve combined sales volumes of production in Russia will probably be at the St Petersburg plant. around 500,000 units in the second half of the decade.  Saarlouis: sole EU production site for Focus, and adding C-Max. This model was transferred to Valencia from Saarlouis within the last year, but this will be transferred back in time for the next model change.  Valencia: will make the new Mondeo, S-Max and Galaxy from 2014/15 onwards. Will also make Transit Connect small van, and also Kuga SUV until 2015/16.  Craiova: will add a second model to be made alongside the B-Max, although the exact timing remains to be confirmed; we belie this will be an SUV vehicle based on the Fiesta/B-Max.  Kocaeli: the Turkish plant will become the sole supply point for the Transit which Ford wants to make into a global brand in its own right. It will also make a micro-van, below the Transit Connect, based on the Fiesta platform.  St Petersburg and Sollers JV plant, Russia: St Petersburg will continue to make the Focus and Mondeo, and we would expect this plant to make the Fiesta as well. Larger vehicles, the Explorer, Transit and S-Max/Galaxy will be made by Sollers.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 67

New models: Ford’s new models are set out in the table below. 2013 2014 2015-2016 Kuga and Transit Connect (V408) start full scale 2nd model for Romanian factory New Mondeo New Fiesta launch, incl. version to replace Ka production in Spain 2nd Ford LCV (Transit/Tourneo Courier) in made by Fiat C-Max plug-in hybrid and electric model Turkey Focus 4 B-Max in full production S-Max and Galaxy (2015) Completion of new Transit launch C-Max (2016)

In the Production Outlook which follows, we project note that Ford production in 2012 will be around 195,000 units down on 2011 volumes; overall 2013 will be broadly unchanged overall, but this masks the start of change at Ford, with increasing Russian production and rising LCV production in Turkey. The “real” recovery at Ford will follow from 2014. The importance of Russia to Ford cannot be underestimated – take the projected Russian production out of the 2016 volumes and there will be almost no growth at all in Ford’s volumes compared to the present day. And even with Russia, Ford will struggle to maintain its 2009-2010 volumes in Europe, let alone return to its 2007 peak which did not include Russia. In addition to these new production models, Ford will widen its sales line-up in Europe with imported models, ie:  The Mustang sports car and Edge from the US.  The EcoSport small SUV, initially from India – some reports suggest this model could ultimately be made in Europe, but this awaits confirmation.  And the Ranger pick-up, from Thailand.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 68

Ford Production Outlook to 2017 Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) of Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Ford Ford Ka Pass. A BE146 Valencia SP H1 96 Q3 07 2008 53,012 35,761 0 0 0 0 0 0 0 0 0 Ford Ford Fiesta Pass. B B256 Valencia SP Q1 02 H2 08 2008/9 145,784 80,000 0 0 0 0 0 0 0 0 0 Ford Ford Fiesta Pass. B B2XX Valencia SP H2 08 H2 2014 0 33,684 169,306 108,986 50,000 25,000 0 0 0 0 0 Ford Ford Fiesta Pass. B B256 Cologne DE Q1 02 2008/9 269,001 126,116 0 0 0 0 0 0 0 0 0 Ford Ford Fiesta (inc. 3dr as Ka replacemen t) Pass. B B2XX Cologne DE H2 08 2014 0 138,854 343,757 340,548 333,000 292,000 285,000 275,000 343,000 402,000 387,500 Ford Ford Fusion Pass. B‐MPV B226 Cologne DE Q2 02 2009/10 129,847 115,411 55,696 38,971 24,000 6,000 0 0 0 0 0 Ford Ford B‐Max Pass. B‐MPV B232 Craiova RO H2 11 0 0 0 0 0 37,000 74,500 100,000 98,000 93,000 93,000 Ford Ford 2nd B seg model in Romania Pass B B232? Craiova RO After 2012 0 0 0 0 0 0 0 15,000 38,500 55,000 49,500 Ford Ford Focus Pass. C C307 Saarlouis DE Q3 04 2008 FL 254,421 243,982 208,174 226,308 0 0 0 0 0 0 0 Ford Ford Focus Pass. C C307 Valencia SP Q1 05 2008 205,982 208,201 131,041 102,606 59,500 000000 Ford Ford Focus Pass. C C307/C346 St Petersburg RU Q2 05 Q3 11 69,088 64,967 37,000 69,722 84,056 92,000 101,000 92,500 90,000 88,500 86,250 Ford Ford Focus Pass. C C346 Saarlouis DE H2 10 2017 0 0 0 397 280,000 283,000 261,000 249,000 226,500 203,500 249,000 Ford Ford Focus C‐MAX Pass. C‐MPV C214 Saarlouis DE 2007 FL 137,821 111,061 69,102 42,570 0 0 0 0 0 0 0 Ford Ford Focus C‐MAX Pass. C‐MPV C344 Valencia SP H1 10 0 0 0 45,058 121,000 109,000 96,000 0 0 0 0 Ford Ford Focus C‐MAX Pass C‐MPV C344 Saarlouis DE H1 14 2017 0 0 0 0 0 0 0 91,000 82,000 75,000 102,000 Bairo Canavese Ford Ford Focus coupe cabrio Pass. C S383 IT Q2 06 15,088 12,472 3,886 4,346 0 0 0 0 0 0 0 (Pininfarina) Ford (Focus SUV) Pass. C‐SUV C394 Saarlouis DE H1 08 0 44,403 62,360 81,074 82,000 24,000 0 0 0 0 0 Ford Ford Kuga (Focus SUV) Pass. C‐SUV C394 Valencia SP H2 12 0 0 0 0 0 46,500 75,000 67,500 40,000 5,000 0 Ford Ford Kuga (Focus SUV) Pass C‐SUV C394 Sollers JV RU H2 12 07/05 0 0 0 0 0 3,500 20,000 25,000 90,000 115,000 109,000 Ford Pass. D CD162 Genk BE H1 07 32,346 0 0 0 0 0 0 0 0 0 0 Ford Ford Mondeo Pass. D CD3XX Genk BE H2 07 H2 13 142,874 197,503 116,973 110,128 98,750 67,500 62,500 18,500 PLANT CLOSING Ford Ford Mondeo Pass D CD3XX Valencia SP H1 14 0 0000 0 0 65,000 95,000 110,000 106,250 Ford Ford Mondeo Pass. D CD3XX St Petersburg RU H1 09 0 0 4,367 10,668 14,751 15,500 16,000 17,500 20,000 26,500 24,000 Ford Ford S‐Max Pass. MPV CD3XX Genk BE H1 06 69,108 57,553 41,492 49,786 48,000 33,000 26,500 19,000 PLANT CLOSING Ford Ford S‐Max Pass. MPV CD390 Valencia SP H2 14 0 0 0 0 0 0 0 2,500 30,000 36,500 34,500 Ford Pass. MPV CD3XX Genk BE Q2 06 2013 33,137 33,193 25,441 25,778 27,500 23,500 16,000 11,500 PLANT CLOSING Ford Ford Galaxy Pass. MPV CD390 Valencia SP H2 14 0 0 0 0 0 0 0 1,500 24,500 28,000 26,500 Ford Ford Fiesta Pas Var Various Sollers JV RU H2 14 0 000 00020,000 45,000 60,000 65,000 Ford / Transit/ S‐Max/ Galaxy Pass. Var Various Sollers JV RU H1 12 0 0000 19,250 40,000 55,000 72,000 74,500 70,000 Ford Ford Fiesta Comm.Van B256/ B2XX Cologne DE 2008+ 12,080 9,815 6,709 11,935 10,000 7,000 5,500 3,500 2,500 0 0 Ford Comm.Van V227 Kocaeli TR H2 10 2010 112,093 84,847 54,063 75,588 102,000 92,500 81,000 24,500 0 0 0 Ford Ford Transit Connect Comm.Van V227 Craiova RO H2 09 0 0 300 9,558 7,547 0 0 0 0 0 0 Ford Ford Transit Connect Comm.Van V408 Valencia SP H1 12 0 0 0 0 0 0 15,000 105,000 98,000 85,000 77,500 Ford Ford Transit Comm.Van V347/8 Southampton UK H2 06 2011‐2012 75,662 66,215 20,981 28,270 28,170 29,000 8,000 0 0 0 0 Ford Ford Transit Comm.Van V347/8 Kocaeli TR H2 06 2011‐2012 2012 162,829 178,051 119,671 175,610 185,000 30,000 10,000 0 0 0 0 Ford Ford 2nd LCV for Turkey Comm Van B460 Kocaeli TR H2 13 tbc 0 0 0 0 0 0 0 65,000 90,000 101,000 94,500 Ford Ford Transit Comm.Van V362/3 Southampton UK H1 12 0 000 00PLANT CLOSING 000 Ford Ford Transit Comm.Van V362/3 Kocaeli TR H1 13 0 0 0 0 0 126,000 195,000 210,500 205,000 199,250 190,000 Ford Ford Total 1,920,173 1,842,089 1,470,319 1,557,907 1,555,274 1,361,250 1,388,000 1,534,000 1,690,000 1,757,750 1,764,500 Ford Volvo Total 488,756 356,748 294,108 #REF! 0 0 0 0 0 0 0 Ford Jaguar Total From 2008 counted as Tata ‐ JLR 53,812 0 0 0 0 0 0 0 0 0 0 Ford Land Rover Total From 2008 counted as Tata ‐ JLR 232,548 0 0 0 0 0 0 0 0 0 0 Ford Mazda Total 14,235 0 0 0 0 0 0 0 0 0 0 Ford ALL Total 2,709,524 2,198,837 1,764,427 #REF! 1,555,274 1,361,250 1,388,000 1,534,000 1,690,000 1,757,750 1,764,500

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 69

GM loss of $160mn on its stake in PSA, PSA’s stock value having fallen significantly in recent months. Key recent developments: since our last report, the most important news at GM Europe concerns developments in its JV with PSA.  Developing four shared platforms, covering: o Mid-size/large cars, ie the and the PSA 508 and C5/6 GM announced its latest quarterly results at the end of October which showed a replacements group net income of US$1.5bn; this worldwide result was tempered however by continuing losses in Europe. In fact, the company expects net losses for 2012 in o A small car (B segment) programme – ultimately to replace the Opel Europe to be in the range of $1.5-1.8bn. despite this losses – the 12th consecutive Corsa year that GM will lose money in Europe – GM management remains committed to o An MPV programme for Opel and Citroen – which we believe will its European operations and has outlined a new model programme, some of which mean replacements for the Meriva and C3 Picasso (ie new B-MPVs) will come from its JV with PSA, and a new round of cost-cutting in order to return o And a van and crossover for Opel and Peugeot – we take this to mean the European operations to break-even by mid-decade. the replacement for the Zafira and the 3008/5008. The new plan comes under the title “Drive Opel 2022”, at the heart of which are  Details for these programmes remain to be confirmed, but we doubt any of plans to: them will be in production before 2016 – which is when we believe the next  Generate higher revenue from existing products Insignia is due.  Launch 23 new models and 13 new engines by 2016, with many of the new  Shared purchasing, which will see around US$125bn of annual spending models in segments in which Opel/Vauxhall has not previously operated, as is shared, while the two companies look to save at least $2bn annually in the case with the ADAM, Mokka and Cascada materials, logistics and engineering savings.  Exploit the JV with PSA to develop four joint vehicle programmes  In the logistics area, GEFCO (PSA’s in-house logistics arm which is actually being partly sold off) will take over GM Europe’s logistics.  Finalize the purchasing JV with PSA Changes to the JV  Cut $300mn of fixed costs in 2012 and cut a further $500m of fixed costs between 2013-2015 In December, some changes to the JV were effectively confirmed: the large car  Cutting 100,000 units from its own and dealers’ inventory programme appears to have been dropped and the first joint new models will be the C-MPV (Zafira) replacement at GM and a C-CUV crossovers for PSA, although  And cut 2,600 jobs, many of which have already been lost. whether this will really involve replacing the 3008 and 5008 remains to be seen. The “original” JV with PSA The B-MPV programme referred to above will continue, as will the B-segment At the heart of the medium term future for GM in Europe will be its JV with PSA. programme to replace the Corsa. Timing for these remains somewhat oblique. The key elements of the PSA deal are as follows: In addition, the JV will expand into joint development of small petrol engines,  GM has paid €304mn for a stake of 7% in the enlarged capital base of PSA based on the PSA EB series and also the evaluation of joint product and (the Peugeot family have seen their stake in the company fall from 30.3% to manufacturing initiatives in Latin America and other emerging markets. 25.5%, although they still have a voting share of just under 38%. It is worth The initial focus of these shared arrangements will still be in Europe but this will noting that in August GM confirmed that it had already recorded a book not include the large car programme which we believe Opel was to have led. The

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 70

two companies will now develop replacements for the Insignia and parallel PSA The alliance with PSA came about partly in direct response to GM European models independently. returning to a loss-making position; this follows extensive reorganisation in 2010- 2011 which had established the situation in Europe. renewed losses forced GM We believe PSA will lead the development of the next B segment platform for both into further reorganisation of its European production operations including the end companies. If a shared B segment platform can be successfully developed, the of production in Bochum from 2016, although it has not confirmed officially where potential economies of scale are vast with the possibility for the two companies to the next Zafira will be made after this date; we now think that this will be made have a shared platform of over 2mn units pa. We assume that GM will lead the either in Gliwice or Russelsheim, rather than in a PSA plant. C-MPV/C-CUV model developments. While production arrangements for the Zafira are uncertain, GM has confirmed the Many of the practical implications of this alliance remain unclear even now, production of the next Astra will take place only in the UK and Poland. especially in terms of manufacturing and product development as it will take a number of years for any apparent benefits to be realised. The unions on both New business plan – Drive Opel 2022 sides of the alliance have expressed concern as to what this could mean in terms The announcement of the intended closure of Bochum was accompanied by the of potential plant closures. A senior PSA executive said last year that there are no approval of a new business plan for Opel through to 2016 and beyond. This plans at the present time for PSA and Opel to share production facilities and includes: produce cars for each other in Europe.  23 new models being launched (including numerous derivatives and variants Will this alliance work? on main nameplates, plus 13 new powertrains, including 3 new engine GM has a somewhat chequered history of alliances in Europe, its earlier families; new models include the Mokka SUV, Adam premium small car and a purchasing, platform and engine production alliance with Fiat having lasted just a new cabrio – all of which were already well-known and had been factored into few years. With this in mind, it is reasonable to wonder how long the PSA JV will the Production Outlook. last.  New sales strategies, although even now, little detail has yet been revealed on The financial support given to PSA’s finance arm by the French government has these. caused some concern at GM about the possibility of increased government  A new brand strategy which will be focused on existing and potentially involvement in PSA – this in turn led, we understand, to a slowdown in the pace of attainable customers, and which is designed to result in a much more precise talks between the two companies; the already planned joint purchasing and model brand definition. programmes are continuing, but the idea of a closer alliance, even a merger of GM  Clear plans to cut costs in materials, production and development, especially Europe and PSA has been put on hold, despite occasional rumours that this will through leveraging the global GM organisation and the synergies with PSA. eventually happen  A coordinated export strategy especially focused on China, Russia and Indeed, GM management in the US has been keen to emphasise the company’s Turkey; the immediate aim is to sell 20,000 Opels in China. commitment to its European operations. CEO Dan Akerson told staff at the  The exclusion of compulsory workforce reductions before 2016. European HQ in Russelsheim in November that GM will not sell Opel or close it down and leave Europe, he emphasised how GM needed a strong design,  The implementation of the proposed 2012 wage increase. engineering, manufacturing and sales presence in Europe. The commitment to Will another GM Europe plant close? GM Europe as an independent entity, with GM, was reinforced in a briefing before Christmas when GM confirmed that production at Bochum will definitely finish in Press reports on which GM factories could close are many and varied. The 2016. “consensus” in early 2012 was that Bochum and quite possibly Ellesmere Port

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 71

would close, although some reports have suggested that even Russelsheim was within the period covered by the Outlook, and possibly not at all. We think it under consideration for closure – the idea of Opel closing its “home” plant has is more likely that Ampera will continue to be made in North America, to always seemed somewhat unlikely in our view. However, there is no doubt that a keep the Hamtramck plant in Detroit fully operational and if production came range of possibilities were considered as GM Europe worked how to bring down to Europe, then it would move to Germany, partly as a payback for the the break-even point of its European operations to a more manageable level. closure of Bochum. Having announced the intention to close Bochum and having retained Ellesmere Shared production possibilities Port, the question is what is next for GM and possible closures. We had previously The idea of sharing production facilities between PSA and GM Europe has been called the risk of at least one GM Europe closure as real; whether any more plant mentioned several times in the wake of the companies’ JV: we had thought that closures are on the cards is not known. the Citroen C5 and would move to a shared platform with the Opel Some analysts have even suggested GM might decide to close its Spanish plant, Insignia (itself shared with other GM models) and production of the PSA models although given the investment there to make the Meriva and Corsa, it may be would also move to Russelsheim. This could have been as early as 2016, questionable whether savings achieved through moving production of the Corsa depending on the final decisions regarding the run-out of the PSA models; and Meriva would be significant or sufficient to be deemed worthwhile in the long however, this idea has been quietly dropped and the two companies will make run. their own large cars outside the JV. We believe that for GM to find a way of avoiding a plant closure or two, it will have Overall, it is difficult to imagine PSA and GM Europe sharing production sites to find additional products to push through its European factories; for this to without movement in both direction; at this stage, we think both companies have happen, the most likely solution would be for Chevrolet models to be made here, enough problems filling their existing plants with their own products that moving rather than in Korea. Opel’s unions have begun to press again for the transfer of production into the other companies’ factories is highly unlikely. the from Korea to Europe: GM in Russia: GM will increase capacity at its own plant in St Petersburg to  We have included this possibility in our Production Outlook – which is 230,000 upa, with production at the JV with AvtoVAZ rising to 100,000 vehicles per also predicated on the assumption for now that no more European GM year. Together these will give GM the 350,000 upa it requires under Decree 166 plants will close. which provides numerous financial benefits for producing at this volume. Reports in January 2012 suggested that GM was actually planning to raise production in  We understand that GM Europe will make models for sale beyond Europe Russia to over 500,000 – this would presumably have to include either further under the and Chevrolet brands, but it is not clear whether these expansion at St Petersburg or expanding the kit assembly deal with GM has with will be new models to European production, or rather, as we suspect, re- Avtotor. badged versions of existing Opels. The wholly-owned GM St Petersburg plant will make Chevrolet and Opel models GM watchers have also been expecting news of production arrangements for the for the local market, while the AvtoVAZ JV will focus on new versions of the Niva Ampera range extender vehicle to be announced by now; however, given the new and Lada 4x4. Local content will be around 60%, and locally sourced engines and round of restructuring that is under way, a decision on the Ampera’s production’s transmissions will be fitted to 30% of GM vehicles made in Russia. In return, location in Europe has almost certainly been delayed until once GM has decided customs duties on imported components will be reduces to between zero and 3% on its overall strategy for European production. for eight years. Although we have not been given any specific guidance by GM on this matter, we now think that Ampera production is unlikely to come to the UK

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 72

New models: a major new model programme is under way, summarised in the table below:

2013 2014 2015 2016 Adam (new small car, previously known as Junior) New Vivaro van at Luton New Astra Zafira facelift Cascada (replaces Astra coupe-cabrio) New Corsa New Meriva Imported Antara and Agila replacements New Insignia

The Production Outlook which follows shows 2012 European production, excluding Russia, having fallen by over 250,000 to c930,000; in all likelihood we see another fall this year and a small fall in 2014. this would mean four years of decline – from nearly 1.235mn units in 2010, to around 814,000 in 2014. This decline reflects a combination of the market difficulties in Europe, the ageing of the Opel line-up and the strong competition it is facing from all sides. The company is attacking its cost base and trying to launch new models as quickly as possible,. however, the key new models, the Corsa and Astra, do not appear until 2014, and because the Meriva and Zafira are also going to be at the end of their lifecycles come 2014, it will take until the Astra arrives from 2015 for Opel to have a serious chance of recovery in production volumes. The Bochum plant is going to be on much reduced production volumes from early 2013, further worsening the production outlook in the short term. By contrast with the current decline in its traditional European markets, GM’s production in Russia is rising strongly – from around 180,000 in 2010 to an anticipated total of just under 0.5mn units by 2017 – without Russia, GM’s position in Europe would be parlous; in this light, the alliance with PSA makes some sense but getting real, quantifiable and sustainable benefits from the alliance will prove to be a very big challenge indeed. The provisional 2012 production total also factors in recent decisions to cut as many as 20 production days in the last four months of the year at Russelsheim and the Kaiserslautern engine plant – effectively this is a 20% cut in production for the rest of the year. The German government is expected to help with the costs of this through its Kurzarbeit (short time working) scheme, under which it effectively subsidises some of the labour costs at companies on short time working. In the UK, Ellesmere Port and Luton will also see at least a one week production stoppage although no financial support from the government exists here. Ellesmere Port is understood to be operating on a four-day week until the end of 2012. Please note there are some cells in the Production table highlighted in yellow; this indicates the provisional nature of these numbers.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 73

GM Production Outlook to 2017

Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform)

Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

GM Pass. A 302 Gliwice PL Q1 00 Q4 07 2008 13,116 0 0 0 0 0 0 0 0 0 0 GM Pass. A Corsa Eisenach DE 2012‐2013 0 0 0 0 0 1,500 60,000 75,000 72,500 70,000 68,500 GM Comm.Van S4300 Zaragoza SP Q4 00 TBC 2010+ 61,416 57,006 29,914 37,068 27,941 0 0 0 0 0 0 GM Opel Combo Comm Van S4400 Zaragoza SP H2 12 0 000 0000000 GM Pass. B Shared with Punto Zaragoza SP Q2 06 2013/4 283,605 264,250 227,048 222,617 216,084 190,000 162,500 0 0 0 0 GM Opel Corsa Pass. B New Zaragoza SP 2013/4 2013/4 0 0 0 0 0 0 10,000 223,000 262,000 281,500 281,500 GM Opel Corsa Pass. B Shared with Punto Eisenach DE Q3 06 2014 181,684 156,970 133,026 139,185 129,958 104,000 67,500 10,000 0 0 0 GM Opel Corsa Pass. B New Eisenach DE 2013/4 2013/4 0 0 0 0 0 0 0 35,000 73,500 77,000 75,000 GM Pass. B‐MPV S4316 Zaragoza SP Q3 03 Q4 06 2006 141,359 101,936 82,708 30,846 0 0 0 0 0 0 0 GM Opel Meriva Pass. B‐MPV S4470 Zaragoza SP H1 07 2017 0 0 0 89,614 121,394 71,000 68,250 65,000 56,500 42,000 0 GM Opel Meriva Pass. B‐MPV PSA JV Zaragoza SP H2 16 2016 0 0 0 0 0 0 0 0 0 25,000 75,000 GM Pass. Sports S4300 Cerizay (Heuliez) FR Q3 04 2004 11,770 8,840 3,218 0 0 0 0 0 0 0 0 GM Pass. C T3300 Antwerp BE H2 04 219,194 165,505 124,180 75,120 0 0 0 0 0 0 0 GM Opel Astra Pass. C T3300 Bochum DE H2 04 124,406 102,696 76,599 45,700 44,379 35,000 0 0 0 0 0 GM Opel Astra 2010 Pass. C T3400 Russelsheim DE H2 10 0 0 0 0 18,345 36,500 30,000 20,000 10,000 0 0 GM Opel Astra (incl. van) Pass. C T3300 Ellesmere Port UK H2 04 2010 127,954 111,730 71,005 4,633 3,903 5,750 2,500 0 0 0 0 T3400/new from GM Opel Astra 2010 Pass. C Ellesmere Port UK H2 10 0 0 8,539 102,655 137,971 91,000 84,500 78,500 115,000 159,000 157,500 2015 GM Opel Astra Pass. C T3000 Gliwice PL Q3 04 37,064 29,806 8,454 0 0 0 0 0 0 0 0 GM Opel Astra Pass. C T3300 Gliwice PL Q2 07 14,714 33,329 13,013 18,432 21,134 13,500 2,500 0 0 0 0 GM Opel Astra 2010 incl. new GTC Pass. C T3400 Gliwice PL H2 10 0 0 10,860 120,796 152,881 117,250 102,000 87,000 119,000 165,000 194,000 GM Pass. C T3400 Gliwice PL H2 12 0 0 0 0 0 0 15,000 24,500 22,000 18,500 18,500 GM Opel Astra coupe cabrio Pass. Sports T3300 Antwerp BE Q2 06 26,763 17,958 4,369 4,093 0 0 0 0 0 0 0 GM Pass. C‐MPV T3300 Bochum DE Q3 05 2011 67,474 43,875 26,020 74,432 74,371 38,500 22,500 7,500 PLANT CLOSING GM Opel Zafira Pass. C‐MPV T3300 Gliwice PL Q3 05 122,371 108,509 64,072 19,504 0 0 0 0 0 0 0 GM Opel New Zafira Pass. C‐MPV T3470 Bochum DE H 1 11 0 0 0 0 12,577 74,500 71,000 68,000 62,000 38,000 0 TBC ‐ assume for now: GM Opel New C‐MPV (Zafira repl'ment) Pass C‐MPV PSA JV DE H2 16 2017 0 0 0 0 0 0 0 0 0 35,000 60,000 Russelsheim GM Pass. D J3200 Rüsselsheim DE Q3 00 Q4 07 2008 116,584 93,942 0 0 0 0 0 0 0 0 0 Insignia, incl. until GM Opel Pass. D Epsilon 2 ‐ J3700 Rüsselsheim DE H1 08 2016 0 21,918 146,916 177,532 162,410 97,250 88,500 76,500 63,500 20,000 0 Q3/2011 GM Opel Insignia Pass D New Insignia Russelsheim DE H1 16 2016 0 0 0 0 0 0 0 0 0 55,000 90,500 GM Pass. E J3200 Rüsselsheim DE Q1 02 2009+ 9,358 4,163 0 0 0 0 0 0 0 0 0 GM Opel Vivaro Comm.Van X83 Luton IBC UK H2 06 2006 FL 65,542 60,420 26,413 37,851 53,078 38,250 34,250 0 0 0 0 GM Renault/ Nissan Trafic/ Primastar Comm.Van X83 Luton IBC UK H2 06 2006 FL 29,426 26,828 27,772 34,705 15,001 17,250 8,500 0 0 0 0 GM Opel New Vivaro Comm.Van TBC Luton IBC UK H2 13 To be confirmed 0 0 0 0 0 0 0 44,000 63,500 60,000 59,750 GM Opel Total 1,653,800 1,409,681 1,084,126 1,234,783 1,191,427 931,250 829,500 814,000 919,500 1,046,000 1,080,250 GM / Kalos / Lanos / Matiz Pass. A/B Daewoo small Warsaw (FSO) PL Late 06 72,578 90,428 30,949 44,782 4,883 000000 GM Chevrolet/ Opel Captiva/ Antara/ Cruze and others Pass. Various Various Shushary, St Petersburg RU H2 07 5,688 41,159 6,831 23,641 39,000 90,000 118,000 125,000 170,000 190,000 185,000 GM Chevrolet Various Korean models Pass Various Various Uncertain, prob. Ger DE H2 09 0 0000 0 0 10,000 30,000 45,000 42,000 GM Chevrolet Various Korean models Pass Various Various AvtoTor RU 0 0 0 56,010 70,097 84,000 89,000 90,000 84,500 82,500 80,000 GM Opel Corsa/Astra/Zafira etc Pass Various Various AvtoTor RU 0 0 2,460 21,893 34,727 49,500 68,250 72,500 70,000 68,000 66,750 GM Various Incl Niva 4x4 and variants Pass. Various TBA AvtoVAZ RU H1 12 25,000 25,000 25,000 36,761 55,403 61,000 65,250 74,000 89,000 94,000 100,000 GM Excludes kits assembled by various Russian and Uzbek assemblers, incl kits of Opel Corsa/Astra/Zafira pre 2010 103,266 156,587 65,240 183,087 204,110 284,500 340,500 371,500 443,500 479,500 473,750 GM Saab 9‐3 Pass. D J2900/ P440 Trollhattan SE Q3 08 2010? 77,598 59,847 12,378 1,112 All production from March 2010 counted in Saab‐Spyker GM Saab 9‐3 cabrio Pass. Sports P442 Graz (Magna) AU 2011? 16,997 11,047 5,057 2All production from March 2010 counted in Saab‐Spyker GM Saab 9‐5 Pass. E J2900/ P640/641 Trollhattan SE Q4 08 2010? 22,545 14,391 3,250 368 All production from March 2010 counted in Saab‐Spyker GM Cadillac BLS Pass. E Trollhattan SE Q2 06 2,772 1,195 0 0 0 0 0 GM Saab/Cadillac Total 119,912 86,480 20,685 1,482 0 0 0 0 0 0 0 GM ALL Total 1,876,978 1,652,748 1,170,051 1,419,352 1,395,537 1,215,750 1,170,000 1,185,500 1,363,000 1,525,500 1,554,000

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 74

Honda Key recent developments: in 2012 there were a number of good news stories for Honda in the UK, after a challenging period for the company. However, 2013 has started with not so good news, ie the announcement that 800 permanent and 300 temporary jobs will be cut from the Swindon factory. The company had been planning to increase production this year significantly but a downturn in the European market means this is not going to happen. Despite the new Civic and CRV having been launched last year, sales have been disappointing and we now expect declining UK production for Honda for at least 2013 and 2014. Last time we had also had to report how the Jazz will NOT be manufactured in the UK. This model will now be made in Asia and Mexico – in partial, but not total compensation for this loss, Honda will extended the Civic range made in Swindon, adding the estate/wagon version, and also the next Type R, high performance model. The Civic wagon will arrive in 2013 or 2014 and the low volume Type R in 2016. We noted last time that this decision will make it more difficult for Honda to reach the 250,000 units output it has targeted for the Swindon plant. In fact in light of the disappointing sales of the CRV and Civic we now think it is going to be quite some time before Honda even gets back to 200,000 upa from the Swindon plant. Honda’s aim had been to make 182,000 cars in the UK in the current fiscal year (to March 2013) and increase this to 250,000 pa over the next three years – we noted our scepticism of this last time and this now seems justified. In addition, Honda’s European president had told the press in February 2012 that it expected its European operations to move into profit in 2013-14, by when it also expects to be sourcing around 80% of its sales in Europe from its Swindon facility – for this to happen, based on Honda's recent sales volumes in Europe, production at Swindon would need to be around 240,000 upa: the job losses announced in January 2013 make this ambition unlikely to be realised. In an interview earlier in 2012, Ken Keir, EVP of Honda Europe, had suggested that further expansion of capacity at Swindon was possible, from 250,000 to 280,000 upa – but was ambiguous on whether this would be for a new model or simply to allow increased production of existing models, especially the CRV. Our projections for Honda in Turkey are on the low side, but we still think it is probable that Honda will look to raise output at its factory there in the long term and take advantage of the low-cost production arrangements there. New models: the main new model due at Honda will be the Civic wagon from later this year or early 2014, followed by the low volume Type R Civic. We have now excluded the Jazz from future production in Swindon, but there are some rumours of a Jazz-based SUV/crossover possibly being added to production in the UK at some point in the future. In the light of the job cuts announced in early 2013, we suspect this is now most unlikely. Honda Production Outlook to 2016 Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Honda Honda Civic Pass. C DX Swindon UK Q1 06 2011‐12 139,685 110,293 47,234 45,185 26,215 0 0 0 0 0 0 Honda Honda Civic Pass. C New Swindon UK Q4 11 0 0 77,500 71,000 72,500 78,000 82,000 81,000 Honda Honda Civic Pass. C CX Kocaeli TR Q2 06 2012 19,725 46,083 18,264 20,305 12,341 22,500 26,500 29,500 28,000 26,500 24,500 Honda /City Pass. B Fit Kocaeli TR Q4 055,9383,99000 0000000 Honda Honda Jazz Pass. B AZ Swindon UK Q4 09 2013/4 0 0 8,912 33,398 23,273 25,750 21,250 17,250 0 0 0 Honda Honda CRV Pass. SUV WL Swindon UK Q2 07 2012‐2013 98,087 120,150 19,437 51,215 47,971 39,237 0 0 0 0 0 Honda Honda CRV Pass. SUV New Swindon UK Q3 2012 0 0 0 0 0 24,250 69,000 66,750 72,500 69,500 68,000 Honda Honda Civic/CRV Pass. C/C‐SUV TBC New Russian plant RU H2 13 0 0 0 0 0 0 10,000 25,000 30,000 35,000 37,500 Honda Honda Total 263,435 280,516 93,847 150,103 109,800 189,237 197,750 211,000 208,500 213,000 211,000

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 75

Hyundai-Kia New Kia cee’d production launched Key recent developments: the main news since our last report is the confirmation Kia Slovakia started production of the new cee’d with the 5-door hatch (in April) from Kia of record car and engine production. This was confirmed just as this and estate (in August); the 3-door will be produced in Slovakia from early 2013. report was being finalised and we have not yet amended the main data tables to The factory had moved to a three-shift production system in January 2012 and will include the final 2012 figures (this will be done next time, although there is little soon reach its 300,000 upa capacity. difference between our provisional numbers and the actual figures). In addition to the new cee’d starting production in Slovakia, the Slovakian factory We provisionally had Kia production at just over 301,000 whereas Kia now reports has also started production of a new diesel engine for the Sportage SUV – this 292,000. This has been achieved on the back of three shift operation throughout engine began life with imported components, from Korea, but from mid-2012, it will 2012. move to full European components supply; including the main castings which currently come from Korea; by mid-year Slovakian plant will undertake the In addition, Kia produced a record of 464,000 engines, split 45% diesel and 55% machining of locally-sourced castings. petrol. This was a rise of around 29% over 2011’s engine production volume. Major developments in 2011 Hyundai and Kia continue to grow from strength to strength in Europe; and indeed both are doing very well globally. Having reported strong profit growth at both 2011 was an important year for both Hyundai and Kia in Europe, ie: brands during 2011, this positive picture was repeated in results in the first three  The start of the third shift at Hyundai Nosovice in mid-September, quarters of 2012. The good prospects for both Hyundai and Kia were confirmed increasing production capacity to 300,000 upa. when Moody’s announced it was raising its rating on both Hyundai and Kia from  Also at Nosovice, construction of a new gearbox plant began, with series stable to positive. Moody’s drew attention to the improvement in the group’s production in 2012, helping to raise vehicle output at its Czech factory from financial profile as a result of strong and rising sales and a conservative expansion 200,000 to 300,000 units per year policy which is seen as not having led to excess capacity being installed.  Changing the production arrangements between Kia at Zilina and Strong financials in 2012 Hyundai in Nosovice to balance output better between the two plants. Q3 Production of the Kia Venga moved from the Hyundai factory to the Kia plant and in reverse the Hyundai ix35 moved from the Kia plant to the Hyundai plant. Globally, Hyundai reported a 0.9% rises in unit sales, but a rise of 3.6% in  Completing the expansion of Kia engine production facility; the expanded revenue; Q1-3/2012, revenue was up 7.8%, with operating profit up 11.1%; within plant will be able to make 450,000 engines per year, although in practice it the automotive division, the rise in operating profit was higher, up 16.7%. managed to exceed this in 2012! Meanwhile at Kia, Q3 also saw revenue and earnings gains, although operating  Full scale production starting at St Petersburg in Russia: The first model margins fell year-on-year. The results were affected by the costs of industrial off the line was the Solaris salon. Capacity in Russia started at 150,000 upa, action in Korea. Q3 revenue was up 16.4 year-on-year, but this was still 7.4% but has since been raised to 200,000; indeed the potential exists for this to be down on the Q2 figures. Year-to-date revenue was up 11.6%, driven by an almost raised to 300,000 upa. exactly equal rise unit sales: Kia’s biggest gain was in Europe, where sales rose over 20%. The company has lowered its global production target to 2.8mn,  Agreement in Turkey with commercial vehicle builder, : This will lead against the previous target of 3mn – but expects this to be reached in 2013 when a to a new range of Hyundai vans, trucks and minibuses being built at the new plant in China comes on stream. Karsan plant, rather than at the Hyundai Assan factory which will focus on cars

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 76

and small MPVs. To date no specific details on the volumes and timing for van production have been released.  We also understand that the small Hyundai i10 will be added to the production line-up in the Turkish factory from 2014. Hyundai is actually investing €475m in its Turkish plant to double production to 200,000 upa, with full production not being reached until 2014. At the moment the plant only produces left-hand drive vehicles but during 2014 will add right-hand drive production which is currently supplied from India.  This will help push Hyundai-Kia production in Europe to more than 1mn units pa: o However, we suspect that Hyundai and Kia will add at least one more model each in Europe to their current line-ups and were just one of these possible models to be successful, this would push Hyundai-Kia production above the 1.25mn barrier: o We believe the i40 will be added to the Hyundai plant in Nosovice but we are not yet sure which models will be added to the Kia plant, although we would expect them to be in the C segment and based on the cee’d platform.  In addition, Hyundai’s presence in Europe has been reinforced by the increasing role played by its R&D centre in Germany which is responsible for the engineering and develop of the U family of small turbo diesel engines and a new direct injection turbo petrol engine.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 77

New models: the new model plan for Hyundai-Kia Europe is as follows: 2013 2014 2015 2016 New cee’d range completed Revised Sportage (Slovakia) New Hyundai ix35 New Kia Venga Hyundai-Kia Production Outlook to 2017 Vehicle Country Start Segment Prod'n Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Hyundai‐Kia Hyundai Accent Pass. B Accent Izmit TR 55,971 49,723 40,247 35,854 17,940 3,165 0 0 0 0 0 Hyundai‐Kia Hyundai i10 Pass A Izmit TR H2 2014 0 0 0 0 0 0 7,500 75,000 110,000 112,000 108,750 Hyundai‐Kia Hyundai i20 Pass. B Izmit TR H2 2010 0 0 12 34,682 73,262 79,500 82,000 85,000 82,250 77,500 75,000 Hyundai‐Kia Hyundai Matrix Pass. C‐MPV Matrix Izmit TR 27,720 30,959 11,823 4,959 90 0 0 0 0 0 0 Hyundai‐Kia Hyundai H100/H1 Comm.Van IzmitTR6,499000 0000000 Hyundai‐Kia Hyundai New H1 Comm.Van Karsan (Bursa) TR 0 0 0 0 574 5,000 15,000 17,500 16,250 15,250 14,250 Hyundai‐Kia Hyundai Turkey Total 90,190 80,682 52,082 75,495 91,866 87,665 104,500 177,500 208,500 204,750 198,000 Hyundai‐Kia Kia "cee'd" and variants Pass. C ED Zilina SK Late 06 134,996 163,320 121,635 95,906 103,693 35,287 0 0 0 0 0 "cee'd" and variants ‐ inc. kits for Hyundai‐Kia Kia Pass. C ED Zilina SK H1 2012 0 0 0 0 0 90,000 132,000 150,000 146,500 141,000 139,500 Russia Hyundai‐Kia Kia Sportage inc. kits for Russia Pass. SUV HM Zilina SK H1 09 21,469 37,503 38,515 54,415 101,073 141,000 132,500 128,500 123,250 118,500 116,500 Hyundai‐Kia Kia Venga Pass. B YN Zilina SK H2 11 0 0 0 0 10,636 35,000 40,000 38,250 35,000 33,000 31,500 Hyundai‐Kia Kia Other unknown models Pass C Unknown Zilina SK H1 14 0 0 0 0 0 0 0 10,000 20,000 30,000 30,000 Hyundai‐Kia Hyundai ix35 ‐ Tucson replacement Pass. SUV HM Zilina SK H1 10 0 0 32 79,184 36,798 0 0 0 0 0 0 Hyundai‐Kia Kia Total 156,465 200,823 160,182 229,505 252,200 301,287 304,500 326,750 324,750 322,500 317,500 Hyundai‐Kia Hyundai i30 Pass. C ED Nosovice CZ H2 08 0 11,004 111,036 130,966 107,000 131,000 138,500 131,000 129,500 126,500 125,000 Hyundai‐Kia Hyundai ix20 Pass. B UYN Nosovice CZ H1 11 0 0 0 19,725 46,316 44,250 45,500 43,500 42,000 40,500 39,500 Hyundai‐Kia Hyundai ix35 Pass. SUV HM Nosovice CZ H2 11 0 0 0 0 69,597 129,500 111,500 105,000 95,500 93,500 92,500 Hyundai‐Kia Hyundai 4th model Pass TBC TBC Nosovice CZ H2 13 0 0 0 0 0 0 20,000 42,500 55,500 66,500 69,000 Hyundai‐Kia Kia Venga Pass. B YN Nosovice CZ H2 09 0 0 5,164 49,319 28,096 0 0 0 0 0 0 Hyundai‐Kia Hyundai i40 Pass D St Petersburg RU H2 14 0 0 0 0 0 0 0 12,500 27,500 40,000 40,000 Hyundai‐Kia Kia Rio Pass B St Petersburg RU H2 11 0 0 0 0 19,962 93,250 90,000 84,500 80,000 76,500 74,500 Hyundai‐Kia Hyundai Solaris and variants Pass. C St Petersburg RU H2 10 0 0 0 0 106,165 111,000 106,500 102,500 100,000 97,500 95,000 Hyundai‐Kia Hyundai Total Excludes production in Russia from kits supplied from Korea 0 11,004 116,200 200,010 377,136 509,000 512,000 521,500 530,000 541,000 535,500 Hyundai‐Kia ALL Total 246,655 292,509 328,464 505,010 721,202 897,952 921,000 1,025,750 1,063,250 1,068,250 1,051,000

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 78

PSA loss of $160mn on its stake in PSA, PSA’s stock value having fallen significantly in recent months. Key recent developments: the main news at PSA since our last report concerns its poor sales performance for 2012. worldwide, its sales (2.97mn) were down  Developing four shared platforms, covering: 16.5%, with European sales down 8.6%, with Spain (-14.9%), Italy (-20.9%) and o Mid-size/large cars, ie the Opel Insignia and the PSA 508 and C5/6 France (-13.3%) the worst hit. The company was able to report rises in Russia replacements – as noted in the GM profile this joint programme (10.1%), China (7.2%) and Latin America as a whole (5.6%), but the picture was has actually been cancelled and the two companies will go their unremittingly bleak. This will undoubtedly be reflected in the full year financials own ways in large car development when they are released. o A small car (B segment) programme – ultimately to replace the Opel PSA had already announced that in the nine months to September, group revenue Corsa was down 4.7% and automotive revenue was down nearly 10%. Although direct o An MPV programme for Opel and Citroen – which we believe will support from the French government is not possible, it is receiving effective state mean replacements for the Meriva and C3 Picasso aid by an indirect route: o And a van and crossover for Opel and Peugeot – we take this to mean  The company’s finance arm will receive €11.5bn in additional banking facilities, the replacement for the Zafira and the 3008/5008. this should be the €7bn of which is backed by the French government’s guarantees for new bond first joint programme to produce results, in around 2016. issues; these facilities can be drawn down between 2013-15. the EU  Shared purchasing, which will see around US$125bn of annual spending announced a review of this guarantee, a process which will take two months to shared, while the two companies look to save at least $2bn annually in complete. materials, logistics and engineering savings.  In return for this state backing, PSA has agreed to suspend dividends, share  In the logistics area, GEFCO (PSA’s in-house logistics arm which is actually buybacks and the awarding of stock options or performance shares to being partly sold off) will take over GM Europe’s logistics. management – and employees will be able to elect a board director. In addition, in January 2013, a government minister admitted that PSA will have to Shared purchasing and logistics will be the most immediate practical implications undertake significant restructuring, more than it has done so far. Having objected of this alliance, but in terms of manufacturing and product development, it will take to the closure of Aulnay, the government now seems to accept that PSA has to 2-3 more years for any apparent benefits to be realised. Unsurprisingly, the unions change. some reports suggest that selling a stake or indeed most of its stake in on both sides of the alliance have expressed concern as to what all this would Faurecia is on the cards, following the disposal of the GEFCO logistics operations mean in terms of potential plant closures. to the Russian Railways. Unions’ fears realised With declining sales and worsening finances, the alliance with GM is not surprising, Strong words have come from union leaders’ mouths and the new French but whether it will really produce the hoped-for benefits remain to be seen. government has been equally forceful in terms of stating its objection to cutbacks The GM alliance by PSA – although having initially described the decision to close Aulnay and cut  GM has paid €304mn for a stake of 7% in the enlarged capital base of PSA back capacity and jobs at Rennes as “unacceptable”, this was later described as (the Peugeot family have seen their stake in the company fall from 30.3% to “inevitable”. As we noted previously, quite what either the government or the 25.5%, although they still have a voting share of just under 38%. It is worth unions are really going to be able to in view of PSA’s declining overall market noting that in August GM confirmed that it had already recorded a book position is open to question.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 79

