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The Light Vehicle Market, Advertising & the Economy Phil Brady, NADA President National Automobile Dealers Association, McLean, VA Television Bureau of Advertising Annual Forecast Conference New York City September 5,

Franchised Auto Dealers are a Vital Cog in the U.S. Economy At around a trillion dollars per year, the auto retailing business is the largest retail industry in America. Franchised New Car Dealers account for over $700 billion, or 70 percent Twenty-two percent of retail sales in the U.S. today are generated at franchised new car dealerships New light vehicle sales have enjoyed the 3 best years in history, NADA expects 2002 to be 4th best sales year At around a trillion dollars per year, the auto retailing business is the largest retail industry in America. Franchised New Car Dealers account for over $700 billion, or 70 percent Twenty-two percent of retail sales in the U.S. today are generated at franchised new car dealerships New light vehicle sales have enjoyed the 3 best years in history, NADA expects 2002 to be 4th best sales year 3

Source: NADA Industry Analysis 2001 = 17.1 million units (New) 2002E = 16.8 million units (New) 2001 = 13.3 million units (Used) 2002E = 13.2 million units (Used) New Car & Light Duty Truck Sales were Well Above the Trend Line in Recent Years (millions of units) 4

Source: NADA Industry Analysis New Car & Light Duty Truck Sales this year will compare favorably with the three best years was a Very Mild Recession, unlike the recession like (graph in millions of units) Recession 16.8 est

Source: NADA Industry Analysis New Car & Light Duty Truck Sales this year will compare favorably to the all-time record of 17.4 millions units in Trucks: 51% of sales in 2001; 53% this year 16.8 est

“Crossover” sales, a subset of SUVs, Show Most of the Growth in Sales and a Strong Change in U.S. Segment Share of New Light-Vehicle Sales (YTD July 2002 Vs YTD July 2001). Truck-based SUVs and Luxury Cars gained slightly in share. Source: Ward’s Automotive*Crossover Utility Vehicles are built on unitized car platforms 7

Korea and other lower volume countries show the largest Change in Sales by Country of Origin Share Change in U.S. New Light-Vehicle Sales, YTD July 2002 Vs. YTD July 2001 Source: Ward’s Automotive 8

Currently, Domestically produced “Crossovers” are the fastest growing segment, year-to-date July. Off-shore produced CUVs show strong growth also. U.S. made Truck-based SUVs Show Modest Growth 9

Net Household Wealth = Total Financial Assets - Total Liabilities (excludes home equity but includes all mortgage debt) Source: Federal Reserve Flow of Funds Data, Z.1., Table L.10. U.S. Household Net Financial Assets Doubled from 1994 through 1999 (5 years) Then the impact of Equity Market Corrections ensued 10

Net Household Wealth = Total Financial Assets - Total Liabilities Source: Federal Reserve Flow of Funds Data, Z.1., Table L.10., Ward’s Automotive Looking at the Correction by Quarters: U.S. Net Household Assets fell during Stock Market Corrections, which subdued Luxury Light Vehicle Sales (Blue Line) estimated Incentives for Luxury Makes Have Helped Increase Sales Recently 11

How Have Light Vehicle Sales Remained So Strong? Total Dealership Advertising Spending Jumped with Record Vehicle Sales Source: NADA Industry Analysis 12

Franchised Dealers’ Overall Ad Spending increased 3.7% in 2001 compared with 2000, shown below by media Source: NADA Industry Analysis *Other includes items such as Community/Event Sponsorship, Billboard/Transit Ads, Yellow Pages/Shopper Flyers, and Magazines 13

Automakers’ Overall Ad Spending fell 8.1% in 2001 compared with 2000, shown below by Media. Spot TV Advertising has picked up in 2002, year-to-date Source: Competitive Media Reporting *National Newspaper consists of NY Times, USA Today, and Wall Street Journal 14 * Syndicated TV fell by 19.9% ** Network Radio fell by 9.5% -19.0% -6.8% +2.1% -1.4% +24.6% -19.6%

Optimism Sales Source: NADA Industry Analysis NADA Dealer Optimism Index in July Reflects Market Concerns, but Overall Consumer Confidence is still Reasonably Strong 15

89 % of Dealerships now have a Website, Up from 47 % in 1997 Internet will help Future New Light Vehicle Sales Source: NADA Industry Analysis 16

More Services are Offered on Dealership Websites in 2001 compared with 1997 Source: NADA Industry Analysis 17

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