Car Wars

The US Automotive Product Pipeline
Car Wars 2020-2023 The Rise (and Fall)

of the Crossover?
Equity | 10 May 2019
Car Wars thesis and investment relevance

Car Wars is an annual proprietary study that assesses the relative strength of each
automaker’s product pipeline in the US. The purpose is to quantify industry product
trends, and then relate our findings to investment decisions. Our thesis is fairly
United States
straightforward: we believe replacement rate drives showroom age, which drives market Autos/Car Manufacturers
share, which drives profits and stock prices. OEMs with the highest replacement rate
and youngest showroom age have generally gained share from model years 2004-19.
John Murphy, CFA
Research Analyst
Ten key findings of our study MLPF&S
+1 646 855 2025
1. Product activity remains reasonably robust across the industry, but the ramp into a johnj.murphy@baml.com
softening market will likely drive overcrowding and profit pressure. Aileen Smith
Research Analyst
2. New vehicle introductions are 70% CUVs and Light Trucks, and just 24% Small and MLPF&S
Mid/Large Cars. The material CUV overweight (45%) will likely pressure the +1 646 743 2007
aileen.smith@baml.com
segment’s profitability to the low of passenger cars, and/or will leave dealers with a
Yarden Amsalem
dearth of entry level product to offer, further increasing an emphasis on used cars. Research Analyst
MLPF&S
3. Product cadence overall continues to converge, making the market increasingly yarden.amsalem@baml.com
competitive, which should drive incremental profit pressure across the value chain.
Gwen Yucong Shi
4. Our lower average showroom age estimates are partially a result of an elevated Research Analyst
MLPF&S
level of product cancellations by OEMs, particularly in the passenger car segment. gwen.shi@baml.com
5. GM lags the broader industry replacement rate, as it just completed its light duty Global Auto Research Team
pickup launch in MY19. However, the upcoming launches of its heavy duty pickups in Kai Mueller, CFA >>
Research Analyst
MY20 and large SUVs in MY21 should drive strong profitability. MLI (UK)
kai.mueller@baml.com
6. Ford's replacement rate is at the high end of the range, and by design is dominated
by CUVs (41%) and Trucks (55%). This should support market share and profitability. Kei Nihonyanagi >>
Research Analyst
7. FCA was an industry leader in embracing Trucks and CUVs, somewhat out of Merrill Lynch (Japan)
kei.nihonyanagi@baml.com
necessity, but the relative outperformance is fading, even with a focus on Jeep.
Ming Hsun Lee, CFA >>
FCA's total replacement rate is below average. Research Analyst
Merrill Lynch (Hong Kong)
8. Japanese OEMs each have a volatile product cadence over MY2020-23. The focus is minghsun.lee@baml.com
on CUVs, but most remain committed to passenger cars. Honda's replacement rate Sahil Kedia >>
leads, Toyota is strong, and Nissan continues to sputter. Research Analyst
DSP Merrill Lynch (India)
9. Hyundai and Kia’s replacement rates are above the industry average, with a very sahil.kedia@baml.com
strong MY2020-21, but lighter MY22-23. The duo appears relatively Car heavy. See Team Page for List of Analysts
10. European OEMs’ total replacement rate is just below industry average. In addition
to Luxury, there is an emphasis on CUVs and alternative powertrain vehicles. Chart 1: Replacement rate MY20E-23E[1]
Daimler leads the pack in replacement rate, while BMW and Volkswagen trail.
Honda 93%
Electrification/autonomy are still coming, but slowly Korean 88%
Ford 85%
Similar to prior years, we have projected launches of alternative powertrains (hybrid,
Toyota 79%
electric, and fuel cell), as well as automakers’ rough product and technology targets for Industry Avg. 79%
autonomous vehicles, which ties in to our enterprise-wide investment theme of European 74%
Innovation. Our overriding conclusion is that proliferation of these vehicles will remain Nissan 69%
limited for now, due largely to prohibitive costs for the value chain and consumer, which FCA 68%
VW 65%
we will further detail in our upcoming Who Makes the Car analysis.
GM 63%
>> Employed by a non-US affiliate of MLPF&S and is not registered/qualified as a research analyst under Source: BofA Merrill Lynch Global Research; Based on
the FINRA rules. methodology detailed on page 6
Refer to "Other Important Disclosures" for information on certain BofA Merrill Lynch entities that take [1] Cumulative replacement rate for MY2020-2023;
responsibility for the information herein in particular jurisdictions.
BofA Merrill Lynch does and seeks to do business with issuers covered in its research reports.
As a result, investors should be aware that the firm may have a conflict of interest that could
affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
Refer to important disclosures on page 74 to 75. 11999315
Executive summary
Car Wars is a proprietary study we conduct every year to assess the relative strength of
each automaker’s product pipeline in the US. It was published for the first time in 1991.
The study is based on numerous primary and secondary sources, including industry
contacts, auto show visits, trade publications, enthusiast magazines, supply chain
relationships, as well as our general knowledge of platform strategies and product cycle
planning. The purpose is to quantify industry product trends, and then relate our findings
to investment decisions.
The key metrics that we use are: replacement rate (the estimated percentage of an
OEM’s (original equipment manufacturer) sales volume to be replaced with all-new or
next generation models), average showroom age (the number of years on the market for
the average model in an OEM’s showroom), and new model volume mix (the mix of new
models by segment during the forecast period for each OEM).
Car Wars thesis

We believe that replacement rate drives showroom age, which drives market share,
which in turn drives profits and ultimately stock prices. Table 1 summarizes the average
annual replacement rate, relative showroom age, and market share change of the largest
OEMs between MY2004 and MY2019 (calendar years 2003 through 2018).
Table 1: Historical replacement rate, showroom age, market share (MY2004-2019)

Avg. Volume Avg. Showroom Age
Replacement Rate [1] O/(U) Industry Avg. US Market Share ∆[2]
Ford 13.6% 1.0 -5.4%
FCA 16.1% 0.3 -1.1%
Toyota 15.8% 0.0 3.8%
Industry Avg. 16.0% 0.0 0.0%
GM 16.0% (0.0) -11.1%
Nissan 16.5% (0.1) 4.9%
European 18.1% (0.1) 2.4%
Honda 19.3% (0.3) 2.2%
Korean 20.2% (0.7) 3.8%
Source: BofA Merrill Lynch Global Research; Based on methodology detailed on page 6
[1] Volume weighted average annual replacement rate
[2] Market share change is based on calendar years 2003-2018
Although other factors, including mix, pricing, execution, distribution, brand power, and
unforeseen disruptions, impact market share, we think this data supports our thesis that
successful new products generally drive higher market share and profits. Table 2
summarizes our forecasts of these key metrics for MY2020-23 and subsequent
estimates of market share shifts. Based on our estimates, the shifts in market share will
likely be somewhat limited, as convergence of product cycles is intensifying across the
industry, and many OEMs are set to drive a solid product cadence over our four year
forecast period. GM sits at the low end of the range, so there is some downside market
share risk for the company, although its mix of launches is very favorable. Conversely,
Honda is at the high end of the, range so there is potential upside to market share.
Table 2: Forecast replacement rate (MY2020-23E), showroom age (MY2020-23E), and market share change (CY2022 vs. CY2018)
[1] [2]
Replacement Rate Avg. Showroom Age O/(U) 2018 Market Share Direction of US Mkt. Share, CY22 vs. CY18
Honda 23.3% (0.5) 9.6%
Korean 21.9% (0.8) 7.4%
Ford 21.3% (0.1) 14.7%
Toy ota 19.7% 0.3 14.2%
Industry Avg. 19.6% 0.0 nm nm
European 18.6% 0.1 7.9%
Nissan 17.2% (0.1) 9.3%
FCA 17.1% 0.5 12.0%
GM 15.8% 0.3 17.5%
Source: BofA Merrill Lynch Global Research; Based on methodology detailed on page 6; [1] Volume weighted average annual replacement rate; [2] Directional market share forecast is for calendar years 2018 to 2022
2 The US Automotive Product Pipeline | 10 May 2019

Ten key conclusions
1. Product activity remains reasonably robust across the industry, but the ramp into a
softening market will likely drive overcrowding and profit pressure.
2. New vehicle introductions are 70% CUVs and Light Trucks, and just 24% Small and
Mid/Large Cars. The material CUV overweight (45%) will likely pressure the
segment’s profitability to the low of passenger cars, and/or will leave dealers with a
dearth of entry level product to offer, further increasing an emphasis on used cars.
3. Product cadence overall continues to converge, making the market increasingly

competitive, which should drive incremental profit pressure across the value chain.
4. Our lower average showroom age estimates are partially a result of an elevated
level of product cancellations by OEMs, particularly in the passenger car segment.
5. GM lags the broader industry replacement rate, as it just completed its light duty
pickup launch in MY19. However, the upcoming launches of its heavy duty pickups
in MY20 and large SUVs in MY21 should drive strong profitability.
6. Ford's replacement rate is at the high end of the range, and by design is dominated
by CUVs (41%) and Trucks (55%). This should support market share and
profitability.
7. FCA was an industry leader in embracing Trucks and CUVs, somewhat out of
necessity, but the relative outperformance is fading, even with a focus on Jeep.
FCA's total replacement rate is below average.
8. Japanese OEMs each have a volatile product cadence over MY2020-23. The focus is
on CUVs, but most remain committed to passenger cars. Honda's replacement rate
leads, Toyota is strong, and Nissan continues to sputter.
9. Hyundai and Kia’s replacement rates are above the industry average, with a very
strong MY2020-21, but lighter MY22-23. The duo appears relatively Car heavy.
10. European OEMs’ total replacement rate is just below industry average. In addition
to luxury, there is an emphasis on CUVs and alternative powertrain vehicles. Daimler
leads the pack in replacement rate, while BMW and Volkswagen trail.
The US Automotive Product Pipeline | 10 May 2019 3

Car Wars background

The purpose of Car Wars
Background and purpose
Purpose of report: quantify industry product trends, project market share

shifts, and then relate conclusions to investment decisions.
Car Wars is a proprietary study we conduct every year to assess the relative strength of
each automaker’s product pipeline in the US. It was first published in 1991. The study is
based on numerous primary and secondary sources, including industry contacts, auto
show visits, trade publications, enthusiast magazines, supply chain relationships, as well
as our general knowledge of platform strategies and product cycle planning.
The purpose of the report is to quantify industry product trends, and then relate our
findings to investment decisions.
Key metrics
Replacement rate, average showroom age, and new model volume mix are
the key metrics we calculate to analyze the OEMs' product pipelines.
The key metrics that we use include the following:
 Replacement rate: The estimated percentage of an OEM’s sales volume to be

replaced with entirely new models or next generations of existing models. This is
one of the simplest and most important ways to measure the strength of an
automaker’s product plan.
 Average showroom age: The number of years on the market for the average
model in an OEM’s showroom, measured on a stand-alone basis and relative to the
industry. This is sales volume weighted.
 New model volume mix: The mix of new models by segment during the forecast
period for each OEM.
Our data collection is continuous, and we have developed a comprehensive database of US

product activity going back to 1987 – through essentially three cycle peaks and two cycle
troughs. Once a year, we summarize our findings in a report and on a color poster. This
year’s study forecasts activity for the 2020-2023 model years (2019-2022 calendar years).
An independent view
Relative performance is what counts
Car Wars represents our independent view of automakers’ competitiveness, so it does
not necessarily agree with all of the views of the auto companies. It is likely we are
missing information on all OEMs. Therefore, despite differences of opinion on any one
OEM’s pipeline forecast, we believe that we have an accurate view of its relative
position in the market. And, in our view, that is what matters when forecasting market
share.
-
Readers may find that our data might differ from the announcements OEMs make
occasionally about the number of products they plan to launch. This is because our
definition of a new product may differ from that of an automaker, and we would note
that new product definitions can even vary from company to company. In Car Wars, we
include only products we judge to be all-new or next-generation vehicles – what the
industry typically calls a “major”. We do not include mid-cycle enhancements, where only

modest changes are made to the vehicle. However, we do concede there is an increasing
focus by many OEMs to make more substantial mid-cycle enhancements that could
create some distortions. In addition, we forecast volume based on what we think the
average annual volume will be for the product over its entire model life. We do not use
company sales targets or peak volumes, which could distort results. Importantly, the
sum total of our volume forecasts is limited to rational trend levels of US demand.
Car Wars thesis

Replacement rate  showroom age  market share  profits  share price
Our overarching thesis is that an OEM’s product replacement rate drives showroom age,
which drives market share, which in turn drives profits and ultimately stock prices. Table
3 details the average annual replacement rate, relative showroom age, and market share
change of the largest OEMs between model years 2004 and 2019 (calendar years 2003-
2018). The below illustrates how the OEMs with the highest replacement rate and
youngest showroom age relative to the industry have generally gained market share.
Table 3: Historical replacement rate, showroom age, market share (MY2004-2019)

Avg. Volume Avg. Showroom Age
Replacement Rate [1] O/(U) Industry Avg. US Market Share ∆[2]
Ford 13.6% 1.0 -5.4%
FCA 16.1% 0.3 -1.1%
Toyota 15.8% 0.0 3.8%
Industry Avg. 16.0% 0.0 0.0%
GM 16.0% (0.0) -11.1%
Nissan 16.5% (0.1) 4.9%
European 18.1% (0.1) 2.4%
Honda 19.3% (0.3) 2.2%
Korean 20.2% (0.7) 3.8%
[2] Market share change is based on calendar years 2003-2018
Although other factors, including mix, pricing, execution, distribution, brand power, and
unforeseen disruptions, impact market share, we think this data supports our thesis that
successful new products generally drive higher market share and profits. Table 4
summarizes our forecasts of these key metrics for MY2020-23 and subsequent
estimates of market share shifts. Based on our estimates, the shifts in market share will
likely be somewhat limited, as convergence of product cycles is intensifying across the
industry, and many OEMs are set to drive a solid product cadence over our four year
forecast period. GM sits at the low end of the range, so there is some downside market
share risk for the company, although its mix of launches is very favorable. Conversely,
Honda is at the high end of the, range so there is potential upside to market share.
Table 4: Forecast replacement rate (MY2020-23E), showroom age (MY2020-23E), and market share change (CY2022 vs. CY2018)
[1] [2]
Replacement Rate Avg. Showroom Age O/(U) 2018 Market Share Direction of US Mkt. Share, CY22 vs. CY18
Honda 23.3% (0.5) 9.6%
Korean 21.9% (0.8) 7.4%
Ford 21.3% (0.1) 14.7%
Toy ota 19.7% 0.3 14.2%
Industry Avg. 19.6% 0.0 nm nm
European 18.6% 0.1 7.9%
Nissan 17.2% (0.1) 9.3%
FCA 17.1% 0.5 12.0%
GM 15.8% 0.3 17.5%
[2] Directional market share forecast is for calendar years 2019 to 2022

Industry & manufacturer trends

Industry & manufacturer trends
Industry trends
This section details product trends for the broader US automotive market. The size,
homogeneity, relatively rich mix, and the profitability of the US market continue to
attract new investments from many incumbent players, as well as new industry entrants
like Tesla, Rivian, Lucid, SF Motors, among others. The accelerating boom of new model
launches in the mid-2000s took a slight breather from model years 2009-14,
reaccelerated once again in model years 2015-16, and has remained reasonably solid
since then. Product activity appears to be picking up once again in the later stages of
the cycle, which we believe is indicative of competition intensifying. However, on a
volume weighted basis there is some relative easing.
New model launch activity solid after a slight lull

As shown in Chart 2, we expect OEMs to launch 246 new models during our forecast
period (MY2020-23), or an average of 62 per year. This rate is over 50% above the
average number of models launched per year between model years 2000 and 2019,
underscoring that competition is extremely hot. Typically, this level of new model
introductions would be a positive sign for the industry. However, given softening
demand more broadly and crowding into the CUV segment, we believe this product
activity creates risk for industry-wide profits.
Chart 2: New model launches MY2000-2023E
80 Average 2020 - 2023 = 62
Average 2000 - 2019 = 40 69 69
70
61
60 55
47 48 47
50
41 39 41 40 40 43 39 39 37
43
39 40
40 37 36
32 31 32
30
20
10
-
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: BofA Merrill Lynch Global Research, company announcements, auto show visits, trade publications, enthusiast magazines, supply
chain relationships, and others
There are many factors contributing to still strong cadence of product launches and
redesigns in more recent years, including automakers’ rush to enter relatively new
vehicle segments (CUVs, hybrids, specialized trucks, ultra-luxury, etc.) with attractive
returns (for now), an aggressive push by some OEMs to overhaul or fine-tune product
line-ups (i.e. Fiat Chrysler in its 2018-2022 business plan), as well as the relative
richness and size of the US vehicle market. Overall, this is helping to drive an industry
product pipeline that is overweight the CUV and Light Truck segments, which, at first
blush, should drive positive mix shift in MY2020-23 (Chart 3 on the following page).
However, the CUV segment is becoming increasingly saturated by new product, so little
incremental benefit is likely to accrue to the industry as a whole, in our view.

