China Capsule: Automotive perspective for 2015

7/30/2019 China Capsule: Automotive perspective for 2015

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China Automotive Industry

A perspective 2015


2/18

Data Points to be covered.

Country Profile

Passenger vehicles Market Overview

Segmentation

Commercial vehicles Market Overview Alternate fuel development in China

Market forecasts

2


3/18

Key economic/ capital indicators China against key global

economies

3

3,744

8,121

1,134

8,684

45,989

40,670

39,738

China

Brazil

India

Russia

USA

Germany

Japan

GDP per capita (Current USD)

54

15

34

23

10

21

24

China

Brazil

India

Russia

USA

Germany

Japan

Gross savings as

%age of GDP

27

11

21

28

11

41

13

China

Brazil

India

Russia

USA

Germany

Japan

Exports of

goods &

service as

%age ofGDP

48

17

35

19

14

16

20

China

Brazil

India

Russia

USA

Germany

Japan

Gross capital

formation as%age of GDP

Country Profile


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Chinese miracle has been built upon building the infrastructure

to be the manufacturing hub for the world goods

4Country Profile


5/18

Automotive industry in China has transitioned itself from

centrally planned to left of free market industry

5

0

0.2

0.4

0.6

0.8

1

1.2

1949-1979 1978-1994 1994-2004 2004 onwards

War with Japan & Civil warensured virtually no auto

industry

FAW was offshoot of

Russian influence produced

1600 Jiefang trucks in 1956

Hongqi limousine produced

in 1958 at FAW1960 Policy of self

development initiated after

Russian experts withdrawal

1965 SAW formed

(Dongfeng) to cater to

M&HCV for Vietnam war

Reform and Open policy

launched in 1979

Initially production plans

were annually provided by

government

In 1987, Chinese

government started

promoting PV

Above directive changed

the structure of PV marketin 1990s

Represented by volume

increase and depth of

product lineup

Planning process evolved

to more local rather than

centralized

Tariff were around 200%

in 1980s

Auto industry was chosen asone of the pillar industries

Tariff protection reduced

after China joined WTO

Tariff reduced to 80-100% in

1990s

30K vehicle allowed from

foreign car makersAutomotive industry policy

in 1994 drafted to promote

scale, consolidation and

private car ownership

Target in 2000 was 2.7mn

output, 1.3mn was to

comprise of saloons

Considerable investmentsmade in China after WTO

entry in 2002, resulting in

substantial capacity

Self reliant product

development & local brand

development cited as critical

aspect in 2004 Auto Policy Light vehicles & fuel

efficiency was another plant

promoted

Source: http://www-innovation.jbs.cam.ac.uk/publications/downloads/holweg_past.pdfPassenger vehicles

Market Overview


6/18

Personal vehicles are gradually increasing their penetration as

seen by increasing share of industry of PV & SUV segments

6

16% 13% 13% 13% 12% 12%

41% 44% 44% 44% 43% 43%

33% 31% 32% 32% 30% 28%

3% 4% 3% 3% 4% 4%

2% 2% 2% 1% 1% 2%

4% 5% 7% 7% 9% 11%0% 0% 0% 0% 0% 0%

YR 2006 YR 2007 YR 2008 YR 2009 YR 2010 YR 2011

A&B Mid to Lux Vans MPV Pick Up SUV Others

SUVs, Mid to Lux segment have increased their share indicating increasing disposable

incomes trend which accelerated after 2001

Chinas passenger vehicle segments breakup have been indicative of its massive capital