Talk of closing PSA plants has been evident for many months – finally in early July It is now clear that PSA is one of the leaders in capacity reduction across Europe. came the news that the unions and the French government had feared: 8,000 jobs at least will go between Aulnay and Rennes, although further cuts at  First, PSA announced that no new models would be allocated to the SevelNord appear to have been averted; the reduction in production at Madrid will SevelNord MPV/van plant in Valenciennes from 2016 – although this probably see 400-500 jobs go there, but the plant has arguably been saved until a subsequently turned out to be incorrect as PSA first quickly announced Toyota final decision is made on the production of the C-Cactus. as its new partner here, replacing Fiat, and then in late August it confirmed As we noted above, the next most vulnerable plant is Madrid, and we would expect that €750mn would be invested in a new range of vans to be made by PSA a decision on this plant’s future to be announced during 2013. Other plants appear and Toyota. safe for now, but production cutbacks at Trnava – 21 production days will be lost in  Second, that Aulnay, in the north of Paris, would also not receive a new model Q4 – may be repeated elsewhere in PSA’s European network next year. and production will end in 2014, with its current model, the C3 going on a Manufacturing news: there has been little definite news on any manufacturing steady run-out. Some of the Aulnay workers will be moved to the nearby investment at PSA – the focus of the news has been on cutbacks. We do not Poissy plant, but there will still be job losses from Aulnay. Closing Aulnay expect any more significant news on manufacturing arrangements in Europe to be completely is quite a challenge because of other important activities on the site, given out until PSA and GM have reached agreement on production arrangements notably the pressings and stampings operation which is run by Magnetto of for their joint developed programmes. Italy and having been an integrated part of a PSA’s portfolio for as long as can be remembered. It is difficult to see PSA moving stampings work elsewhere, if One good news item announced this year is confirmation of the 2008 going into only because of the challenges and costs of moving stamping presses. PSA production at Mulhouse (it will also be made in Brazil and China). plans to “revitalise” the Aulnay site and has said it wants to develop the site for In addition, the JV with Mitsubishi in Russia is now moving into full manufacturing other uses, although few details have emerged as to what exactly this will mode, having been a kit operation until now. At full production this will make at involve. least 125,000 upa, possibly more:  Third, there will be significant cut backs at Rennes where 25% (c1,400) of the  More specifically, PSA started making the 408 and version of the C4 in Kaluga, 5,600 employees there will lose their jobs. GM’s chances of using a PSA Russia from mid-2012; this is part of a plan to raise production in the PSA- facility to make one of its own models have arguably been reduced by this Mitsubishi JV in Russia to at least 125,000 upa. news. In addition, PSA confirmed that it would make its emerging markets, low cost And moreover, the company has notably refused to provide any assurances about models, the and Citroen Elysee/C4L sedan in Vigo, Spain. This the future of the Madrid plant, another which we expect could close in the long programme actually began at the end of last year. term. we still have our doubts about whether this plant will survive. We have In addition, as reported last time, the large diesel engine production JV with Ford long expected this plant to close, but we now understand some low volume will come to an end from 2015. The planned hybrid technology co-operation with production of the 207 will continue into 2013 and that PSA still plans to BMW will stop before it has really started allocate the E3/C-Cactus model to this plant, but not until 2014. This has not been confirmed by PSA itself, although numerous Spanish reports to this China will become PSA’s no. 1 market in the future and this where we can effect have not been denied. There have also been suggestions that the 208 expect the next round of major investment to take place. By 2015, the PSA- could be made there, but in view of the general poor sales performance of Dongfeng JV will be making 750,000 vehicles a year. By 2020, PSA intends to Peugeot models and the need to keep its French plants and Trnava in have doubled its own production capacity in China; currently it has around Slovakia operating as close to fully as possible, we think this is unlikely 450,000 upa capacity, with a third factory of 150,000 upa capacity due on stream

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 80

in 2012. A production JV project with Changan will add a further 200,000 capacity by 2013 – this factory will work for Citroen only, especially the DS range and certain LCVs as well. This will give PSA a total capacity in China of 800,000 upa by 2013, with 950,000 upa possible from 2015; further increases in production capacity expected after this date. In addition, it is expanding in Brazil, with €350mn having been invested in 2010-11 and €240mn committed for 2012-15. This is being done with the aim of doubling production capacity there, with production at the Porto Real plant near Rio de Janeiro reaching 300,000 vehicles and 400,000 engines a year by 2015. And in India, €650mn is being invested in a new plant in Gujarat, with an initial capacity of 165,000 vehicles a year. Production should begin during by 2014 and can be expanded to 340,000 units a year. The first vehicle to be made there could well be the Peugeot 508. Shipping components to Iran has stopped On intriguing side-effect of the PSA-GM alliance is that PSA has stopped shipping parts to Iran-Khodro; officially, PSA made this decision before the PSA-GM alliance, but it is also clear that it would have been very difficult for the alliance to progress with PSA continuing to supply Iran Khodro with components and technology. Quite what this means for vehicle production in Iran as a whole in the long term is an interesting question. the loss of the Iran CKD contract also meant a significant loss of revenue for PSA which only worsened its sales volumes for 2012.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 81

New models: plans for PSA in Europe are summarised in the table below:

2013 2014 2015-2016 208CC and other 208 variants, including GTi, 2008 New C1/108 New vans and MPVs to replace product from Sevel Nord Hybrid/EV versions of most high volume models by this New C5 New C3 Picasso and C4 Picasso (B78) date T9 – replacement for 308 308 SW 301/C4 for emerging markets DS1 (provisional) 3008 and 308CC replacements (2016) Jumper/Boxer New Expert and Partner

We continue to include the large PSA MPVs, ie the 807 and C8, in our forward projections, and we expect MPVs to continue to be part of PSA’s portfolio after 2016 now that the Fiat alliance has been replaced by one with Toyota – it may well be that Toyota will simply take vans while PSA will develop MPVs for itself off the new platform without involving Toyota. Fiat stopped sourcing MPVs from the PSA-Fiat JV some time back, but it will continue to source the Scudo until 2016. The Production Outlook which follows shows a marked decline in production at Citroen in 2012-14, with only modest recovery in 2015-17. we now think that by 2016-7, Citroen will recover only to around its 2009 volumes. At Peugeot, production volumes are projected to recover from 2014, ie once the 208 has been fully replaced and when all its variants are in production; by this point, the 308’s renewal will be under way too. Even so, like Citroen, we now expect Peugeot to recover only to its 2009 level and certainly back to its past 2007 peak for many years to come, if at all.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 82

PSA Production Outlook to 2017 – Citroen and group totals Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform)

Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

PSA Citroën C1 Pass. A B0 Kolin CZ Q2 05 2014 98,426 108,074 116,070 102,247 88,609 65,000 62,500 77,750 90,000 94,000 91,500 PSA Citroën DS1 Pass A B0 Kolin CZ H2 13 2015/6 0 0 0 0 0 0 0 0 5,000 7,500 6,500 A6 ‐ switch to A55 PSA Citroën C2 Pass. B Aulnay, Paris FR H2 03 2010 66,345 52,099 41,391 0 0 0 0 0 0 0 0 2010 PSA Citroën C2 Comm.Van A60 Aulnay, Paris FR H2 03 2009 7,726 5,943 2,684 0 0 0 0 0 0 0 0 A81 ‐ switch to A51 PSA Citroën C3 Pass. B Aulnay, Paris FR Q2 02 2008/9 214,110 174,175 0 0 0 0 0 0 0 0 0 late 2008 PSA Citroën C3 Comm.Van A81 Aulnay, Paris FR Q2 02 2008/9 12,649 15,361 7,265 0 0 0 0 0 0 0 0 PSA Citroën C3 Pass. B A51 Aulnay, Paris FR H1 09 2008/9 0 0 169,503 224,406 193,702 163,000 137,500 127,000 40,000 PLANT CLOSING PSA Citroën C3 Comm.Van A51 Aulnay, Paris FR H1 10 2008/9 0 0 0 13,042 13,586 6,250 4,500 2,500 0 0 0 PSA Citroën New C3 Pass B New Poissy, Paris FR H2 15 2015 0 0 0 0 0 0 0 0 98,000 193,500 205,000 PSA Citroën DS3 Pass. B A55 Poissy, Paris FR H2 09 2016 0 0 1,486 68,391 77,169 64,500 57,500 52,500 49,500 72,500 78,000 PSA Citroën C3 Pluriel Pass. B sports A42 Villaverde, Madrid SP Q1 03 2009 9,456 6,900 19,890 11,791 5,500 000000 PSA Citroën C3 Picasso Pass. B MPV A70/71 Trnava SK H1 09 2016/7 0 2,500 91,500 75,000 72,000 57,500 50,500 42,500 40,000 66,000 68,500 PSA Citroën C segment car for emerging mkts Pass B/C M4 Vigo SP H2 12 2012 0 0 0 0 0 7,500 35,000 45,000 50,000 42,500 42,500 PSA Citroën C‐Cactus/E3 Pass C New Villaverde, Madrid SP H2 14 2014 0 0 0 0 0 0 0 15,000 35,000 40,000 40,000 PSA Citroën C4 Pass. C B50/B51 Mulhouse FR Q2 04 Q3 2010 178,345 136,482 99,460 89,623 24,620 000000 PSA Citroën C4 Comm.Van B50/B51 Mulhouse FR Q2 04 Q3 2010 6,314 5,019 3,131 1,930 5,329 4,500 4,000 3,750 3,500 4,000 5,000 PSA Citroën C4/C4L Pass. C B50/B51 Kaluga RU H2 10 2010 0 0 0 6,500 12,500 11,500 25,000 31,000 35,000 30,000 27,500 PSA Citroën C4 Pass. C B6 Mulhouse FR H1 11 2017 0 0 0 0 110,000 119,000 93,500 87,000 78,000 72,500 69,000 PSA Citroën DS4 Pass. C B75 Mulhouse FR H2 11 H1 2011 0 0 0 233 34,593 31,000 28,500 26,500 24,000 22,500 21,000 PSA Citroën Xsara Picasso Pass. C‐MPV N68 Vigo SP H2 08 2008 8,230 10,807 35,925 24,072 8,325 0 0 0 0 0 0 PSA Citroën Xsara Picasso Pass. C‐MPV N68 Rennes FR H2 09 12,143 47,846 5,942 0 0 0 0 0 0 0 0 PSA Citroën C4 Picasso Pass. C‐MPV B58 Vigo SP H1 07 2015 215,714 191,818 133,814 126,808 114,000 80,500 77,500 72,500 105,000 119,000 121,000 PSA Citroën DS5 Pass. C‐MPV B58 Sochaux FR H2 11 H2 2011 0 0 0 0 4,424 30,000 28,500 26,500 21,500 17,500 16,000 PSA Citroën C5 Pass. D X7 Rennes FR Pre 02 2013 49,909 98,602 79,987 79,106 65,726 38,750 32,500 29,500 23,500 19,500 35,000 PSA Citroën C6 Pass. E X61 Rennes FR Q3 05 7,343 1,667 982 1,114 1,029 1,400 250 0 0 0 0 PSA Citroën C8 Pass. MPV V3 Valenciennes FR Q1 02 2011FL 11,976 8,448 5,298 5,525 5,731 3,700 4,000 3,750 3,500 5,000 4,500 PSA Citroën Jumpy Comm.Van UValenciennesFRQ1 02 2007 37,198 41,035 19,957 27,910 29,625 22,000 19,000 17,000 16,500 15,500 14,500 PSA Citroën Jumper Comm.Van Val di Sangro IT Pre 2002 H2 06 2013FL 56,688 58,215 23,916 37,038 44,267 34,500 33,500 39,000 41,000 38,000 36,000 PSA Citroën Berlingo Comm.Van‐based M59 Vigo SP H2 96 133,359 0 0 0 0 0 0 0 0 0 0 PSA Citroën Berlingo Comm.Van‐based B9 Vigo SP H2 08 2016 0 128,933 116,223 132,856 133,000 95,000 82,000 73,000 60,000 56,500 52,500 PSA Citroën Berlingo Comm.Van‐based M59 Mangualde PT H2 96 48,924 31,717 20,919 24,214 0 0 0 0 0 0 0 PSA Citroën Berlingo Comm.Van‐based B9 Mangualde PT H2 09 0 0 0 0 25,681 23,500 20,000 17,250 15,500 14,250 14,000 PSA Citroën Total 1,174,855 1,125,641 995,343 1,051,806 1,069,416 859,100 795,750 789,000 834,500 930,250 948,000 PSA Peugeot Total 1,502,828 1,352,227 1,242,968 1,325,329 1,310,011 1,088,000 1,092,000 1,151,000 1,147,450 1,148,750 1,159,750 PSA ALL Total 2,677,683 2,477,868 2,238,311 2,377,135 2,379,427 1,947,100 1,887,750 1,940,000 1,981,950 2,079,000 2,107,750

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 83

PSA Production Outlook to 2017 – Peugeot and group totals Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform)

Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

PSA Citroën Total 1,174,855 1,125,641 995,343 1,051,806 1,069,416 859,100 795,750 789,000 834,500 930,250 948,000 PSA Pass. A B0 Kolin CZ Q2 05 2014 104,427 108,187 116,070 110,554 91,308 74,500 68,500 62,000 88,000 95,000 96,250 PSA Pass. A A08 Poissy FR Q4 04 H2 11 11,391 10,396 4,788 15 0 0 0 0 0 0 0 PSA Comm.Van T10/T11 Poissy FR Pre 99 Q3 06 2006 8,355 4,933 4,061 6,533 4,963 2,500 0 0 0 0 0 PSA Peugeot 206 incl 206CC Pass. B T10/T11 Mulhouse FR Q3 06 2006 103,213 75,062 129,027 127,080 92,939 8,500 0 0 0 0 0 PSA Pass. B A70/71 Poissy/Aulnay FR Q4 06 2012 213,041 187,794 166,103 128,322 88,725 16,750 0 0 0 0 0 PSA Peugeot 207 Comm.Van A70/71 Poissy/Aulnay FR Q4 06 2012 9,991 189 0 0 0 0 0 0 0 0 0 PSA Peugeot 207 Pass. B A70/71 Trnava SK H1 06 2012 178,000 183,000 194,000 129,000 105,000 57,500 0 0 0 0 0 PSA Peugeot 207 incl 207CC Pass. B A70/71 Villaverde, Madrid SP H1 07 127,071 107,824 107,878 107,522 98,000 48,000 34,000 21,500 0 0 0 PSA Peugeot 208 Pass. B Poissy FR H1 12 0 0 0 0 585 131,000 158,000 172,500 165,000 153,500 149,000 PSA Peugeot 208 Pass. B Trnava SK H1 12 0 0 0 0 0 96,500 145,000 136,000 155,000 142,000 136,500 PSA Peugeot 208 Pass. B Mulhouse FR H1 12 0 0 0 0 0 40,000 30,000 22,250 15,000 0 0 PSA Peugeot 208CC Pass B Mulhouse FR H2 12 0 0 0 0 0 2,000 12,500 22,000 30,000 26,500 26,500 PSA Pass B Mulhouse FR H2 13 0 0 0 0 0 0 15,000 65,000 75,000 80,000 76,500 PSA Peugeot 301 Pass B/C M3 Vigo SP H2 12 2012 0 0 0 0 0 10,750 31,500 39,500 38,250 36,500 35,500 PSA Comm.Van T50/T51 Mulhouse/ Sochaux FR Q1 02 Q4 08 2008+ 4,615 0 0 0 0 0 0 0 0 0 0 PSA Peugeot 307 CC Pass. C T56 Mulhouse/ Sochaux FR H2 03 H2 09 2009+ 18,167 2,500 32 0 0 0 0 0 0 0 0 PSA Peugeot 307 Pass. C T50/T51 Sochaux FR H1 01 H2 08 2008 161,672 0 0 0 0 0 0 0 0 0 0 PSA Peugeot 307 SW Pass. C T52 Sochaux FR H2 02 H2 09 2009+ 67,853 33,903 0 0 0 0 0 0 0 0 0 PSA , incl SW and incl. CC from 2010 Pass. C T7 Sochaux/ Mulhouse FR 2007+ 2013 106,054 299,322 209,341 222,946 198,405 142,500 60,000 31,500 0 0 0 PSA Pass. C‐MPV T8 Sochaux FR H2 09 2009 0 406 64,671 132,543 139,827 101,000 82,500 70,000 62,500 96,500 99,000 PSA Peugeot 308 Comm.Van T7 Sochaux FR 2008+ 2 3,478 3,337 3,088 3,885 7,500 5,000 4,000 3,500 0 0 PSA Peugeot 308 CC Pass. C T76 Sochaux FR 2009+ 0 1,331 21,000 0 0000000 T7 ‐ add cabrio in PSA Peugeot 308 RCZ Pass Sports Graz (Magna) AU H1 10 2015 0 0 92 19,135 19,725 9,750 8,500 7,750 18,500 24,500 21,500 2015 PSA Peugeot New 308 Pass C T9 Sochaux FR H2 13 2013 0 0 0 0 0 0 100,000 165,000 185,000 176,500 172,500 PSA Peugeot 308 Pass. C B50/B51 Kaluga RU H2 10 2010 0 0 0 15,500 19,000 9,500 26,500 27,500 28,000 26,500 24,500 PSA MPV Pass. C MPV T7 Sochaux FR H2 09 2016 0 0 21,923 69,345 74,469 49,000 47,500 46,500 41,000 58,000 60,000 PSA Pass C T7? Kaluga RU H2 12 0 0 0 0 0 9,500 30,000 35,000 36,000 32,000 30,000 PSA incl coupe Pass. D D22/D23 Rennes FR Q3 04 2010 127,930 81,756 33,247 28,898 734 0 0 0 0 0 0 PSA Peugeot 508 incl coupe Pass. D W2 Rennes FR H1 11 2011 0 0 0 6,385 131,750 90,000 75,000 59,500 50,000 42,500 75,000 PSA Pass. D Z83 Sochaux FR Q2 07 2007 5,983 4,565 909 956 0 0 0 0 0 0 0 Valenciennes (Sevel PSA Peugeot 807 Pass. MPV V2 FR Q1 02 2011FL 20,223 13,384 6,185 5,724 6,376 4,250 4,000 3,750 3,450 5,000 5,500 Nord) Valenciennes (Sevel PSA Peugeot Expert Comm.Van U FR Q1 02 2007 42,049 44,075 18,950 28,893 33,260 26,250 22,500 20,000 22,500 28,000 31,000 Nord) Valenciennes (Sevel PSA Toyota Pro‐Ace Comm Van U FR Q2 13 0 0 0 0 0 0 3,500 7,500 11,000 14,000 12,500 Nord) PSA Peugeot Boxer Comm.Van Val di Sangro (Sevel Sud) IT Pre 2002 H2 06 2013FL 51,822 52,393 23,194 46,716 54,451 42,000 43,500 48,000 50,000 47,500 46,500 PSA Peugeot Partner Comm.Van‐based M59 Vigo SP H2 96 H1 08 H2 08 115,779 0 0 0 0 0 0 0 0 0 0 PSA Peugeot Partner Comm.Van‐based B9 Vigo SP H2 08 2016 0 108,086 93,614 112,991 122,000 88,500 70,000 67,500 55,000 52,000 50,000 PSA Peugeot Partner Comm.Van‐based M59 Mangualde PT H2 96 25,190 29,643 24,546 23,183 0 0 0 0 0 0 0 PSA Peugeot Partner Comm.Van‐based B9 Mangualde PT H2 09 0 0 0 0 24,609 20,250 19,000 16,750 14,750 12,250 11,500 PSA Peugeot Total 1,502,828 1,352,227 1,242,968 1,325,329 1,310,011 1,088,000 1,092,000 1,151,000 1,147,450 1,148,750 1,159,750 PSA ALL Total 2,677,683 2,477,868 2,238,311 2,377,135 2,379,427 1,947,100 1,887,750 1,940,000 1,981,950 2,079,000 2,107,750

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 84

Renault-Nissan-Dacia rose by 5.8%. Unit sales were down 5.8% at just over 596,000 units – this fall was entirely due to Europe, because international sales outside Europe rose by 7.7%. Key recent developments: the key news at Renault since the last report Renault’s European sales fell by 18.4%. concerns the following: Q2/H2 results also down  News of 7,500 more jobs to go in France mostly by what Renault calls “attrition”, although around 1,800 of these lost jobs could be compulsory H1 revenue was down slightly, by just 0.8%, at €20.935bn, although Q2 revenue redundancies. was actually up, year-on-year, from €10.67bn to €11.4bn, a rise of nearly 7%.  A proposal put to the unions to increase working time in Renault factories by However, Renault’s unit sales were down, by 3.3% to 1.328mn, with European around 6.5%, which would in turn save €65mn a year; unsurprisingly perhaps sales down by nearly 15% to 708,000. The impact of this is that H1 net income the unions have reacted rather negatively to this! was down 39% - and as with PSA’s major problems being in its car unit, so this is the case with Renault’s core car business.  The continuation of negotiations with its unions regarding improvements in competitiveness and efficiency – with Renault still saying that it does not want Although these results are disappointing enough, they would have been far worse to close any plants in France. without the contribution of associate companies, especially Nissan: associate companies contributed €636mn to the profit pool (up from €557mn in H1/2011),  The start of full scale production at its new Moroccan plant. with Nissan accounting for €564mn of the H1/2012 total. This followed on from key news last time, namely: Unions negotiations re the future structure of Renault  New investment in Spain, apparently ensuring the future of both vehicle plants and the powertrain operations in the country. While PSA, GM and Ford have responded to the downturn in the European market  Confirmation that the new Laguna and Espace have been delayed until 2015. by announcing plant closures, Renault appears resolute in going down a different path. Its earlier strategy, 2016 – Drive The Change, was predicated on re-sizing  Confirmation that plans are under way to build a new assembly plant in Algeria its existing plants in France, but keeping them going with new products promised. with an initial capacity of 75,000 upa, with the potential for this to rise to 150,000 upa The new union negotiations which started at the beginning of November appear to  And Nissan deciding to bring manufacture of its small Infiniti model for Europe be based on the same underlying premise. Confirming these negotiations, Renault in-house, rather than have it made by Magna. In addition, Nissan has re-stated the French manufacturing arrangements which underpin its plans, ie: decided that this model will be made in the UK, with the consequence  Cleon will make a new range of electric motors that one of the models planned for the UK will move to another Nissan  Flins will make the new Clio and ZOE – although unions and the industry press plant. Possibly outside Europe. continue to report that Clio production will be progressively transferred to Further details on these issues are provided below: Turkey, with possibly as little as 30% of future Clio volumes made in France  Sandouville will be reconfigured as a van plant for the new Trafic Falling Q3 revenue  Maubeuge will add the electric version of the Kangoo Full year financials are not yet available, so for now, and for convenience we repeat the information on Renault’s Q3 results.  And Douai will make the replacements for Scenic, Laguna and Espace. Renault reported a 13.3% fall in group revenue in Q3, and a fall of 14.4% fall in Then at the beginning of 2012, Renault said it was looking to change working automotive revenue. At the same time, revenue at its finance arm, RCI Banque practices in France, to effectively increase working time by 6.5%, by reducing gaps between work stations and breaks in work. It maintains it does not plan any

