Global Automotive Review The Year in Pictures The Year in Pictures To remind investors of some of the events and themes that we looked at in 2014, in this report we have reproduced all of the “Tables of the Week“ that appeared in our Auto Weekly this year. The tables provide a salutary reminder of some of the issues, such as market demand, new innovation updates, emerging market trends and policy change impact and aspects in the global auto market context. that occupied much of our thoughts in 2014. We expect many of these topics will continue to be key features to consider in 2015. 2014: global car demand +3% driven by NAFTA, Europe and China 2014 has been another challenging year: Europe started to recover (ending 5 years of uninterrupted decline), even if still 15% below trend. U.S growth remained solid. And China enjoyed a double digit growth for Western brands, albeit the overall market growth was slower than the prior years as the market trends stabilized to a more sustainable level. In contrast, emerging market performance has been very weak, mainly ASEAN, Russia and Latin America, with sharp devaluation of their currencies being an added burden. And we expect 2015 to be another transitional year with modest growth in most regions We expect growth in North America to moderate (U.S. SAAR flattens at around 17 MM) as rising regulatory costs on new cars, falling prices on used cars, and rising benchmark rates begin to impact affordability. Our expectations for Europe are also relatively modest (i.e. 2-3% growth), driven by South Europe. China growth may stabilize in the high single digits, but price deflation is likely to continue. We expect weakness to continue in other emerging markets despite a weaker base, perhaps with the exception of India. Seasons Greetings from the Deutsche Bank Automotive Team On behalf of the DB Auto Team, we would like to take this opportunity to wish all our readers an enjoyable winter break and all the very best for 2015, which will likely be another transitional year across the globe. We would suggest our clients use the holiday period to forget about the auto sector for two weeks and to recharge their batteries ahead of this slow ride. Enjoy the holidays. Valuation/Risk We utilize an EV/IC model and multiples to value the sector. Primary risks are higher- or lower-than-expected production in NA or Europe, driven by higher or lower-than-expected economic and/or freight growth. Our base case assumes +4% global car sales. Page 2 Table Of Contents 10th January - Quarterly SAAR trend in W. Europe . 3 17th January - European mass market OEM performance . 4 24th January - Snapshot of PSA FCF and cash burn . 5 31st January - CAPEX and R Global sales and CUR . 51 19th December Electrified and IC powertrain market share outlook . 52 Page 3 10th January - Quarterly SAAR trend in W. Europe Figure 1: Quarterly SAAR trend in W. Europe Country (000 units) Country (000 units) 2012 2012 Q1 13 Q1 13 Q2 13 Q2 13 Q3 13 Q3 13 Q4 13 Q4 13 2013 2013 Germany 3,083 2,940 2,970 2,970 2,930 2,952 France 1,900 1,660 1,820 1,810 1,830 1,790 Italy 1,402 1,220 1,390 1,290 1,300 1,304 UK 2,045 2,110 2,250 2,210 2,380 2,265 Spain 700 700 710 720 770 724 RoWE 2,643 2,390 2,410 2,500 2,760 2,505 Sum W. Europe Sum W. Europe 11,772 11,772 11,020 11,020 11,540 11,540 11,490 11,490 11,980 11,980 11,540 11,540 Source: Deutsche Bank, Industry data The above table sets out the selling rates in the core markets and the overall W. European region for car registrations. In 2013, volumes reached 11.5mn in W. Europe, -3% YoY. This is: 1. 1% higher than what we expected 12 months ago with a good surprise coming from the UK market and disappointing France and Italy (both 100k units lower than our estimates) 2. 20% below pre crisis level (14.5mn units), 3. 18% below what we estimate as replacement demand (14.0mn units) 4. And is a level of registrations reached 27 years ago (1986). 5. Winners last year were Renault, +4% YoY (of which a high +16% in Q4) and Daimler (+4% too) when losers were PSA (-9%) and Fiat (-7%) During 2013, SAAR has moved from 11.0mn units in Q1 (of which a low 10.0mn in January) to 12.0mn in Q4 (of which 12.2mn in Dec). When looking at 2014, we expect a 4% rebound of the Western European market to 12.0 mn units (v. 11.8mn previously). This is : 1. Still 17% below pre crisis level 2. A stable market versus the run rate of Q4 2013 2014 should be a front end loaded story .Thanks to a low base effect, we expect Q1 14 to record the strongest growth. We expect that 40% of FY14 volume increase (+420k units) should be achieved in Q1 (+180k units or +6% YoY). Page 4 17th January - European mass market OEM performance Figure 2: Performance of European mass market OEMs during