Chart 3: MY2020E-23E new vehicle launch mix vs. MY2010-19
100%
90% Crossover
80% 35%
45%
70% Light Truck
60%
20%
50% Luxury & Sporty Car
40% 7% 25%
30% 20% Mid/Large Car

6%
20% 12%
10% 18% Small Car
12%
0%
10-19 20-23
Replacement rate remains high in MY2020-2023

The replacement rate mirrors the trend in new model launches to a large degree. On
average, between model years 2000 and 2019, the industry replaced about 16% of its
volume each year with new models. At this rate, the industry turns over its entire model
line about every 6 years. Over the next four years, we expect the annual replacement
rate will trend higher at about 20%, above the historical average level. New volume mix
is moving toward CUVs, representing about 45% of new volume to be launched from
MY2020 to MY2023 (Chart 4). We would note, however, that the proliferation of CUV
launches (110 models over MY20-23) will likely pressure OEMs’ profitability in this
segment as the market gets overcrowded and price competition potentially emerges.
Chart 4: Replacement rate MY2000-2023E
Average 2020 - 2023 = 20%
30% Average 2000 - 2019 = 16%
25% 24%
22%
20% 19%
20%
20% 18% 18% 19%
17% 17% 17% 17% 17%
15% 15% 16%
14% 14% 15%
15% 13% 13%
12% 12%
11%
10%
5%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
In our opinion, the continued strong pace of product activity that we project more
broadly for the industry is very much linked to the competitive environment, what most
automakers expect to be a “plateau” environment in the US market over the next few
years, as well as a meaningful push into new CUV nameplates, as demand for the
segment still remains robust. As with all industries, automotive manufacturers can
compete through cost leadership, superior product, or product differentiation.
The first strategy of cost leadership has been unachievable for most OEMs, and with the
reorganized and restructured Detroit Three, it is even tougher to differentiate on cost.

On the second strategy of superior product, there has been extreme convergence in
product quality, as all automakers have improved to a relatively common level.
Specifically, this was attributable to a catch up in product by the Detroit Three OEMs to
the Japanese OEMs coming out of the downturn, as well as what has been significant
improvement in quality at the Korean brands over the last decade.
That leaves almost all automakers trying to compete by differentiating product, which
has resulted in a strengthening pace of new model introductions, a search for relatively
unique models, and a step up in vehicle technology. As all automakers have benefited
from the strength of the broader economic and automotive cycle (i.e. a rising tide that
lifts all ships), more are aiming to spur demand and outperform the market by launching
fresh product with increased content rather than discounting stale models at the
expense of margins. That said, with fading/flattening auto sales over the past few years,
incentive activity has naturally crept up, indicating signs of slippage from the industry
discipline that had been established since the prior downturn.
As a reminder, we continue to believe that the US automotive industry has entered the
early innings of a downturn, on its way from a peak of roughly 17.5mm units in 2016 to
a trough in the 13-14mm unit range in the early 2020s. Therefore, the investments that
automakers are putting into new product may be fighting a naturally receding tide of
demand, which could exacerbate the looming pressure on profits, especially in the CUV
segment.
Average showroom age remains low across the board

The age of vehicles on sale in showrooms across the US (Chart 5) has been on a
somewhat steady decline since the early 1990s, as automakers worked to replace aging
products more frequently. We attribute this trend to intensifying competition, in part
from new entrants, and product line expansion by companies that have introduced
numerous new nameplates. Through the 2000s, there were periods where average
showroom age ticked up slightly, driven by a relative pause or push-out by companies in
launching new product (2007-2009 and 2015-2017 are two examples), although these
phases were generally short-lived, as OEMs appreciate the necessity of fresh product.
We expect that the industry’s average showroom age will trend lower over our forecast
period, averaging about 2.7 years for model years 2020-23, a slight tick down from an
average age of 3.1 years for the last two decades.
Chart 5: Average showroom age [1] MY2000-2023E
5.0
Average 2000 - 2019 = 3.1 yrs Average 2020 - 2023 = 2.7 yrs
4.5
4.0
3.5
3.5 3.3 3.2 3.2 3.3 3.2 3.4 3.4 3.3
3.1
2.9
3.1 3.0 3.0 2.9 3.1
3.0 2.7 2.8 2.8 2.9
2.6 2.6 2.7 2.5
2.5
2.0
1.5
1.0
0.5
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2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
[1] Average is volume weighted
Intensifying competition and the resulting new products are, of course, beneficial for
consumers, who will enjoy the choice of new cars, trucks, and CUVs. However, this new
product comes at a high cost to the OEMs, which will need to increasingly leverage

global platforms, simplify product offerings, and rationalize costs to remain efficient
and competitive. Although industry-wide pricing has been challenged in the past, a
relative level of price stability emerged temporarily, as supply and demand are much
more closely balanced. However, recent signs of cracks in pricing have emerged as sales
have started to weaken, so there is still much for the industry to prove.
New model segment shift toward trucks and CUVs

Chart 6 and Chart 7 show the US market’s evolving market mix by segment, based on
the number of new models and volume, from traditional small, mid-size and large cars to
light trucks and crossovers.
Since the MY1997 launch of the Toyota RAV4 and the Honda CR-V, crossover utility
vehicles (or CUVs) have been the fastest growing vehicle segment in the US industry,
which may accelerate even further in the upcoming model years. Specifically, 110 of the
246 new models we forecast for MY2020-23, or roughly 45% of estimated volume, will
be CUVs. The extreme focus on this segment ranges from more mainstream Detroit
Three and Japanese OEM models to numerous new luxury CUVs, such as the Range
Rover Velar, Tesla Model Y, Rivian R1S, and others, as well as new competition from the
lower end of the price spectrum with the Korean brands. However, the profitability of
the CUV segment is likely to decline materially over time as competition intensifies.
Chart 6: MY2020E-23E new vehicle launch mix vs. MY2010-19
100%
90% Crossover
80% 35%
45%
70% Light Truck
60%
20%
40% 7% 25%

6%
20% 12%
10% 18% Small Car
12%
0%
10-19 20-23
Chart 7: New models by segment, simple vehicle count [1] MY2000-2023E

100%
90% Crossover
80%
70% Light Truck
60%
50%
30% Mid/Large Car
20%
10% Small Car
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
[1] Not volume weighted

The explosion of the CUV segment is best illustrated in Chart 8 below, which shows the
total number of nameplates increasing over 50% in the next four model years.
Chart 8: New & existing CUV nameplates MY1987-2023E
160
Existing CUVs New CUVs
140
32
120
25
30
100
23
17
80
21
12
10
18
14
9
7
60
10
10
117
108
10
11
90
33 17
85
40
79
34 6
69
66
31 5
63
61
60
58
56
26 6
55
55
49
16 11
45
20
13 4
59
51
41
32
0
22
11
2-
01
1-
0-
0-
0-
0-
0-
0-
2020E
2021E
2022E
2023E
1987
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2018
2019
This is somewhat analogous to the proliferation of light truck nameplates in the early
2000s (Chart 9), but the magnitude of proliferation is a factor of 2x and broader based.
Chart 9: New & existing light truck nameplates MY1987-2023E
100
Existing Light Trucks New Light Trucks
13
80
13
10
15
12
5
20
11
13
7
11
4
13
60
12
10
14
14
7
2
6
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9
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0
2020E
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2023E
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2017
2018
2019
At the same time, the rationalization of car nameplates is making headlines. This is yet
to show substantial decline in total nameplates (Chart 10), but this may change.
Chart 10: New & existing small, mid, and large car nameplates MY1987-2023E
100
Existing Cars New Cars
16
16
11
80
22
12
14
15
11
7
7
11
7
9
23
11
13
10
11
6
22
14
5
11
16
15
60
14
12
20
11
9
7
10
10
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11
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47
20
0
2020E
2021E
2022E
2023E
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
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2018
2019

CUV focus with luxury bias may conspire for a dearth of entry level product
Interestingly, of the all-new or redesigned CUVs to be introduced over the next four
model years, we estimate that almost half of them will be aimed at the luxury or
premium price level. This has proven a successful strategy by automakers over the last
decade given the hot demand for the segment, as well as relatively limited supply from
the lower end (Korean brands) and from the high end (German luxury brands), which has
allowed the Detroit and Japanese Three to effectively dominate the segment and price
up. However, with a slew of new CUV product coming from the European OEMs (Audi
Qs, BMW Xs, Mercedes-Benz GLs, etc.), as well as newer (more luxury-oriented) industry
entrants (Tesla, Lucid, Faraday, etc.), not to mention a concerted effort by mass market
OEMs to launch more premium level CUVs (Ford-Lincoln, GM-Cadillac, Hyundai-Genesis),
not only will the CUV segment overall become increasingly crowded, the luxury/premium
sub-segment will also, which will likely result in a more competitive pricing environment.
Combined with a shift by many OEMs away from the passenger car segment, which
represents the entry level product for many brands to attract new customers, we expect
this CUV focus will likely also create a dearth of true entry level models in the industry.
In response, we expect dealers will likely focus on selling affordable used vehicle options
to consumers (CUVs or otherwise), which could result in a shrinking new vehicle market,
further exacerbating what will likely already be an overcrowding of the CUV segment.
It should be noted that not all OEMs are focused on launching CUVs exclusively at higher
price points. The Japanese and Korean brands appear committed to their mass market
segments, and are guiding their product strategies accordingly, with new both new Car
and CUV launches. Over time, the commitment to entry level buyers may prove a
differentiating factor for those OEMs, particularly if the cycle comes under pressure.
Table 5: New CUV product pipeline MY2020E-2023E [1]

2020E 2021E 2022E 2023E
Buick Encore - Small Lux CUV Buick Envision - Small Lux CUV Cadillac XT5 - Mid Lux CUV Cadillac XT3 - Small Lux CUV
Cadillac XT6 - Large Lux CUV Chevrolet Trax - Small CUV Chevrolet Electron - Small CUV Chevrolet FNR-X - Small CUV
Ford Explorer - Large CUV Ford Maverick - Mid CUV Jeep Cherokee - Mid CUV GMC Acadia - Mid CUV
Ford Escape - Small CUV Ford Mach 1/E - Small CUV Toyota C-CUV - Small CUV Ford Edge - Mid CUV
Lincoln Aviator - Large Lux CUV Alfa Romeo Kamal - Small Lux CUV Honda Pilot - Large CUV Ford Edison EV/AV - Mid CUV
Lincoln Corsair - Small Lux CUV Jeep Grand Cherokee - Large CUV Honda CR-V - Small CUV Lincoln Nautilus - Mid Lux CUV
Toyota Highlander - Large CUV Jeep Commando - Small CUV Honda HR-V - Compact CUV Lincoln C-CUV - Compact Lux CUV
Lexus NX - Mid Lux CUV Maserati Valente - Mid Lux CUV Infiniti QX50 - Small Lux CUV Alfa Romeo Castello - Mid Lux CUV
Honda Passport - Mid CUV Acura MDX - Mid Lux CUV BMW iX3 - Small Lux CUV Fiat 500X - Small CUV
BMW X7 - Large Lux CUV Nissan Pathfinder - Large CUV BMW iNext - Small Lux CUV Jeep Compass - Small CUV
BMW X6 - Mid Lux CUV Nissan Murano - Mid CUV Porsche Macan - Small Lux CUV Jeep Renegade - Small CUV
Mercedes-Benz GLS - Large Lux CUV Nissan Rogue - Small CUV Hyundai NE/C-CUV - Mid CUV Maserati Levante - Mid Lux CUV
Mercedes-Benz GLE - Mid Lux CUV Nissan Rogue Sport - Compact CUV Kia Sportage - Small CUV Lexus RX - Mid Lux CUV
Mercedes-Benz EQC - Small Lux CUV Infiniti QX60 - Mid Lux CUV Genesis GV70 - Small Lux CUV Honda Urban EV - Mid CUV
Mercedes-Benz GLB - Compact Lux CUV Mercedes-Benz GLA - Compact Lux CUV Faraday FF91 - Mid CUV Nissan IMx EV - Mid CUV
Audi E-Tron - Small Lux CUV Mercedes-Benz EQB - Compact Lux CUV Lucid Light/D-CUV - Mid CUV Nissan Kicks - Small CUV
Audi Q3 - Small Lux CUV Mercedes-Benz EQA - Compact Lux CUV Lynk 02 - Mid CUV Infiniti C-CUV EV - Mid Lux CUV
Volkswagen Atlas Cross Sport - Mid CUV Audi Q5 - Mid Lux CUV Mazda CX-7 - Mid CUV BMW X8 - Large Lux CUV
Hyundai Palisade - Large CUV Audi Q4 - Small Lux CUV Mazda CX-5 - Small CUV BMW X1 - Small Lux CUV
Hyundai Venue - Compact CUV Volkswagen ID Crozz - Mid CUV Mitsubishi EV CUV - Small CUV Mercedes-Benz EQ GLE - Mid Lux CUV
Kia Telluride - Mid CUV Volkswagen Tarek - Small CUV Mitsubishi Outlander Sport - Compact CUV Mercedes-Benz GLC - Small Lux CUV
Mazda CX-30 - Small CUV Hyundai Tucson - Small CUV Land Rover Road Rover - Large Lux CUV Audi Allroad - Small Lux CUV
Range Rover Evoque - Small Lux CUV Kia FCEV - Mid CUV Rivian R1S - Large CUV Audi eQ5 - Mid Lux CUV
Kia Sorento - Small CUV SF Motors SF7 - Mid CUV Audi eQ3 - Small Lux CUV
Genesis GV80 - Mid Lux CUV Volvo XC90 - Large CUV Porsche Taycan Cross Turismo - Mid Lux CUV
Jaguar J-Pace - Small Lux CUV Kia Niro - Small CUV
Mazda CX-3 - Compact CUV Genesis GV-E/D-CUV - Mid Lux CUV
Mitsubishi Outlander - Small CUV Lucid Space/E-CUV - Large CUV
SF Motors SF5 - Small CUV Mazda CX-9 - Large CUV
Tesla Model Y - Mid CUV Polestar 3 - Mid CUV
Subaru Crosstrek - Small CUV
Waymo EV/AV - Mid CUV
Source: BofA Merrill Lynch, company announcements, auto show visits, trade publications, enthusiast magazines, supply chain relationships, and others; [1] Red shading indicates luxury segment per BofAML

Manufacturer trends
Average showroom age converging around 3 years for the next four years
Average showroom age is one way to quantify how intensely competitive the US market
has become in the last two decades (Chart 11). Since at least the late 1980s, there has
been a significant convergence in average showroom age as OEMs have worked
diligently to ensure their showrooms are stacked with fresh product to attract
consumers. We expect an increasing convergence in average showroom age to around
2.7 years, with only slight outliers on either end of the spectrum by MY23 (GM at 3.3
years, Honda at 1.5 years). The most pronounced improvement in average age over the
next few years, according to our product launch forecasts, is Ford, down from 4.5 years
at MY19 to 2.3 years by MY23E.
Chart 11: Average showroom age by OEM (years) MY2000-2023E
9
General Motors Ford FCA
8
Industry European Korean
7
Toyota Honda Nissan
6
5
4
3
2
1
-
2020E
2021E
2022E
2023E
2000
2001
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2003
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2009
2010
2011
2012
2013
2014
2015
2016
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2018
2019
Cumulative replacement rates appear to drive market share

Comparing cumulative replacement rates is one of the simplest and most effective ways
in which we measure the strength of each automakers’ product pipeline. The
replacement rate is the estimated percentage of sales volume to be replaced with
entirely new models or next-generation existing models during the period.
Over the next four years, we estimate the industry will replace roughly 79% of its
volume based on calendar year 2018 industry volumes (Chart 12).
Chart 12: Cumulative replacement rates, % of 2018 CY volume replaced in MY2020E-23E*
Honda 93%
Korean 88%
Ford 85%
Toyota 79%
Industry Avg. 79%
European 74%
Nissan 69%
FCA 68%
VW 65%
GM 63%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
*VW includes Porsche

