Michigan 1 Motor Vehicle Outlook FTA Revenue Estimating Conference Waterville Valley, New Hampshire September 25, 2000 Mark Haas, Director Jeffrey Guilfoyle,

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Motor Vehicle OutlookMotor Vehicle Outlook

FTA Revenue Estimating Conference

Waterville Valley, New HampshireSeptember 25, 2000

Mark Haas, DirectorJeffrey Guilfoyle, EconomistOffice of Revenue and Tax

AnalysisDepartment of Treasury

State of Michigan

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U. S. Automotive Outlook

• What Affects Auto Purchases

• Changing Auto Market

• Shares of Production

• U. S. Automotive Outlook

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Factors Affecting Auto SalesAbility to Buy

1999 2000

Disposable Income Green Green

Vehicle Prices Green Green

Interest Rates Green Green

Affordability Green Green

Debt Yellow Yellow

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Real Disposable Income Growth

-3.0%

0.0%

3.0%

6.0%

1970 1980 1990 1999

Change in Per Capita Income

Source: U.S. Bureau of Economic Analysis

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New Domestic Car Prices Stable

0

10

20

30

1970 1980 1990 1999

Thousands of Dollars

Sources: AAMA & Automotive News, Market Data Book 2000

Import

$30,347

(-5.1%)

Domestic

$18,724

(0.8%)

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Low Interest Rates Help Sales

0%

5%

10%

15%

20%

1973:I 1978:I 1983:I 1988:I 1993:I 2000:II

Average Vehicle Finance Rate

Source: Comerica Bank

7.84%

17.78%

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Best Affordability Since 1980

20

25

30

1979 1982 1985 1988 1991 1994 1997 2000

Weeks of Income

Source: Comerica Bank Economics Department

24.4 weeks in 1999

23.1 weeks 1st half 200022.9 weeks in 1979

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Consumer Debt Payments Installment, Mortgage & Auto Leases

11

12

13

14

15

16

1983 1987 1991 1995Percent of Disposable Personal Income

Source: Michigan Department of Treasury

14.8%

2000

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Factors Affecting Auto SalesWillingness to Buy

1999 2000

Consumer Attitudes Green Green

Age of Vehicle Green Yellow

Demographics & Tastes Green Green

Oil Prices Yellow Yellow

Stock Market Green Yellow

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Consumer Car Buying Attitudes

50

80

110

140

1973:I 1978:I 1983:I 1988:I 1993:I 2000:II

Index: Good - Bad + 100

Source: University of Michigan, Survey Research Center, July 2000

158144

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Vehicle Age Declining

5

6

7

8

9

1989 1994 1999

U.S. Lt. Vehicle Age

1999 Median for Trucks 7.2 years

1999 Median for Cars 8.3 years

Source: Automotive News, 1999 Market Data Book

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Vehicles Per Household

0

0.5

1

1.5

2

1960 1970 1980 1990 2000

1.90

1.22

1.81

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Oil Prices Rising

$0

$10

$20

$30

$40

1973 1978 1983 1988 1993 2000:Q2

Dollars Per Barrel

Source: Monthly Energy Review, Standard and Poor’s DRI

$27.10

$35.24

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More Dependent on Petroleum Imports

0

10

20

30

40

50

60

1975 1980 1985 1990 1995 1999

Net Imports as % of U.S. Supplies

Source: Monthly Energy Review

Total 56.6%

All-OPEC

Persian Gulf

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Stock Market Growth Slows

0

600

1200

1800

Jan-90 Jan-93 Jan-96 Jan-99

S&P 500 Index

Aug-00

1518

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Demand For Motor Vehicles

• Trend

• Wealth Effect

• Economic Conditions

• Price Incentives

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Trend

0

8

16

1960 1970 1980 1990 2000

Millions of Units

Vehicle Sales Trend

Source: Michigan Department of Treasury

Sales

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Motor Vehicle Production

• Capacity Utilization

• Worker Bonuses

• Occupational Mix Changing

• Improved Vehicle Production Management

• Improved Vehicle Demand Management

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1999 Production and CapacityNorth America

9.027

7.996

8.877

8.302

Cars Trucks

Millions of Vehicles

Production Capacity

Source: Automotive News, 2000 Market Data Book

92%

111%

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$0

$2,500

$5,000

$7,500

$10,000

1995 1996 1997 1998 1999 2000

Average Per Autoworker

Big 3 Profit Sharing Checks

Source: Ward’s Automotive Reports

Daimler Chrysler

Ford $8,000

GM $1,775

$8,100

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Occupation Mix Shifts in Michigan’s Vehicle Industry

15

17

19

21

1983 1987 1991 1995 1999

Share of Professional Jobs

Source: Bureau of Labor Statistics & Economy.Com

21.8%

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Improved Vehicle Production Management

0.5

0.7

0.9

1.1

1960 1970 1980 1990 2000

Inventory to Sales Ratio

Source: Bureau of the Census

0.52

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Improved Vehicle Demand Management

0

10

20

30

40

1986 1988 1990 1992 1994 1996 1998 '00Q1

Leasing Share of Financing

Source: Ward’s Automotive Reports, Economy.Com, WEFA

25.2%

35.7%

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2000 Forecast Accuracy

Aug 1999Forecast

SeptUpdate

WEFA Group 15.4 17.2

Standard & Poor’sDRI

15.7 17.5

Univ. of Michigan 16.0 17.2

Blue Chip 15.3 16.7

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Light Vehicle Forecasts

2001 2002

WEFA Group 15.9 16.0

Standard & Poor’sDRI

16.6 17.0

Univ. of Michigan 16.1 15.8

Blue Chip 16.0 N/A

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U. S. Motor Vehicle OutlookCar and Light Truck Sales Forecast

Source: University of Michigan, RSQE, August 2000

Forecast

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U. S. Motor Vehicle OutlookCar Sales Forecast

8.58.3 8.1

8.78.9

8.38.1

1996 1997 1998 1999 2000 2001 2002

Millions

Source: University of Michigan, RSQE, August 2000

Forecast

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U. S. Motor Vehicle OutlookLight Truck Sales Forecast

6.5 6.87.3

8.1 8.37.8 7.7

1996 1997 1998 1999 2000 2001 2002

Millions

Source: University of Michigan, RSQE, August 2000

Forecast

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U. S. Motor Vehicle OutlookSummary

• Record Level Sales

• Vehicle Mix Continues to Shift

• Income and Affordability Key to Sales

• Near Capacity Production

• Oil Prices and Stock Market Uncertain

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Motor Vehicle OutlookMotor Vehicle Outlook

FTA Revenue Estimating Conference

Waterville Valley, New HampshireSeptember 25, 2000

Mark Haas, DirectorJeffrey Guilfoyle, EconomistOffice of Revenue and Tax

AnalysisDepartment of Treasury

State of Michigan