investments in the past decade offshoot of Self Reliance Policy

Passenger vehicles

Market Overview


7/18

Unlike Rest of world, China has unusually large CDV & Med-Lux

segment cars market

7

Small & Mid

Size26%

Med to Lux

33%Vans & Mini

trucks

8%

MPV

8%

Pick Up

trucks

7%

SUV

15%

Others

3%

Global Automotive Segment Breakup

Small &

Mid Size

12%

Med to Lux

44%

Vans &

Mini trucks

28%

MPV

4%

Pick Up

trucks

2% SUV

10%

China Automotive Segment Breakup

Total market size 58mn Total market size 18mn

Passenger vehicles

Market Overview


8/18

Until now, Foreign JVs have played with western brands above RMB100,000

price value & Local OEs below that, but its changing now

8

Passenger vehicles

Market Overview

Sino Foreign JVs

1987 Chinese government starts to promote PV

VW was first Foreign Brand to enter, others

followed

Focused on producing cars above RMB100,000

Brands were western, though legal entity was JV

Ensured technology transfer, though hasnt

fulfilled the role envisaged

Have dominated the PV category with almost 70%

share of sales in China

Today, are introducing domestic JV brands on theguidelines set by Chinese government

Chinese OE

Relatively new Eg: Chery entered PV market in

1987, Geely in 2001

Have played with domestic brands

Manufactured & sold products under

RMB100,000

Have sources Human Resources, Technology tie

ups to bridge technology gap between them & Sino

Foreign JVs

Had initially focused on trucks, PU and other CVs

2.14

1.46 1.451.26

1.14

0.87 0.83 0.80 0.72 0.69 0.69 0.63

Sino Foreign JV 2011 sales

0.74

0.59

0.40

CHERY GEELY GREAT WALL

Chinese OE 2011 sales

All figures in mn


9/18

Self Reliance Policy ensured that Chinese CV industry got a headstart vis a

vis PV segments and was focus of development of Chinese government

9

1.2

0.12

1.2

1.7

0.13

1.5

2.2

0.36

1.8

HCV Buses LCV

CV Industry China2008 2009 2010

0.67

0.64

0.39

0.28

0.25

0.23

0.22

0.17

0.12

0.11

Beiqi Foton

Dongfeng

FAW

Changan

JAC

Jinbei

Sinotruk

JMC

Shaanxi Auto

NAC

Top 10 OE in CV segment

All Fig in mn

Self Reliance Policy ensured that CV industry is dominated by Chinese OE

Factors driving the Chinese CV market ahead

Policy guidelines and tighter emission regulations Improved road infrastructure & Increased freight tonnage

All figures in mn

Commercial vehicles

Market Overview


10/18

Just a glance, at the gap in technology between Western &

Chinese brands in CV

10

Region/

ParametersWestern Markets/ Brands Chinese Brands

High spec models top HP upto 600 High spec models top HP upto

350HP / Power

AT available Manual transmissionTransmission

Emissions Euro5 in Europe Euro3

Fuel

efficiency35-38L/ 100km 40L/ 100km

Commercial vehicles

Market Overview


11/18

China is net oil importer today & the substantial, supplies come

from geopolitically highly unstable areas

11

Alternate fuel development

Today China consumers 7.8mn bpd, 40% of it is

used in transportation

By 2020, this %age will grow to 50%


12/18

Evolution of Chinese Governments policy for transitioning to

environmentally friendly vehicles

12

To mitigate air pollution, bigcities such as Beijing

implemented compliance

for Euro2 norms, CNG & LPG

vehicle promotion.