Interestingly, and unique to what has been a low level of disparity in replacement rates
in past years of our analysis, our estimates indicate there exists a fairly wide
discrepancy in replacement rates among the major OEMs over the next four model
years. Specifically, Honda stands out at the high end of the range and GM at the lower
end of the range. However, as simple volume weighted replacement rate does not
encompass the element of mix, any conclusions as to implied market share shifts based
on estimated replacement rate alone may be oversimplifying our analysis. That being
said, we believe what has generally been a convergence in product cycles and a low level
of disparity in product replacement rates in more recent years, as well as a concerted
effort by OEMs to focus on the hot segments of the market (CUVs, Light Trucks, etc.)
may result in smaller market share shifts through our forecast period, although this
could result in a hyper-competitive market if the demand environment softens.
Near-term dynamics imply potential volatility

The next two model years, 2020 and 2021, lead to somewhat different conclusions than
our typical four year forecast window, and could result in some volatility for the
following reasons:
 The Korean OEM replacement rate in MY2020-21 is boosted by an onslaught of all-

new CUVs, along with the redesign of high volume sedans, but product cadence
fades materially in MY2022-23.
 Nissan should post a strong MY2020-21, driven by the Sentra redesign in MY20 and
an aggressive push of CUVs in MY21, although this again drops off in the out years.
 Ford’s replacement rate in MY2020-21 is aided by the launch of the new Explorer,
Escape, and F-150 and all-new models like the Ranger and Bronco. Given the high
volume nature of these products, Ford’s cadence will naturally ease in MY2022-23.
 Honda’s product cadence is uncharacteristically light in MY2020, with just the
launch of the all-new Passport, but accelerates meaningfully in MY2021-23 with a
redesign and relaunch of almost its entire product portfolio.
 Toyota’s product cadence is also a bit uneven, with a strong MY20 from the new
Corolla and Highlander, but low volume products and replacement rate in MY21,
before accelerating once again in the out years.
 FCA is working off an aggressive product launch year in MY19/CY20; and therefore,
has a slightly lighter product cadence in MY2020-21. However, FCA’s cadence
accelerates into the outer years of our forecast period.
Chart 13: 2-year cumulative replacement rates, % of 2018 CY volume replaced in MY2020E-21E*
Korean 73%
Nissan 61%
Ford 60%
Industry Avg. 43%
European 39%
VW 37%
GM 33%
Honda 30%
Toyota 29%
FCA 28%
*VW includes Porsche

Company analysis

General Motors Company
Conclusion: GM’s volume weighted replacement rate lags the industry over our four-
year forecast period, as the company just completed the launch of its large light duty
pickups in MY19 and a number of its high volume CUVs in the last two years.
Nonetheless, GM is currently undergoing the changeover and launch of its heavy duty
pickups in MY20 (CY19), followed by its large SUV line-up in MY21, both under its K2XX-
T1XX program, all of which should be very favorable to mix, price, and margin. Beyond
its all-important truck and SUV launch, GM's product cadence through MY2020-23 is
focused on Cadillac, with a stated goal to launch a new vehicle every six months through
2021, and also focus on alternative powertrains, with most of its new vehicle launches
being available as hybrid or electric variants (possibly at mid-cycle major refreshes).
With few all-new or redesigned CUVs launched over the next four years, there is some
risk that GM could cede small market share. However, we find GM's approach of
focusing on quality share to drive improved profits across its core business as being a
solid long-term strategy.
We estimate GM's cumulative replacement rate is approximately 63% over

the next four years, which is below the industry average of 79%.

70%
GM
60%
GM 00-19 Avg.
50%
Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
GM's launch mix is heavily skewed towards Light Trucks due to the launch
of its heavy duty pickups in MY2020 and SUVs in MY21, both of which
followed the launch of the light duty pickups in MY19 (last year). Over our
forecast period, GM's new model volume mix is underweight CUVs relative
to the industry, although this is largely a function of what had been an
onslaught of new CUVs in the last few years.

Chart 15: New model volume mix MY2020E-2023E
100%
90% Crossover
29%
80% 45%
70% Lt. Truck
60%
47%
40% 25%
30% Mid/Large Car

6%
20% 12% 11%
10% 8% Small Car
12%
0% 5%
Industry General Motors
Source: BofA Merrill Lynch Global Research
GM’s average showroom age is below the industry average through

MY2020, but increases slightly above and remains above thereafter
through MY23, which is largely a function of its CUV line-up aging to a
degree in the latter years of our forecast period. This slight tick up above
industry average in showroom age could theoretically pressure market
share, although we expect GM's new truck and SUV product will more than
compensate to support profits, while GM's relatively more balanced
approach towards supply and demand should drive long-term value.
Chart 16: Average showroom age (years) [1] MY2000-2023E
5
Average Showroom Age (Years)
4
2
Relative to Industry:
1 Older
-
Younger
(1)
(2)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 6: General Motors US product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
Buick Encore - Small Lux CUV Buick Envision - Small Lux CUV Cadillac XT5 - Mid Lux CUV Cadillac XT3 - Small Lux CUV
Cadillac XT6 - Large Lux CUV Chevrolet Trax - Small CUV Chevrolet Electron - Small CUV Chevrolet FNR-X - Small CUV
Chevrolet Silverado HD - Large Pickup Cadillac Escalade - Large Lux SUV Cadillac CT1000 - Coupe GMC Acadia - Mid CUV
GMC Sierra HD - Large Pickup Cadillac Escalade ESV - Large Lux SUV Chevrolet Camaro - Coupe & Convertible Chevrolet Colorado - Small Pickup
Cadillac CT5 - Sedan Chevrolet Suburban - Large SUV Chevrolet Malibu - Sedan GMC Canyon - Small Pickup
Chevrolet Corvette - Coupe & Convertible Chevrolet Tahoe - Large SUV Chevrolet FCEV - Hatchback GMC Jimmy - Mid SUV
Cruise AV1 EV/AV - Hatchback GMC Yukon - Large SUV Cadillac CT7 - Sedan
GMC Yukon XL - Large SUV Chevrolet Bolt - Hatchback
Cadillac CT4 - Sedan
% of volume replaced : 15% % of volume replaced : 18% % of volume replaced : 12% % of volume replaced : 18%
Source: BofA Merrill Lynch Global Research, company announcements, auto show visits, trade publications, enthusiast magazines, supply chain relationships, and others
Exhibit 1: 2020 Chevrolet Silverado HD Exhibit 2: 2020 Cadillac XT6
Source: General Motors Source: General Motors
Exhibit 3: 2020 Cadillac CT5 Exhibit 4: 2020 Cruise AV1 AV/EV (2019 model year shown)
Source: General Motors Source: General Motors
GM Future Car Wars Powertrain

In 2018, GM sold a little over 45k hybrids, plug-in hybrids, and electric vehicles
(combined) in the US, representing roughly 1.5% of its US light vehicle sales, up from
just 1.6k total electrified vehicles sold in 2006, when it introduced its first hybrid model.
At this point, within the US, GM’s alternative powertrain line-up includes a plug-in hybrid
version of the Cadillac CT6 (off an ICE/gas model), and hybrid versions of the Buick
Lacrosse, Chevy Malibu, and GMC Sierra (all of which are off ICE/gas models), an electric
version of the Chevy Spark (gas model also offered), in addition to the dedicated plug-in
hybrid Chevrolet Volt (to be discontinued in MY2021), and very importantly, its mass
market oriented pure battery electric Chevrolet Bolt. Importantly, GM’s overarching
strategy for the Chevy Bolt was not necessarily for personal ownership/consumption,
but rather to serve as the electric platform for the deployment of its autonomous ride-
hailing operation, Cruise Anywhere, with the vehicle being badged the Cruise AV.

Beyond the models outlined above, and GM’s strategy for its electric autonomous ride-
hailing fleet, GM has noted that its Cadillac brand will serve as the spearhead for the
deployment of electrified powertrain technology across its product line-up. This appears
to be a function of the company’s goal in generating a profit on electric nameplates
even in early launch phase, which will be facilitated through rationally high luxury level
pricing, before cost is naturally brought down sufficient to make mass market electric
vehicles economic for consumers and the value chain. Overall, GM plans to launch 20 all-
new electric vehicles by 2023 across its entire product line-up, although we would note
this scope is global, and not just in the US market. In the past, GM has also established
targets to sell as many as 1mm pure electric vehicles worldwide by 2026, and also to
reduce battery costs by ~30% via its new EME 1.0 platform.
Table 7 below outlines powertrain forecasted availability for GM’s MY2020-23 US

product pipeline
Table 7: General Motors US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Powertrains Powertrains Powertrains Powertrains
Model Available Model Available Model Available Model Available
Buick Encore ICE Buick Envision ICE Cadillac XT5 ICE, Hybrid Cadillac XT3 ICE, Electric
Cadillac XT6 ICE Chevrolet Trax ICE Chevrolet Electron Electric Chevrolet FNR-X ICE
Chevrolet Silverado HD ICE, Hybrid Cadillac Escalade ICE Cadillac CT1000 Electric GMC Acadia ICE, Hybrid
GMC Sierra HD ICE, Hybrid Cadillac Escalade ESV ICE Chevrolet Camaro ICE, Hybrid Chevrolet Colorado ICE
Cadillac CT5 ICE, Hybrid Chevrolet Suburban ICE Chevrolet Malibu ICE, Hybrid GMC Canyon ICE
Chevrolet Corvette ICE Chevrolet Tahoe ICE, Hybrid Chevrolet FCEV Fuel Cell GMC Jimmy ICE
Cruise AV1 EV/AV Electric GMC Yukon ICE, Hybrid Cadillac CT7 ICE
GMC Yukon XL ICE Chevrolet Bolt Electric
Cadillac CT4 ICE
% new nameplates with % new nameplates with % new nameplates with % new nameplates with
alternative powertrain 57% alternative powertrain 22% alternative powertrain 100% alternative powertrain 38%
GM Future Car Wars Autonomy

GM was the first, and appears to still be the only, company that has filed a petition with
the Department of Transportation for permission to safely deploy the fourth generation
of its fully autonomous (Level 4-5) Cruise AV in 2019. It should be noted that this
autonomous vehicle will theoretically include no driver, steering wheel, pedals, or manual
controls. In the past, GM had targeted a calendar year 2019 production launch of its fully
autonomous electric Cruise AV for commercial use, at scale, in a dense urban
environment, although it appears the company’s commitment to safety (determined by
the sophistication of the technology employed) may push this commercialization target
out to some degree.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of GM’s autonomous
development plan versus competitors.

Ford Motor Company
Conclusion: Ford is working out of a major dearth of new product in MY2019 (last
year), and really starts to hit stride in MY2020, with most new product hitting in the
latter half of calendar year 2019. Following the new Ranger, which launched in late
CY18/early CY19, Ford's product cadence begins in earnest with the MY20 Explorer and
Escape, continues in MY21 with the F-150 and Bronco, along with a slew of other all-
new CUV-oriented products, including the Mach 1/E, Maverick (Baby Bronco), Edison
(EV/AV), among others. Yes, this is an extremely Truck and CUV heavy product cadence
by design, and should also be viewed in the context of Ford's stated strategy of moving
away from the passenger car segment in the US. One clear example of the benefit of
this strategy is the changeover of the Michigan Assembly plant from Focus/C-Max to
Ranger/Bronco, which alone is expected to drive a positive $1bn+ EBIT swing by 2021.
If market mix holds, this product pipeline should mean that Ford will be able to sustain
market share, mix, and price, although there remains risk that industry volumes do not
hold in as Ford expects.
It should also be noted that, while Ford's overarching future plan for the business is just
now becoming clearer, management is also now very much focused on building a strong
pipeline of vehicles that should drive success for its core business.
Ford’s estimated replacement rate for MY2020-23 is 85%, which is above

with the industry average of 79% over the same time period.

70%
Ford
60%
Ford 00-19 Avg.
50%
Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Ford's launch mix over the MY2020-23 time period is essentially all Light
Trucks and CUVs, and to a very small extent Luxury & Sporty Cars, which is
reflective of the company's stated strategy of leaving the passenger car
segment in the US market. Important Light Truck launches include the F-
150 and Bronco (MY21) and SuperDuty (MY23) and important CUV
launches include the Explorer and Escape (MY20), Mach 1/E and
Maverick/Baby Bronco (MY21), and Edge (MY23).

100%
90% Crossover
80% 45% 41%
70% Lt. Truck
60%
40% 25%

6%
20% 12%
10% Small Car
12%
0% 4%
Industry Ford
Ford's average showroom age begins our forecast period above the
industry average, due mainly to a lack of new product in prior years,
particularly MY19. However, Ford's showroom age drops significantly
through our forecast period as the company launches a slew of redesigned
or all-new CUVs, as well as its all-important and high volume F-150 and
SuperDuty. The cancellation of a number of relatively older passenger cars
(Fiesta, Focus, Fusion, Taurus, etc.) also helps to bring down Ford's
average showroom age.
7
6
5
4
3
2
Older
1
-
Younger
(1)
(2)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 8: Ford US product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
Ford Explorer - Large CUV Ford Maverick - Mid CUV Ford Courier/EF-100 - Small Pickup Ford Edge - Mid CUV
Ford Escape - Small CUV Ford Mach 1/E - Small CUV Ford Transit Connect - Small Van Ford Edison EV/AV - Mid CUV
Lincoln Aviator - Large Lux CUV Ford F-150 - Large Pickup Ford Mustang - Coupe & Convertible Lincoln Nautilus - Mid Lux CUV
Lincoln Corsair - Small Lux CUV Ford Bronco - Mid SUV Lincoln C-CUV - Compact Lux CUV
Ford Ranger - Small Pickup Ford F-Series Super Duty - Large Pickup
Exhibit 5: 2020 Ford Explorer Exhibit 6: 2020 Ford Escape
Source: Ford Motor Company Source: Ford Motor Company
Exhibit 7: 2020 Ford Ranger Exhibit 8: 2020 Lincoln Aviator
Source: Ford Motor Company Source: Ford Motor Company

Ford Future Car Wars Powertrain
In 2018, hybrids and plug-in hybrids comprised just 3.0% of Ford’s total light vehicle
sales in the US, although this has increased from only 0.5% in 2005. At a little under
600 units, Ford’s sales of pure electric vehicles in 2018 were essentially negligible as a
percent of total unit sales. Within the US, Ford’s alternative powertrain line-up currently
includes a hybrid and plug-in hybrid (Energi) version of the Ford Fusion (based off an
ICE/gas model), an electric version of the Focus (again off an ICE/gas model), and a
hybrid version of the Lincoln MKZ (ICE/gas model also offered). It should be noted, with
nearly 74k electrified (including hybrid) models sold in the US in 2018, Ford is the third
largest new energy vehicle (NEV) player in the market behind Toyota and Tesla.
In the past, Ford’s product strategy for hybrid and electric vehicles had been to utilize
existing popular Ford platforms and offer various electrification options, rather than
introducing standalone dedicated hybrid and electric models, unique to other OEM
strategies. Key examples include the Ford Fusion Energi (plug-in hybrid) and Ford Focus
electric.
However, we believe Ford’s overarching strategy for electrification has changed more
recently, as the company has indicated that will invest over $11bn on development of
electrified vehicles through 2022, with plans to launch 16 battery electric vehicles and
40 EVs (including models with varying levels of hybridization) over that timeframe. This
EV product push will begin with the Mach 1/E in MY2021, which is slated to be a high
performance and premium priced electric CUV.
Table 9 below outlines powertrain forecasted availability for Ford’s MY2020-23 US

product pipeline
Table 9: Ford US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Ford Explorer ICE, Hybrid Ford Maverick ICE, Hybrid Ford Courier/EF-100 Electric Ford Edge ICE
Ford Escape ICE, Hybrid Ford Mach 1/E Hybrid, Electric Ford Transit Connect ICE Ford Edison EV/AV Electric
Lincoln Aviator ICE, Hybrid Ford F-150 ICE, Hybrid Ford Mustang ICE, Hybrid Lincoln Nautilus ICE
Lincoln Corsair ICE, Hybrid Ford Bronco ICE, Hybrid Lincoln C-CUV Electric
Ford Ranger ICE Ford F-Series Super Duty ICE
Ford Future Car Wars Autonomy

Ford has noted that all new Ford vehicles sold in the US by 2019 will be enabled with
connectivity technology, and 90% of all new vehicles sold globally enabled by 2020.
Ford continues to target a calendar year 2021 production launch of a fully autonomous
(SAE Level 4) vehicle for commercial use. According to the company, these vehicles are
expected to be deployed in geo-fenced areas as part of a ride-hailing network, similar to
GM’s strategy with its Cruise Anywhere platform. Ford is currently testing a fleet of
autonomous Fusion Hybrids in California, Arizona, and Michigan, having expanded from
30 vehicles in 2017 to 90+ in 2018+.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of Ford’s

autonomous development plan versus competitors.

