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China Automotive Industry
A perspective 2015
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Data Points to be covered.
Country Profile
Passenger vehicles Market Overview
Segmentation
Commercial vehicles Market Overview Alternate fuel development in China
Market forecasts
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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
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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
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Personal vehicles are gradually increasing their penetration as
seen by increasing share of industry of PV & SUV segments
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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
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Unlike Rest of world, China has unusually large CDV & Med-Lux
segment cars market
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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
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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
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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
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Just a glance, at the gap in technology between Western &
Chinese brands in CV
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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
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China is net oil importer today & the substantial, supplies come
from geopolitically highly unstable areas
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Alternate fuel development
Today China consumers 7.8mn bpd, 40% of it is
used in transportation
By 2020, this %age will grow to 50%
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Evolution of Chinese Governments policy for transitioning to
environmentally friendly vehicles
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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
Alternate fuel development
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To go Green - Chinese government has formulated favorable policies
for hybrids and EVsSupported by Rare Earths Monopoly
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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
Alternate fuel development
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Further democratization of the passenger cars ownership in
China going ahead is expected
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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
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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
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Forecasts for CV & Other fuel vehicles
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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
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Thank You
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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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