1. The Future of the Automobile:
A Look into the Crystal Ball
Presented by
Auto Futures Group, LLC
1/13/2009

2. What is the Auto Futures Group?
• An organization oriented towards the future
of the automobile.
• We provide comprehensive support services
to car companies, the investment community
and policy makers.
• We are an alternative to internal staff.
• We get things done and we make things
happen……

3. Our Team
Bob Austin
• Marketing strategy
• Brand development
• Public Relations
• Advertising
• Event marketing
• Relationship marketing
• Marketing partnerships
• Volvo Cars, Rolls-Royce

4. Our Team
Bill Pettit
• Market Research
• Market Analysis
• Strategic Planning
• Customer Relationship Marketing
• Brand Management
• Performance Metric Development
• Voice of the customer
• BMW NA

5. Our Team
Bert Holland
• Marketing Strategy
• Automotive Engineering
• Strategic Planning
• Marketing Innovation
• Public Policy
• Product Planning
• Event Marketing
• BMW AG, BMW NA, Porsche AG

6. Auto Futures Group did not
come in a corporate jet…

7. Auto Futures Group Senior Partners
does not have a corporate yacht

8. Auto Futures Group did not
come here asking for money…yet

9. The Auto world…2008

10. US Light Vehicle Sales
2008 vs. 2007

11. Light Vehicle Overview
• Total Sales declined 18.3%
• Worst year since 1991
• Cars Sales off 10.7%
• Cars outsold Trucks in 2008 for
first time in several years
• Truck Sales dropped 25%

12. Car Segment
Source: AutoData, Inc.

13. Truck Segment
Source: AutoData, Inc.

14. 2008 “Winners”
• MINI Sales up 28%
• Rolls-Royce increased 17%
• Subaru about even (+.03%)

15. 2008 Losers!
• Hummer - 51%
• Land Rover - 40%
• Chrysler - 39%
• Saab - 35%
• Isuzu - 33%
• Maybach - 33%
• Bentley - 33%
• Jaguar - 32%
• Volvo - 32%
• Jeep - 30%

16. Why Did This Happen?
• Real estate collapse
• Escalating fuel prices
• Stock market collapse
• Credit market freeze
• Job losses
• “THE PERFECT STORM” for our industry
• It hurt virtually everyone not just the D3!

17. Things you should note:
• In May of 2008 TechoMetrica’s Alternate
Fuels Tracker showed consumers expected
gas prices to remain over $4 per gallon and
almost 40% thought it would climb to $6
within 3 years.
• Sales of SUVs and Light Trucks dropped
precipitously during the summer and fall.
• By November, Toyota Prius demand had
dropped off

18. The Detroit 3
• Detroit had been accused of making cars people
do not want.
• Americans love big, roomy, comfortable, and
powerful cars.
• The sudden increase in fuel prices drove
Americans to smaller cars.
• The problem is production can not change as
quickly as customer preferences.

19. The global car industry suffers
• European sales have dropped
• BRIC country sales have dropped precipitously
• Drop in demand resulted from local stock
market collapses and the prospect of
unemployment due to diminished US demand
• They have always had higher fuel prices and
smaller cars…

20. What lies ahead?

21. The slump is here to stay
• Vehicles have become more reliable
– Replacement demand softened to 14 million
– 2 million extra cars / yr were sold to reach 16 million
– Today: Purchase intent down 18%
• Manufacturers compensated with Subventions
– Today: Market is in withdrawal
• Credit Crisis began in 2008
– Today: Credit causes about half of slump
• Confidence began to plummet in September
– Today: Consumers are losing jobs as well

22. Legislation – One slide
• Obama administration will be very active
• “Cash for Clunkers”
• Distributed electric grid
• Money for municipalities as incentives
• Local government initiative will increase
– traffic zones and fees
– plug-in parking spots
– incentives for HOV and parking

23. Alternate Powerplants– One slide
• Gasoline will dominate
• Diesel will make little progress
• CNG and LNG will make more progress in local
delivery light trucks and busses
• Electric will ultimately replace gasoline, but at
present lack of battery capacity and expense
reduce it to a novelty for at least the next 5 years
• Corn based ethanol uses more energy than it
delivers.
• Biomass ethanol will be somewhat better

24. What about Electric Cars?
• In 1900 electrics were prevalent
– Energy density, speed of filling and costs
• Future depends on three key factors
– Government incentives and regulations
– Intensity of investment in batteries
– Breakthrough concept needed – i.e. like iPod
• Pure electric
– smaller cars, postal vehicles first
• Range-extended electrics will prevail
– Volt is not just hype

25. Gradual Electrification of Vehicles
• Expansion of Hybrid to near 100% by 2020
• High-speed sportscars, Trucks, Buses will
include piston engines for some time
• Diesels, synthetic fuels, natural gas
– pricing policy of energy companies
– government policy
– opportunity for natural gas for truck fleets
• Powergrid, solar charging, distributed storage
– depend on public policy and private initiatives

26. Prognosis
• 2009 US Sales will be around 11 million
– Unlikely to go over 14 million in the next 3 years
• Trends
– Trucks will weaken, especially larger ones
– Practicality is crucial, but also emotion
– Price is trump in 2009/2010
• Low end will go for price
– Creative subventions, even rental/leases
• Brand reputation trumps on high end
• Extinction of 2nd
string luxury

27. Potential Winners
• Opportunity to grab share
• Asian manufacturers in domestic clothes
• Asian manufacturers who develop strong
brands
• European manufacturers who maximize Asian
sourcing for price
• New manufacturers
– borrowing brand power (Google, Sony, Apple, GE)
– new brands: Aptera, Mahindra (Fiskar, Tesla????)

28. Implications

29. Car companies will have to learn
to live with lower volumes . . .
• Excess production capacity needs to be shut
• Manufacturers need to tune up brands and
eliminate non-relevant offerings
• Staff sizes will be reduced and work will be
outsourced as required
• Politics…as much as business will determine
the fate of GM and Chrysler
• Ford is the one eyed man in the land of the
blind

30. Dealerships are going to
change . . .
• There are just too many dealerships with too
little volume to carry the overhead.
• As many as 1000 more dealers may close.
• The dealership paradigm may change from
brand palace to department store.
– Provides more customer oriented experience
– More cost effective facility

31. Conclusions
• The automobile will be the dominant form of
transportation in the US for the foreseeable
future. We like that!
• Car companies will need to focus on profit
rather than volume.
• Brands need to be reviewed to see that they
make a promise they deliver on, which is
relevant, and desirable.

32. What are the biggest issues we face?
• FEAR!!!
• Lack of confidence
• Lack of trust
• Lack of transparency
• This extends well beyond the auto
business!!!

33. What can help us move forward?
• LEADERSHIP
– In Government
– In Business
• Efficient, distinctive, and well branded
products
• A domestic energy policy to help motivate
people to seek more fuel efficient vehicles
• Global harmonization of safety and emissions
standards in the developed world.

34. And that is the way we see it…….
Thank you
Auto Futures Group