Fiat Chrysler Automobiles
Conclusion: FCA was ahead of the curve in terms of the broader industry effort to
rationalize and/or eliminate passenger cars from product portfolios. We believe this was
essentially a necessary move by the company, as the lion share of its profits are
generated from Jeep and Ram. The company has clearly followed through on this
strategy, with product introductions through MY2020-23 that are almost exclusively
Light Trucks and CUVs, and just two Mid/Large Cars (Dodge Charger and Challenger).
FCA is following a big year in terms of product launches, with the redesigned Jeep
Wrangler and Ram light duty pickup in MY19, and will be launching the redesigned Ram
heavy duty pickup and all-new Jeep Gladiator pickup in MY20. Over our forecast period
for the US market, FCA's priority clearly remains Jeep, with a slew of replacement or all-
new product, including the Grand Cherokee and Grand Wagoneer (MY21), Cherokee and
Wagoneer (MY22), and Compass and Renegade (MY23), among others. FCA also is set to
launch a few Alfa Romeo and Maserati vehicles, although these remain fairly low
volume, so they will have a limited impact on replacement rate. Based on the lack of
product forthcoming, according to our analysis, we have to question FCA's longer-term
commitment to the Chrysler, Dodge, and Fiat brands.
FCA’s cumulative replacement rate over the next four model years is about
68%, which is below the industry average of 79%.
70%
FCA
60%
FCA 00-19 Avg.
50%
Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
FCA's mix is heavily skewed towards Light Trucks and CUVs, as the
company discontinued its small car platform (Chrysler 200, Dodge Dart,
etc.) several years ago. The launch of the Jeep Wrangler and Ram 1500 in
MY19 (last year), along with the redesigned Ram 2500/3500 and all-new
Jeep Gladiator in MY20, along with a number of new Jeep and CUV
launches (Cherokee/Grand Cherokee, Wagoneer/Grand Wagoneer,
Compass, Renegade, etc.) should help to drive favorable mix and pricing,
as long as the broader cycle does not collapse.

100%
90% Crossover
80% 45%
70% 61% Lt. Truck
60%
40% 25%
30% Mid/Large Car

6%
30%
20% 12%
10% Small Car
12% 8%
0%
Industry FCA
FCA's average age is still currently above the industry average, despite
what has been a concerted effort by the company over the past several
years to relaunch its entire US/NA product portfolio. Major recent product
launches (Jeep Wrangler and Ram 1500 in MY19) and upcoming launches
(Ram 2500/3500 in MY20 and Jeep Grand Cherokee in MY21), among
many others, will help to drive FCA's average showroom age closer to the
industry average within our forecast period, where it appears it will
remain.

7
6
5
4
3
2
1
Older
-
(1)
Younger
(2)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 10: FCA US product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
Jeep Gladiator - Small Pickup Alfa Romeo Kamal - Small Lux CUV Jeep Cherokee - Mid CUV Alfa Romeo Castello - Mid Lux CUV
Ram 2500/3500 - Large Pickup Jeep Grand Cherokee - Large CUV Chrysler Portal EV - Small Van Fiat 500X - Small CUV
Jeep Commando - Compact CUV Jeep Wagoneer - Mid SUV Jeep Compass - Small CUV
Maserati Valente - Mid Lux CUV Ram Dakota - Small Pickup Jeep Renegade - Small CUV
Jeep Grand Wagoneer - Large SUV Ram ProMaster City - Small Van Maserati Levante - Mid Lux CUV
Maserati Alfieri - Coupe Dodge Challenger - Coupe Ram ProMaster - Large Van
Fiat 500 - Hatchback Dodge Charger - Sedan
Maserati Quattroporte - Sedan
Exhibit 9: 2020 Ram 2500/3500 Exhibit 10: 2020 Jeep Gladiator
Source: FCA US LLC Source: FCA US LLC
Exhibit 11: 2021 Jeep Grand Cherokee (2019 model year shown) Exhibit 12: 2021 Maserati Alfieri (concept shown)
Source: FCA US LLC Source: FCA US LLC

FCA Future Car Wars Powertrain
FCA is arguably the farthest behind the industry on alternative powertrain development,
with only a pure electric Fiat 500e and plug-in hybrid version of the Pacifica minivan
(gas version also offered) in its current US line-up. As of 2018, these vehicles accounted
for just under 10k of the company’s US unit sales, or less than 0.5% of the total.
At its Capital Markets Day in mid-2018, FCA announced it will invest more than €9bn
cumulatively through 2018-2020 on electrification technology, which is largely driven by
an effort to meet increasingly stringent global fuel economy regulations. Specifically,
through its 2018-2022 business plan, FCA expects to introduce over 30 nameplates that
will utilize one or more of its alternative powertrain systems (mild hybrid, hybrid, plug-in
hybrid, battery electric). This electrification effort will be implemented across the
company’s entire product portfolio, from Jeep to Ram to Fiat, although Maserati will
likely be the halo products for FCA’s battery electric technology.
However, despite what appears to be an increasing focus on this area by the company,
we continue to believe the FCA’s future car investment and technology remains very
light relative to major competitors, and may not be sufficient to meet future US and
global fuel economy and emissions standards. In fact, recent reports indicate that FCA
has reached an agreement with Tesla to pool their fleets in Europe in an effort by FCA
to meet EU emissions requirements, under which FCA will pay Tesla hundreds of
millions of dollars (reportedly), which we believe illustrates the company’s lagging
position in the industry on alternative powertrain investment and technology.
Table 11 below outlines powertrain forecasted availability for FCA’s MY2020-23 US

product pipeline.
Table 11: FCA US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Jeep Gladiator ICE, Hybrid Alfa Romeo Kamal ICE Jeep Cherokee ICE, Hybrid Alfa Romeo Castello ICE
Ram 2500/3500 ICE Jeep Grand Cherokee ICE, Hybrid Chrysler Portal EV Electric Fiat 500X ICE, Hybrid
Jeep Commando ICE, Hybrid Jeep Wagoneer ICE, Hybrid Jeep Compass ICE, Hybrid, Electric
Maserati Valente ICE Ram Dakota ICE, Hybrid Jeep Renegade ICE, Hybrid
Jeep Grand Wagoneer ICE, Hybrid Ram ProMaster City ICE Maserati Levante ICE
Maserati Alfieri ICE, Hybrid, Electric Dodge Challenger ICE Ram ProMaster ICE
Fiat 500 ICE, Hybrid, Electric Dodge Charger ICE
Maserati Quattroporte ICE
FCA Future Car Wars Autonomy

FCA is part of an industry-wide consortium between BMW, Intel, Aptiv, Continental,
Magna, and Mobileye (among others), which aims to launch autonomous technology into
production vehicles by calendar year 2021. In addition, FCA has a partnership with
Waymo to supply Chrysler Pacifica Hybrid minivans, which Waymo is retrofitting and
then deploying into its autonomous taxi pilot.
FCA’s former CEO Sergio Marchionne (who passed away last year) had been staunchly
opposed to the company investing exclusively on its own in autonomous technology,
arguing that the industry was much better served in collaborating to develop technology
and leverage economies of scale, in keeping with his Confessions of a Capital Junkie
thesis. This overarching view still appears to be the guiding principle behind FCA’s
investment plans for autonomous vehicle technology, although it remains very much
unclear whether this will prove to be a prudent strategy over time.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of FCA’s


Toyota Motor Corporation
Conclusion: Toyota's volume weighted replacement rate is essentially right in line with
the industry average, in aggregate, through MY2020-23. However, the cadence of its
product launches is volatile over this time period, with strong product years MY20 and
MY23 as book-ends to our forecast period, and relatively weaker years in MY21-22. This
volatility is largely due to the redesign and launch of the high volume Corolla (MY20) and
Camry (MY23), which also drives Toyota's overweight of Mid/Large Car product launches
over the next four years. Outside of the company's commitment to passenger cars, and
its franchise Corolla and Camry models, Toyota's replacement model mix over this next
four years is focused on Light Trucks and CUVs. In terms of Light Trucks, over the
MY2020-23 time period, Toyota will be launching the redesigned Land Cruiser (MY21),
Sequoia and Tundra (MY22), along with the 4Runner and Tacoma (MY23). Toyota's
pipeline of replacement and new CUVs include the Highlander and Lexus NX (MY20), a
new Toyota C-CUV (MY22), and the Lexus RX (MY23). The company's replacement rate
through MY2023, and the launch of some important high volume products, should be
enough to keep Toyota competitive and maintain market share, although there will likely
be some volatility through the time period driven purely by cadence.
Toyota’s replacement is about 79% cumulatively over the next four years,
which is right in line with the industry average of 79%.
70%
Toyota
60%
Toyota 00-19 Avg.
50%
Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Uniquely, Toyota's model mix versus the broader industry is overweight

both Mid/Large Cars and Light Trucks, while being underweight CUVs. This
is a function of two key product launches Corolla (MY20) and Camry
(MY23) book-ending our forecast period, as well as a number of pickup
and SUV launches, including the redesigned Land Cruiser (MY21), Sequoia
and Tundra (MY22), and 4Runner and Tacoma (MY23). Toyota's product
launch mix may actually provide a differentiating factor relative to the
broader industry that is increasingly focused on the CUV segment.

100%
90% Crossover
27%
80% 45%
70% Lt. Truck
60%
30%
40% 25%

6%
20% 12%
10% 16% Small Car
12%
0%
Industry Toyota
Toyota begins MY2020 with an average showroom age around the

industry average, which then ticks up with relatively slow product years in
MY21-22, as well as a material aging of its Light Truck models (Land
Cruiser, Tundra, Sequoia). However, its strong cadence of launches
thereafter, consistent with its historical track record, should drive its
average age lower over our forecast period, where it may remain.
7
6
5
4
3
2
1
Older
-
(1)
Younger
(2)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 12: Toyota product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
Toyota Highlander - Large CUV Toyota Land Cruiser - Large SUV Toyota C-CUV - Small CUV Lexus RX - Mid Lux CUV
Lexus NX - Mid Lux CUV Toyota Sienna - Small Van Toyota Tundra - Large Pickup Toyota Tacoma - Small Pickup
Toyota Supra - Coupe Lexus LX - Large Lux SUV Toyota Sequoia - Large SUV Toyota 4Runner - Mid SUV
Toyota Corolla - Sedan Lexus IS - Sedan, Coupe & Convertible Toyota Prius - Hatchback Lexus GX - Mid Lux SUV
Toyota Yaris - Sedan & Hatchback Toyota Camry - Sedan
Exhibit 13: 2020 Toyota Highlander Exhibit 14: 2020 Lexus NX
Source: Toyota Motor Sales, U.S.A., Inc. Source: Toyota Motor Sales, U.S.A., Inc.
Exhibit 15: 2020 Toyota Corolla Exhibit 16: 2020 Toyota Supra
Source: Toyota Motor Sales, U.S.A., Inc. Source: Toyota Motor Sales, U.S.A., Inc.
Toyota Future Car Wars Powertrain

In 2017, Toyota announced its targets for electrified vehicle (hybrid, plug-in hybrid,
electric vehicle, and fuel cell vehicle) sales over the 2020-2030 timeframe. Specifically,
the company targets selling at least 5.5mm electrified vehicles globally by 2030, and
that at least 1 mm of these vehicles will be zero emission configuration, namely fully
electric and fuel cell. Additionally, the company’s goal is for every model in its global
line-up to be available as an electrified option by around 2025. Toyota also plans to
accelerate the launch of its fully electric vehicles starting in 2020, initially targeting
China, followed by a gradual push into Japan, India, United States, and Europe, with the
aim of having at least 10 electric models available globally in the first half of the 2020s.
Lastly, the company plans to expand its line-up of passenger and commercial fuel cell
vehicles in the 2020 time period and beyond.

Toyota established an electric vehicle development joint venture with OEM Mazda and
Tier 1 supplier Denso, which followed an initial agreement by Toyota and Mazda to
cooperate in various product and technology areas like electric vehicle development.
Through the addition of Denso to the partnership, with its strengths in key electric
vehicle components, the companies plan to accelerate the development of mass
production electric vehicles. It should be noted that Toyota boasts a 90% stake in the
aforementioned JV entity, while Mazda and Denso each maintain 5%.
Toyota is also considering a collaboration with Panasonic on automotive prismatic

batteries; and, in 2020, plans to adopt Panasonic's lithium ion batteries for electric
vehicles, which will initially be launched in China. Toyota has begun sourcing EV
batteries from Panasonic, with which it already has a cooperative relationship on hybrid
vehicle batteries, and the company is now moving quickly to establish the manufacturing
and infrastructure to support full scale production of electric vehicles in China.
Table 13 below outlines powertrain forecasted availability for Toyota’s MY2020-23 US

product pipeline
Table 13: Toyota US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Toyota Highlander ICE, Hybrid Toyota Land Cruiser ICE Toyota C-CUV ICE, Electric Lexus RX ICE, Hybrid
Lexus NX ICE, Hybrid Toyota Sienna ICE, Hybrid Toyota Tundra ICE Toyota Tacoma ICE
Toyota Supra Hybrid Lexus LX ICE Toyota Sequoia ICE Toyota 4Runner ICE
Toyota Corolla ICE Lexus IS ICE, Hybrid Toyota Prius ICE, Hybrid, Electric Lexus GX ICE
Toyota Yaris ICE Toyota Camry ICE, Hybrid
Toyota Future Car Wars Autonomy

for autonomous vehicle technology and deployment, similar to some
of its peers in the industry, is a bimodal approach.
The first approach is badged as Chauffeur, which is development of SAE Level 5 fully
automated and Level 4 conditional automated driving. Specifically, Toyota has targeted
2025 for the deployment of Level 4 and 5 autonomous vehicles, which will likely be used
first in commercial applications. Along these lines, Toyota is also developing its E-
Palette concept as purpose built electric vehicle for mobility services, commerce, and
delivery services, with autonomous capabilities enabled by the Chauffer system. Along
with this concept, Toyota has entered into partnerships with several other companies,
including Amazon, Didi, Pizza Hut, and Mazda, and the ultimate goal is to deploy the
concept commercially in the early 2020s, likely around the Tokyo Olympic Games.
The second approach is Guardian mode. Between now and 2025 (when Level 4-5
autonomous vehicle capability may be achieved), Toyota will also be introducing
Guardian mode across its product line-up, which is essentially Level 2-3 autonomous
technology, or an advanced safety driver assistance system, that monitors the vehicle
interior/exterior environment to intervene or take control of the vehicle in the event of
an emergency, and serve as a safety net of sorts.
The model Chauffer and

Guardian technology is the TRI-P4 vehicle, which is based on the Lexus LS, and will join
the TRI test fleet in Spring 2019.
Refer to Table 25 on page 64


Honda Motor Company
Conclusion: Honda has historically has a track record of maintaining a relatively steady
product stream, which has driven a replacement rate generally above industry average
and an average showroom age generally below. However, this consistency does
fluctuate from time to time; and has more recently, with some notably lower
replacement years in MY2019 and MY20 that are set to meaningfully accelerate towards
the end of our forecast period. Specifically, following a surge in MY16-MY18 in Honda's
product cadence, it remains slow in MY20, with just the new Passport CUV launching.
However, in MY21, Honda will be relaunching its high volume Civic, in addition to several
Acura models, which is then followed by the CR-V, HR-V, Fit, and Pilot in MY22, and then
the Accord and Ridgeline in MY23. Honda's product surge positions it with the highest
replacement rate among major automakers and should be at the very least supportive of
market share. Overall, Honda's product pipeline is slightly overweight CUVs, but
materially overweight Small and Mid/Large Cars. We expect the company's continued
commitment to passenger cars may prove a prudent strategy over the longer-term
versus other industry players that are abandoning the segment.
Honda’s cumulative replacement rate of 93% over MY2020-23 is the

highest among majors and well above the industry average of 79%.

70%
Honda
60% Honda 00-19 Avg.
50% Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Honda's new product pipeline over the next few years is just slightly
overweight CUVs versus the broader industry, at about 50% of its new
launch volume with key new products including the new Passport (MY20),
Acura MDX (MY21), as well as the CR-V, HR-V, and Pilot (all MY22).
However, the real product differentiation lies in its relative overweight to
Small and Mid/Large Cars versus the industry, which is a function of the
intro of new high volume Civic (MY21) and Accord (MY23). Honda will be
launching a number of Acura models, which except for the MDX (MY21),
are mostly lower volume.