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 85

compulsory closures in France, but we still think this cannot be discounted in the  And reaching a global sales target of more than 3mn units. long run, especially if, as we expect, it fails to recover to past production levels. These objectives and path which Renault is following are consistent with the It is clear that Renault is looking for cost reductions, and around 7,500 job cuts at picture set out by Renault’s finance director, Dominique Thormann, in November its French plants as well; it said that the aim of the negotiations (which are still 2011. At that time, he confirmed that the principal growth opportunities for the ongoing) will be to draw up details for “innovative solutions” to secure these plants’ company were outside Europe. The change in focus for the company was futures. At this stage, it has not got the unions fully on side and further tough already apparent by then – 5 of its top 10 markets are outside Europe, ie Brazil negotiations are inevitable. (2nd), Russia (4th), Turkey (5th), S Korea (7th) and Argentina (8th); put another way, in 2007 Europe represented 65% of Renault sales, and by 2011, it accounted for Investment in Spain confirmed 57%; by 2013 this will have fallen closer to 50%, with the proportion somewhat In earlier reports we had questioned the long term viability of Renault retaining its difficult to project at this stage given the uncertainty affecting the European current manufacturing network in the light of the industry’s overcapacity and economy as a whole. restructuring taking place at other vehicle companies. We had suggested that one In Europe, Renault faces a number of challenges, not the least of which will be or other, or possibly even both of Renault’s plants in France could be closed with assessing whether it can retain all its production facilities in the long run. In April, Spanish production absorbed within other plants. Renault cut the night shift at its Slovenian plant, cutting 330 jobs. This followed on However, somewhat unexpectedly, in late November, the head of Renault Spain from earlier decisions: announced that Renault would in fact invest in its Spanish operations, adding new  At least 300 workers will be cut at Flins as the plant reduces Clio production models to its plants there and, crucially for the Spanish economy, creating new and switches increasingly to batteries and EV production. It is conceivable that jobs. More specifically, the information released so far covers: actual labour force cuts here could be higher than this, especially if the EVs to  Two new platforms to be allocated to Palencia, both shared with Nissan, in be made here are less successful than Renault is expecting. four body styles, with future annual production of 280,000 upa – note that the  Renault laid off almost 2,300 workers at the Valladolid plant in Spain for more timing for these models has not been confirmed and this announcement than 25 days in H1. It has also suspended the night shift at the other Renault came too late to be reflected in the data tables; this will be done for the plant in Spain, Palencia, affecting 300 workers. next report o Renault’s explanation is that 15 of the planned shut-down days are due to  A rise in engine and gearbox output, to between 1.3-1.4mn units the time required to modify the assembly lines at Valladolid for the new  Confirmation that the Valladolid plant will continue with the Twizy and planned SUV and EVs, while the other days are due to the economic slowdown. B-segment SUV; this has now been revealed as the Captur and will be fully o Laid-off workers will receive around 65-70% of their normal salaries. unveiled at the Geneva motor show in March.  Production at Valladolid will fall from 460 to 340 units a day, while at Palencia  In total, the new plans for Spain will create around 1,300 new jobs and the production will be much higher, but still fall from 1040 to 940 a day. In safeguard existing positions at the factories concerned. practice we think the volumes at Valladolid will be reduced even further Other objectives for 2013 and beyond and remain depressed until the Captur is in full production, although we do not see this as making a major impact on this plant’s low level of Earlier in 2012, Renault set the following objectives for 2013: utilisation. It should be added, in fairness, that Renault will also make  To achieve a cumulative operational free cash flow between 2011-13 of over the Twizy in Valladolid – however, this is not officially a car and therefore €2bn, having achieved its 2011 objective of >€500mn free cash flow. is excluded from our Production Outlook.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 86

 Meanwhile, in a move indicating the competitive market place in which Renault currently have combined Dacia/Renault/Nissan based vehicles being produced at operates, it is cutting the range sold in the UK where Renault is a relatively a rate of around 0.5mn upa by 2016 – this could well turn out to be an small player. Selling certain vehicles in right hand format is no longer underestimate if the rate of production of “old-style” Ladas (traditionally around economic in view of their low volumes; the models to be cut from the UK sales 700,000 upa) declines much faster than is currently expected at the present time. list are: Espace, Laguna, Kangoo passenger version, Modus and Wind cabrio. Depending on the pricing of the new Dacia models (including those to be badged as Ladas), the ratio of old-to-new Ladas could change much more quickly than this. As noted before, 2011 saw the launch of the new Renault “2016” strategy; this sets out a 2013 sales target of 3mn units and also calls for: In addition to the new Togliatti line, there is also:  An expansion in the Renault range from 40 models in 2010 to 48 by 2018.  Avtoframos in Moscow, Renault’s first facility in the country, where capacity is being increased to 160,000 upa; this plant will, we understand, switch partly  Renault-Nissan attaining global leadership in what it calls “zero-emissions” to the Megane and other vehicles on that platform. Clio production will switch mobility, with a target of 1.5mn EVs from the Renault-Nissan Alliance on the to the AvtoVAZ plant in due course. road by 2016. The expansion at Togliatti will allow Logan and Sandero production to move  A review of the Alliance’s capital structure within three years; this is very from Moscow – and other Renault-badged models will be made there instead, interesting as there were some calls from the financial markets in 2011 for although the timing for this switch remains to be clarified. We assume this will Renault to review the amount of capital it has tied up in the Renault-Nissan begin in earnest by 2015 – the groundwork is already being laid for this with alliance. It would not be surprising if Renault decided to reduce its stake in the start of Megane and Fluence production at Avtoframos in late 2011. Nissan – certainly the pressure for a full-blown merger does not seem to be pressing at the present time.  The Nissan St Petersburg plant which is now being expanded. More specifically: Russian update – control of AvtoVAZ effectively now complete, new o Nissan is expanding the pressings and injection moulding capacity it has assembly line in use installed in Russia and will add the Qashqai and other as yet unnamed Renault-Nissan together with its JV partner, Russian Technologies, have models to be sold under the Datsun brand to Russian production. Datsun progressively taken an ever larger stake in AvtoVAZ; in December 2012, they models will also come off the line at the AvtoVAZ plant, with some of the signed an agreement to take a 75% stake in AvtoVAZ; Renault-Nissan will hold Datsun models actually based on existing Lada models. 50% plus one share and Russian Technologies will hold 25% plus one share; and o Investment will total €167mn, raising capacity to 100,000 upa and the these stakes will then be increased so that by July 2014, Renault-Nissan will own assembly line in Russia will be able to make 5 different models including 67.1% and Russian Technologies will own 32.9% the Qashqai; Russian demand for the Qashqai cannot be met by Nissan 2012 saw a new production line was opened in AvtoVAZ’s Togliatti factory. This Sunderland so additional capacity was required. new line has seen an investment of €400mn to provide new capacity of up to o Capacity here is being raised to 100,000 upa and an investment of 350,000 cars, to make two new Ladas and a Nissan model this year, and two new €167mn has been made in new press and plastic injection moulding Renaults next year. facilities. The investment has included assembly equipment which is flexible enough to make five different models on the line at the same time. In terms of manufacturing facilities in Russia, the group currently operates three production facilities with a total capacity of 1.1mn upa – this is due to rise to 1.6mn o Nissan wants to sell 500,000 units in Russia by 2016 and also wants 80% upa by 2016. Our current Outlook for Dacia/Renault/Nissan based vehicles made of these to be made in Russia: for this to be realistic, the 100,000 upa at AvtoVAZ and Avtoframos is provisional and in all probability conservative – we

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 87

capacity of the St Petersburg plant will either have to be raised again or as Barcelona factory followed on from a new labour agreement having been signed, many as 300,000 Nissan units will have to come out of Togliatti. guaranteeing increased labour flexibility in return for a commitment to produce Nissan in Europe vehicles in Barcelona for the next 10 years; this announcement was made in mid- January 2011 – in the first week of December 2010, reports had appeared which One of the most remarkable success stories of the auto industry in recent years suggested that Nissan had discounted Barcelona as a production location for the has been the continual rise in production of the Japanese VMs outside Japan. new pick-up. Although Honda and Toyota have witnessed production slowdowns owing to the tsunami and Thai floods, at Nissan the situation is rather different and the brand is Production of the NV200 van has already started in Barcelona, but production of growing seemingly inexorably. the NV400 (the replacement for the Interstar) will take place at Batilly in France as this vehicle will, as was the outgoing model, be based on the . The Indeed in 2011, the Nissan UK factory produced a record total in 2011, over Pathfinder SUV will continue to be made in Spain, but the new model to be 480,000 vehicles, of which just over 301,000 were Qashqais and almost 133,000 launched in the US will not be allocated to Europe which will continue with the were Jukes; the balance were Notes. At the time of compiling this report, the existing model for the foreseeable future. official figures for 2012 production had not been made public (they should be public by the time this report is published) but we understand that 2012 will be Electric vehicles another record year, with the Sunderland plant topping 0.5mn vehicles. Renault and Nissan’s commitment to electric vehicles is becoming increasingly Nissan’s commitment to the UK was reinforced in 2011 and 2012 by a number of evident. Having started production of EV version of the Kangoo and Fluence in decisions, starting with the announcement that it would make the second 2011, As well as launching sales of the (Japanese-made) , at the generation Qashqai at Sunderland. This will involve an investment of around Geneva motor show in March, Renault launched the Zoe EV, its first own purpose £192m and should save 6,000 UK jobs. It is also understood that the long term designed EV. Nissan is investing €100mn in Barcelona to make an EV version of aim is to raise production in Sunderland to more than 600,000 upa – with the the NV200 van. Invitation and the compact Infiniti car to be added from 2013 and 2014, exceeding Readers are referred to earlier reports for details on Renault-Nissan’s battery the 600,000 upa barrier is eminently reasonable. plants. The Infiniti model was going to be made outside the UK, but at the end of 2012, Manufacturing news: while Nissan Sunderland has had a record production year Nissan decided to make this model in Sunderland (largely because of its in 2012, production at Renault has been declining and slowed down particularly in engineering commonality with the Qashqai) and this will mean that the proposed the last quarter of the year, specifically to stop excessive stock build-up; this C-segment car will now be made elsewhere,, although its production location has affected production at the end of October and early November, production at Douai, not been confirmed. Nissan is also recruiting another 200 engineers and Flins and Sandouville in France and at the Novo Mesto plant in Slovenia. This will technicians for its Sunderland plant to support record production, the opening of continue in 2012 and we expect European production of Renault brand models to the battery plant and the expansion in the manufacturing line-up. slow this year, dropping by around 290,000 units to approximately 1.18mn units. These new models, along with the expected continued success of Qashqai and Renault is also in the midst of a reorganisation of its production footprint in France: Juke, plus the Leaf EV, mean that it is entirely plausible for Nissan’s Sunderland plant to be making well over 600,000 vehicles a year by 2016.  It is switching production of the next Laguna and Espace from Sandouville to Douai. This has clear significance for production levels at Sandouville which The Nissan Barcelona plant has also benefited from an investment of €80mn to will switch to being solely a van plant (see below). make a new pick-up truck. The decision to award the pick-up contract to the

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 88

 Switching Laguna and Espace to Douai from 2015 (a year later than planned) maintaining the line that closures are not planned. The reality may well is practical because the new models will be made on the new C/D platform turn out to be something rather different. which Renault is developing with Nissan. That said, Renault also wants to Reorganisation of engine production in Europe produce a premium model, quite possibly, in association with Mercedes (with whom it has a co-operation in small cars) and a premium Renault made on a Renault has also announced plans to re-allocate some of its engine production Mercedes platform in the second half of the current decade is quite probable. between its various European engine factories, with changes taking place in France and Spain:  The new Renault-Nissan C/D platform will form the basis for the brands’ mid- sized MPVs/SUVs and saloons/sedans, with as much as 70% of the  The Cleon factory (which will make electric motors for EVs) has also been components (accounting for 80% of the cost) being standardised. allocated production of a new diesel engine for the Megane. Other vehicles made on this platform will include the replacements for the  The Valladolid plant in Spain will make a new small petrol engine for the Nissan X-Trail and Qashqai/Dualis, as well as the Renault Megane and Renault-Nissan alliance; this will be made as a downsized 900cc, 3-cylinder Fluence. A Renault version of the Qashqai could appear in the second half of unit and a 1.2 litre 4-cylinder version. The Valladolid plant is also supplying the decade, using this new platform. The first vehicles off this new platform will diesel engine to Mercedes for the new A-class appear in 2013, with total volumes from the platform expected to be in the  Production of the 3-cylinder H4 engine will also be made at the Dacia factory region of 1.5mn upa. from November 2013, while the larger 4-cylinder H5 engine will be made in  As noted above, once production of the current Laguna and Espace have Valladolid: come to an end, the Sandouville plant will become entirely dedicated to LCVs.  These engines will produce much lower emissions that the engines which Sandouville will make the new Trafic and also the high roof versions of the they replace; indeed the H4 and H5 are expected to account for over 80% new Opel/Vauxhall Vivaro from 2013: of Renault’s engine production by 2015.  Peak production here is planned to be around 100,000 upa.  Renault has said these new engines will not impact on production of  At this stage, no Nissan versions are planned, although they have not engines at its Douvrin factory in France despite union fears that engine been ruled out. The Sandouville production volumes will include high roof production will in fact be shifted abroad, to Spain and Romania. versions of the Opel/Vauxhall Vivaro – high roof models cannot be made Expansion continues at Dacia at the Luton factory owing to height restrictions in the paint shop. Dacia production in Romania is close to the plant’s capacity; around of this  The big question concerning Renault is whether it will actually close a factory installed capacity this year will be used for the Duster SUV. Because of the strains in Europe: on the Romanian plant’s capacity, Renault decided to add a second full  As noted in the Overcapacity section earlier in this report, we had thought manufacturing facility for Dacia. A new group plant in Morocco has now come on that think Renault could well close one, or even both, of its plants in stream; this factory, in the Tangiers duty free zone, will have initial capacity for Spain; for now this appears to have been avoided with the decision to 170,000 upa, with the potential to reach 400,000 upa when two further models are invest at Palencia in particular. introduced. The first vehicles made here will be Dacias, although Renault and  Nonetheless, given that we do not see Renault reaching even 1.4mn units possibly Nissan models could also be made there. in Europe by 2017, which would be close to 400,000 units down on its The Moroccan factory was officially opened in February and has started production 2007 peak, we have to question whether Renault will really be able to of the MPV; this will be followed by a small van – the Dokker – which avoid cutting any capacity in Europe in the long run. Officially it is will also be sold in passenger format; this vehicle is similar to the .

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 89

The Moroccan plant is intended to supply Europe, as well as North Africa and parts of the Middle East. Renault has invested around €1.1bn in the plant which has a high level of local content, 70% by volume, but 46% by value. Numerous suppliers have been encouraged to locate in Morocco to support this venture, including Valeo, Faurecia, St Gobain and Yazaki. They all operate within the free trade zone and are within a 30km range of the factory. This may even have some long term impact on production of the Dacia range in Romania, depending on which model variants are to be made at each plant. If the European market fails to recover at the expected rates, quite how Renault will manage this new capacity, alongside its existing capacity, is an intriguing question. In a separate development, it has now been confirmed that Renault will open a second new factory in North Africa, in Algeria, with output of initially at 75,000 upa. Timing remains to be confirmed and as is the status of the plant, ie whether it will simply be a kit plant or a full manufacturing facility. Back in Morocco, new versions of the Logan and the Sandero will be launched at the old plant in Casablanca later in 2013. This plant is entirely focused on the local market, whereas the new plant in Tangier is very much orientated to exports, to Europe, the rest of Africa and the Near East as a whole.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 90

New models: These are summarised below:

2013 2014 2015 2016 Clio switch to X98 platform Twingo and other models from Daimler JV New Kangoo New Logan PU Capture, B-segment SUV-like model to be made in Spain (delayed by one year) New Megane starts New Juke (replacement for Modus), will be Renault’s equivalent to Possible revival as rival to Citroen Sandero Stepway New Megane CC the Juke) DS3 and Mini crossover New Trafic New Qashqai Laguna and Espace Renault version of Smart ForTwo New Sandero New Pick-up in Spain Nissan Infiniti at Sunderland Nissan Leaf EV Nissan Invitation starts van from Moroccan factory

The Production Outlook tables which follow show that we expect Renault production in Europe to fall by close to 300,000 units this year, before recovering slightly from 2013. All of the main volume Renault models currently made in Europe have now passed the early days of their life cycles, so a decline would be expected in normal circumstances anyway. The economic uncertainty means that this situation will be somewhat exacerbated and it will be a couple of years before the new electric vehicles and new Clio will have a significant impact in terms of reviving sales. We see Renault having a much stronger time in production terms from 2013, when it will have a full year of the new Clio, start production of the Trafic in France, and also launch the new B-segment SUV in place of the Modus; in addition, the Zoe EV will have its first full year of production. The rise in 2015 and 2016 will be underpinned by the next Espace/Laguna and the start of the new Megane range. However, even allowing for the Megane and Fluence in Russia, we do not see Renault brand production in Europe by 2016 getting back to its 2007 pre-recession peak. Note that the volumes shown here for Palencia are possibly too low in light of the commitment to add four new models to this plant, although the timing and details for these models have still not been confirmed and some of them may actually not appear until after 2016. Nissan’s European production will fall slightly next year, due largely to model cycle effects, but it will steadily climb again from 2014 once the Leaf, Invitation and new Qashqai have started production. Dacia production is also expected to rise strongly this year, largely on the back of rising production in Russia, and also the start of production at the new plant in Morocco. Group production volumes in Europe should reach 3mn units in 2014 – the tipping point should be the full scale production of Logan-based models at Togliatti; we expect over 300,000 of these to be made there per year by 2016. 4mn units in Europe by the end of the decade is also a reasonable expectation for the Renault group.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 91

Renault-Nissan-Dacia Production Outlook to 2017 – Renault and totals for other group brands Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform)

Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Renault‐Nissan Renault Twingo Pass. A X06 Flins FR H1 07 2005 28,466 2 0 0 0 0 0 0 0 0 0 Renault‐Nissan Renault Twingo Comm.Van X06 Flins FR H1 07 2005 386 0 0 0 0 0 0 0 0 0 0 Renault‐Nissan Renault Twingo 2 /Twingo Campus Pass. A X44 Novo Mesto () SL Q1 07 2012 82,763 134,398 187,444 163,052 146,782 97,000 91,000 10,000 0 0 0 Renault‐Nissan Pass. A X33 Novo Mesto (Revoz) SL Q1 11 2010 0 0 0 20,000 12,000 1,000 750 500 0 0 0 Twingo 3 inc Renault 5 Renault‐Nissan Renault replacement to compete with Pass A Daimler JV Novo Mesto (Revoz) SL H1 12 0 0 0 0 0 0 7,500 125,000 155,000 152,500 152,500 Citroen DS3 Renault‐Nissan Smart New Four Seater Pass. ARenault JV Novo Mesto (Revoz) SL H2 13 0 0 0 0 0 0 5,000 60,000 70,000 68,500 68,500 Renault‐Nissan EV Pass. B Flins FR H1 12 0 0 0 0 0 750 35,000 55,000 65,000 60,000 57,500 Renault‐Nissan Renault Clio Campus Pass. B X65 Flins FR Q3 09 0 0 13,000 5,000 0 0 0 0 0 0 0 Renault‐Nissan Renault Clio Pass. B X85 Flins FR Q4 05 207,917 160,056 126,228 140,732 136,382 115,000 101,000 84,000 69,500 56,000 40,000 Renault‐Nissan Renault Clio Comm.BX85FlinsFRQ4 05 2013 ‐ X98 3,277 3,620 5,208 7,693 14,461 10,000 7,500 5,500 5,000 3,500 2,500 Renault‐Nissan Renault Clio Pass. B X85 Valladolid SP Q4 05 36,951 20,560 25,450 30,000 40,000 31,000 6,000 0 0 0 0 Renault‐Nissan Renault Clio Pass. B X65 Novo Mesto (Revoz) SL Q4 06 2005 117,394 63,696 25,236 29,441 15,000 7,500 0 0 0 0 0 Renault‐Nissan Renault Clio (Old Symbol) Pass. B X65 Bursa TR 2006 75,448 48,887 0 0 0 0 0 0 0 0 0 Renault‐Nissan Pass. B L35 Bursa TR H2 08 0 29,870 64,117 74,513 79,052 43,000 36,500 10,000 0 0 0 Renault‐Nissan Renault Clio Pass. B X86 Bursa TR 2013 ‐ X98 102,929 151,425 179,495 145,119 127,500 160,000 179,000 202,000 215,000 203,000 201,250 Renault‐Nissan Renault Modus Comm.Van J77 Valladolid SP Q2 04 2,357 0 0 0 0 0 0 0 0 0 0 Renault‐Nissan Renault Modus Pass. B‐MPV J77 Valladolid SP Q2 04 65,157 72,590 69,359 47,251 29,000 31,000 10,000 0 0 0 0 Renault‐Nissan Renault New B‐seg SUV (similar to Juke) Pass B‐SUV B87 Valladolid SP 2012‐13 0 0 0 0 0 0 45,000 69,000 72,000 67,500 67,500 Kangoo incl EV and Mercedes X76 switching to 2011 (EV), Renault‐Nissan Renault Comm.Van Maubeuge FR H2 97 2007‐2008 190,252 178,602 113,488 139,243 146,677 107,500 115,000 116,500 109,000 105,000 102,000 version X61 2015 New Renault‐Nissan Renault Mégane Pass. C X84 Douai FR Q1 03 2009+ 19,019 8,000 0 0 0 0 0 0 0 0 0 Renault‐Nissan Renault Mégane CC Pass. C sports X84 Douai FR Q2 03 2009+ 27,907 14,000 2,750 0 0000000 Renault‐Nissan Renault Mégane CC Pass. C sports X95 Douai FR Q2 09 0 0 0 10,000 11,000 6,000 5,250 5,000 7,000 9,000 8,250 Renault‐Nissan Renault Mégane Pass. C X84 Palencia SP Q1 03 2009+ 168,620 157,513 65,000 0 0 0 0 0 0 0 0 Renault‐Nissan Renault Mégane Comm.Van X84 Palencia SP 2009+ 8,078 7,300 0 6,340 7,500 4,500 3,500 3,000 2,500 2,000 2,000 Renault‐Nissan Renault Mégane Pass. C X95 Palencia SP Q2 09 2015 0 0 190,280 255,736 245,000 199,000 171,000 149,500 175,000 210,000 205,500 Renault‐Nissan Renault Mégane sedan Pass. C X84 Bursa TR Q1 04 2009+ 85,279 65,369 23,657 21,834 14,000 000000 Renault‐Nissan incl. EV Pass. C X95/L38 & B32/38 Bursa TR Q2 09 0 0 10,312 65,617 103,994 108,000 93,000 75,000 69,500 65,000 62,000 Renault‐Nissan Renault Megane/Fluence Pass C X95 Moscow (AvtoFramos) RU H1 2011 0 3,085 5,000 11,000 30,000 55,000 70,000 75,000 Renault‐Nissan Renault Scenic Pass. C MPV J94 Douai FR Q1 03 2009+ 267,970 170,912 30,000 0 0000000 Renault‐Nissan Renault Scenic Pass. C MPV J95 Douai FR Q2 09 2016 0 0 130,000 184,191 166,000 112,500 105,000 94,500 74,000 98,000 92,500 Renault‐Nissan Pass. D X74 Sandouville FR H2 00 Q1 07 H2 05 40,000 0 0 0 0 0 0 0 0 0 Renault‐Nissan Renault Laguna Pass. D X91 Sandouville FR Q1 07 2014‐15 59,514 81,572 46,907 52,267 50,232 28,000 26,500 22,500 17,500 7,500 5,000 Renault‐Nissan Pass. E X73 Sandouville FR Q1 02 Q1 10 2008 2,812 1,693 1,180 0 0 0 0 0 0 0 0 J81 ‐ switch to J93 will Renault‐Nissan Pass. MPV Sandouville FR H2 02 H2 09 2011+ 40,675 21,668 15,214 16,876 14,674 13,250 11,500 10,000 6,500 0 0 take place 2014 tbc Renault‐Nissan Renault New Laguna and Espace Pass D/MPV New CD platform Douai FR 0 0 0 0 0 0 0 0 10,000 65,000 80,000 Renault‐Nissan Comm.Van X83 successor Sandouville FR Q4 12 0 0 0 0 0 0 55,000 67,500 75,000 80,000 76,500 Renault‐Nissan Renault Master (incl Opel and Nissan versions) Comm.Van X70 Batilly FR H2 02 H2 10 2010 112,140 90,580 53,674 75,787 0000000