1999-2002

10th 5 year plan gave a goalof commercializing EVs

National 863 program

identified FCV, EV, HEV as

priorities

3x3 Plan with FCV, EV,

HEV focusing on force

assembly, driving electric

motor, dynamic battery

initiated

2002-2006

Energy saving and Newenergy vehicle key project

initiated covering R&D,

research of key components

such as traction battery,

motor and fuel cell engine,

application and test

standards

2006 onwards



13/18

To go Green - Chinese government has formulated favorable policies

for hybrids and EVsSupported by Rare Earths Monopoly

13

Supply Side Measures

China intends to have 20mn Battery operated

vehicles on roads by 2020

Government has laid plans to invest USD15bn to

development technologies and infrastructure

Starting 2011 Euro 4 emissions would have to be

met Co2 emissions targets by Chinese government is

132g/km from todays 187g/km

Progressive taxation is practiced based on engine sizes

of ICE

Subsidies upto $8000 are available for EV and $7350 for

plug ins

Projects such as Ten Cities and 1000 cars aimed at pilot

testing the technologies, showcasing them

Beijing: purchased 800 hybrid buses from Beijing Foton

Shanghai: hydrogen fuel cell car project was initiated

Jinan: promotes NEVs and plans to use HEV buses to

replace some of the old bus system

Shenzhen: is going to establish a charging station in the

downtown area for NEVs; and the F3DM duel mode EV

was first launched in Shenzhen which is the first massproduced duel mode EV in the world

Wuhan: becomes new energy resource experimental

unit for Nissan, and Nissan will contribute 300 hybrid

buses to the city

Chongqing: purchased hybrid buses from Changan

Demand Side Measures



14/18

Further democratization of the passenger cars ownership in

China going ahead is expected

14

1920

2224

2527 29

2011 2012 2013 2014 2015 2016 2017

China - Total light weight vehicle market

foreacast

A&B

12%

Mid to Lux

43%

Vans

28%

MPV

4%

PickUps

2%

SUV

11%

2011 segment breakup

A&B

12%

Mid to

Lux

44%

Vans

23%

MPV

5%

PickUps

2% SUV

14%

2017 segment breakup

Chinese light vehicle market is expected

to grow to 29mn units by 2017 CAGR

growth rate of 7.3%

Passenger vehicle penetration is

forecasted to grow further, hence Vans

category would decline in its share of

total market pie JV brands that are being introduced will

contribute to additional costs of them

and competition

Expansion into the interiors of China will

have to be managed

These actions coupled with regulatory

(emissions/ safety/ others) will ensure

added costs & access to technology/

capital and human resources will be

differentiator

Forecasts

All figures in mn


15/18

JV brands will dominate the passenger car market going ahead

as well

15

1.62

1.231.16

0.80 0.76 0.75 0.72 0.67 0.64 0.60 0.58 0.53 0.510.40

2011 Sales JV & Local Brands

2.27

1.651.54

1.12 1.07 1.00 0.94 0.91 0.88 0.86 0.82

0.66 0.64

0.840.74 0.70

2017 sales - JV & Local Brands

Biggest opportunity to reach scale for Local brands is through inorganic acquisition of western

brands

That will provide them scale not only in China but in international markets as well

Forecasts

All figures in mn


16/18

Forecasts for CV & Other fuel vehicles

16

2.52

3.33

4.364.71

5.095.49

5.936.41

6.927.47

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

China - Total CV Market Sales Forecast

7280 10850

16166

24088

35891

53478

2012 2013 2014 2015 2016 2017

EV & HEV Sales Forecast

Commercial vehicle industry is expected to grow at 8% pa

That translates into 26% as a percentage of passenger car market

EV & HEV sales are expected to grow at CAGR of 49% till 2020

Still the proportion w.r.t. passenger vehicles will be less than 1%

Other fuels like CNG will remain confined to CV segments only

Today CNG vehicles amount to 50k units pa annually

They have potential to sell 100k units pa by 2017

Forecasts

All figures in mn


17/18

Thank You

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18/18

Appendix

Segmentation of passenger car market done as per Global

Insight categorization A & B Segment have been combined

C to F have been put under Mid to Lux category

CDV, HVAN, MVAN, MIC have been put under Vans category

MPVB, MPVC, MPVD have been put under MPV, similarly for PU and SUV categories

Commercial vehicles segmentation has been done as per OICA

definitions

EV are vehicles being propeller by electric motors only

whereas HEV are propelled by a combination of IC engines

and electric motors

FCV wherever mentioned are fuel cell vehicle

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China Capsule: Automotive perspective for 2015

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