100%
90% Crossover
80% 45% 49%
70% Lt. Truck
60%
40% 25%
22%
30% Mid/Large Car
6%
20% 12%
10% 24% Small Car
12%
0%
Industry Honda
Honda's consistent focus on product has kept its average showroom age
relatively fresh and almost always below the industry average, although it
may pop up very slightly above over the next few years, due to a lack of
new product in MY19 and MY20. However, we expect Honda's strong
product cadence will drive its showroom age once again below average by
the end of our forecast period.
7
6
5
4
3
2
1
Older
-
(1)
Younger
(2)
(3)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 14: Honda product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
Honda Passport - Mid CUV Acura MDX - Mid Lux CUV Honda Pilot - Large CUV Honda Urban EV - Mid CUV
Acura RLX - Sedan Honda CR-V - Small CUV Honda Ridgeline - Small Pickup
Acura TLX - Sedan & Coupe Honda HR-V - Compact CUV Honda Accord - Sedan & Coupe
Honda Civic - Sedan. Hatchback & Coupe Acura ILX - Sedan Honda Clarity - Sedan & Coupe
Honda Fit - Hatchback
Exhibit 17: 2020 Honda Passport Exhibit 18: 2021 Honda Civic (2019 model year Type R shown)
Source: American Honda Motor Co., Inc. Source: American Honda Motor Co., Inc.
Exhibit 19: 2021 Acura MDX (concept shown) Exhibit 20: 2021 Acura TLX
Source: American Honda Motor Co., Inc. Source: American Honda Motor Co., Inc.

Honda Future Car Wars Powertrain
Similar to its Japanese peer Toyota, Honda’s focus on alternative powertrain technology
has shifted more recently, from hybrids and fuel cell vehicles to now electric vehicles.
After forming a joint venture, in 2017, with GM to mass produce fuel cell systems,
Honda agreed, in June 2018, to also work with GM on next generation battery
components for electric vehicles, as well as autonomous vehicles. And while both
companies will jointly develop the requisite technology, components, and systems, they
intend to develop, engineer, and manufacture their own electric vehicle models
independently, and the jointly developed battery components will be primarily available
to models in North America.
Honda’s ultimate goal is for two-thirds of its vehicle line-up to be powered by non-
conventional internal combustion engine systems by 2030. With this in mind, the
company is developing models equipped with its highly efficient Sport Hybrid i-MMD
system. In the electric vehicle space, Honda sells the Clarity Electric model in the US and
plans to launch a mass produced electric model, the Urban EV concept, in Europe in
2019 and Japan in 2020. Honda is also developing an electric vehicle exclusively for the
Chinese market, which it will sell under the Guangqi Honda brand, and also aims to have
at least 20 electrified models on the Chinese market by 2025. In the plug-in hybrid and
fuel cell vehicle space, Honda is rolling out the Clarity series in the US, and launched its
Clarity plug-in model for Japan in 2018.
Table 15 below outlines powertrain forecasted availability for Honda’s MY2020-23 US

product pipeline
Table 15: Honda US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Honda Passport ICE Acura MDX ICE, Hybrid Honda Pilot ICE, Hybrid Honda Urban EV Electric
Acura RLX ICE, Hybrid Honda CR-V ICE, Hybrid Honda Ridgeline ICE
Acura TLX ICE, Hybrid Honda HR-V ICE, Electric Honda Accord ICE, Hybrid
Fuel Cell, Hybrid,
Honda Civic ICE Acura ILX ICE Honda Clarity Electric
Honda Fit ICE
Honda Future Car Wars Autonomy

Under its mid-term Vision 2030 strategy plan, Honda expects to introduce highly
automated (SAE Level 3) vehicles by 2020 for on-highway driving purposes, and fully
autonomous (SAE Level 4+) vehicles by 2025 for on-highway and off-highway
(city/suburb roads) use cases.
Earlier this year, Honda partnered with Cruise (and GM) in funding and developing a
purpose-built autonomous vehicle for Cruise to be deployed in a mobility services model.
As part of this agreement, Honda will contribute $2bn in investment over 12 years, and
has also invested $750mm for an equity stake in GM Cruise. And as part of the
funding/development, Cruise, GM, and Honda will explore opportunities for commercial
development of the Cruise network. We would also note that Honda had been in
discussion with Waymo (Google’s autonomous driving business unit), and potentially
others, on the co-development of autonomous vehicle technology.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of Honda’s


Nissan Motor Company
Conclusion: Nissan's product cadence has been relatively underwhelming for some
time, with only a few boom years in the last decade, although this appears set to
“boom” again in MY2021, before once again dropping off significantly in MY2022-23,
for a four year cumulative replacement rate below the industry average. A number of
relatively higher volume models drive the near-term improvement, including the Sentra
(MY20), as well as the Murano, Rogue/Rogue Sport, and Pathfinder (all MY21). Broadly,
Nissan's product pipeline is overweight CUVs versus the industry overall, accounting for
about 60% of its new volumes, which could be a risk for the company, as the segment is
becoming increasingly competitive and crowded. Similar to its Japanese peers, Nissan
does not appear to have sworn off passenger cars; and, as a result, model introductions
are also overweight Small Cars. The reasonably low replacement rate and volatile
showroom age over our forecast period appears to indicate that Nissan's product engine
remains hazy. For this reason, we generally view Nissan's product cadence as less
competitive than others through MY2020-23, which may result in relatively more
competitive pricing activity to support volume.
Nissan's cumulative replacement rate of 69% over MY2020-23 is below

the industry average of 79%, with a slow MY22-23 a real drag relative to
MY20-21.

70%
Nissan
60%
Nissan 00-19 Avg.
50% Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Like its Japanese peers, Nissan has historically been over-indexed to Small
and Mid/Large Cars, which appears to persist in MY2020-23, with an
overweight versus the broader industry on Small Cars. However, a number
of key CUV launches, including the Murano, Rogue/Rogue Sport and
Pathfinder, and a few Infiniti QXs, are driving an overweight in CUV model
mix introductions as well, accounting for about 60% of its new model
launches by volume.

100%
90% Crossover
80% 45%
70% 59% Lt. Truck
60%
40% 25%
12%
30% Mid/Large Car
6%
20% 12%
28%
10% Small Car
12%
0%
Industry Nissan
Nissan's average showroom age trends above average through MY2020,

but drops below in MY21, with several high volume new model
introductions like the Sentra, Rogue, and Murano. However, it begins to
tick up in the latter years of our forecast period, closer to and even above
the industry average, as it product cadence slows once more.
7
6
5
4
3 Relative to Industry:
2
1
Older
-
(1)
Younger
(2)
(3)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 16: Nissan product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
Nissan Sentra - Sedan Nissan Pathfinder - Large CUV Infiniti QX50 - Small Lux CUV Nissan IMx EV - Mid CUV
Nissan Versa - Hatchback Nissan Murano - Mid CUV Nissan NV - Large Van Nissan Kicks - Small CUV
Nissan Rogue - Small CUV Infiniti C-CUV EV - Mid Lux CUV
Nissan Rogue Sport - Compact CUV Infiniti QX80 - Large Lux SUV
Infiniti QX60 - Mid Lux CUV Nissan GT-R - Coupe
Nissan Frontier - Small Pickup Nissan Leaf - Hatchback
Nissan NV200 - Small Van
Exhibit 21: 2020 Nissan Sentra Exhibit 22: 2020 Nissan Versa
Source: Nissan North America, Inc. Source: Nissan North America, Inc.
Exhibit 23: 2021 Nissan Rogue (2019 model year shown) Exhibit 24: 2021 Infiniti QX60 (concept shown)
Source: Nissan North America, Inc. Source: Nissan North America, Inc.

Nissan Future Car Wars Powertrain
Under Nissan’s mid-term plan, Nissan M.O.V.E. to 2022, the company aims to achieve
annual sales of 1mm electrified vehicles (including hybrid, plug-in hybrid, electric, and
fuel cell) by FY2022, which includes either pure electric models or those with e-Power
powertrains (hybrid). Currently, Nissan has two electric vehicle models, the Nissan Leaf,
which is one of the highest selling pure electric vehicles globally, as well as the e30
Venucia, essentially a Chinese version of the Nissan Leaf (sold through its joint venture
with Dongfeng). In 2017, Nissan announced a new joint venture with Dongfeng labelled
eGT under which the entities will co-develop electric vehicles for the China market, and
within this partnership, Nissan and Renault will hold a 25% capital stake each, with
Dongfeng holding the remaining 50%. Nissan plans to launch several new electric
vehicles in China, including C-segment models that draw on the technology incorporated
into the new Nissan Leaf. The mid-term plan also includes A-segment electric vehicles,
based on an SUV platform to be developed by eGT. Nissan also plans to develop two
electric vehicle derivatives under the Venucia brand.
Ultimately, Nissan views its e-Power system as the key technology for its electric model
launch strategy. The company believes it can maintain a technological edge over other
OEMs (as an aside, the Nissan Note, which has the e-Power system, was the highest
registered car in Japan in 2018); sees considerable common ground between e-Power
hybrids and pure electric vehicles; and has high expectations for e-Power as global
demand for electric vehicles increases. Ultimately, Nissan expects pure electric vehicles
and e-Power vehicles to account for at least 50% of its global sales by 2030.
It should also be noted that Nissan has a partnership with Renault and Mitsubishi,
badged Alliance 2022. The alliance aims to launch 12 new fully electric vehicles by 2022.
The alliance is also working to reduce battery cost by 30%, and to reduce charging time
to 15 minutes to deliver range of 230km, on average, by 2022.
Table 17 below outlines powertrain forecasted availability for Nissan’s MY2020-23 US

product pipeline.
Table 17: Nissan US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Nissan Sentra ICE, Hybrid Nissan Pathfinder ICE, Hybrid Infiniti QX50 ICE Nissan IMx EV Electric
Nissan Versa ICE Nissan Murano ICE, Hybrid Nissan NV ICE Nissan Kicks ICE
Nissan Rogue ICE, Hybrid Infiniti C-CUV EV Electric
Nissan Rogue Sport ICE Infiniti QX80 ICE
Infiniti QX60 ICE, Hybrid Nissan GT-R ICE, Electric
Nissan Frontier ICE Nissan Leaf Electric
Nissan NV200 ICE
Nissan Future Car Wars Autonomy

Also under the Alliance 2022 framework, Nissan plans to launch 40 vehicles with varying
levels of autonomous technologies and capabilities by 2022, including fully autonomous
vehicles. Eventually, the company also aims to become a key operator of autonomous
mobility on demand services, with pilot programs that are currently in place, with major
partners such as DeNA in Japan and Transdev in France.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of Nissan’s


European OEMs
Conclusion: In total, the European OEMs' cumulative replacement rate over the next
four model years of 74% is just below the industry average, and is reasonably consistent
through our forecast period. New product introductions are, as usual, over-indexed to
the Luxury & Sporty Car segment, but are otherwise dominated by CUVs (equalweight
relative to the industry). This combination should generally translate into reasonably
steady market share and pricing over the time period. It should be noted that we
estimate that Volkswagen, combined with Porsche, will post a cumulative replacement
rate of about 65%, which is the lowest among the European OEMs overall. Daimler
(97%) is well above the industry and European average, while BMW (68%) is below, but
both are relatively overweight CUVs. Very importantly, likely in an effort to recover some
market share that has been purportedly lost over the past several years to Tesla, a
notable portion of the European OEMs' product launches are focused on alternative
powertrain launches, particularly electric vehicles, with important line-ups/series like the
Audi E-Tron, BMW i Series, and Mercedes-Benz EQ-Class.
European OEM cumulative replacement rates are about 74% over the next
four years, just below the industry average of 79%.
70%
European
60%
European 00-19 Avg.
50%
Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Numerous European brands, such as Audi, BMW, Mercedes-Benz, and

Porsche, obviously leads to a natural skew towards Luxury & Sporty Cars,
which is unlikely to change. However, there is also an increasing focus and
product weight on CUVs, as OEMs are smartly attempting to leverage the
secular trend towards the segment.

100%
90% Crossover
80% 45% 50%
70% Lt. Truck
60%
40% 25%

6%
20% 12%
10% Small Car
12% 6%
0%
Industry European
European OEMs have an average age of about 2.8 years over the next four
model years, which is generally in line with the industry average of 2.7
year. This appears to vacillate slightly through the forecast period, and
finishes just above average in MY2023.
8
7
6
5
4
3
2
1
Older
-
Younger
(1)
(2)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 18: European OEM product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
BMW X7 - Large Lux CUV Mercedes-Benz GLA - Compact Lux CUV BMW iX3 - Small Lux CUV BMW X8 - Large Lux CUV
BMW X6 - Mid Lux CUV Mercedes-Benz EQB - Compact Lux CUV BMW iNext EV/AV - Small Lux CUV BMW X1 - Small Lux CUV
Mercedes-Benz GLS - Large Lux CUV Mercedes-Benz EQA - Compact Lux CUV Porsche Macan - Small Lux CUV Mercedes-Benz EQ GLE - Mid Lux CUV
Mercedes-Benz GLE - Mid Lux CUV Audi Q5 - Mid Lux CUV BMW i4 - Coupe Mercedes-Benz GLC - Small Lux CUV
Mercedes-Benz EQC - Small Lux CUV Audi Q4 - Small Lux CUV BMW i3 - Hatchback Audi eQ5 - Mid Lux CUV
Mercedes-Benz C-Class - Sedan, Hatchback
Mercedes-Benz GLB - Compact Lux CUV Volkswagen ID Crozz - Mid CUV & Wagon Audi Allroad - Small Lux CUV
Audi E-Tron - Small Lux CUV Volkswagen Tarek - Small CUV Mercedes-Benz EQS - Sedan Audi eQ3 - Small Lux CUV
Audi Q3 - Small Lux CUV BMW 4 Series - Coupe & Convertible Mercedes-Benz SL - Convertible Porsche Taycan Cross Turismo - Mid Lux CUV
Volkswagen Atlas Cross Sport - Mid CUV Mercedes-Benz S-Class - Sedan & Coupe Audi E-Tron GT - Sedan Volkswagen Atlas Tanoak - Small Pickup
BMW 8 Series - Coupe Audi A3 - Sedan & Wagon Porsche Boxster - Convertible Volkswagen ID Buzz - Small Van
BMW 3 Series - Sedan & Wagon Audi E-Tron Sportback - Hatchback Porsche Cayman - Coupe BMW 7 Series - Sedan
BMW Z4 - Coupe & Convertible Volkswagen ID - Hatchback BMW 2 Series - Coupe & Convertible
Mercedes-Benz CLA-Class - Coupe Volkswagen Golf - Hatchback BMW i8 - Coupe
Porsche 911 - Coupe & Convertible MINI Cooper - Hatchback
Porsche Taycan - Coupe Mercedes-Benz EQE - Sedan
Volkswagen Arteon - Sedan Mercedes-Benz GT - Coupe
Audi A4 - Sedan, Wagon & Convertible
Volkswagen Passat - Sedan
Exhibit 25: 2020 BMW X7 Exhibit 26: 2019 Mercedes-Benz GLS
Source: BMW of North America LLC Source: Mercedes-Benz USA, LLC
Exhibit 27: 2020 Volkswagen Atlas Cross Sport Exhibit 28: 2021 Audi E-Tron Sportback (concept shown)
Source: Volkswagen of America, Inc. Source: Audi of America

European Future Car Wars Powertrain
Volkswagen
Volkswagen Group’s brands now offer a total of about a dozen models with electric
drive technology, ranging from pure battery electric vehicles to plug-in hybrid electric
vehicles (PHEVs), and others. As part of its Strategy 2025, the company aims to
introduce 80 new electric vehicle models by 2025 (across Skoda, Porsche, Lamborghini,
Volkswagen, SEAT and Audi brands), as well as offer an electric version of each of its
300 models by 2030. Of these 80 new models, 50 are targeted to be pure battery
electric vehicles. With this product launch strategy in mind, Volkswagen expects roughly
2-3mm of its annual units, or 20-25% of its Group sales, will be pure battery powered
vehicles, likely by the end of 2025 and aims share of electric vehicles in the group fleet
to rise to at least 40% by 2030. Notably, the company acknowledges that pure electric
vehicles will likely be most applicable for local travel, while hybrid vehicles will be most
relevant for longer distances, likely driving a bifurcated market over the longer term.
The Volkswagen brand has already revealed an electric concept for some models (ID, ID
Buzz, ID Crozz, ID Vizzion, and ID Lounge). According to the company, the VW ID Lounge
will be a luxury electric SUV, with 600 miles range, and will be launched in 2021. Current
hybrid vehicles under Volkswagen’s roof globally include: the Audi E-Tron range to be
launched through the A3 Sportback E-Tron, up to the Q7 E-Tron and A6 L E-Tron (for
the Chinese market) available since 2016, as well as the Golf GTE, Passat GTE and
Passat Estate GTE.
To support its ambitious electrification plans, as outlined in its latest five year business
plan, Volkswagen announced a combined investment of €34bn through 2022 across e-
mobility, digitization, autonomous driving, and mobility services, and put a €50bn
battery order out for tender (of which €40bn has already been placed). Volkswagen also
announced that it will install 400 fast-charging stations along Europe's major roads and
highways by 2020 in collaboration with industry partners in IONITY, 100 of which will be
located in Germany. Elli (Electric Life), Volkswagen’s new subsidiary, will also offer
wallboxes for charging at home, using green power – initially in Germany.
BMW
In 2018, BMW sold approximately 142k electrified vehicles, including pure electric and
plug-in hybrid vehicles, and it expects this powertrain segment to account for 15-25%
of the company’s annual unit sales in 2025. BMW’s electric vehicle development and
commercial deployment has been done primarily through its “i” brand including the i3
(available as both a plug-in hybrid and electric vehicle) and the i8 (plug-in hybrid). The
company has also introduced, or plans to introduce, plug-in hybrid versions across
popular models, including the 3 Series, 5 Series, and 7 Series, as well as X5. Several new
electrified models are also in the company’s pipeline, such as a Mini (battery electric
vehicle) in 2019, BMW X3 (battery electric) in 2020 and BMW iNEXT (electric) in 2021.
With range limitations for pure electric vehicles at the moment, BMW continues to focus
on the rollout of plug-in hybrid versions across its model range, which we expect will be
labelled iPerformance and will incorporate i brand technology. BMW currently has nine
electrified models available globally, including the hybrid X5, 2 Series, 3 Series, 5 Series,
7 Series and the Mini Countryman, with more to come over our forecast period.
Ultimately, the company aims to have 25 electrified models available by 2025, 12 of
which will likely be fully electric, with a range of up to 700km.
It should also be noted that BMW is partnering with Toyota on the development of
hydrogen fuel cell vehicles, which should offer longer range and solid state batteries
that recharge in shorter period of time. In the past, BMW has stated that hydrogen fuel
cell technology will become an integral component of the company’s Efficient Dynamics
Strategy. In addition, BMW has invested €200mm in a new Battery Technology Research
Center to further product and technology. In September 2017, BMW announced its plan
to cut €2bn in parts cost per annum to help finance the rapid shift to electric vehicles.