Renault‐Nissan Renault Master (incl Opel and Nissan versions) Comm.Van X62 Batilly FR H2 10 0 0 0 5,000 106,491 100,500 96,500 89,500 79,000 67,500 65,000 Renault‐Nissan Renault Total 1,745,311 1,482,313 1,377,999 1,495,692 1,468,830 1,180,500 1,217,500 1,284,000 1,331,500 1,390,000 1,363,500 Renault‐Nissan Nissan Total 546,415 522,298 386,205 529,377 663,985 685,350 664,750 796,750 915,000 942,000 933,000 Renault‐Nissan Dacia Total Also approx 125,000 kits pa from Pitesti for other Logan assembly sites 361,402 357,029 345,663 428,147 466,839 521,695 658,000 783,000 869,500 865,000 867,000 Renault‐Nissan AvtoVAZ Total 0 0 0 0 0 20,000 125,000 185,000 261,500 395,000 433,000 Renault‐Nissan ALL Total 2,653,128 2,361,640 2,109,867 2,453,216 2,599,654 2,407,545 2,665,250 3,048,750 3,377,500 3,592,000 3,596,500

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 92

Renault-Nissan-Dacia Production Outlook to 2017 – Nissan and Dacia/AvtoVAZ details and totals for other group brands Nissan Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) of Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Renault‐Nissan Renault Total 1,745,311 1,482,313 1,377,999 1,495,692 1,468,830 1,180,500 1,217,500 1,284,000 1,331,500 1,390,000 1,363,500 Renault‐Nissan Pass. B K123 Sunderland UK Q1 03 2010 82,917 80,746 88,429 54,580 0 0 0 0 0 0 0 Renault‐Nissan Nissan Micra CC Pass. B sports K127 Sunderland UK Q3 05 5,576 3,001 175 0 0 0 0 0 0 0 0 Renault‐Nissan Nissan Leaf (electric) Pass B New Sunderland UK H1 12 0 0 0 0 0 100 31,000 45,000 50,000 55,000 51,000 Renault‐Nissan Pass. B‐SUV X12C Sunderland UK Q1 10 0 0 0 44,622 132,606 157,500 149,500 135,000 126,500 109,000 109,000 Renault‐Nissan Pass. B‐MPV E111 Sunderland UK Q1 06 2012 92,678 77,819 50,880 52,872 46,602 47,000 12,500 0 0 0 0 Renault‐Nissan Nissan Invitation Pass. B New Sunderland UK Q3 13 0 0 0 0 0 0 19,000 85,000 105,000 100,000 100,000 TBC ‐ assume Spain for Renault‐Nissan Nissan New C segment car Pass. C New SP Q3 14 2014 0 0 0 0 0 0 0 18,000 66,500 77,000 72,500 now ‐ could be outside Renault‐Nissan Pass. C‐SUV J101 Sunderland UK Q4 06 2014 164,191 224,989 198,841 271,188 301,277 320,000 309,000 325,000 318,500 313,500 309,000

Renault‐Nissan Pass. D MS/ X31B Sunderland UK Pre 02 8,316000 0000000 Renault‐Nissan Pass. C FFL St Petersburg RU H2 09 2009 0 0 790 4,000 12,500 13,000 14,250 16,000 20,000 25,000 25,000 Renault‐Nissan Nissan X‐Trail Pass. C‐SUV P32E St Petersburg RU H2 09 2009 0 0 3,000 11,000 21,000 24,750 26,750 24,250 20,000 17,500 17,500 Qashqai ‐ inc. probable Renault Renault‐Nissan Nissan Pass C P32E St Petersburg RU H2 13 2013 0 0 0 0 0 0 10,000 30,000 35,000 45,000 45,000 version from 2014/5 Renault‐Nissan Pass E Murano St Petersburg RU H2 11 2011 0 0 0 0 5,500 7,000 6,250 5,750 5,000 4,500 4,000 Renault‐Nissan Nissan Various other models Pass. &Various Various St Petersburg RU H2 11 0 0000 2,500 20,000 29,000 45,000 58,000 65,000 Renault‐Nissan Nissan Infiniti compact model Pass C Mercedes A Sunderland UK H2 14 0 0 0 0 0 0 0 9,500 45,000 60,000 57,500 Primastar (and Renault Trafic, Opel Renault‐Nissan Nissan Comm.Van X83 Barcelona SP 2006 FL 86,435 69,445 24,556 41,263 69,000 51,500 7,000 0 0 0 0 Vivaro) Renault‐Nissan Nissan NV200 Comm Van NV200 Barcelona SP H2 09 0 0 420 12,753 27,000 25,500 28,000 22,250 19,500 17,500 17,500 Renault‐Nissan Nissan Navarra Comm.PU QZ/H61 Barcelona SP 79,147 47,194 15,102 25,925 32,000 23,500 19,000 31,000 35,000 32,000 32,000 Renault‐Nissan Pass. SUV QZ/P61 Barcelona SP Q2 05 27,155 19,104 4,012 11,174 16,500 13,000 12,500 11,000 9,000 13,000 13,000 New models, details to be Renault‐Nissan Nissan Comm Pass Unknown Barcelona SP 2011‐12 0 0 0 0 0 0 0 10,000 15,000 15,000 15,000 confirmed Renault‐Nissan Nissan Total 546,415 522,298 386,205 529,377 663,985 685,350 664,750 796,750 915,000 942,000 933,000 Renault‐Nissan Dacia Total Also approx 125,000 kits pa from Pitesti for other Logan assembly sites 361,402 357,029 345,663 428,147 466,839 521,695 658,000 783,000 869,500 865,000 867,000 Renault‐Nissan AvtoVAZ Total 0 0 0 0 0 20,000 125,000 185,000 261,500 395,000 433,000 Renault‐Nissan ALL Total 2,653,128 2,361,640 2,109,867 2,453,216 2,599,654 2,407,545 2,665,250 3,048,750 3,377,500 3,592,000 3,596,500 Dacia/AvtoVAZ Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Renault‐Nissan Renault Total 1,745,311 1,482,313 1,377,999 1,495,692 1,468,830 1,180,500 1,217,500 1,284,000 1,331,500 1,390,000 1,363,500 Renault‐Nissan Nissan Total 546,415 522,298 386,205 529,377 663,985 685,350 664,750 796,750 915,000 942,000 933,000 Renault‐Nissan Dacia Logan Pass. B Clio Pitesti RO H2 04 2012 185,246 88,347 50,548 50,952 41,796 57,000 68,000 80,500 77,000 72,500 70,000 Renault‐Nissan Dacia Logan MCV Pass. B Clio Pitesti RO H1 07 2012+ 99,515 104,189 80,247 44,514 39,187 38,500 62,500 72,500 74,000 69,000 68,000 Renault‐Nissan Dacia Logan PU Comm.B Clio Pitesti RO 2012+ 0 9,847 7,721 7,276 6,201 3,650 0 0 0 0 0 Renault‐Nissan Dacia Logan Van Comm B Clio Pitesti RO 2012+ 7,400 7,100 8,969 10,436 11,176 7,545 0 0 0 0 0 Renault‐Nissan Pass. B‐SUV Clio Pitesti RO H1 2010 0 0 0 86,239 168,673 135,000 125,000 105,000 115,000 110,000 106,500 Renault‐Nissan Pass. B Clio Pitesti RO 2014 0 74,828 148,527 141,882 60,587 64,000 95,000 109,000 103,500 95,000 90,000 Logan/Sandero/ Duster ‐ 2006/ Renault‐Nissan Dacia progressive switch to Renault C seg Pass. B Clio Moscow (AvtoFramos) RU 2012+ 69,241 72,718 49,651 86,848 139,219 164,000 172,500 191,000 200,000 193,500 192,500 2007 models from 2015 Renault‐Nissan Dacia Various incl. Lodgy MPV Pass. B/C Clio Tangiers MO H1 2012 2012+ 0 0 0 0 0 52,000 135,000 225,000 300,000 325,000 340,000 Renault‐Nissan Dacia Total Also approx 125,000 kits pa from Pitesti for other Logan assembly sites 361,402 357,029 345,663 428,147 466,839 521,695 658,000 783,000 869,500 865,000 867,000 Lada/Dacia/ Renault‐Nissan Various models on Logan platform Pass B Clio Togliatti RU Q1 2012 0 0 0 0 0 15,000 80,000 105,000 185,000 325,000 365,000 Renault/Nissan Renault‐Nissan Pass C Almera Togliatti RU Q3 2012 0 0 0 0 0 5,000 45,000 80,000 76,500 70,000 68,000 Renault‐Nissan AvtoVAZ Total 0 0 0 0 0 20,000 125,000 185,000 261,500 395,000 433,000 Renault‐Nissan ALL Total 2,653,128 2,361,640 2,109,867 2,453,216 2,599,654 2,407,545 2,665,250 3,048,750 3,377,500 3,592,000 3,596,500

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 93

Suzuki Recent news: in late November, just after our last report was published, Suzuki confirmed its long term commitment to its Hungarian plant. Moreover, it has signed an agreement with the Hungarian government which centres on expanding and strengthening its operations in the country. This agreement includes Suzuki intending to invest €200mn to build the new S-cross compact crossover. No specifics have been released on timing and volumes for this model and the implications this has for the other models currently made in Hungary. The precise division of production between these models in the table below is very provisional – and it is probable that S-cross volumes will be higher and those of the other models lower – we plan to address this issue in more detail in the next report. From its side, the Hungarian government is going to make a number of infrastructure improvements to the area around the plant, including to the road network to address a number of problems with the inbound logistics for component supply to the plant. Previously we had reported that Suzuki was going to slow production in late 2012, with the plant having moved to one shift operation through to the end of the year. Suzuki intends to move back to two shifts in January 2013. There is no news on the dispute with Volkswagen, with whom Suzuki has a cross shareholding arrangement which included proposals to develop new models together. In October 2011, Suzuki served Volkswagen with a notice of breach, with Suzuki claiming that Volkswagen has committed several breaches of the two companies’ Framework Agreement. This announcement has come after a period of inaction and clear disagreement between the two companies. Volkswagen had objected to Suzuki buying diesel engines from Fiat, in response to which Suzuki demanded a public retraction, without success. Suzuki claims that the partnership was intended to allow both sides to continue to operate as “independent entities and equal partners” – moreover, Suzuki specifically saw the agreement as a means for it to secure access to Volkswagen’s environmental technology, but when this did not appear to be happening, Suzuki decided to proceed along its own path. The breakdown of this alliance is not altogether surprising. Suzuki has been a notoriously independent company, while Volkswagen has been highly acquisitive in the past and very much likes to control its subsidiaries and, arguably, its partners too. In previous reports, we had commented on the lack of significant developments in the companies’ relationship. Specifically, we noted reports that Suzuki apparently feared that VW was trying to take control of the company. The break-up of the alliance is now proceeding through the London court system. Production in Hungary: The production contracts for Fiat (Sedici) and Opel (Agila) will continue in the short term, but will not be renewed. Suzuki versions of these models will continue until at least the middle of the decade. The key new model plans surround the S-cross, but details of this model and its implications for the remainder of Suzuki’s production portfolio are unclear at this stage.. Suzuki Production Outlook to 2017 Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Suzuki Pass. SUV Linares SP 2009+ 5,064 3,163 549 0 0 0 0 0 0 0 0 Suzuki Suzuki Grand Vitara Pass. SUV St Petersburg RU H1 10 2011 0 0 0 0 0 0 7,500 15,000 20,000 17,500 15,000 Suzuki Suzuki SX4 Pass. SUV St Petersburg RU H1 10 2011 0 0 0 0 0 0 3,500 12,500 15,000 12,500 10,000 Suzuki Pass. A Esztergom HU Q2 08 2008 2,327 47,064 41,500 34,500 15,500 14,000 12,500 35,000 45,000 41,500 39,500 Suzuki Opel Agila Pass. A Esztergom HU Q2 08 2008 0 64,660 50,500 27,897 28,124 20,000 10,000 0 0 0 0 H2 10, FL Suzuki Pass. B Esztergom HU Q1 05 2013, new 108,775 92,547 60,000 62,500 70,000 62,000 59,500 55,000 70,500 95,000 90,000 after 2016 Suzuki Subaru Justy Pass. B Esztergom HU 6,853 0 0 0 0000000 Suzuki Suzuki Ignis Pass. B Esztergom HU Q2 03 27,453 0 0 0 0000000 Suzuki Suzuki SX4 Pass. B‐SUV Esztergom HU Q2 06 2006 56,976 49,453 22,000 38,000 45,000 38,000 34,500 40,000 55,000 48,750 45,000 Suzuki Fiat Sedici Pass. B‐SUV Esztergom HU H2 06 2006 39,338 29,120 11,500 16,000 14,250 9,000 6,250 0 0 0 0 Suzuki Suzuki S‐cross Pass. C Esztergom HU 2014+ 2014 0 0 0 0 0 0 0 7,500 15,000 22,500 30,000 Suzuki Suzuki Total 246,786 286,007 186,049 178,897 172,874 143,000 133,750 165,000 220,500 237,750 229,500

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 94

Tata – Jaguar-Land Rover Initial production will be in the region of 130,000 vehicles a year and will ultimately grow much higher than this – there is also intended to be an engine plant and an Key recent developments: 2012 was a very good year for JLR with a series of R&D facility. Timing for the start of production awaits confirmation but it could be positive announcements. This has continued at the start of 2013 with the news as soon as 2014. The most likely first model for assembly in China is thought to be that 800 new jobs will be added at Solihull to help meet continued strong demand the revised Freelander. for the large SUVs made there from North America and China especially; admittedly these are one year contract positions, but the company and the unions Earlier in 2012, JLR had indicated that CKD assembly of the Freelander would are confident that they will become permanent jobs in due course. 200 of the 800 begin in Brazil by the end of 2013 or early 2014. However, owing to tax rule new jobs are supported by the government’s Regional Growth Fund. This follows changes in Brazil, this project is no longer viable and the plans have been shelved. on from news in November last year of another 1000 jobs being added at Solihull. JLR’s first engine plant 2012 saw a succession of good news announcements for JLR In September last year, JLR confirmed it would invest over UK£350mn in this new 2011 had seen several positive announcements for JLR and the good news facility, creating 750 direct jobs and boosting or securing employment throughout continued in 2012. This began with the move to three-shift production at the supply chain. The UK government is making a small, UK£10mn, grant. Halewood, a development which involved the creation of 1,000 new jobs. The plant in Wolverhampton will make 4-cylinder diesel and petrol engines, This was followed by confirmation that JLR will make the F-type 2-seater, with a reducing the company’s dependence on Ford which is currently the principal £200mn investment in the Castle Bromwich factory, and a further 1,000 workers engine supplier to JLR. These engines will be fitted in small Land Rovers/Range being taken on. Production will begin in mid-2013. The vehicle was shown at the Rovers and on the Jaguar range, on models up to the size of the XF. Large Paris motor show in September. engines are likely to continue to be sourced from Ford in the medium term. The other new model launched at the Paris motor show was the Range Rover in Strong financial results which £370mn had been invested at the Solihull plant. At the heart of this JLR’s financial performance has enabled it to pay its first dividend to its parent, investment is an all-new aluminium body shop. Tata; £150mn was paid to the Indian company in the quarter ending September 30. In March 2012 it was confirmed that JLR and Chery will set up a JV to make This was Q2 in Tata’s financial year 2012/13 and the highlights of JLR’s various JLR and indeed jointly branded products in China. Formal authority for the performance during this period were as follows: factory to be built was finally granted in autumn 2012 and construction of the new  Unit sales up 13.9% factory started in November. The models made in China will avoid the steep  Revenue up 12.8% at almost £3.3bn import duties currently imposed on JLR products. These duties have not put Chinese customers off: China was actually Land Rover’s biggest market in 2012,  EBITDA margin of 14.8%, or £486mn, a rise of 15.7%. up 71% at nearly 72,000 units, ahead of the UK (68,000) and the USA (56,000). The main driver behind this strong performance was the The new JV will be known as Automotive; the two which accounted for more than one-third of Land Rover sales in Q2. On the back companies are investing around US$1.75bn in the new factory which is being built of these impressive results, JLR is understood to have offered its employees a at Changshu near . The factory will make both vehicles under the Jaguar 7.5% pay rise, payable in two stages, November 2012 and November 2013. and Land Rover names, although which has yet to be confirmed – and also for a These figures are representative of a steady improvement in JLR’s performance new unnamed JV brand specifically targeted at the Chinese market. since 2010. 2009 had seen a substantial fall in production volumes for both Jaguar and Land Rover, but 2010 was a very positive year for the company. JLR

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 95

reported H1 2010/2011 profits of nearly £0.5bn, compared to a £60m loss in in March), with the new XK now delayed until 2015/2016. A SUV-crossover of the 2009/10. This tuned into annual profits of over £1bn for 2010/11. XF is also possible after 2015. A small saloon, a long awaited X-type replacement is expected in 2016 or possibly 2017. We expect a smaller 4-door version of the For the full year 2011/12 Jaguar Land Rover reported a 34% rise in profits after XF to appear as well, possibly in late 2014, as a direct competitor to the 3-series. sales hit a record high. In 2011-2012 the group made pre-tax profits of £1.5bn, up Jaguar executives have been speaking of the need to have a strong presence in from £1.12bn the year before. Pre-tax profits for the quarter ended 31 March were the sub-£30,000 segment of the market £530m, up from £299m for the same quarter last year. Revenues were up 51.5% at £4.14bn. Last year reports started to leak out regarding expansion of the Land Rover range. Following the Evoque, we have seen the new Range Rover model which based on Manufacturing news: as noted above, the main previous developments of note an all-new aluminium platform. This has cut around half a tonne of weight include: compared to the old model. Around half of the vehicle’s body will be made of  Confirmation of the new joint venture in China and the start of construction of recycled aluminium and will include versions which will retail at over UK£100,000. the new factory there. The new Range Rover has been designed to have the same on-road dynamics as  Launch of the new Range Rover production line. the XJ saloon. Initial press reports suggest this objective has been met – and that  Moving Halewood to 24-hour working. the new model will be a truly class-leading model, taking the premium segment of  Confirming the F-type would be produced from 2013. the SUV market to a new level. Smaller engines will be offered, but it will retain the large V8 petrol and diesel engines. A hybrid is expected in 2013, with a plug-in  And construction of the new engine plant in Wolverhampton which is now well hybrid also due by 2015. under way. Following the new Range Rover, there will be the replacement for the Range In addition, reports in December 2012 suggested that Tata was seriously Rover Sport in 2015. This will be more visually differentiated from the Range considering vehicle production in Saudi Arabia; this would be a kit operation Rover than the first model. The new will be made on the same initially and would be specifically designed to benefit from the extensive aluminium L405 platform as the Range Rover (the current model is made on the Discovery production now being developed in the country. Alcoa and a Saudi mining platform). Thereafter, the new Freelander will come in 2015, based on the Evoque company will start production of aluminium in Saudi Arabia in 2014 and Tata/JLR platform, followed by the new Discovery in late 2015/early 2016. A sub-Evoque wants to examine whether it could profitably make vehicles there, taking model is also expected at this time. advantage of the new aluminium plant. Further news on this will undoubtedly appear in 2013, but any vehicle production Saudi Arabia is unlikely before the end In addition, it is understood that Land Rover engineers are working on a Grand of the current decade. Evoque, to fit between the Evoque and the Range Rover Sport; this would be a family-sized coupe SUV, similar to the BMW X6. A cabrio version of the Evoque New models: The very long-awaited F-type, the spiritual successor to the E-type, was shown in concept form at Geneva, but no definite decision has been made as was shown at the Paris motor show, its launch having been originally expected at to whether this will be made. the Detroit motor show in January 2013. The F-type will come in cabrio and coupe versions. Initial models will have a V6 petrol engine, with a V8 expected, but a It has also been reported that the existing Defender will be retained, notably in long diesel remains uncertain. The new model will be built on the same platform as the wheel base and commercial format until at least 2017 – it had been expected XK; both vehicles will be made at Castle Bromwich. production would stop by then but reports have suggested that this vehicle has been given an exemption from forthcoming pedestrian impact legislation; as a An estate version of the XF (the Sport Brake) and a 4WD version of the saloon result, production can continue. have been launched (the XF estate concept was shown at the Geneva motor show

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 96

Quite when the new Defender will actually appear remains to be confirmed – we think it is likely in 2015 or possibly a year later. JLR has ambitious plans for this new model, citing the Toyota Hilux/Landcruiser (c0.5mn upa) as its target competitors – whether the Defender can really or quickly achieve sales of this order of magnitude remains to be seen, but that JLR is targeting this sort of range is indicative of the new ambitions of the company and its owners. The expansion of the company’s product will also include filling in gaps which currently limit its potential – for example in the USA, Jaguar is missing out on as much as 70% of its potential market for the XF because it does not have a 4WD version, while in Europe the lack of a 2.0 litre diesel for the same model means a similar loss of sales. The latter gap will be filled with the forthcoming 2.2 litre diesel engine, while Jaguar has also confirmed an AWD version will be available for both the XF and XJ, targeted especially at the Snow Belt markets in the USA, Russia, Europe and China; for now the 4WD versions will not be offered in the UK. We understand electric Range Rovers are currently undergoing trials, but when any of these are signed off for actual production remains to be seen New model plans are summarised in the following table overleaf.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 97

New models 2013 2014 2015 onwards, timing to be confirmed Jaguar F-type New sub XF (X760) New Jaguar XK (X151) Jaguar XJ hybrid New Freelander New Range Rover Sport New Defender; Discovery production to start; possible additional model between Evoque and Range Rover Sport (Evoque XL?)

