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Total Car and Truck Units Sold (in thousands, seasonally adjusted) Industry Outlook 16 MoldMaking Technology —— JANUARY 2018 home building and family formation. Both result in significant direct, indirect or direct and indirect consumer consumption of plastics across all end markets in the form of products and the packaging of those products. Authorized housing permits of both homes started and not started showed strong growth through the third quarter of 2017. The latest permit authorization data, when compared to new household formations and historical permits data, sug- gests that permit volumes could quite easily increase without the concern of a correction from an oversupply of housing. In fact, recent data suggests that there is a lack of single-family housing, which partly explains the strong appreciation of housing prices in recent years. Millennial-driven, future household formations will con- tinue to grow well into the 2020s. Millennials were born between 1980 and 2000. Home purchasing data informs us that the average millennial is getting married at approximate- ly 30 years of age and purchases a house between 33 and 34 years of age, according to Zillow. The weighted average birth year of a millennial is 1998, which suggests a fair amount about where the housing market is likely to go in coming years. Specifically, if consumption by age remains relatively constant, the demand that is based on new household forma- tion between now and the early 2030s should propel plastic product consumption well into the next decade at least. Also, homeownership rates among millennials fell between 2006 and 2015 before turning upward in mid-2016. As millennials make up for lost time from the impact of the Great Recession and from paying off debt from student loans, it is possible that there will be an above-normal growth in new household formations and thus in the demand for homes. Automotive Trends Speaking of long-term trends, there are significant factors that will impact vehicle demand. Examples include pow- ertrain development, body material and autonomous vehi- cles. During the last two years, U.S. automotive sales have grown as the growth in light truck sales has more than offset the simultaneous decline in car sales. Through the first three quarters of 2017, car sales continued to decline, while sales growth in light trucks was largely flat and thus unable to off- set a decline in total vehicle sales. In brief, there are several headwinds in the industry. Assuming that all or most of these will be short-term concerns, Gardner Intelligence's long-term outlook for the industry is positive. The short-term headwinds include a slowing of financing, a lengthening of loan terms and an inability from original equipment manufacturers (OEMs) to sustain the exceptional growth of finance incentives on new vehicle sales. Lending and loan data suggests that banks may have over-lent in recent years, as delinquency rates on auto loans have been trending higher since 2014. The auto-loan delinquency rate is currently at 3.92 percent, which is well above its 20-year aver- age. However, the persistence of low unemployment into the future should help to mitigate delinquencies on auto loans. It is important to note that these headwinds in the industry do not represent the entire automotive industry story. In fact, mold builders can look for- ward to opportunities in 2018 and 2019, as OEMs strategically invest in equipment and technologies over the next few years to posi- tion themselves for a very different automotive industry. According to the U.S. Vehicle Forecast by LMC Automotive, OEMs are expected to create more new models in 2018 and 2019 than in recent years. Outside of normal competitive pressures to produce attractive new models, regulatory pres- sures to meet aggressive miles-per-gallon goals will force manufacturers to create new models with more efficient drivetrains. Additionally, those regulatory pressures may force manufacturers to create models that are significantly lighter, or to create models with more efficient drivetrains Mold builders can look forward to opportunities in 2018 and 2019, as OEMs strategically invest in equipment and technologies over the next few years to position them- selves for a very different automotive industry. Car sales deteriorated in 2015 and 2016 but were more than offset by growth in the light-truck category. 2017 could be the first year in which sales in light trucks are unable to offset the decline in cars. 2000 2005 2010 2015 400 600 800 1000 Cars Trucks Total Car and Truck Units Sold (in thousands, seasonally adjusted)