Daimler
At the Paris Auto Show in 2016, Daimler introduced its new brand for electric mobility,
EQ, which will encompass all future electric models and services provided by the
company. Daimler will launch its first electric vehicle in 2019, labelled the EQC (based
on the GLC CUV) which will then be followed by a plethora of other models (EQA and
EQB in 2020 and EQ GLE in 2021). As part of its fleet electrification plan, Daimler plans
to launch more than 130 electrified models (including battery electric, plug-in hybrid,
hybrid, etc.) by 2022, including the B-Class, C-Class, EQ, E-Class, GLC, GLE, S-Class,
Denza, Smart, an electric bus, electric van (Vision van), and Mercedes-Benz electric truck.
Also of note, from 2020, Smart models will be available only with an electric drivetrain.
Ultimately, Daimler plans to have, in each series of vehicle classes and segments, at
least one electrified version, and more than 10 pure battery electric vehicles available by
2022. The company expects full battery electric vehicles to account for 15-25% of unit
sales by 2025. To fund this product strategy, Daimler has earmarked over €10bn for
electric vehicle development and investment, and, as part of its product and company
strategy to reach the targeted levels of electric vehicle volume and penetration, the
company has also projected €4bn of cost savings to be achieved by 2025, which should
offset what will be lower profitability from electric vehicles in early stages of
deployment.
As noted, the first of the electric models to be manufactured and sold by Daimler is the
EQC, beginning in 2019. Meanwhile, Daimler continues to cite plug-in hybrid vehicles as
an important component of its emission free product strategy. Daimler is pushing
forward with fuel cell technology, and while this remains relatively niche for the
moment, the company appears convinced that fuel cell drive systems (powered by
hydrogen) offer great potential, due to the long range and short refilling times, which
should provide a viable alternative to battery electric drive systems for long distances.
Table 19 on below outlines powertrain forecasted availability for the European OEMs’
MY2020-23 US product pipeline
Table 19: European OEM US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
BMW X7 ICE Mercedes-Benz GLA ICE, Hybrid BMW iX3 Electric BMW X8 Hybrid
BMW X6 ICE Mercedes-Benz EQB Electric BMW iNext EV/AV Electric BMW X1 ICE
Mercedes-Benz GLS ICE Mercedes-Benz EQA Electric Porsche Macan ICE, Hybrid, Electric Mercedes-Benz EQ GLE Electric
Mercedes-Benz GLE ICE, Hybrid Audi Q5 ICE, Electric BMW i4 Electric Mercedes-Benz GLC ICE, Hybrid, Fuel Cell
Mercedes-Benz EQC Electric Audi Q4 ICE BMW i3 Electric Audi eQ5 Electric
Mercedes-Benz GLB ICE Volkswagen ID Crozz Electric Mercedes-Benz C-Class ICE, Hybrid Audi Allroad ICE
Audi E-Tron Hybrid, Electric Volkswagen Tarek ICE Mercedes-Benz EQS Electric Audi eQ3 Electric
Porsche Taycan Cross
Audi Q3 ICE BMW 4 Series ICE Mercedes-Benz SL ICE Turismo Electric
Volkswagen Atlas Cross
Sport ICE, Hybrid Mercedes-Benz S-Class ICE, Hybrid Audi E-Tron GT Hybrid, Electric Volkswagen Atlas Tanoak ICE, Hybrid
BMW 8 Series ICE Audi A3 ICE, Hybrid Porsche Boxster ICE Volkswagen ID Buzz Electric
BMW 3 Series ICE, Hybrid, Electric Audi E-Tron Sportback Hybrid, Electric Porsche Cayman ICE BMW 7 Series ICE, Hybrid
BMW Z4 ICE Volkswagen ID Electric BMW 2 Series ICE
Mercedes-Benz CLA-
Class ICE Volkswagen Golf ICE, Electric BMW i8 Hybrid
Porsche 911 ICE, Hybrid MINI Cooper ICE, Hybrid, Electric
Porsche Taycan Electric Mercedes-Benz EQE Electric
Volkswagen Arteon ICE Mercedes-Benz GT ICE
Audi A4 ICE, Hybrid
Volkswagen Passat ICE

European Future Car Wars Autonomy
Volkswagen
Volkswagen’s autonomous vehicle development strategy appears reliant on partnering
with other industry players, although it has an Autonomous unit within Audi, where most
of the in-house development is undertaken. Earlier this year, Volkswagen had been in
talks with two of its major peers, BMW and Daimler, to explore an industry-wide
collaboration in an effort to leverage economies of scale and compete with industry
leaders. These discussions also reportedly included major European Tier 1 suppliers.
More recently, however, Volkswagen formed a strategic alliance with Ford, which
appears to be far-reaching, ranging from collaboration on light commercial vehicles and
medium sized pickups (starting in 2022) to potentially also on future businesses and
technology (electrification, autonomy, mobility services), including Ford’s Argo AI unit.
Volkswagen is also currently working with Aurora (an autonomous driving technology
startup), in a non-exclusive partnership also involving Hyundai, which aims to launch a
number of fully autonomous (SAE Level 5) vehicles (including cars, trucks, and vans) in
controlled environments by 2021. Volkswagen’s premium brand, Audi, expects to launch
the next generation A8 model with Level 3 autonomous capability, and by 2020-2021,
Audi plans to introduce its Highway Pilot feature (SAE Level 4) across various models.
BMW
BMW currently offers Level 1-2 vehicle autonomy in all production models through its
Personal CoPilot driver assistance systems, which includes Active Cruise Control with
Stop&Go function, Collision & Pedestrian warning with City Brake Activation, among
other features. Semi-autonomous (Level 2+) systems and capabilities are also available
on a number of production models already, including functions like Steering & Lane
Control Assistant, Traffic Jam Assistant, and Automated Parking. Over the past several
years, BMW has also deployed a number of research vehicles that have been testing
highly automated (Level 3+) driving on public roads, with the ultimate goal of being
production ready and available for commercial deployment in 2021.
BMW is also part of an industry-wide consortium between FCA, Intel, Aptiv, Continental,
Magna, and Mobileye (among others), which aims to launch autonomous technology into
production vehicles by 2021. Along with this partnership, BMW expects to launch its
first highly automated (Level 4-5) vehicle, iNEXT, around the same timeframe. It should
also be noted that BMW and Daimler have recently announced that they are partnering
to develop autonomous driving technology, even as each automaker pursues separate
efforts to develop fully autonomous vehicles.
Daimler
Daimler has been developing and testing autonomous driving technologies for several
years, with prototypes including the Mercedes-Benz S-Class S 500 INTELLIGENT DRIVE
and the F 015 Luxury in Motion. The company also demonstrated its intelligent Highway
Pilot in the Freightliner Inspiration Truck in the United States, as well as series
production Mercedes-Benz Actros (trucks) in Germany. Daimler also has targeted a 2020
production launch of its partially autonomous (SAE Level 3) technology, which will likely
first be deployed on the S-Class, before being expanded across its product portfolio.
Daimler has also entered into a development agreement with Tier 1 supplier Robert
Bosch to bring fully automated (SAE Level 4-5) driving to urban roads in the early
2020s. This partnership encompasses software and algorithms for an autonomous
driving system, as well as the total vehicle expertise in terms of hardware and
manufacturing. Daimler and Bosch have identified San Jose, California as the pilot city
for trials of its highly and fully automated driving (SAE Level 4-5) on demand ride-
hailing service, which is targeted to launch in the second half of calendar year 2019.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of the European
OEMs’ autonomous development plan versus competitors.

Korean OEMs
Conclusion: Hyundai and Kia's new model introductions have become more consistent
in recent years, although there is some volatility over our forecast period, with very
strong replacement years in MY2020-21 and a notable drop off in MY2022-23. Generally
speaking, however, the two brands cumulative replacement rate over the next four
model years is above industry average. Very importantly, passenger cars are a material
portion of new product introductions, at just over 50% of total, while CUVs are roughly
in line with the industry average. With the combination of a higher replacement rate,
below average showroom age, and a generally steady gain in product quality, we expect
this to keep the Korean OEMs relatively competitive over the next four model years. It
should also be noted that Hyundai is working to expand its luxury Genesis brand, with
several redesigned sedan and all-new CUV launches over our forecast period.
Hyundai and Kia’s cumulative replacement rate of 88% over the next four
years is above the industry average of 79%.
70%
Korean
60%
Korean 00-19 Avg.
50%
Industry
40%
30%
20%
10%
0%
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Hyundai and Kia's new model introduction mix is heavily skewed towards
Small Cars and Mid/Large Cars, with about an equal weight CUVs relative
to the industry. We note however, almost the entire industry is moving
aggressively away from passenger cars.

100%
90% Crossover
80% 45% 43%
70% Lt. Truck
60%
4%
40% 25% 22%
30% Mid/Large Car
6%
20% 12%
29%
10% Small Car
12%
0%
Industry Korean
For the past two decades, average showroom age for Hyundai and Kia has
consistently remained below the industry average. We assume this will
largely continue through our forecast period, although gird close to
average by MY2023. This is a result of efforts to renew a number of
models within its line-up, as well as introducing several all-new models.
7
6
5 Average Showroom Age (Years)
4
3
2
1
Older
-
(1)
Younger
(2)
(3)
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Table 20: Korean OEMs US product pipeline MY2020E-2023E
2020E 2021E 2022E 2023E
Hyundai Palisade - Large CUV Hyundai Tucson - Small CUV Hyundai NE/C-CUV - Mid CUV Kia Niro - Small CUV
Hyundai Venue - Compact CUV Kia FCEV - Mid CUV Kia Sportage - Small CUV Genesis GV-E/D-CUV - Mid Lux CUV
Kia Telluride - Mid CUV Kia Sorento - Small CUV Genesis GV70 - Small Lux CUV Hyundai Santa Cruz - Small Pickup
Hyundai Sonata - Sedan Genesis GV80 - Mid Lux CUV Kia Sedona - Small Van Genesis G90 - Sedan
Kia Soul - Hatchback Genesis G80 - Sedan & Coupe Kia Rio - Hatchback & Sedan
Kia Optima - Sedan
Hyundai Elantra - Sedan
Exhibit 29: 2020 Hyundai Palisade Exhibit 30: 2020 Kia Telluride
Source: Hyundai Motor Company Source: Kia Motors America, Inc.
Exhibit 31: 2021 Hyundai Venue Exhibit 32: 2020 Kia Soul
Source: Hyundai Motor Company

Source: Kia Motors America, Inc.

Hyundai/Kia Future Car Wars Powertrain
Hyundai and Kia are working diligently to catch up to other global automaker efforts on
alternative powertrain vehicles, and their group-wide development plan is relatively
clear. However, neither could be identified as an industry leader among global OEMs just
yet. 2016 marked an inflection point for the brands, as they finally launched dedicated
alternative powertrain models, the Hyundai Ioniq and Kia Niro, utilizing existing
platforms. In April 2018, Hyundai announced that the company refocused its product
strategy around electric vehicles, and expects to catch up with its global peers. At the
Geneva Motor Show in March 2019, the company unveiled three models and variants of
its Ioniq car – namely hybrid, plug-in hybrid, and fully electric models. In addition,
Hyundai indicated plans to launch three new pure electric models by 2022 – a Kona SUV
in 1H:18 (estimated battery range of 390km), a smaller A-segment SUV in 2020, and a
new Genesis EV sedan in 2021 (projected battery range of 500km). Kia has also
announced plans to introduce three new plug-in hybrid vehicles by 2020.
More broadly, Hyundai has indicated that it would maintain its wide mid-term
alternative powertrain plan to further develop all variants, including hybrid, plug-in
hybrid, and electric, as well as improve fuel economy around 25% across its line-up by
2020, which even excludes improvements to be realized from upgrading the traditional
powertrain system. It should also be noted that Hyundai has begun commercial
production for fuel cell vehicles under the Tucson and Nexo nameplates, and will
continue to develop the technology. Considering shorter charging/fuelling time (similar
to an internal combustion engine vehicle) and longer driving distance (estimated at over
800km in 2018), Hyundai believes fuel cell electric vehicles represent another important
alternative powertrain option for vehicles, particularly in the commercial vehicle market.
Overall, Hyundai and Kia, as a combined group, aim to be the second largest
manufacturer of alternative powertrain vehicles by 2020, expecting to offering up to 31
models, including ten hybrids, eleven plug-in hybrids, six electric vehicles, and four fuel
cell vehicles.
Table 21 below outlines forecasted powertrain availability for Hyundai/Kia’s MY2020-23

US product pipeline.
Table 21: Hyundai/Kia US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Hyundai Palisade ICE Hyundai Tucson ICE, Fuel Cell Hyundai NE/C-CUV Electric Kia Niro Hybrid, Electric
Hyundai Venue ICE Kia FCEV Fuel Cell Kia Sportage ICE Genesis GV-E/D-CUV Electric
Kia Telluride ICE Kia Sorento ICE, Hybrid Genesis GV70 ICE Hyundai Santa Cruz ICE
Hyundai Sonata ICE, Hybrid Genesis GV80 ICE Kia Sedona ICE Genesis G90 ICE
Kia Soul ICE, Electric Genesis G80 ICE Kia Rio ICE
Kia Optima ICE, Hybrid
Hyundai Elantra ICE
Hyundai/Kia Future Car Wars Autonomy

Both Hyundai and Kia have announced their intention to bring fully autonomous (SAE
Level 4) vehicles to market by 2021, largely in partnership with Aurora, an autonomous
driving technology startup. Notably in 2018, Hyundai’s fleet of autonomous vehicles
(specifically, three next generation NEXO SUVs and two Genesis G80s) successfully
completed an autonomous drive of 190km from Seoul to Pyeongchang.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of Hyundai/Kia’s


