INDUSTRY REPORT: Feb. 9, 2004 Page 2

February 8, 2004

XM Expects To Double Subscribers In 2004

XM Satellite Radio expects to more than double its list of subscribers in 2004, XM officials said during a press conference at the Chicago Auto Show. Chance Patterson, XM vice president of corporate affairs, said XM had 1.36 million subscribers now but expects to finish the year with twice as many in 2004 as it continues to expand its presence on new models offered by carmakers such General Motors, Toyota, Volkswagen, Honda, and Nissan. In the past week, GM announced plans to equip thirteen more models with the service and VW announced it was putting XM into a "Satellite Blue" Beetle.

In addition, XM also has boosted its aftermarket business, teaming up with Delphi Corp. to sell more than 500,000 units at $199 each for used cars. A less expensive "Roady" aftermarket model was a huge hit at Christmas, added George Lynch, XM's director of radio. Patterson added that surveys by GM indicated the system extremely popular with consumers. The churn rate, the number of subscribers who drop the service after one year, are extremely low — just over one percent. The renewal rate among new car buyers who were offered free, trial subscriptions when they buy their new car is running at better than 70 percent, Lynch said. "This is the fastest growing entertainment category ever," Patterson added.

Patterson said XM is also trying to upgrade its service. Its music channels went commercial free on February 1 and on March 1 it will begin offering a traffic and weather reports in 21 top markets across the United States. The traffic system will rely on traffic counts from a system developed by Mobility Inc., which also gathers traffic data for the U.S. government.

XM also is getting ready to kick off a new promotion next month — the Dashboard Concert Series, Patterson said. Car buyers activating XM service on new vehicles purchased at Acura, Audi, Honda, Lexus, Scion, or Toyota dealerships between March 1 and May 31 will have a chance to win private concerts at XM Live Performance Theater at the company's broadcast headquarters in Washington D.C. The winner can choose among concerts by B.B. King, Leann Rimes, Everclear, and Michelle Branch, XM officials said. — Joe Szczesny

2004 Chicago Auto Show Index by TCC Team (2/3/2004)

Diesel, Europe May Be in Dakota's Future

Dodge's new Dakota mid-size truck may be big, bulky and American to its core, but it also may destined for sale in Europe, according to Frank Klegon, DaimlerChrysler vice president in charge of the truck product team. Klegon told TCC Wednesday that the company will consider the truck as part of the future product mix that DaimlerChrysler is planning to sell in Europe, pointing to the vehicle's success in Asian markets, such as South Korea, as reason to expect possible demand in Europe. Klegon says that the company will also consider a diesel powertrain for the truck for America and other markets. The engine would likely be produced by Cummins, Detroit Diesel, or taken from the shelf of diesel-rich Mercedes-Benz. If a diesel engine becomes part of the Dakota's option list, its attractiveness to the European market would likely increase substantially. —John D. Stoll

Scion Expands Sales Network

Scion, Toyota's youth brand, has now expanded out behind its original base in California and as of this month is now on sale in 20 different states, stretching from Maine down the East Coast to Florida and West to Texas. "Our sales numbers are going to jump from 1500 per month to around 5000 per month," predicted Jim Farley, Scion's general manager. Farley added Scion now has 50 dealerships up and running and is shooting for sales of around 75,000 units this year. It could be or it could be less, he added. Farley also said the Scion xB model remains the best-selling Scion and now accounts for 75 percent of all Scion sales. But Scion is scheduled to add a third model in June, Farley said. Farley added the average age of the Scion buyers remains in the 30s but Toyota is satisfied that Scion is attracting the target audience of young, hip, urban buyers. — Joe Szczesny

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