The Production Outlook tables include provisional volumes for the new Jaguars, but these are provisional and some of the timings for these models have not been confirmed. Production allocation between Castle Bromwich, Halewood and Solihull has not been confirmed and there could well be a change in where vehicles are made; we expect news of this to become clear during 2013. Tata – Jaguar-Land Rover Production Outlook to 2017 Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Tata Jaguar X type Pass. D X400/ CD132 Halewood UK Q1 01 2009+ 0 15,973 8,046 0 0 0 0 0000 Tata Jaguar Small Jaguar ‐ X760 Pass C/D New TBC UK H1 16 2015 0 0 0 0 0 0 0 0 0 25,000 30,000 Tata Jaguar XD ‐ new sub XF 4‐dr Pass D/E X760 Castle Bromwich UK H2 14 0 0 0 0 0 0 0 7,500 35,000 55,000 55,000 Tata Jaguar F‐type/XE Pass. Sports C‐X16 Castle Bromwich UK H2 13 0 0 0 0 0 250 9,000 23,500 19,250 16,000 14,500 2016 = Tata Jaguar XF, plus estate from late 2012 Pass. E X250 Castle Bromwich UK H1 08 0 43,792 27,236 34,396 31,295 37,250 42,500 49,000 36,500 59,000 57,500 X260 H2 09 Tata Jaguar XJ / XJR Pass. F X350/ DEW98 Castle Bromwich UK H2 02 0 5,982 1,953 16,495 14,033 15,000 16,500 14,750 12,250 10,250 9,750 major FL Tata Jaguar XK / XK8 Pass. Sports X150 Castle Bromwich UK H1 06 2013‐4 0 6,949 4,530 5,565 4,604 4,250 3,750 3,250 7,500 10,000 9,500 Tata Jaguar Total 0 72,696 41,765 56,456 49,932 56,750 71,750 98,000 110,500 175,250 176,250 Tata Pass. SUV L359 Halewood UK Mid 2006 2014 0 59,137 35,405 56,487 48,753 54,000 49,250 45,500 5,000 0 0 Tata Land Rover New Freelander Pass. SUV New Halewood UK H 1 15 2015 0 0 0 0 0 0 0 0 61,000 82,000 87,500 Tata Land Rover Sub‐Evoque Pass SUV L538 Halewood UK H2 15 2015‐16 0 0 0 0 0 0 0 0 15,000 40,000 40,000 Tata Land Rover Range Rover Evoque Pass. SUV L538 Halewood UK H1 11 0 0 0 0 40,212 116,000 109,000 102,500 102,500 100,000 95,500 Tata Pass. SUV L319 (T5) Solihull UK Q2 04 2011 FL 0 35,383 21,195 39,374 46,480 45,750 40,000 37,500 12,500 2,500 0 Tata Land Rover New Discovery Pass SUV L661 Solihull UK H2 13 0 0 0 0 0 0 0 0 17,500 45,000 55,000 Tata Land Rover Range Rover Sport Pass. SUV L321 Solihull UK Q2 05 2015 0 45,628 29,265 47,439 54,981 58,000 52,000 40,000 0 0 0 Tata Land Rover New Range Rover Sport Pass. SUV L405 Solihull UK H1 15 0 0 0 0 0 0 0 20,500 55,000 49,500 46,500 Tata Land Rover Range Rover Pass. SUV L322 Solihull UK H2 01 2012 0 23,786 15,173 24,563 30,848 20,175 0 0000 Tata Land Rover New Range Rover Pass SUV L405 Solihull UK H1 12 0 0 0 0 0 10,000 49,000 51,000 47,000 41,500 38,500 Tata Land Rover New Defender Pass. &SUV L660 Solihull UK H1 11 0 0 0 0 0 0 0 0 15,000 50,000 60,000 Tata Pass. SUV Solihull UK 2015 0 22,345 15,543 17,233 19,825 16,000 15,000 14,000 10,000 10,000 10,000 Tata Land Rover Defender Comm.SUV SolihullUK201501,86800 0000000 Tata Land Rover Total 0 188,147 116,581 185,096 241,099 319,925 314,250 311,000 340,500 420,500 433,000 Tata Tata JLR Total 0 260,843 158,346 241,552 291,031 376,675 386,000 409,000 451,000 595,750 609,250

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 98

Toyota level could be reached. Interestingly Toyota expects sales of the new Auris to be divided equally between the diesel, petrol and hybrid versions. Key recent developments: the main development at Toyota Europe in recent months has been the start of production of the new Auris in the UK: this will be Toyota has also confirmed that its French plant has returned to three-shift working made in hatchback and estate (Touring Sports) versions. Production officially in January 2012. To help in this regard, 800 new employees were taken on, with started in early November, following investment of £185mn in the new model and 18 month contracts; if sales are better than expected the three shift working the supply chain which will supply it. Toyota hopes that this model, along with the arrangements and the 18 month contracts could be extended. This good news Avensis, will push UK production back close to or even over the 200,000 upa level regarding Yaris production counters the negative news from the PSA JV (TPCA) in which would make the utilisation of the one assembly line in use at Burnaston very the Czech Republic where production of the Aygo (and PSA equivalents) is being high indeed. cut in 2012 – although this is really due to the natural decline in production numbers for these models as they approach the end of their life cycle. New Last year we had also reported on Toyota’s expansion in Russia, replacing Fiat as versions will be made and this JV is regarded as very solid. PSA’s partner in medium van production in France and co-develop a fuel cell technology and (separately) a sports car with BMW. More specifically: Manufacturing news: as noted above, the UK plant should soon approach full utilisation of its single open line. The concentration of Auris production in the UK  The Russian plant added its second shift from August and having made nearly will also mean: 20,000 Camrys in the first seven months of the year, production of over 50,000  Burnaston will be the European centre for C-segment hatchback production. units this year seems assured: Toyota will make both the Auris and the Avensis on one assembly line. o A small car will be added to this plant in a couple of years.  The Turkish plant will become the centre of C-segment sedan production in o In addition, from 2014, the Russian factory will add pressings and plastic parallel; total investment across the two factories will be €265mn. In Turkey, injection mouldings for large parts, giving it the same vertically integrated the new sedan will be made on the same line as the current Corolla Verso capacity as other Toyota plants in Europe. compact MPV. 400 new jobs will be added in Turkey.  Toyota will start sourcing vans from the PSA-Fiat JV in 2013 and will then In addition, in late 2011, Toyota had announced that Europe will become the global replace Fiat as PSA’s partner in this venture; it will contribute to the €750mn product planning centre for small cars, leading development for the Aygo, Yaris planned investment in the next model, although what Toyota’s exact and Auris/Corolla segment vehicles. This is part of the company’s globalisation contribution in financial or technical terms will be remains to be seen. The new strategy, which specifically focuses on reducing its dependence on Japan. van will be called Pro-Ace.  In addition to the earlier announcement that BMW will supply 1.6 and 2.0 litre Production capacity has also been increased in Russia, reflecting the diesel engines to Toyota from 2014, the two companies also plan to work continued growth in this market which is in marked contrast to the rest of Europe: together on fuel cell technology and in the development of a sports car.  In February 2012, Toyota confirmed it would invest 7bn Yen in its St Whether these two developments will have any implications for Toyota in Petersburg factory, adding stamping and plastic moulding capacity as part of a Europe remain to be seen. strategy to increase localisation of models made there. These new facilities will be operational from 2014 which is when we now expect a new small car to Rising production at Toyota’s plants in UK and France go into production in Russia. The Burnaston factory in the UK is now operating its one open line on two shifts  In April a second shift was confirmed to increase production of the Camry; a and will soon be close to its nominal annual capacity 170-180,000 units; with a further 600 workers will be taken on to make more Camrys. As noted at the recovering market from 2015 onwards, it is entirely possible that the 200,000 upa start of this profile, Toyota has started this second shift in August.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 99

New models: these are summarised below: 2013 2014 2015-2016 Completion of Auris launch in UK and Corolla sedan New Aygo (could be 2015) New Avensis in Turkey New small B segment car in Russia In addition in the second half of the decade at least two more all-new models are expected to be added to Toyota’s European line-up.

The Production Outlook below shows a strong rise in Toyota production in 2013-14, largely because of the Yaris having two full years of production, plus the launch of the new Auris, and the expected extra model to be made in Turkey. In addition, we also include production of the Landcruiser in JV with Sollers and the probable new small model in Russia. We have not yet factored in the expected new models we expect Toyota to add to its European production line-up in the second half of the decade. Toyota Production Outlook to 2017 Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Toyota Toyota Aygo Pass. A B0 ‐ 590N Kolin CZ Q1 05 2014 106,982 108,127 101,000 82,911 90,788 70,000 65,000 60,000 84,000 95,000 90,000 Toyota Pass. B 316W Valenciennes FR Q1 06 2011 262,313 232,406 207,456 158,512 24,153 000000 Toyota Toyota Yaris Pass. B 020X Valenciennes FR H2 11 0 0 0 0 125,000 195,000 201,000 195,000 193,000 187,000 182,500 Toyota Toyota Corolla Pass. C 340N Burnaston, Derby UK Q2 01 2007 11,839 0 0 0 0 0 0 0000 Toyota Toyota Auris Pass. C 345 Burnaston, Derby UK H1 07 2012 120,317 102,588 50,212 68,687 57,411 27,000 0 0000 Toyota Toyota Auris Pass. C New Burnaston, Derby UK H2 12 0 0 0 0 0 25,000 121,000 140,000 135,000 129,000 118,000 Toyota Toyota Auris Pass. C 131L Gebze TR Q1 07 2012 60,742 66,000 27,501 42,936 47,250 39,00000000 Toyota Toyota Corolla Verso Pass. C‐MPV 240N Gebze TR Q1 04 2009 100,874 60,594 0 0 0 0 0 0000 Toyota Toyota Corolla Verso Pass. C‐MPV 681N Gebze TR Q3 09 2016 0 0 44,763 40,350 48,250 36,000 48,000 75,000 90,000 85,000 81,000 Toyota Toyota Corolla sedan Pass C Gebze TR H2 12 0 0 0 0 0 2,500 35,000 55,000 65,000 54,000 50,000 Toyota Toyota Avensis Pass. D 223W/ 352WW Burnaston, Derby UK Q1 03 2008+ 142,669 92,063 0 0 0 0 0 0000 Toyota Toyota New Avensis Pass. D MC 445L Burnaston, Derby UK 2011/12 2016/7 0 18,678 77,193 68,367 70,735 61,000 58,000 52,000 78,000 80,000 77,500 St Petersburg or new Toyota Toyota New small B Pass. B RU H1 14 2014 0 0 0 0 0 0 0 20,000 58,000 55,000 52,000 plant Toyota Pass. E MC 045L St Petersburg RU H2 08 2008+ 0 6,275 8,310 15,000 14,500 30,000 54,000 60,000 65,000 75,000 75,000 Toyota Toyota Landcruiser Pass SUV Sollers RU H2 12 2012 0 0 0 0 0 1,250 14,500 25,000 24,000 22,500 20,000 Toyota Toyota Total 805,736 686,731 516,435 476,763 478,087 486,750 596,500 682,000 792,000 782,500 746,000

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 100

Volkswagen (incl. Porsche)  Despite the fall in profits, VW confirmed it should still match 2011’s record operating profit for the year of €11.27bn Key recent developments: the most important news at Volkswagen since our last report concerns the following: Meanwhile, since August Porsche has been fully integrated within the VW group. At the beginning of July 2012, it was confirmed that Volkswagen will buy the  Group deliveries reached over 9mn units for the time in 2012, a rise of 11.2% remaining 50.1% of Porsche’s automotive business that it did not already own. over 2011; December was an especially strong month, with a rise of nearly 21% to over 784,000 vehicles sold worldwide. We have removed the detail on earlier financial performance for the VW  Particularly strong sales in North America, with a 26.2% rise in North America, group for space reasons and readers are referred to earlier issues for this with the US rising 34.2%. Chinese sales were up 25.3% in 2012. information.  West European sales were essentially unchanged, but they rose in Central Investment continues at Audi and Eastern Europe by 17.6%; and in Russia sales rose by almost 39% At the end of 2012, Audi announced a €13bn capital expenditure programme in the  Volkswagen passenger cars rose 12.7% worldwide, to over 5.7mn units, with period through to 2016; of this total, €10.5bn will be allocated to new models and particularly strong growth in North America, up 23.2% and also in Central and production technology - €8bn will be invested in the two main Audi plants at Eastern Europe, where Volkswagen brand sales rose 25.5% Neckarsulm and Ingolstadt  Audi brand sales rose 11.7% to 1.46mn, with North American sales up 18.5% Other investments announced in 2012 and Asia-Pacific sales up 28.1%. At the Geneva motor show, VW group chairman, Martin Winterkorn, confirmed the  Skoda saw a 6.8% rise to 939,000, with Central and East European sales up objectives for a €62bn investment programme through to 2015: the company will 12.7% and Asia-Pacific sales up 8.1% focus on investment in increasingly fuel efficient vehicles, new powertrains and  Seat sales were disappointing, down 8.3% at 350,000 overall, although sales technologies and environmentally-friendly production systems at its factories. A rose in the UK, Germany and Mexico further €14bn will also be invested in China. The investment will be used to meet  Volkswagen Commercial Vehicles saw sales rise 4.1% to over 550,000 units, the following targets: with European sales unchanged, but sales in Asia were up nearly 62%.  Reducing CO2 emissions across its product range by 30% by 2015.  And at Bentley, sales rose 22%, with North America being the brand’s largest  Ensuring new models are 10-15% more fuel efficient than their predecessors. market, followed by China.  A 25% improvement in the “environmental compatibility” of the production Ahead of the full year financials being released, we repeat the information on the process across the group by 2018, specifically consuming 25% less energy financial results to Q3 from last time, ie: and water and reducing waste and emissions also by 25%.  VW group quarterly underlying profit fell by a fifth, reflecting the decline in the  A 40% reduction in greenhouse gas emissions by 2020. European market and the costs it has had to bear in the development of its new MQB platform, as well as the consolidation costs incurred with the  Investing €600mn in renewable energy. integration of MAN and Porsche In addition, since then VW has confirmed an investment of €3.4bn in Brazil through  Operating profit fell from €2.89bn to €2.34bn, although quarterly sales revenue to 2016. This will focus on improving the environmental performance of its six actually rose 27% to €48.8bn; year-to-date revenue was up 24% at €144bn; plants in Brazil: particular attention is being paid to energy saving, with VW nine month operating profit was down slightly at €8.8bn opening its second hydropower plant in Brazil.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 101

In addition it continues to expand in China – and in October reports emerged that it brands’ abilities to sell increasing numbers of the most expensive versions of was considered an investment of US$1.6bn in a new factory in China, boosting its their SUV capacity there by another 10%; a 300,000 upa plant in Changsha, Hunan province Other brand-specific plans for the immediate future include: is under consideration. This follows on from earlier reports that VW will invest €14bn in China, including the opening of at least four plants – in Foshan, Yizheng, Volkswagen: Ningbo and Xingjian initially, with more to follow – by 2016.  Golf Variant BlueMotion and e-Golf, 2013 Corporate issues still being resolved  Golf plug-in hybrid and Golf Plus, 2013/4 At a corporate level, there are a number of other issues which we have referred to  Golf cabrio (CC), 2015 in past reports which still need to be recorded here:  Cross-Polo, due late 2013/early 2014.  The shareholding dispute with Suzuki has now entered into the arbitration  Passat Alltrack (4WD). phase – a resolution should be found during 2012, but there is no guarantee as to how long this will take and whether either side will accept the London  Cross-Golf, after 2016 court’s first judgement without a further fight.  Coupe version of Tiguan, once new Tiguan has been launched in 2013; the  And finally, the infamous “VW Law” is understood to be the subject of an EU new Tiguan will include a 3-row version for the US and China. review – currently, the German state of Lower Saxony has veto rights over the  Jetta CC (a smaller version of the Passat CC), from Mexico. company’s ownership over above its 20% ownership state, something which  At least two new SUVs will also be added, one based on the Up! And one the EU regards as anti competitive and wants to get removed. positioned between the Tiguan and Touareg; we would expect this second Manufacturing news: other than the stat of production of the Skoda Yeti in Russia, model to be made in North America. at the GAZ JV plant, there have been no major manufacturing developments since Audi: our last report. Readers are referred to earlier reports for these details.  Q2 from late 2013 New models: three specific news items are worthy of note here, ie:  New Q3 in 2017, including a Seat version.  VW is studying the possibility of a 7-seater SUV for the North American  Q4: 2015. market; this would sit between the Tiguan and Touareg and probably be made  New Allroad A4 in 2014-5. in the US; VW’s ideas in this regard are embodied in the CrossBlue  Q5/Q6 and Allroad A6 in 2014-5.  Various hybrids, Audi having decided against a range of full EVs now:  A new budget brand is being considered for the group; this would be targeted at emerging markets, ie India and Mexico especially o A6 and A8 hybrids in 2012. o A3 plug-in hybrid in 2014.  And at the other end of the market, a decision is due soon on the proposal to make the Bentley SUV. Although the economic situation is far from ideal, on o And A4 and Q7 plug-in hybrids in 2015. balance we think VW will approve production of this vehicle, having noticed the Skoda: success of Range Rover and the Porsche Cayenne especially and these  Replacement Yeti by 2018, but with heavy facelift before then.  Octavia Scout (4WD version), also by 2018.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 102

Meanwhile, Lamborghini has announced plans to add what it calls an “everyday” Spanish production – the brand remains Volkswagen’s biggest problem. model to its line-up; this will be sold alongside the Gallardo and the new Aventador SEAT’s next focus will be in Russia where its doubling its dealership network which has replaced the Murcielago. It has also been confirmed that a Lamborghini in the major cites. Spanish production will be underpinned by the new Leon SUV will be added around 2016. And at the Geneva motor show, Bentley showed which has been the subject of an investment totalling €800mn. There will be the concept version for its own super-luxury SUV; we expect this will be introduced some SEAT brand output by Volkswagen at the MPV plant in Portugal and by around 2015/16. Skoda in the Czech Republic, with the Toledo made on the same line as the Skoda Rapid Porsche will launch the Macan small SUV in 2013 and this will be followed by further models in due course – we expect a small saloon ie a mini Panamera  At Skoda, production will increase by c180,000 upa between 2010 and 2017, amongst others, although these are likely to appear after 2016. driven by the addition of a new model (Rapid) between Fabia and Octavia and the addition of a Skoda MPV and a second SUV by around 2015. Skoda will The Production Outlook which follows shows that: also experience significant growth in Russia, China and India in the coming  Volkswagen brand production settling down at around 2.5mn upa in Europe at years. The Skoda numbers are less than shown before as more production least 0.5mn more than the 2007 level; we think the majority of its broader has been allocated to growing Skoda plants outside Europe (earlier numbers production growth will come in North America, Brazil and China. Most of the included allowance for kit production within European volumes.) near term growth in Europe is being driven by rising production in Russia (of a wide variety of vehicles), the introduction of the Up (and its SEAT and Skoda  Porsche production should top 200,000 by 2014, subject to Macan volumes siblings); as the we move further into the middle of the decade, the second being at the upper end of expectations and sales of the core 911 and Russian plant and the widening of the Up! range will drive much of the next Cayenne ranges also holding up well. Porsche however has indicated that it phase of growth. will slow the production ramp up at Zuffenhausen for the 911, although this will mean the plant will now only operate on a five-day a week basis, dropping  At Audi the growth will come from smaller cars especially, eg A1 and Q2, plus the Saturday shift from January the widening Q range. By 2016, we expect Audi production in Europe to be just over 1.3mn units, a rise of more than 30% on the 2007 volume. The main  There is the possibility that the Bentley and Lamborghini SUVs could be growth in Audi production will occur from 2014 onwards when the next A4 delayed owing the overall downturn in Europe, but for now we have included starts and the Q models really widen the Audi brand to other markets. The these in our projections on an unaltered time line. growth shown here is somewhat less than shown previously and reflects the likely growth in Audi production in North America and China rather than in Europe. Some of the production previously allocated to Europe will now, we believe, take place overseas. We have retained some Q5 production in Germany for now but it is possible that all Q5 output could shift to north America.  SEAT production (without the Audi Q3) so expected to grow just modestly, but at full production rates, the Q3 will add around 100,000 units to the SEAT factory at its peak. However, Seat (excluding the Q3) will see 2013 production remain below 300,000 units; although this fall will probably have been made up by the end of the period under consideration, SEAT is not going to be getting back to its 2007 levels in the near term, at least not in terms of

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 103

New models are summarised in the table which follows: 2013 2014 2015 2016 2-seater VW Up! Caddy replacement Golf VII (provisional) Audi A8 Electric version of Up! Golf hybrid Passat CC Audi Q4 and Q6 – could be Golf Variant, electric version of Golf Phaeton Tiguan 2015 Golf Plus & Touran Audi A2 Transporter Porsche Panamera New Audi Q7, S7 & S8 New Audi A4 and A5 start A4 All-road Skoda Yeti Skoda Fabia Audi TT, R8 & Q5 New Skoda Superb, incl. cross-over Golf CC Skoda Rapid and Seat Toledo production at SEAT Ibiza version full tilt Skoda Roomster SEAT Exeo Porsche 918 Spyder New Porsche, super-car above 911 New Cayenne and Bentley SUV Porsche Macan Audi Q2 Note that the yellow cells in Volkswagen table indicate changes to historic volumes in Poland; they do not affect the overall picture but have been highlighted for convenience.