Other OEMs
Table 22: Other OEMs US product pipeline MY2020E-2023E

2020E 2021E 2022E 2023E
Mazda CX-30 - Small CUV Jaguar J-Pace - Small Lux CUV Faraday FF91 - Mid CUV Lucid Space/E-CUV - Large CUV
Range Rover Evoque - Small Lux CUV Mazda CX-3 - Compact CUV Lucid Light/D-CUV - Mid CUV Mazda CX-9 - Large CUV
Subaru Legacy - Sedan Mitsubishi Outlander - Small CUV Lynk 02 - Mid CUV* Polestar 3 - Mid CUV
Subaru Outback - Sedan & Wagon SF Motors SF5 - Small CUV Mazda CX-7 - Mid CUV Subaru Crosstrek - Small CUV
Mazda 3 - Sedan & Hatchback Tesla Model Y - Mid CUV Mazda CX-5 - Small CUV Waymo EV/AV - Mid CUV
Land Rover Range Rover - Large Lux SUV Mitsubishi EV CUV - Small CUV Tesla Model P - Small Pickup
Land Rover Defender - Mid Lux SUV Mitsubishi Outlander Sport - Compact CUV Jaguar XE - Sedan
Rivian R1T - Small Pickup Land Rover Road Rover - Large Lux CUV Tesla Model S - Sedan
Jaguar F-Type - Coupe & Convertible Rivian R1S - Large CUV Lynk 03 - Hatchback*
Lucid Air - Sedan SF Motors SF7 - Mid CUV Subaru Impreza - Sedan, Coupe & Wagon
Lynk 01 - Sedan* Volvo XC90 - Large CUV
Mazda 6 - Sedan Land Rover Discovery Sport - Small Lux SUV
Land Rover Range Rover Sport - Small Lux
Mitsubishi Mirage - Hatchback SUV
Polestar 1 - Coupe Jaguar XJ - Sedan
Subaru WRX - Hatchback Mazda MX-5 Miata - Coupe & Convertible
Subaru BRZ - Coupe
Tesla Roadster - Coupe
Polestar 2 - Sedan
*Note: Final plan/strategy and timing around launch of the Lynk brand in US market remains unconfirmed in light of US-China trade negotiations, although Lynk & Co will be launching in China and Europe
Exhibit 33: 2020 Range Rover Evoque Exhibit 34: 2020 Subaru Outback
Source: Land Rover USA Source: Subaru of America, Inc
Exhibit 35: 2021 Mazda CX-3 (2020 model year shown) Exhibit 36: 2021 Mitsubishi Outlander (concept shown)
Source: Mazda USA Source: Mitsubishi Motors North America

Exhibit 37: 2021 Tesla Model Y Exhibit 38: 2021 Lucid Air
Source: Tesla Motors Source: Lucid Motors
Exhibit 39: 2021 Lynk 01* Exhibit 40: 2021 Rivian R1T
Source: Lynk & Co Source: Rivian
Other Future Car Wars Powertrain

Jaguar Land Rover
Jaguar Land Rover has announced that every Jaguar and Land Rover branded model
launched from 2020 onwards will be electrified in some form, which encompasses fully
electric, plug-in hybrid and mild hybrid vehicles. Between now and 2020, the company
plans to introduce a number of electrified models, both as standalone models and as
variants, with the key example being the company’s first battery electric CUV, the Jaguar
I-Pace, that launched in calendar year 2018.
Mazda
Mazda has noted it will introduce electric powertrain technologies, including fully
electric vehicles, across its product portfolio, beginning in 2019, but has yet to provide
explicit detail as to its product pipeline. However, the company has indicated that it
plans to launch a new standalone electric CUV, based on the Mazda 3 platform. Notably,
Mazda has made several investments in the development of alternative powertrains,
including investing a 5% stake in “EV Common Architecture Spirit”, a joint venture
established between Mazda, Toyota (90% stake) and Denso (5% stake) focused on the
development of shared electric vehicle platforms.
Mitsubishi
Mitsubishi has entered into a partnership with Nissan and Renault, badged Alliance
2022. The alliance aims to launch 12 new fully electric vehicles by 2022. The alliance is
also working to reduce battery cost by 30%, and to reduce charging time to 15 minutes
to deliver range of 230km, on average, by 2022.

Subaru
Subaru is also involved in the “EV Common Architecture Spirit” partnership that was
initially established between Toyota, Mazda, and Denso, which focuses on the
development of shared electric vehicle platforms. In addition, Subaru had announced its
plans to launch a plug-in hybrid vehicle in 2018, later unveiled as the Crosstrek, and a
battery electric model in 2021.
Volvo
Under its Electric Car Initiative, Volvo has announced its plan to sell 1mm electrified
(including varying levels of hybridization) vehicles by 2025. In addition, Volvo will only
launch vehicles with alternative powertrains from 2019 onwards, with at least five
battery electric vehicles launched by 2021.
We would also note the following startup electric vehicle companies that we
expect will launch new product in the US market over our forecast period:
Faraday Future
Lucid
Rivian
SF Motors
Tesla
Table 23 below outlines powertrain forecasted availability for the Other OEMs’
MY2020-23 US product pipeline.
Table 23: Other OEM US product pipeline by powertrain type MY2020E-2023E

2020E 2021E 2022E 2023E
Mazda CX-30 ICE Jaguar J-Pace Electric Faraday FF91 Electric Lucid Space/E-CUV Electric
Range Rover Evoque ICE Mazda CX-3 ICE Lucid Light/D-CUV Electric Mazda CX-9 ICE
Subaru Legacy ICE Mitsubishi Outlander ICE, Hybrid Lynk 02 ICE Polestar 3 Hybrid
Subaru Outback ICE SF Motors SF5 Electric Mazda CX-7 ICE Subaru Crosstrek ICE, Hybrid, Electric
Mazda 3 ICE Tesla Model Y Electric Mazda CX-5 ICE Waymo EV/AV Electric
Land Rover Range Rover ICE, Hybrid, Electric Mitsubishi EV CUV Electric Tesla Model P Electric
Mitsubishi Outlander
Land Rover Defender ICE Sport ICE, Hybrid Jaguar XE ICE
Rivian R1T Electric Land Rover Road Rover Electric Tesla Model S Electric
Jaguar F-Type ICE Rivian R1S Electric Lynk 03 ICE
Lucid Air Electric SF Motors SF7 Electric Subaru Impreza ICE
Lynk 01 ICE Volvo XC90 ICE, Hybrid
Land Rover Discovery
Mazda 6 ICE Sport ICE
Land Rover Range Rover
Mitsubishi Mirage ICE Sport ICE, Hybrid, Electric
Polestar 1 Hybrid Jaguar XJ Electric
Subaru WRX ICE Mazda MX-5 Miata ICE
Subaru BRZ ICE
Tesla Roadster Electric
Polestar 2 Hybrid

Other Future Car Wars Autonomy
Jaguar Land Rover
Jaguary Land Rover is currently developing both full and semi-autonomous driving
systems, although the company has not established an official timeline for deployment.
The company began testing its autonomous driving technologies on public roads in the
United Kingdom in late 2017, as part of the UK’s Autodrive project. In addition, JLR has
also entered into a partnership agreement with Waymo, under which it will supply
20,000 units of its new electric I-Pace vehicles for Waymo’s self-driving taxi pilot.
Mazda
Mazda aims to begin testing of its autonomous driving technology, Mazda Co-Pilot (SAE
Level-2-3), in 2020, with plans to make the system a standard feature on all models by
2025. However, Mazda has noted that the focus and motivation of its autonomous
driving technology is to augment driving safety without sacrificing driver control. As
such, the company has previously indicated that it will not pursue development of fully
autonomous (Level 4/5) capabilities, although we expect this may change over time.
Mitsubishi
Mitsubishi, with its Alliance 2022 partners (Nissan and Renault), plans to launch a total
of 40 vehicles with varying levels of autonomous driving capability by 2022, including
fully autonomous vehicles. Eventually, the alliance also aims to become a key operator
of autonomous mobility on demand services, with pilot programs that are currently in
place, with major partners such as DeNA in Japan and Transdev in France.
Subaru
Subaru is currently working on the development of advanced driving assist capabilities,
including the company’s EyeSight system, which offers Adaptive Cruise Control, Lane
Keep Assist & Sway Warning, Pre-Collision Braking, and Pre-Collision Throttle
Management. To date, Subaru has sold over 1mm units equipped with its EyeSight
system. At this point, Subaru has noted that development of fully autonomous vehicles
are not part of the company strategy, although we expect this could change over time.
Tesla
Tesla hosted its first Autonomy Investor Day earlier this year, at which the company
outlined key autonomous driving technologies currently in development, including a Full
Self Driving (FSD) chip, neural network, data engine, among others. Notably, all Tesla
vehicles now being manufactured (Model S/X starting in March 2019, Model 3 in April
2019) are equipped with an FSD computer, which the company cited as the necessary
hardware for fully autonomous driving capabilities, and the incremental step to reach
Level 4-5 capabilities will be achieved with further software improvement.
Tesla expects to achieve feature complete full self-driving, or Level 4+ autonomous

driving capability in terms of technology, by the end of 2019, and launch a fully
autonomous mobility on demand (Robotaxi) fleet in 2020, pending regulatory approval.
In the interim, the company continues to sell all Tesla models with Autopilot, effectively
a Level 2+ advanced driver assistance system, offering features like Navigate on
Autopilot (semi-autonomous on-highway driving), Autosteer+, and Enhanced Summon.
Volvo
Volvo has announced plans to launch its first fully autonomous (SAE Level 4+) vehicle by
2021. In 2017, the company launched its autonomous driving pilot, Drive Me, intended
to provide Volvo with data/feedback to be utilized for its first model with Level 4+
autonomy. Volvo is involved in a number of partnerships for autonomous technology,
development, most notably a joint venture with Veoneer, badged Zenuity, which invests
in both next generation driver assistance software and fully autonomous software.
Refer to Table 25 on page 64 of the Appendix for a rough breakout of the Other OEMs’

Future Car Wars

Alternative powertrains proliferate with limited volumes
For the second year in our Car Wars analysis, we have outlined our expected powertrain
offerings for all of the product launches by each automaker, with a particular focus on
identifying alternative powertrain offerings. Our characterization of powertrain
segmentation is as follows:
 ICE: Internal combustion powertrain with no alternative powertrain variants

 Hybrid: Mild hybrids (including integrated motor assist, 48-volt, etc.), Full hybrids,
and Plug-in hybrids
 Electric: Pure battery electric vehicles with no combustion component
 Fuel Cell: Electric vehicle operating on a fuel cell rather than a battery
Ultimately, the sales volumes of alternative powertrain vehicles will greatly depend on
the path of consumer demand for fuel efficient vehicles, as well as availability and cost
of alternative power sources. However, current industry consensus projections indicate
low volume for alternative powertrain vehicles in the near-term, with even the most
optimistic forecasts calling for relatively limited sales. Although we find it encouraging
that automakers are diversifying their powertrain offerings, in an effort to meet
increasing stringent global fuel economy and emissions standards, it will be critical for
automakers to leverage powertrain technology across global models and platforms in
order to realize scale and generate sufficient returns on investment.
Based on our estimates, a number of alternative powertrain vehicles to be launched over

the next four years will be variant offerings off of existing internal combustion models.
For example, we expect that GM’s next-generation Trucks and SUVs (to be launched in
MY2019-2021) will be offered with integrated motor assist; and therefore, count as
both ICE and hybrid models. However, certain vehicles, such as medium/heavy-duty
trucks, will likely remain ICE-only through our forecast period.
Many alternative powertrain offerings are ICE variants

We have tallied up all the powertrain offerings across all the new models estimated to
be launched over our forecast period (MY2020-2023), and it appears a little over half
will be ICE, and the remainder some alternative powertrain variant (hybrid, electric, fuel
cell), as illustrated in Chart 38. Note that most models are accounted for more than once
for each of their powertrain offerings (for example, we count Fiat 500 three times for
ICE, hybrid, and electric). Chart 39 details the number of nameplate offers by powertrain
type, indicating ICE is still dominant, followed by hybrid and electric, which are fairly
close in magnitude, and then fuel cell, which should remain relatively niche.
Chart 38: New model nameplate offerings by powertrain - % of total[1] Chart 39: Number of new model nameplate offerings by powertrain type
Fuel Cell 200 182
1%
180
Electric 160
20%
140
120
100
77
80 67
60
ICE 40
Hybrid 55%
24% 20 4
0
ICE Hybrid Electric Fuel Cell
Source: BofA Merrill Lynch Global Research, company announcements, auto show visits, trade Source: BofA Merrill Lynch Global Research, company announcements, auto show visits, trade
publications, enthusiast magazines, supply chain relationships, and others publications, enthusiast magazines, supply chain relationships, and others
[1]% of nameplate and powertrain count; not a % of volume

But some standalone alternative powertrain models also to be launched
However, based on a number of company announcements/commentary, we estimate
that many standalone alternative powertrain models will be launched over the next four
years, with the focus primarily being on pure battery electric vehicles, and fuel cell
vehicles to a lesser extent. The electric vehicle product pipeline is heavily concentrated
among the European brands (Audi, BMW, Mercedes), which likely reflects a response to
the regulatory environment in their home markets, a competitive response to the foray
of Tesla into the luxury market, as well as several new industry entrants (Faraday, Lucid,
Rivian, etc.), and also likely an effort to mimic Tesla’s early success as a trailblazer in the
electric vehicle market. However, incumbent mass market automakers, such as GM,
Ford, and Hyundai/Kia (among others) are also making a concerted effort to launch
alternative powertrain models. Table 24 below details the standalone alternative
powertrain models set to launch over the next four years, by our projections.
Table 24: Standalone alternative powertrain product pipeline MY2020E-2023E

2020E 2021E 2022E 2023E
Cruise AV1 EV/AV Electric Ford Mach 1/E Hybrid, Electric Chevrolet Electron Electric Chevrolet Bolt Electric
Toyota Supra Hybrid Mercedes-Benz EQB Electric Cadillac CT1000 Electric Ford Edison EV/AV Electric
Mercedes-Benz EQC Electric Mercedes-Benz EQA Electric Chevrolet FCEV Fuel Cell Lincoln C-CUV Electric
Audi E-Tron Hybrid, Electric Volkswagen ID Crozz Electric Ford Courier/EF-100 Electric Honda Urban EV Electric
Fuel Cell, Hybrid,
Porsche Taycan Electric Audi E-Tron Sportback Hybrid, Electric Chrysler Portal EV Electric Honda Clarity Electric
Volkswagen ID Electric BMW iX3 Electric Nissan IMx EV Electric
Kia FCEV Fuel Cell BMW iNext EV/AV Electric Infiniti C-CUV EV Electric
Jaguar J-Pace Electric BMW i4 Electric Nissan Leaf Electric
SF Motors SF5 Electric BMW i3 Electric BMW X8 Hybrid
Tesla Model Y Electric Mercedes-Benz EQS Electric Mercedes-Benz EQ GLE Electric
Rivian R1T Electric Audi E-Tron GT Hybrid, Electric Audi eQ5 Electric
Lucid Air Electric Hyundai NE/C-CUV Electric Audi eQ3 Electric
Porsche Taycan Cross
Polestar 1 Hybrid Faraday FF91 Electric Turismo Electric
Lucid Light/D-CUV Electric Volkswagen ID Buzz Electric
Mitsubishi EV CUV Electric BMW i8 Hybrid
Land Rover Road Rover Electric Mercedes-Benz EQE Electric
Rivian R1S Electric Kia Niro Hybrid, Electric
SF Motors SF7 Electric Genesis GV-E/D-CUV Electric
Jaguar XJ Electric Lucid Space/E-CUV Electric
Tesla Roadster Electric Polestar 3 Hybrid
Polestar 2 Hybrid Waymo EV/AV Electric
Tesla Model P Electric
Tesla Model S Electric
Electric vehicle proliferation likely to begin at high price points in the US

One important dynamic in the US market is that the proliferation of alternative
powertrain vehicles appears to be directed more so at the luxury segment than at the
mass market segment, which is why penetration of new powertrain variants may lag
other regions. The reason for this is two-fold: 1) US OEMs have indicated a goal of
generating a profit on electric vehicle nameplates even in early launch phase, despite
prohibitive battery/powertrain costs, which will be facilitated primarily through rationally
high pricing. A relative leader in this effort is GM, which has identified its Cadillac brand
as a halo for electric vehicle launches. 2) A more favorable and conducive regulatory
backdrop for automakers in the US, namely less stringent (and potentially even relaxed
from current levels) fuel economy and emissions standards, does not entirely
necessitate expansive deployment of electric vehicles, at least for now.

