Pub. 3 Issue 2

421,742 339,240 240,746 267,382 298,458 372,726 424,403 463,271 486,700 0 100,000 200,000 300,000 400,000 500,000 600,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Forecast New light vehicle registrations Market is predicted to improve 5.1% in 2015. Covering Data thru June 2015 Los Angeles Auto Outlook Los Angeles Auto Outlook Comprehensive information on the LA County new vehicle market Market Summary Domestic brands consist of vehicles sold by GM, Ford, Chrysler, and Tesla. Data source: AutoCount data from Experian Automotive. YTD '14 YTD '15 % Chg. Mkt. Share thru June thru June '14 to '15 YTD '15 TOTAL 228,362 246,052 7.7% Car 151,887 159,486 5.0% 64.8% Light Truck 76,475 86,566 13.2% 35.2% Domestic 41,782 46,108 10.4% 18.7% European 49,855 52,167 4.6% 21.2% Japanese 118,937 127,785 7.4% 51.9% Korean 17,788 19,992 12.4% 8.1% Annual Trend in LA County New Vehicle Market The graph above shows annual new retail light vehicle registrations in the county from 2007 thru 2014 and Auto Outlook’s projection for 2015. FORECAST County Market Predicted to Increase 5.1% from 2014 to 2015 Positive factors slightly out-weigh negatives; further improvement expected in 2016 Incentive to upgrade. In almost every way, today’s new car and trucks are far superior to vehicles that came out just five years ago. But it’s the introduction of advanced safety features (i.e, mitigation braking, lane alert, smart cruise control, blind spot monitoring, rear-view cam- eras, etc.) on mainstream, non-luxury brand vehicles that will give a boost to sales for many years to come. These safety-related technolo- gies will provide a strong motivation for consumers to trade in their current vehicles for new ones. Pent up demand. The average age of vehicles on the road is still at extremely high levels. Following five years of well below average sales, the new vehicle market has only recently moved above trend line lev- els. We think that based on cyclical factors alone, the market recovery still has legs. Labor market is improving. Total employment has moved steadily higher for the past five years, while the unemployment rate has de- clined. There are also some recent signs that wages and incomes are finally starting to move higher. Some economists remain concerned about sluggish growth in the labor force and lingering under-employ- ment, but the outlook for jobs and incomes has improved. Key factors providing a boost to new vehicle sales Rising interest rates. After several years of hovering near zero, it ap- pears as though interest rates are on the rise. It’s not likely to be an abrupt, upward march, but it’s inevitable that they will drift higher. Higher interest rates lead to increasing monthly finance and lease payments, which puts a drag on new vehicle sales. Insufficient household savings . Leading into the financial crisis of 2008, households had amassed record debt. After several years of deleveraging, the debt burden has eased significantly. However, the majority of U.S. households have insufficient savings for retirement, and it will take considerable time to build these nest eggs. As a result, households will need to devote a chunk of disposable income toward savings instead of retail spending (which includes automobiles). Consumer sentiment. Most measures of consumer sentiment have improved recently, but there is still a pervading sense of uneasiness among many U.S. households. Median household incomes have been stagnant for decades, while many still feel that high quality, good pay- ing jobs are difficult to find. This nagging sense that things are not as good as they should be, will likely prevent many potential purchasers from buying a new vehicle. Key factors holding back new vehicle sales Note: Reported monthly registration totals for May, June, and July of 2014 were impacted by title processing delays by the DMV. Registration figures were modified by Auto Outlook to more accurately reflect the level of new vehicle sales in these three months. Annual totals for 2014 were not impacted by these adjustments.