VW Group Production Outlook to 2017 – by brand

Production Production Production Production Production Production Group Marque Model range 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Volkswagen Volkswagen Total 2,026,602 2,054,283 1,835,493 2,124,741 2,369,789 2,431,050 2,491,000 2,475,500 2,560,250 2,537,750 2,511,000 Volkswagen Audi Total 974,706 1,019,616 931,007 1,148,683 1,349,747 1,094,300 1,131,400 1,166,750 1,265,000 1,310,000 1,312,750 Volkswagen Seat Total 412,937 379,834 293,548 344,162 370,794 392,000 371,500 396,000 384,250 376,500 386,000 Volkswagen Skoda Total 621,626 614,999 541,189 558,735 583,000 622,400 638,800 639,000 687,500 741,250 733,500 Volkswagen Lamborghini Total 2,580 2,424 1,253 1,227 1,738 2,250 2,750 3,300 4,000 6,500 6,250 Volkswagen Bentley Total 10,000 7,692 3,596 4,792 7,528 9,700 9,525 9,200 10,350 10,750 11,100 Volkswagen Porsche Total 107,170 96,721 75,637 95,529 127,165 147,500 162,168 207,900 212,350 233,250 230,500 VW ALL Total 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 104

Volkswagen Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform)

Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

4 seater Up! (and 2‐seater from Volkswagen Volkswagen Pass. A MHB Bratislava SK H1 11 0 00020,000 137,000 159,000 181,000 195,000 192,000 189,000 2013) ‐ inc. Taigun SUV Volkswagen Seat Mii (Up!) Pass. A MHB Bratislava SK H1 11 0 0001,500 28,500 38,000 42,500 41,000 40,000 39,500 Volkswagen Skoda Citigo Pass. A MHB Bratislava SK H1 11 0001,500 36,000 49,500 52,000 50,000 48,500 45,500 Volkswagen Volkswagen Polo Pass. B A04 Bratislava SK H1 01 2008 53,972 0 0 0 0 0 0 0 0 0 0 Volkswagen Volkswagen Polo Pass. B A04 Pamplona SP H1 01 2009 228,462 259,000 90,765 0 0 0 0 0 0 Volkswagen Volkswagen Polo Pass. B A05 Pamplona SP H2 09 0 92 152,735 365,695 353,353 278,000 275,000 269,000 265,000 259,000 255,000 Volkswagen Volkswagen Polo SUV Pass. B A05 Pamplona SP H2 10 0 000 00015,000 45,000 52,000 47,500 Volkswagen Volkswagen Polo Pass. B A04 Brussels BE H2 06 2009 46,888 53,177 39,749 15,000 0 0 0 0 0 0 0 Volkswagen Volkswagen Golf V Pass. C A5/ PQ35 Brussels BE H2 03 17,573 0 0 0 0 0 0 0 0 0 0 Volkswagen Volkswagen Golf V Pass. C A5/ PQ35 Zwickau / Mosel DE 2009 193,246 128,409 160,111 11,648 0 0 0 0 0 0 0 Volkswagen Volkswagen Golf VI ‐ switch to Golf VII in 2013 Pass. C A6 Zwickau / Mosel DE H2 09 0 0 0 171,924 171,000 65,000 0 0 0 0 0 Volkswagen Volkswagen Golf V Pass. C A5/ PQ35 Wolfsburg DE H2 03 2009 287,810 315,057 383,021 33,626 0 0 0 0 0 0 0 Golf VI (incl. cabrio ‐ final assembly Volkswagen Volkswagen at Karmann); switch to Golf VII in Pass. C A6 Wolfsburg DE H2 08 0 0 0 325,565 405,500 178,000 30,000 0 0 0 0 2013‐4 Volkswagen Volkswagen Golf VII Pass. C MQB Wolfsburg/Mosel DE H2 13 2013‐1400000 289,000 535,000 526,000 509,000 493,500 493,500 Volkswagen Volkswagen Tiguan (Golf SUV) Pass. SUV Wolfsburg (Euro 5000) DE H1 07 2014 16,401 151,028 143,680 183,371 199,000 242,000 215,000 193,000 201,000 213,000 208,000 Volkswagen Volkswagen Golf Plus Pass. C PQ35 Wolfsburg DE H2 04 Q1 10 2010FL 111,917 92,565 106,320 7,126 0 0 0 0 0 0 0 Volkswagen Volkswagen Golf Plus FL Pass. C PQ35 Wolfsburg DE H1 13 0 0 0 81,382 95,000 74,000 10,000 0 0 0 0 Volkswagen Volkswagen Golf Plus 2PassCPQ36WolfsburgDEH1 13 H1 13 0 0 0 0 0 0 44,500 95,000 119,000 103,500 101,000 Volkswagen Volkswagen Jetta/Bora Pass. C PQ35 Mlada Boleslav CZ 0 1,627 1,633 4,340 275 5000000 Volkswagen Volkswagen Touran Pass. C‐MPV A5/ PQ35 Wolfsburg (Euro 5000) DE Q1 03 2010 FL 187,900 135,762 106,888 80,828 0 0 0 0 0 0 0 Volkswagen Volkswagen Touran Pass. C‐MPV A5/ PQ35 Wolfsburg (Euro 5000) DE Q1 13 0 0 0 31,639 114,000 50,000 0 0 0 0 0 Volkswagen Volkswagen Touran Pass. C‐MPV MQB/VW368 Wolfsburg (Euro 5000) DE Q1 13 0 0 0 0 0 62,500 125,000 115,000 109,000 105,000 102,500 Volkswagen Volkswagen Passat Pass. D PQ46 Emden DE Q1 05 Q4 2010 252,792 188,989 142,082 123,027 0 0 0 0 0 0 0 Volkswagen Volkswagen Passat Pass. D PQ46 Zwickau / Mosel DE Q1 05 Q4 2010 141,189 125,242 52,210 46,332 0 0 0 0 0 0 0 Volkswagen Volkswagen Passat Pass D PQ47 Emden & Zwickau DE Q1 2012 0 0 0 45,409 291,000 235,000 217,000 195,000 187,500 181,000 178,500 Volkswagen Volkswagen Passat Pass. D PQ46 Mlada Boleslav CZ 392 642 394 786 0 000000 Volkswagen Volkswagen Passat Pass. D PQ47 Mlada BoleslavCZ 0 000700 1,000 750 500 250 0 0 Volkswagen Volkswagen Passat CC Pass. E PQ46 Emden DE Q3 07 2015 154 47,169 59,932 76,901 69,000 71,000 68,250 54,000 65,000 75,000 72,500 2011 FL, Volkswagen Volkswagen Phaeton Pass. E D1/VW611 Dresden DE Q4 01 5,711 6,189 4,071 7,477 11,000 10,000 9,500 10,500 12,000 10,500 10,000 2013 New Volkswagen Volkswagen Eos Pass. Sports A5 Setubal PT H1 06 2014‐5 55,559 43,578 17,880 22,775 22,511 12,500 11,500 9,500 18,500 24,000 22,000 Volkswagen Volkswagen Scirocco Pass. Sports A5 Setubal PT Late 2008 2014‐5 83 20,537 47,277 45,230 42,481 34,000 30,000 26,500 33,500 41,000 42,500 Volkswagen Volkswagen Sharan Pass. MPV VW418 Setubal PT H2 06 2011 23,808 19,703 14,643 23,229 14,968 000000 Volkswagen Volkswagen New Sharan Pass. MPV T5 Setubal PT H1 11 0 00035,000 49,000 40,000 35,500 30,500 26,500 24,500 T5/PL75/VW759; VW766 Volkswagen Volkswagen Touareg Pass. SUV in 2010 Bratislava SK H2 02 2010 72,455 62,229 29,576 26,966 0 0 0 0 0 0 0 T5/PL75/VW759; VW766 Volkswagen Volkswagen Touareg Pass. SUV in 2010 Bratislava SK H2 10 0 0 0 20,861 72,000 87,500 76,500 71,000 69,500 65,000 70,000 Full Prod Volkswagen VW and Skoda Various models Pass. Various Various Kaluga RU 1,198 62,234 48,012 94,944 135,000 170,000 189,000 195,000 200,000 193,500 191,000 2009 2012 or Volkswagen VW and others Various models Pass. Various Various GAZ RU 0 0 0 0 0 15,000 62,500 90,000 95,000 101,000 98,500 2013 Volkswagen Comm.Van PQ35 Poznan PL Q4 03 2014 142,226 155,741 127,291 137,180 157,976 151,000 148,500 150,000 147,000 145,000 145,000 Volkswagen Comm.Van T5 Poznan PL Q1 04 2010 24,810 18,738 10,802 12,020 19,025 18,000 16,500 14,500 12,500 11,250 10,000 Volkswagen Volkswagen Transporter Comm.Van T5 Hanover DE Q2 02 2010 162,056 166,575 96,421 129,460 138,000 119,500 105,000 95,000 119,000 125,000 135,000 Volkswagen Pick‐up Comm.PU Hanover DE 07/05 0 0 0 0 0 17,500 35,000 40,000 36,000 32,500 30,000 Volkswagen Volkswagen Total 2,026,602 2,054,283 1,835,493 2,124,741 2,369,789 2,431,050 2,491,000 2,475,500 2,560,250 2,537,750 2,511,000 VW ALL Total 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 105

Audi Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) of Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Volkswagen Audi A1 Pass. B PQ25 Brussels BE H2 09 2008 0 0 226 51,937 117,566 126,500 121,000 109,000 105,000 115,000 121,000 Volkswagen Audi Q2 Pass B‐SUV PQ25 Brussels BE H2 13 H2 2014 0 0 0 0 0 0 0 35,000 78,000 80,000 75,000 Volkswagen Audi A2 Pass B PQ25 Ingolstadt DE H2 12 2012 0 0 0 0 0 0 0 7,500 25,000 30,000 30,000 Volkswagen Audi A3 Pass. C A5 Brussels BE 2010 12,087 31,762 23,562 17,002 0 0 0 0 0 0 0 Volkswagen Audi A3/RS3 (RS3 assembly at Gyor) Pass. C A5/PQ35 Ingolstadt DE Q3 04 H2 10 2010 218,828 171,863 173,177 169,610 170,316 000000 Volkswagen Audi A3 Pass. C MQB/A6/ VW368 Ingolstadt DE H2 10 2010 0 0 0 0 7,000 160,000 225,000 205,000 193,500 185,000 181,000 Volkswagen Audi A4 Pass. D B7/PL46 Ingolstadt DE Q4 00 Q4 07 2008 274,195 54,252 0 0 0 0 0 0 0 0 0 Volkswagen Audi A4 Pass. D B8 MLB Ingolstadt DE Q4 07 2014 9,702 228,288 205,126 232,900 285,000 219,000 202,000 225,000 249,000 251,000 255,000 Volkswagen Audi A4 Pass. D B8 MLB Neckarsulm DE Q4 07 2014 2,209 79,589 70,054 67,458 38,000 11,000 10,000 35,000 60,000 64,000 62,000 Volkswagen Audi A4 cabriolet Pass. Sports B7 Rheine (Karmann) DE H2 2006 23,641 16,790 2,409 0 0 0 0 0 0 0 0 Volkswagen Audi A4 Allroad Pass. B8 MLB Ingolstadt DE H1 09 2014 0 0 9,291 10,788 10,537 8,500 8,000 7,500 10,000 12,000 11,500 Volkswagen Audi A5 incl. RS5 Pass. Sports B7 Ingolstadt DE H1 2007 2014‐5 25,554 57,324 69,471 90,016 91,299 92,500 86,500 77,750 74,500 85,000 93,500 Volkswagen Audi A5 cabriolet Pass. Sports B7 Neckarsulm DE H2 09 2015 0 326 15,388 20,924 20,459 15,000 11,000 10,000 22,500 29,000 26,500 H2 11 FL, Volkswagen Audi A6 Allroad Pass. SUV C6 Neckarsulm DE H2 06 16,340 10,283 4,104 5,551 3,036 0 0 0 0 0 0 New 2014 Volkswagen Audi A6 incl. RS6 Pass. E C6 Neckarsulm DE Q1 04 Q1 11 229,590 210,652 177,599 206,734 141,888 000000 Volkswagen Audi A6 Pass. E C7 MLB Neckarsulm DE Q2 2011 2011 0 0 0 0 100,000 155,500 147,000 125,000 103,500 95,000 86,500 Volkswagen Audi A6 Allroad Pass E C7 MLB Neckarsulm DE H2 2011 2011 0 0 0 0 0 7,000 9,000 8,000 7,000 6,000 6,000 Volkswagen Audi A7 Pass. E C7 MLB Neckarsulm DE H2 09 0 0 251 8,496 37,301 28,500 25,500 24,500 23,500 22,500 21,000 Volkswagen Audi A8 Pass. F D3/PL63 Neckarsulm DE 2010 22,182 20,140 8,009 4,701 0 0 0 0 0 0 0 Volkswagen Audi A8 Pass. F D4 ‐ MLB Neckarsulm DE H1 10 0 0 590 17,734 38,542 37,000 36,500 35,000 32,500 30,000 33,000 Volkswagen Audi TT Coupe Pass. Sports A5/PQ35 Gyor HU Q3 06 2013‐4 40,417 31,101 18,010 20,413 19,704 17,000 15,000 26,000 24,500 22,500 21,750 Volkswagen Audi TT Roadster Pass. Sports A5/PQ35 Gyor HU Q3 06 2013‐4 16,349 10,688 4,811 5,804 5,804 5,500 5,000 7,500 6,250 6,000 5,500 Volkswagen Audi A3 cabrio Pass. Sports A5/PQ35 Gyor HU Q2 07 216 16,570 9,782 12,309 14,050 12,250 0 0 0 0 0 New A3 cabrio and other A3 Volkswagen Audi Pass. C MQB/A6/ VW368 Gyor HU H1 13 0 0 0 0 0 15,000 68,000 85,000 80,000 76,500 74,500 derivatives Volkswagen Audi R4 Pass Sports Neckarsulm DE H2 16 0 0 0 0 0 0 0 0 0 2,000 3,000 Volkswagen Audi R8 Pass. Sports Gallardo Neckarsulm DE Q2 08 2014 6,000 5,656 2,101 3,485 3,551 2,550 2,400 4,000 5,250 5,000 5,000 Volkswagen Audi Q4 Pass SUV MLB Leipzig DE H2 16 0 0 0 0 0 0 0 0 0 12,500 12,500 Volkswagen Audi Q5 Pass. SUV B6 then MLB Ingolstadt DE H2 07 2014/5 0 20,324 109,117 155,052 191,987 127,500 107,500 80,000 90,000 80,000 88,000 Volkswagen Audi Q6 Pass SUV MLB (Q5) Ingolstadt DE H2 15 0 0 0 0 0 0 0 0 5,000 30,000 32,000 Volkswagen Audi Q7 Pass. SUV T5/PL75 Bratislava SK Q4 05 2014 77,396 54,008 27,929 47,769 53,707 54,000 52,000 60,000 70,000 71,000 68,500 Volkswagen Audi Total 974,706 1,019,616 931,007 1,148,683 1,349,747 1,094,300 1,131,400 1,166,750 1,265,000 1,310,000 1,312,750 VW ALL Total 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100

SEAT Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Volkswagen Seat Ibiza Pass. B PQ24 Martorell, Barcelona SP Pre 02 2008 172,209 91,114 14,827 0 0 0 0 0 0 0 0 Volkswagen Seat Ibiza Pass. B PQ25 Martorell, Barcelona SP H2 08 2017 0 101,356 158,890 188,083 190,000 161,000 135,000 129,000 109,000 102,500 125,000 Volkswagen Seat Cordoba Pass. B PQ24 Martorell, Barcelona SP Pre 02 2008 29,747 20,351 4,868 0 0 0 0 0 0 0 0 Volkswagen Seat Toledo Pass. C PQ35 Martorell, Barcelona SP Q1 05 4,744 5,407 571 0 0 0 0 0 0 0 0 Volkswagen Seat Leon Pass. C PQ35 Martorell, Barcelona SP Q3 05 120,630 96,761 66,373 79,462 81,000 5,000 0 0 0 0 0 Volkswagen Seat New Leon Pass. C PQ36 Martorell, Barcelona Sp Q1 12 0 0 0 0 0 66,000 95,000 145,000 135,000 127,000 119,000 Volkswagen Seat Altea Pass. C‐MPV PQ35 Martorell, Barcelona SP Q1 04 71,365 54,542 32,792 43,351 42,000 25,000 14,000 0 0 0 0 Volkswagen Seat Exeo Pass. D PQ46 Martorell, Barcelona SP 2009+ 0 21 9,012 23,108 20,000 12,500 10,000 9,500 14,500 20,000 18,500 Volkswagen Audi Q3 Pass. C‐SUV A5 Martorell, Barcelona SP H2 09 0 0 0 108 19,654 103,500 100,000 96,500 92,000 87,000 84,500 Volkswagen Seat SUV based on Q3 Pass C‐SUV Q3 Martorell, Barcelona SP H1 15 0 0 0 0 0 0 0 0 20,000 29,000 29,000 Volkswagen Seat New Alhambra Pass. MPV PQ46 Setubal PT H2 09 0 0 0 7,050 18,140 19,000 17,500 16,000 13,750 11,000 10,000 Volkswagen Seat Alhambra Pass. MPV PL44 Setubal PT H2 09 14,242 10,282 6,215 3,000 0 0 0 0 0 0 0 Volkswagen Seat Total 412,937 379,834 293,548 344,162 370,794 392,000 371,500 396,000 384,250 376,500 386,000 VW ALL Total 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 106

Skoda Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant of 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Mlada Boleslav & Volkswagen Skoda Fabia Pass. B PQ24 CZ H1 05 93,998 0 0 0 0 000000 Vrchabli Mlada Boleslav & Volkswagen Skoda Fabia Pass. B PQ25 CZ H2 05 2013 153,246 244,269 247,980 181,123 195,000 175,000 169,000 159,000 202,000 219,000 229,000 Vrchabli Volkswagen Skoda Rapid (MissionL)/Seat Toledo Pass B/C PQ25 (AO+) Mlada Boleslav CZ H2 12 2012 0 0 0 0 0 11,500 80,000 105,000 94,500 87,500 84,500 Mlada Boleslav & H2 04 new Volkswagen Skoda Octavia Pass. C SK351 (A5) CZ 277,181 275,545 187,696 218,621 185,000 000000 Vrchabli model Volkswagen Skoda Octavia Pass. C SK351 (A5) Bratislava SK H1 08 0 18,393 18,666 10,000 0 0 0 0 0 0 0 Mlada Boleslav & Volkswagen Skoda Octavia Pass. C SK361 (A6) CZ H2 11 0 00020,000 245,000 226,500 209,000 185,000 169,500 165,000 Vrchabli Volkswagen Skoda Superb Pass. D SK451 Kvasiny CZ 2008 21,326 9,000 000 000 0 Volkswagen Skoda Superb Pass. D SK461 Kvasiny CZ H1 08 2015 0 18,257 24,872 65,964 69,000 61,000 50,000 46,500 52,000 55,000 57,000 Volkswagen Skoda Yeti Pass. B‐SUV SK2XX Kvasiny CZ H1 09 0 0 19,670 52,552 76,000 92,000 79,000 72,000 69,000 62,500 59,000 Kvasiny, switching to Volkswagen Skoda Roomster Pass. B‐MPV SK2XX CZ H1 06 2013/14 69,637 43,247 39,664 27,729 35,000 35,000 31,500 29,500 24,500 40,500 39,000 Vrchabli 2011 Volkswagen Skoda C‐MPV Pass C‐MPV TBC TBC CZ H1 15 0 0 0 0 0 0 0 0 25,000 60,000 55,000 Volkswagen Skoda SUV Pass SUV TBC TBC CZ H2 15 0 0 0 0 0 0 0 15,000 31,000 42,500 40,000 Volkswagen Skoda Praktik Comm.B LCV SK2XX Kvasiny CZ H2 06 6,238 6,288 2,641 2,746 3,000 2,900 2,800 3,000 4,500 4,750 5,000 Volkswagen Skoda Total 621,626 614,999 541,189 558,735 583,000 622,400 638,800 639,000 687,500 741,250 733,500 VW ALL Total 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100

Lamborghini and Bentley Vehicle Country Start Prod'n Next new Production Production Production Production Production Production

Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Volkswagen Lamborghini ALL, inc SUV from 2016 Pass. IT 2,580 2,424 1,253 1,227 1,738 2,250 2,750 3,300 4,000 6,500 6,250 Volkswagen Lamborghini Total 2,580 2,424 1,253 1,227 1,738 2,250 2,750 3,300 4,000 6,500 6,250 Arnage/Azure/Brooklands/ Volkswagen Bentley Pass. Crewe UK Pre 02 728 755 233 320 1,145 1,250 1,100 1,000 900 850 800 Mulsanne Volkswagen Bentley New SUV Pass. Crewe UK 2015 0 0 0 0 0 1,500 2,500 3,250 Volkswagen Bentley Continental GT/Supersports Pass. Crewe UK H2 03 2012 2,148 2,702 1,291 1,481 3,240 3,700 3,500 3,250 3,000 2,850 2,700 Volkswagen Bentley Continental GT/Supersports cabrio Pass. Crewe UK H2 06 2014 4,849 2,410 719 1,080 793 2,975 2,925 2,850 2,700 2,550 2,425 Volkswagen Bentley Continental Flying Spur Pass. Crewe UK H1 05 2014 2,275 1,825 1,353 1,911 2,350 1,775 2,000 2,100 2,250 2,000 1,925 Volkswagen Bentley Total 10,000 7,692 3,596 4,792 7,528 9,700 9,525 9,200 10,350 10,750 11,100 VW ALL Total 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 107