Product cadence heavily weighted towards end of forecast period
As Chart 40 indicates, the cadence for alternative powertrain products is weighted
towards the back half of our forecast period, both for alternative powertrain variants, as
well as for standalone alternative powertrain models. In part, this reflects a broader
industry product pipeline that is more weighted to MY2022-23 than to MY2020-21, but
also illustrates that many of these pending models are still in development phase.
Chart 40: Alternative powertrain new model product cadence by year MY2020E-2023E
45
40
35
30
25
20
15
10
5
0
2020E 2021E 2022E 2023E
Nameplates with alternative powertrain offering Standalone alternative powertrain nameplates
European brands appear to be pushing most aggressively into EVs

Based on our product pipeline forecasts and expectations for powertrain offerings,
among the incumbent automakers, it appears the Europeans are pushing most
aggressively into varying levels of electrification across their product portfolios,
although others are not far behind. As noted, we believe this is a response to the
competitive threat that has been posed by Tesla in the luxury market in recent years, but
is likely also facilitated by a luxury sedan heavy product portfolio, where
electrification/hybridization is likely going to proliferate first.
For the light truck-centric Detroit Three, pushing varying levels of hybridization across
existing nameplates appears to be the overarching strategy, although GM and Ford have
both indicated that they will be launching several standalone alternative powertrain
vehicles over the next few years.
The Japanese and Korean brands are at the lower end of the spectrum in terms of
expected electric vehicle launches, although this reflects a greater emphasis on hybrid,
and ultimately fuel cell, technology, by the respective companies.
Interestingly enough, in terms of the percent of electric vehicle nameplates out of the
total available, Other OEMs lead the broader industry. However, besides the obvious
trailblazer Tesla, this dynamic is very much driven by an onslaught of electric vehicle
launches and competition from new industry entrants like Faraday, Lucid, and Rivian, as
well as a continued effort from incumbent players like Jaguar Land Rover and Volvo. The
more mass market oriented Other OEMs, namely Mazda, Mitsubishi, and Subaru, appear
somewhat behind (Chart 41).

Chart 41: Mix of new model powertrain offerings by OEM (as % of total new model nameplate offerings) MY2020E-2023E
100%
90%
ICE
80% 43%
49% 50% 47%
52% 55%
70% 63% 59% 59%
65% 68%
Fuel Cell
60%
5%
0% 0%
50% 0%
0%
5% 17% 18%
40% 0% 0% 24%
3% 25% Hybrid
0%
32%
30% 23% 4%
27%
23% 32%
20% 27% 16%
34% 35%
25% 29% Electric
10% 18%
13% 16% 14% 12%
8% 8%
0%
GM Ford FCA Toyota Honda Nissan VW BMW Daimler Korean Other
Chart 42 illustrates the number of nameplates by powertrain, for each OEM, expected to
be launched over the next four years. The Other OEMs (including electric vehicle startup
companies), as well as the European brands (on a combined basis) are expected to offer
the greater number of alternative powertrain models, although every industry player
appears to be working diligently to modernize its product and powertrain portfolio.
Chart 42: Mix of new model powertrain offerings by OEM (total number of new model nameplate offerings) MY2020E-2023E
60
50
20
40
5 3
10
30 9 12
12
2
4 3
20 7 3 4 6 4
8 5 6
6 5
25 5 27
22 5
10
17 17 17
13 12 13
10 9
0
GM Ford FCA Toyota Honda Nissan VW BMW Daimler Korean Other
ICE Hybrid Electric Fuel Cell

Autonomous vehicles present opportunities & costs
Most major automakers are currently developing and investing in semi-autonomous
(SAE Level 1-3) and fully-autonomous (SAE Level 4-5) technology. Many also have Level
4+ capable vehicles testing on the road today (although with a backup safety
driver/engineer), with GM’s autonomous ride-hailing pilot program, Cruise Anywhere, in
San Francisco being a key example. Importantly, while many companies had targeted the
early 2020s as the target to achieve Level 4-5 autonomous capabilities, it appears this
has been pushed out to some degree, likely due to the complexity of the technology and
the necessity of near perfection for safety purposes.
However, what remains very much unclear is, not only how quickly the technology will
develop, but also how the technology will be commercially deployed. The general
consensus is that autonomous technology/systems will first be deployed in the form of
a ride-hailing or ride-sharing program before being deployed for personal
consumption/purchase, as the technology will remain cost prohibitive for consumers (as
well as the automotive value chain) in early development phase.
Over our forecast period, autonomous vehicles have little impact on our estimates,
particularly for volume, although we have included some of them in our product
pipelines (Cruise AV1 EV/AV in MY20, Ford Edison EV/AV in MY23, Waymo EV/AV in
MY23, BMW iNext in MY22, etc.). In the respective company sections on pages 19-57,
we have provided commentary on each OEM’s autonomous vehicle plans, which we
summarize in Table 25 below. The table below is illustrative, not exhaustive, as it only
refers to announced strategies, plans, and timelines from the major automakers, and
does not include coincident development of autonomous technology/systems among the
supply base and at technology companies (Waymo, Apple, Uber, Lyft, Aptiv, Magna, etc.).
A description of each of the levels of autonomy is detailed in Table 27 on page 65.
Table 25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 ～
GM 2 2->3? 3, 4/5
Ford 2->3 4-5?
FCA 2 2->3 3 3->4 4-5?
Nissan 2 2->3 3->4-5?
Toyota 2 3 3->4/5
Honda 2 3 4
Daimler 2 2->3 3->4/5
BMW 2 2->3 3 4/5
Audi 2 2 -> 3 4 (->5?)
Volvo 2(->3?) 4
Hyundai/Kia 1 2->3 3->4
Mazda 1 2 3?
Subaru 1 -> 2 2 3->4/5?
Tesla 2 2->3 4>5
Mitsubishi 2 2->3 4
Source: Company commentary/announcements, BofA Merrill Lynch Global Research

Advanced driver assistance systems represent just the first steps in the evolution toward a fully autonomous vehicle, or one that is capable of both (i) sensing the driving
environment and (ii) navigating itself and responding to the environment without human input. It is important to note that there are numerous levels of vehicle autonomy,
from advanced driver assistance systems (currently in production and in the market) that operate in emergency to avoid collisions and enhance vehicle safety, to higher
levels of automation, in which the vehicle operates independently in specific instances, but the driver remains responsible for the full driving experience, to (at some point)
full autonomy, in which the vehicle performs the full driving experience at all times. In fact, the Society of Automotive Engineers (SAE) defines 6 levels of driving
automation from 0 (no automation) to 5 (full automation), while the National Highway Traffic & Safety Administration (NHTSA) defines 5 levels, ranging from 0 (no) to 3/4
(full). Table 26 details the levels of driving automation according to SAE and NHTSA.
Table 26: Levels of driving automation for vehicles

Execution of Steering & Monitoring of Fallback Performance
Acceleration/ Driving of Dynamic Driving System Capability
Level Name Narrative Definition Deceleration Environment Task (Driving Modes) BASt Level NHTSA Level
Full-time performance by human driver of all
aspects of dynamic driving task, even when
0 No Automation Human driver Human driver Human driver n/a Driver only 0
enhanced by warning or intervention systems
Human driver monitors driving environment
Driving mode-specific execution by a driver

assistance system of either steering or
acceleration/deceleration using information
1 Driver Assistance about driving environment and with expectation Human driver and system Human driver Human driver Some driving modes Assisted 1
that human driver perform all remaining aspects
of dynamic driving task
Driving mode-specific execution by one or more

driver assistance systems of both steering and
acceleration/deceleration using information
2 Partial Automation about driving environment and with expectation System Human driver Human driver Some driving modes Partially automated 2
that human driver perform all remaining aspects
of dynamic driving task
Driving mode-specific performance by an

Automated driving system: System monitors driving
automated driving system of all aspects of

dynamic driving task with expectation that
3 Conditional Automation System System Human driver Some driving modes Highly automated 3
The US Automotive Product Pipeline | 10 May 2019
human driver will respond appropriately to a

request to intervene
Driving mode-specific performance by an

environment
automated driving system of all aspects of

dynamic driving task, even if a human driver
4 High Automation System System System Some driving modes Fully automated
does not respond appropriately to a request to
intervene
3/4
Full-time performance by an automated driving
system of all aspects of dynamic driving task
5 Full Automation under all roadway and environmental conditions System System System All driving modes Fully automated
that can be managed by a human driver
Source: Society of Automotive Engineers, National Highway Traffic & Safety Administration, cyberlaw.stanford.edu
65
Implications for suppliers and dealers

Implications for suppliers
Proprietary technology trumps all for suppliers, in our view, though

exposure to profitable and growing OEMs is extremely important for their
growth, profitability, and returns.
In general, we identify the following characteristics of a successful automotive supplier:

proprietary technology, scale, customer diversity, geographic diversity, lean cost
structure, and strong balance sheet. Assuming all else equal, suppliers most exposed to
OEMs with the highest replacement rates and lowest average age are at a relative
advantage. However, as most Tier 1 suppliers are now very diversified across geography
and customer, the convergence of product cycles and solid product cadence by most
major automakers is generally a positive sign for the supply base overall.
In addition, with an increasingly competitive OEM landscape and the convergence of

product cadences, OEMs will likely add content/features to vehicles in an attempt to
differentiate their product. The obvious developments in powertrain electrification and
autonomous driving are where the incremental content growth should be highest. This
should be a net positive for most of the suppliers we cover, but most notably Aptiv.
Chart 43: Supplier exposure to OEMs 2018
100%
GM
90%
F
80%
FCA
70%
VW / Audi / Porsche
60% BMW / MINI
50% Daimler
40% Toyota / Lexus
30% Honda / Acura
Renault / Nissan
20%
Hyundai / Kia
10%
Other
0%
ADNT APTV AXL BWA CPS DAN DLPH GNTX GTX LEA MGA SHLO
Source: Company filings, Bloomberg, BofA Merrill Lynch Global Research

Implications for dealers
Similar to suppliers, and assuming all else equal, dealers that are most
exposed to the OEMs with the highest replacement rates and lowest
average age are best off.
For the automotive dealers, exposure to OEMs with growing market share should
translate into better new vehicle sales and earnings growth in the short term, and,
importantly, feeds into the recurring parts and service profit stream in the long term, as
the number of units in operation continue to grow. Chart 44 summarizes the public
groups' new vehicle exposures by brand.
Once again, the convergence of product cycles will drive OEMs to try and differentiate
their product, which may also occur at the point of sale and increase the OEM focus on
improving the ongoing customer relationship. This means that the successful dealer may
become even more valuable than ever before to OEMs attempting to stand out in a
crowded market.
Importantly, in our view, the constant CUV overweight, at 45% of total new model
introductions by volume, will likely pressure the segment’s profitability to the low of
passenger cars, and/or will leave dealers with a dearth of entry level product to offer
customers. This may further increase the industry’s emphasis on used vehicles for entry
level buyers to introduce them into a brand, which bodes well for dealers’ continued
focus on the used vehicle business.
Chart 44: Dealer exposure to OEMs 2018
100%
GM
90%
F
80%
FCA
70%
VW / Audi / Porsche
60% BMW / MINI
50% Daimler
40% Toyota / Lexus
30% Honda / Acura
20% Renault / Nissan
Hyundai / Kia
10%
Other
0%
ABG AN GPI LAD PAG SAH
Source: Company filings, Bloomberg, BofA Merrill Lynch Global Research

Appendix

Appendix
The mix of industry new model launches varies widely amongst

manufacturers, but in total is skewed towards CUVs and Trucks. This
variation is a result of different points in product cycle cadence, but is also
a function of core product architecture competency.
Chart 45: New model volume mix industry summary, 2020E-2023E model year
100%
90% Crossover
29% 27%
80% 41% 43%
45%
50% 49%
70% 61% 59% Lt. Truck
60%
30%
4%
50% 3% Luxury & Sporty Car
47%
25%
40% 22%
22% 12%
30% 55%
6% 38% 25% Mid/Large Car
30%
20% 11%
12%
28% 29%
10% 24%
8% 16% Small Car
12% 8% 6%
5% 4%
0%
Industry General Motors Ford FCA European Toyota Honda Nissan Korean
New models continue to comprise a material portion of the total number

of models offered in the US. However, a splintering of nameplates in the
coming years is partially inflating the number of new model introductions
in the outer years of our forecast period.
Chart 46: Total number of models offered in the US market MY2000-2023E

380
Existing Models New Models
340
69
61
300
47
69
36
40
39
260
37
31
39
32
48
39
43
47
37
55
43
40
40
220
32
41
39
285
41
271
257
256
180
243
243
242
241
239
236
234
229
229
227
225
224
213
208
208
207
199
192
185
140
170
100
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Since the MY1997 launch of the Toyota RAV4 and the Honda CR-V,
Crossovers have been the fastest growing vehicle segment, which may
accelerate in the upcoming model years. The extreme focus ranges from
more mainstream Detroit Three and Japanese OEM models to numerous
new luxury CUVs, such as the Range Rover Velar and Tesla Model Y. The
profitability of the CUV segment is likely to decline materially over time as
the segment becomes crowded.
Chart 47: Total number of crossovers offered in the US market MY1987-2023E
160
Existing CUVs New CUVs
140
32
120
25
30
100
23
17
80
21
12
10
18
14
9
7
60
10
10
117
108
10
11
90
17
85
40
79
34 6
69
66
31 5
63
61
60
58
56
26 6
55
55
49
16 11
45
20
33
13 4
59
51
41
32
0
22
11
2-
01
1-
0-
0-
0-
0-
0-
0-
2020E
2021E
2022E
2023E
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Even among the segments there is a general convergence around an

average showroom age between two and three years.
Chart 48: Average showroom age by product segment (years) MY2000-2023E

7
Small Car Mid/Large Car Luxury & Sporty Car
6
Light Truck Crossover Industry
5
-
2020E
2021E
2022E
2023E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: BofA Merrill Lynch Global Research based on methodology detailed on page 5

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The US Automotive Product Pipeline

Car Wars 2020-2023 The Rise (and Fall)

Car Wars thesis and investment relevance

Car Wars thesis

Table 1: Historical replacement rate, showroom age, market share (MY2004-2019)

2 The US Automotive Product Pipeline | 10 May 2019

3. Product cadence overall continues to converge, making the market increasingly

The US Automotive Product Pipeline | 10 May 2019 3

The US Automotive Product Pipeline | 10 May 2019 5

Purpose of report: quantify industry product trends, project market share

The key metrics that we use include the following:

 Replacement rate: The estimated percentage of an OEM’s sales volume to be

Our data collection is continuous, and we have developed a comprehensive database of US

6 The US Automotive Product Pipeline | 10 May 2019

Car Wars thesis

Table 3: Historical replacement rate, showroom age, market share (MY2004-2019)

The US Automotive Product Pipeline | 10 May 2019 7

The US Automotive Product Pipeline | 10 May 2019 9

New model launch activity solid after a slight lull

10 The US Automotive Product Pipeline | 10 May 2019

30% 20% Mid/Large Car

Replacement rate remains high in MY2020-2023

The US Automotive Product Pipeline | 10 May 2019 11

Average showroom age remains low across the board

12 The US Automotive Product Pipeline | 10 May 2019

New model segment shift toward trucks and CUVs

30% 20% Mid/Large Car

Chart 7: New models by segment, simple vehicle count [1] MY2000-2023E

The US Automotive Product Pipeline | 10 May 2019 13

14 The US Automotive Product Pipeline | 10 May 2019

Table 5: New CUV product pipeline MY2020E-2023E [1]

The US Automotive Product Pipeline | 10 May 2019 15

Cumulative replacement rates appear to drive market share

16 The US Automotive Product Pipeline | 10 May 2019

Near-term dynamics imply potential volatility

 The Korean OEM replacement rate in MY2020-21 is boosted by an onslaught of all-

The US Automotive Product Pipeline | 10 May 2019 17

The US Automotive Product Pipeline | 10 May 2019 19

We estimate GM's cumulative replacement rate is approximately 63% over

Chart 14: Replacement rate MY2000-2023E

20 The US Automotive Product Pipeline | 10 May 2019

30% Mid/Large Car

Source: BofA Merrill Lynch Global Research

GM’s average showroom age is below the industry average through

Chart 16: Average showroom age (years) [1] MY2000-2023E

The US Automotive Product Pipeline | 10 May 2019 21

Exhibit 1: 2020 Chevrolet Silverado HD Exhibit 2: 2020 Cadillac XT6

Source: General Motors Source: General Motors

Source: General Motors Source: General Motors

GM Future Car Wars Powertrain

22 The US Automotive Product Pipeline | 10 May 2019

Table 7 below outlines powertrain forecasted availability for GM’s MY2020-23 US

Table 7: General Motors US product pipeline by powertrain type MY2020E-2023E

GM Future Car Wars Autonomy

The US Automotive Product Pipeline | 10 May 2019 23

Ford’s estimated replacement rate for MY2020-23 is 85%, which is above

Chart 17: Replacement rate MY2000-2023E

24 The US Automotive Product Pipeline | 10 May 2019

30% 55% Mid/Large Car

Chart 19: Average showroom age (years) [1] MY2000-2023E