1. Opportunities In U.S. Automobile Market Innovations in the Automobile Retail Business Model
Kevin Tynan
Bloomberg Intelligence
June 2019

2. CONSUMER DEMAND DYNAMICS: U.S.
Vehicle Mix Pushing Transaction Prices
The Role of Leasing Evolves
Pre-Owned/CPO Market Opportunity
New Sales Models
Electric
Autonomous
Ridehail
Factors contributing to higher transaction prices

3. New Vehicle Segment mix in u.s.
70.2%

4. Vehicle segment mix shift
61%
Luxury brands have made progress capturing buyers by intensifying light truck portfolio

5. Average MSRP & transaction prices
Segment Mix and In-vehicle Content Inflating Prices
Transaction prices were range-bound until end of 2013 – and began to increasing steadily as truck mix moved higher

6. Average transaction price in us
Competitive CUV and Car Segments
Entry luxury segments – can see trucks (which are the larger portion of mix) prices increasing and cars starting to decline in 2017

7. Discounting ratio in us
Competing CUV and Car Segments
Entry luxury segments – can see trucks (which are the larger portion of mix) prices increasing and cars starting to decline in 2017

8. Light trucks were 74% of sales and inventory on June 1
Inventory by segment
Light trucks were 74% of sales and inventory on June 1
69%
2018
Entry luxury segments – can see trucks (which are the larger portion of mix) prices increasing and cars starting to decline in 2017

9. Unit sales by segment in us
Largest Segments by Volume
Entry luxury segments – can see trucks (which are the larger portion of mix) prices increasing and cars starting to decline in 2017

10. Average transaction prices in us
Entry luxury segments – can see trucks (which are the larger portion of mix) prices increasing and cars starting to decline in 2017

11. CONSUMER DEMAND DYNAMICS: U.S.
Vehicle Mix Pushing Transaction Prices
The Role of Leasing Evolves
Pre-Owned/CPO Market Opportunity
New Sales Models
Electric
Autonomous
Ridehail
Factors contributing to higher transaction prices

12. DISCOUNTING & Incentives
As percentage of transaction prices
Lease pen has moved into a higher band – 28%+ is likely the new normal, sustainable level – barring macroeconomic distress

13. Lease penetration in u.S.
Leasing Increases as Offset to Rising Prices
32.1%
Lease pen has moved into a higher band – 28%+ is likely the new normal, sustainable level – barring macroeconomic distress

14. 60% of vehicle households have at least one lease
Leases by household
60% of vehicle households have at least one lease
40%
Majority of households have at least one lease

15. Lease penetration in u.s.
Entry Luxury Segments
Lease penetration in the segments that Audi is most present in

16. Off-lease vehicle flow
Increasing lease penetration means more lease returns – creates two dynamics. 1) brand loyalty opportunities through re-lease as the dealer has first chance at customer with immediate need for new vehicle. 2) Opportunity in the pre-owned market as there will be a healthy supply of late-model, low-mileage, off-lease vehicles. Typically, there are three types of shopper – new only, pre-owned only, and those that will buy the best value. The pre-owned market only impacts the third bucket of shopper – dealers have opportunity to benefit on both sides and should not consider new vs pre-owned a zero-sum for every shopper. Leverage both sides of the business (plus parts and service).

17. Brand loyalty lease vs purchase
Clear benefits to steering consumers towards leasing
Source: IHS Markit, Bloomberg Intelligence
Average fleet age of 12 years
Older vehicles rolling into new
Purchase turning into leases
Loyalty will intensify as customers lease
Market (and segment) share will be increasingly difficult to win

18. CONSUMER DEMAND DYNAMICS: U.S.
Vehicle Mix Pushing Transaction Prices
The Role of Leasing Evolves
Pre-Owned/CPO Market Opportunity
New Sales Models
Electric
Autonomous
Ridehail
Factors contributing to higher transaction prices

19. Off-lease vehicle flow
Pre-Owned and CPO Opportunities
Gross margin on pre-owned and CPO transactions
2.7 million CPO in 2018

20. Off-lease vehicle flow
Pre-Owned Vehicle Opportunities Attract Competition
Gross margin on pre-owned and CPO transactions

21. Shifting revenue dynamics
intensifying gross margin dynamics
Shifting revenue dynamics
Shifting gross Profit dynamics
Gross margins in service bays – pre-owned better than new in margin (not revenue or profit contribution)

22. Off-lease vehicle flow
Pre-Owned and Parts & Service Opportunities
Off-lease vehicles closer to sweet spot of repair and maintenance needs. Will replenish the registered fleet of vehicles in the U.S. and help dealerships generate operating income.

23. Parts & Service Opportunities
Retail Aftermarket Revenue Growth

24. CONSUMER DEMAND DYNAMICS: U.S.
Vehicle Mix Pushing Transaction Prices
The Role of Leasing Evolves
Pre-Owned/CPO Market Opportunity
New Sales Models
Electric
Autonomous
Ridehail
Factors contributing to higher transaction prices

25. U.S. SAAR LATE IN CYCLE Record U.S. Volume in 2015 and 2016 RECORD
PROFITABILITY
HIGH FIXED COSTS
COST
RATIONALIZATION

26. ADJUSTED OPERATING INCOME Post global financial crisis (2008-09)

27. Legacy U.S. Manufacturers
NEW VEHICLE MIX
Legacy U.S. Manufacturers

28. BEV MIX IN U.S.

29. CONSUMER DEMAND DYNAMICS: U.S.
Vehicle Mix Pushing Transaction Prices
The Role of Leasing Evolves
Pre-Owned/CPO Market Opportunity
New Sales Models
Electric
Autonomous
Ridehail
Factors contributing to higher transaction prices

30. SELF-DRIVING INVESTMENTS
$5.4b

31. Pretax Losses on Zero Revenue
AUTONOMOUS CAR
Pretax Losses on Zero Revenue

32. SELF-DRIVING CAR STUDY

33. CONSUMER DEMAND DYNAMICS: U.S.
Vehicle Mix Pushing Transaction Prices
The Role of Leasing Evolves
Pre-Owned/CPO Market Opportunity
New Sales Models
Electric
Autonomous
Ridehail
Factors contributing to higher transaction prices

34. UBER & LYFT AS CUSTOMER BASE
Expanding the addressable market if the business model holds together
UBER
49%
48%

35. UBER & LYFT AS CUSTOMER BASE
Expanding the addressable market if the business model holds together
LYFT
54%
47%

36. UBER & LYFT AS CUSTOMER BASE
Expanding the addressable market if the business model holds together

37. VEHICLE MILES TRAVELED

38. Supporting Ridehail/Rideshare/Delivery Drivers
NEW BUSINESS MODELS
Supporting Ridehail/Rideshare/Delivery Drivers

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