Porsche Vehicle Country Start Prod'n Next new Production Production Production Production Production Production

Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Volkswagen Porsche Boxster Pass. Uusikaupunki (Valmet) FIN Q2 05201210,3928,0564,1721,4440000000 Volkswagen Porsche Boxster Pass. Stuttgart DE 2012 0 0 3,462 5,657 6,250 000000 Stuttgart and Karmann Volkswagen Porsche Boxster Pass. DE H2 11 2011 0 0 0 0 0 11,000 13,000 14,000 12,500 10,500 10,000 Osnabruck Volkswagen Porsche Cayman Pass. Uusikaupunki (Valmet) FIN H2 06201212,6348,0896,2424,9412,015000000 Volkswagen Porsche Cayman Pass. Zuffenhausen, Stuttgart DE H2 06 2012 0 0 0 0 3,900 1,000 0 d 0 0 0 Volkswagen Porsche Cayman Pass. Karmann Osnabruck DE H2 11 2011 0 0 0 0 500 9,250 12,000 11,250 10,500 10,250 Volkswagen Porsche 911 Pass. Zuffenhausen, Stuttgart DE Q1 05 2011 38,840 32,344 22,110 19,834 15,250 7,0003,0000000

Volkswagen Porsche 911 Pass. Zuffenhausen, Stuttgart DE Q1 110 0006,000 20,250 26,250 30,000 29,000 27,500 26,500 Volkswagen Porsche Panamera Pass. Leipzig DE Q3 07 0 0 10,465 24,060 28,500 24,000 22,500 19,500 18,500 24,500 26,000 Volkswagen Porsche Panamera coupe (928) Pass. Leipzig DE H2 11 2011 0 0 0 0 3,250 4,500 5,500 6,250 5,750 4,500 4,000 Volkswagen Porsche Mid engine super car Pass Zuffenhausen, Stuttgart DE H2 13 2013 0 0 0 0 0 0 0 250 1,000 750 750

Volkswagen Porsche 918 Spyder Pass Zuffenhausen, Stuttgart DE H2 12 2012 0 0 0 0 0 0 168 400 350 00 Volkswagen Porsche Macan Pass. Leipzig DE H2 10 0 0 0 0 0 0 15,000 63,000 75,000 72,000 70,000 Volkswagen Porsche Cayenne Pass. Leipzig DE Q4 02 2010 45,304 48,232 29,186 39,593 62,000 79,250 67,500 62,500 59,000 83,000 83,000 Volkswagen Porsche Total 107,170 96,721 75,637 95,529 127,165 147,500 162,168 207,900 212,350 233,250 230,500 VW ALL Total 4,155,621 4,175,569 3,681,723 4,277,869 4,809,761 4,699,200 4,807,143 4,897,650 5,123,700 5,216,000 5,191,100

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 108

Volvo (Geely) C70 production is continuing and will do for the foreseeable future – production could however move to Gothenburg in the future Background – new Chinese owners and focus on China Manufacturing news Geely bought Volvo from Ford in August 2010. Since then, it has spent a great deal of time and effort in bringing the Volvo brand to China and during 2013 this In recent months, Volvo announced production cutbacks at both of its main will come to fruition with the first of two Volvo plants starting production. This will European plants for the last few months of 2012. Specifically: be in the western city of Chengdu; the second is due to be in the north-eastern city  Production at Ghent was reduced by 5 units an hour for November and of Daqing. The new plants are part of the ambitious plan to raise Volvo sales in December, from 59 to 54 units an hour. China to at least 200,000 upa by 2015. The Chengdu plant will include an engine and a transmission plant. Initial capacity across the two Chinese plants will be  Production at Gothenburg was halted for a week at the end of October, a c200,000 vehicles, but this could be raised to 350,000 upa in the future; annual decision which followed on from the cut back from 57 to 50 units an hour for capacity for 250,000 engines will also be installed. the last three months of the year. In addition, there were three extra production free days in December, as well as the two cancelled shifts. The line speed in 2013 will be very important in charting Volvo’s medium term future – the former Gothenburg is also due to be reduced to 45 vehicles an hour from the end of Volvo chief, Stefan Jacoby had spoken of achieving worldwide Volvo sales of January. 800,000 by 2020. Achieving this will require not just substantial sales in China, the home market of its owners, Geely, but also raising the sales of its core models in In addition, it has made modifications to the Gothenburg assembly line to traditional markets by a significant amount. One route to achieving this could be allow it make the S60 there as well as in Ghent. This will enable Volvo to transforming the current XC60 and XC90 into a full XC brand; such an idea has balance production between the two plants according to demand. been quoted in the industry press, but we may have to wait until well into 2013 New model plans before Volvo’s plans for this range become clear. Although now firmly part of Geely, as we noted previously, Volvo’s detailed product Manufacturing overview plan have been in a limbo-like state for some time. Although the V40 was In terms of Volvo’s current vehicle manufacturing arrangements, these are as launched at the Geneva motor show, and the XC30/40 programme has been follows: transformed into the V40CC (Cross Country), Volvo has not released details on  Gothenburg, Sweden: V60, V70, XC70, S80, plus S60 on a flex basis. other new models along the lines which had been expected after the 2011 Frankfurt motor show. We also now understand that the C30, which we had  Ghent, Belgium: C30, V40, S60, XC60; the V40 has replaced the S40/V50 thought would stop production this year, will be retained until early 2015. and V40 Cross Country will play the role once expected for the proposed XC30. Some indications of the future direction for Volvo under Geely had come at the Shanghai Auto Show in April 2011, when the first concept Volvo produced under  Uddevalla, Sweden: C70; Volvo announced earlier in the year that it will take Geely management was shown. Called “Universe”, this was intended show the full control of this factory, from Pininfarina; this factory had been operated as a new human-centred design language of future “large and luxurious” . The JV since 2003. It is now wholly owned by Volvo; we had understood that Universe was not actually based on a specific vehicle platform, because the Volvo intended to close the factory in around March 2012. We understand vehicle platform and engine strategy had not been finalised by the time of the Shanghai show.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 109

However, the Universe concept gave a good indication as to the future of direction Other interesting areas of technology simplification which will follow include reduce for Volvo. The concept’s interior features touch screens rather than conventional the number of different fuel tanks used by Volvo from 50-60 to just three; switch gear and was designed to be “tranquil and lounge-like”, with detailing such Financial results – disappointing H1 results as blue and white porcelain on the and shift lever. Whether this will be retained in production models remains to be seen. Volvo Car actually still reports separate financial information from Geely and its results for H1/2012 are not especially pleasing. Although the January-June period It is likely that the Universe – and other new models – will be built on what Volvo recorded a 3.9% year-on-year rise in revenue, to over SEK65.3bn (nearly $9.8bn), calls its Scalable Platform Architecture (SPA); when announced, it appeared that this was largely due to positive exchange rates. Unit sales actually fell by 4.1% to this platform was intended to provide the basis for models form the S40 just over 221,000 and EBIT collapsed from SEK1.52bn to SEK329mn – and net replacement up to the long wheel base version of the S80 which is being profits in H1/2011 of SEK1.2bn were transformed into a loss of SEK254mn in developed for the Chinese market. Full details on the Scalable Platform H1/2012. Full year results will be published in May 2013. Architecture were originally due to be unveiled at the Frankfurt motor show in 2011. We now understand these will be revealed during 2013 and on that basis, we now In addition to the general economic uncertainty, Volvo also attributed the losses to believe that the V40 has not actually been built on the new platform after all. We the costs associated with the change from S40/V50 to V40. Car sales in the US now understand the new SPA platform will underpin all models from the S60/V60 were down by over 12% in 11 months to November, but sales of SUVs were up up to the XC90. over 16% in the same period, due largely to the success of the XC60 and in Europe they were down by nearly 11% in the 11 months to November 2012. We are now much more positive for Volvo’s production than we have been for some time – the commitment from Geely is beginning to pay off and we now see Given the state of the European market and Volvo still being heavily focused there, Volvo production climbing close to 500,000 during the period covered by this we think 2013 will be tough for the company and this is reflected in the projected Outlook. decline in production this year. Although the V40 is now at full production, several other models are in the declining phases of their life cycles and a new round of One interesting aspect of the new Volvo strategy which has become public is the model introductions from 2014 onwards will, along with the expected recovery from decision that all engines from 2014 will have a maximum of 4-cylinders. Volvo is that point, be required for Volvo’s production volumes to grow once more moving to lightweight, reduced CO2 emissions and smaller cars; 3-cylinder engines are under consideration for the C30 replacement and similar sized cars. .

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 110

Volvo’s recent launch and future new model programme is as follows:

2012 2013 2014-2015 V60 plug in hybrid V40 Cross Country Further new models to be confirmed – possibly V40 to replace S40 and V50 Revised/replacement C70 including a V90 large estate like vehicle and a “full” small SUV

The Production Outlook table which follows shows production falling again in 2013, following the expected fall of around 26,000 units over the provisional total for 2012. Although 2013 will benefit from full production rates on V40, total production will fall as a result of declining sales of Volvo’s large models. As noted above, we think it will take a further round of new models for Volvo to have sufficient momentum to climb back to nearly 500,000 units’ annual production in Europe. Long term, there may be a small decline in some models’ European production due to switching production to China, although if the new Chinese plants are delayed, then European production could be maintained at higher levels. Volvo wants to double sales globally to 800,000 upa by 2020; we do not think this can happen without major expansion outside Europe. It may be that production in Europe could increase above what is shown here, but Volvo is still a relatively small player and doubling sales, even with the backing of Geely, will not come easily or quickly. We have included a line for “various new models” from 2014, with volumes which are clearly provisional; they have been included to give some recognition to the fact that we expect a broadening of the Volvo line up in Europe from 2014, even if the models and their launch timings have yet to be confirmed. We expect production to be split between Belgium and Sweden, but for now we allocate all of this production to Sweden. Geely Volvo Production Outlook to 2017 Vehicle Country Start Segment Prod'n Prod'n End Next new Production Production Production Production Production Production

Series (platform) of Group Marque Model range Plant 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Geely Pass. C Y279 Ghent BE H1 07 2012+ 11,779 26,167 18,500 14,500 6,000 1,000 0 0 2013 or Geely Volvo V40CC Pass SUV est. V40 Ghent BE H2 12 0 0 2,500 15,000 22,000 26,000 29,000 29,000 2014 Geely Pass C New Ghent BE Q4 12 0 0 35,000 72,000 76,500 70,000 69,000 67,500 Geely Pass. C Y276 Ghent BE Q3 04 2015 tbc H2 15 7,800 17,360 6,470 0 0 0 0 0 Geely Pass. C Y280 Ghent BE Q3 04 2015 tbc H2 15 18,428 46,045 22,578 0 0 0 0 0 Geely Pass C Y283 Gothenburg SE H1 11 12,956 50,668 55,000 49,500 46,500 44,250 42,000 40,000 Geely Pass. D CD3XX/ Y283 Ghent BE H2 10 24,032 76,500 66,000 58,000 50,000 46,500 48,000 55,500 Geely Pass. D P26/ Y285 Ghent BE Q2 00 Q2 07 2007 0 0000000 Geely Volvo V70 Pass. D P26/ Y285 Gothenburg SE Q2 00 Q2 07 2007 0 0000000 Geely Volvo V70 Pass. D CD3XX/ P2X Gothenburg SE Q2 07 2014 21,810 35,928 35,000 32,500 27,500 50,000 55,000 52,500 Geely Pass. E P3X/Y286 Gothenburg SE Q2 06 2013‐14 5,770 12,907 12,000 10,000 25,000 28,500 27,500 25,000 Geely Volvo XC60 Pass. D‐SUV P1/Y359 Ghent BE Q1 08 36,446 100,645 115,000 105,000 95,000 92,000 83,500 80,000 Geely Volvo XC70 Pass. SUV est. P26 Gothenburg SE Q3 00 Q2 07 2007 0 0000000 Geely Volvo XC70 Pass. SUV est. CD3XX/ P2X Gothenburg SE Q3 07 8,328 26,853 27,000 22,500 20,000 19,000 17,000 15,500 Geely Volvo XC90 Pass. SUV P28 Gothenburg SE Q2 02 2014 15,020 40,860 30,000 19,500 40,000 60,000 58,750 55,000 Geely Volvo Various other models Pass Various Gothenburg SE H1 13 0 0 0 0 25,000 50,000 55,000 55,000 Geely CC Pass. Sports Y281 Uddevalla SE Q3 05 2012‐3 2,734 9,593 7,500 3,500 0 0 0 0 Geely Volvo New C70 Pass. Sports Y281 Gothenburg SE H2 13 2013 0 0 0 4,500 10,000 12,000 10,500 9,500 Geely Volvo Total 165,103 443,526 432,548 406,500 443,500 499,250 495,250 484,500

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 111

Other VMs:

Aston Martin Since our last report, Aston Martin has seen a significant investment by the Italian private equity house Investindustrial. The Italian firm injected £150mn in a deal announced in December and now has a 37.5% stake in the business. Investindustrial and the existing main shareholder, the Middle East fund Investment Dar, intend to invest more than £500mn in new product and technology programmes over the next five years. This investment followed on from news in November that the credit rating agency Moody’s had put Aston Martin under review for a credit downgrade as it was deemed to running low on cash reserves. Specifically Moody’s had earlier given Aston Martin a non-investment grade B3 rating, which is defined as meaning the company was a “high credit risk”; in Q3/2012 Aston Martin had reported a negative free cash flow. This in turn led to Aston Martin seeking new investors, with Investindustrial and Mahindra of India the two companies willing to invest. Earlier in 2012, Aston Martin had joined the increasing commitment by VMs to production in the UK by completing its move of Rapide production from Austria to its factory in Gaydon. It had originally planned to make the Rapide in Austria for eight years, but gave a one year notice period in June 2011 if its intention to move production to the UK. This coincided with a reduction in output – to just 25 a week, or a maximum of 1,250 a year, compared to the planned 2,000 per year when the vehicle was announced in 2007/8. Production of the Cygnet, based on the Toyota iQ, started in April 2011; the vehicle had been described by Aston Martin as “tailor-made for the city”, with all Cygnets offering a very high degree of customisation and personalisation. Production volumes for this vehicle have, however, been very low in response to disappointing sales and it would not be surprising to see this vehicle ultimately dropped from Aston’s line-up sooner rather than later. We still expect a new Aston Martin to appear using some Mercedes technology, although the details of this remain to be confirmed. In late 2012 reports emerged that future Aston Martins could also make extensive use of components from the Mercedes’ high performance division, AMG. Aston Martin Production Outlook to 2017 Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Aston Martin Aston Martin Vantage Pass. Sports VH/AM305 Gaydon UK Q3 05 2014 4,772 3,426 1,153 1,427 1,596 1,500 1,250 1,100 1,450 1,650 1,250 Aston Martin Aston Martin Virage Pass. Sports VH Gaydon UK Q2 11 0 0 0 0 763 600 750 900 825 750 675 Aston Martin Aston Martin DB9/DBS Pass. Sports VH Gaydon UK Q1 04 2015 2,436 3,061 1,322 1,276 657 425 125 100 25 0 0 Aston Martin Aston Martin New DBS Pass. Sports VH Gaydon UK H2 12 2012 0 0 0 0 0 50 350 750 900 800 700 Aston Martin Aston Martin New DB9 Pass Sports New platform Gaydon UK H1 15 0 0 0 0 0 0 400 500 600 500 4,000 Aston Martin Aston Martin Pass Sports Merc GL? Gaydon UK H1 14 2014 0 0 0 0 0 0 0 750 1,000 900 825 Aston Martin Aston Martin Rapide Pass. Tourer VH/AM803 Graz (Magna) AU 2009‐2010 0 0 0 1,498 853 380 0 0 0 0 0 from mid Aston Martin Aston Martin Rapide Pass. Tourer VH/AM803 Newport Pagnell UK 000 0 0 290 500 450 400 325 300 2012 Aston Martin Aston Martin Vanquish Pass. Sports VH Newport Pagnell UK 2009 165 0 0 0 0 370 325 250 150 0 0 Aston Martin Aston Martin Cygnet Pass. A/B iQ Gaydon UK 2011 0 0 0 0 558 160 125 100 100 100 100 Aston Martin Aston Martin Total 7,373 6,487 2,475 4,201 4,427 3,775 3,825 4,900 5,450 5,025 7,850

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 112

Mitsubishi Production of the Colt and Outlander in the Netherlands finished during 2012. Mitsubishi has sold the factory to the bus company, VDL which will act as a contract manufacturer. The first contract assembly project will be for BMW which will see Minis assembled here from mid-2014. Production volumes for this contract are included in BMW. The only remaining Mitsubishi production in Europe will be the Outlander production at the PSA JV factory in Russia. Mitsubishi Production Outlook to 2017 Vehicle Country Start Segment Prod'n Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Mitsubishi Pass. B ZBornNLQ2 04 61,692 54,137 43,129 26,907 23,833 21,250 Production finished in December 2012 Mitsubishi Pass. SUV Outlander Born NL H2 08 0 6,168 7,491 21,118 16,939 5,797 Production finished in mid‐2012 Mitsubishi Mitsubishi Outlander & PSA Pass. SUV Outlander Kaluga ‐ PSA JV RU H2 10 0 0 0 4,250 12,000 16,000 28,000 35,000 40,000 45,000 40,000 Bairo Canavese Mitsubishi Mitsubishi Colt cabrio Pass. B sports Z IT Q1 06 4,741 2,830 0 0 0 0 0 0 0 0 0 (Pininfarina) Mitsubishi Mitsubishi Total 66,433 63,135 50,620 52,275 52,772 43,047 28,000 35,000 40,000 45,000 40,000

SAIC MG MG vehicles had been due to resume assembly at Longbridge in late 2010, although in practice production only took place in 2011, since when no vehicles have been reported as made at Longbridge. We now understand MGs will be made in China and the likelihood of assembly resuming, even at modest volumes, at Longbridge is very low indeed. SAIC MG Production Outlook to 2017 Vehicle Country Start Segment Prod'n Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

SAIC MG MGF Pass. Sports PR3 Longbridge UK H2 0804688800000000 SAIC MG MG6 Pass. C Longbridge UK H2 1000001,315000000 SAIC MG MG Total 04688801,315000000

Saab-Spyker Introduction – latest situation – the end of the road for Saab – or rebirth as an EV manufacturer? Having been placed in bankruptcy protection in Q3 2011, no resolution regarding ownership and new funding had been found by the end of 2011, so the company filed for bankruptcy. Saab’s future was sealed when GM announced it would block the sale of Saab to the Chinese; GM has pre-emptive rights over the technology in Saabs and refused to sanction a change of ownership at Saab of which it disapproved. An attempt to save Saab by the Turkish-backed finance company, Brightwell, failed because GM did not want to license any technology to this entity, nor did it want to make the 9-4X SUV for a new owner of Saab.

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 113

The Dutch sports car maker, Spyker, or rather its shareholders, had bought Saab from GM, although the deal included GM holding US$326m worth of redeemable preference shares in Saab. Despite the bullish statements from the new owners after they bought the company, Saab continued to lose money and when production came to a halt when it could not pay suppliers, the writing was really on the wall. The Chinese companies Youngman and Pang Da also wanted to buy Saab, initially providing around €50mn to keep the company going; the total price to be paid for the business was said to be around €100mn. However, this deal, like the proposed takeover by Brightwell, also failed. Our Production Outlook had originally assumed that a future would have been found for Saab; for now we have left the historic information in the report and will reactivate coverage of Saab if it is eventually saved, no matter how unlikely that may seem just now. For now the future for Saab production is shown as zero and highlighted in pink below; this will be changed if Saab is revived. Saab has been taken over by a consortium which intends to make electric vehicles there – we remain doubtful as to the viability of this plan, with almost no detail having been released in terms of timing and actual models. For now we leave this a zero production for the future, but will revise this in future reports when relevant and reliable information is available. Saab Production 2010-2011 – earlier production included in GM Vehicle Country Start Segment Prod'n Production Production Production Production Production

Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016

Saab Sypker Saab 9‐3 Pass. D Trollhattan SE Q1 10 0 0 0 19,481 9,636 0 0 0 0 0 Saab Sypker Saab New 93 incl. cabrioPass.DTrollhattanSE0 000 000000 Saab Sypker Saab 9‐3 cabrio Pass. D Graz (Magna) AU 0 0 0 2,526 1,495 0 0 0 0 0 Saab Sypker Saab 95 Pass. E Trollhattan SE Q1 10 0 0 0 8,756 2,424 0 0 0 0 0 Saab Sypker Saab 92 Pass. C Trollhattan SE H1 140000 000000 Saab Sypker Saab Total 0 0 0 30,763 13,555 0 0 0 0 0

Other Chinese VMs Chery was due to have started production in Turkey by the end of 2011, but this will now begin in late 2013, a year and a half later than expected; meanwhile Great Wall also delayed the start of production at its 50,000 upa JV in Bulgaria until February 2012. Chery and Great Wall Production Outlook to 2017 Vehicle Country Start Segment Prod'n Next new Production Production Production Production Production Production

Series (platform) Group Marque Model range Plant 2007 Production 2008 Production 2009 Production 2010 Production 2011 Production type of model Outlook 2012 Outlook 2013 Outlook 2014 Outlook 2015 Outlook 2016 Outlook 2017

Chery Chery Various Pass Various Various Turkey TR Q3/13 2013 0 0 0 0 0 0 5,000 40,000 70,000 86,000 95,000 Chery Chery Total 0 0 0 0 0 0 5,000 40,000 70,000 86,000 95,000 Great Wall Great Wall Various Pass. Various Various Bulgaria BU Q1/12 2012 0 0 0 0 0 7,500 32,000 42,500 44,000 47,500 50,000 Great Wall Great Wall Total 0 0 0 0 0 7,500 32,000 42,500 44,000 47,500 50,000

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 114

EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT January 2013| Page 115