Pub. 3 Issue 4

339,240 240,746 267,382 298,458 372,726 424,403 463,271 521,310 537,750 0 100,000 200,000 300,000 400,000 500,000 600,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 Forecast New light vehicle registrations Market is predicted to improve 3.2% in 2016. Covering Data thru March 2016 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 '15 YTD '16 % Chg. Mkt. Share thru March thru March '15 to '16 YTD '16 TOTAL 121,508 132,358 8.9% Car 78,749 82,846 5.2% 62.6% Light Truck 42,759 49,512 15.8% 37.4% Domestic 22,468 25,901 15.3% 19.6% European 26,239 27,374 4.3% 20.7% Japanese 63,319 68,254 7.8% 51.6% Korean 9,482 10,829 14.2% 8.2% Annual Trend in LA County New Vehicle Market The graph above shows annual new retail light vehicle registrations in the county from 2008 thru 2015 and Auto Outlook’s projection for 2016. FORECAST County Market Gets Off to Good Start in 2016 Annual total likely to exceed 537,000 units Below is a list of four trends in the Los Angeles County new vehicle market. Following each is Auto Outlook’s prediction on whether the trend is likely to continue, or fade out. Trend #1: New vehicle sales are increasing County new retail registrations were up 8.9% in the First Quarter of this year. This followed the 12.5% increase from 2014 to 2015. Be- tween 2009 (the low point in the downturn) and 2015, the county market improved by 117%. Will this trend continue or fade out? We think it will fade out. Sales are likely reaching their peak. Further, significant improvement in sales seems unlikely. However, and importantly, we do not believe that a precipitous decline is in the cards. Strong consumer affordability, ad- vanced age of cars on the road, and dramatic improvements in today’s new vehicles should keep the market strong. Trend #2: Truck sales are booming Light truck market share in Los Angeles Coun- ty hit 37.4% in the First Quarter of this year, up from 35.2% a year earlier. And the truck trend is even more evident when looking back several years. Light truck market share has in- creased by more than five points since 2012. Will this trend continue or fade out? Bar- ring a significant spike in gasoline prices, the trend should continue. Consumers have made it clear that if gas is affordable, light trucks (especially SUVs and pickups) are their ve- hicle of choice. There’s obviously a limit to how high truck share can go, but we think it can sill move higher. Trend #3: Luxury car sales are falling New luxury car registrations in the county declined 5% during the first three months of this year versus a year earlier, while the overall market was up 8.9%. Will this trend continue or fade out? It should continue. Obviously, consumer prefer- ences for light trucks are hurting luxury car sales, but there is another force at work here: advanced safety features and connectivity op- tions, once restricted to luxury cars, are now available on mainstream offerings. This “trickle down” of high tech features has negated some of the tangible benefit of purchasing a luxury car. Trend #4: Consumer affordability is strong Consumer affordability for new vehicles re- mains at very strong levels. The average monthly new vehicle payment as a percent of disposable personal income has been at very low levels for a long time, which has provided sustainable momentum for the new vehicle market. Will this trend continue or fade out? It should continue. Although interest rates might move marginally higher during the next 12 months, personal incomes are improving. In addition, increasing incentives have kept a lid on vehicle prices which should combine to keep a new vehicle purchase within reach for a significant number of consumers.