Low Emission Auto Future Loan (China)

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Low Emission Auto Future (LEAF) Loan Team - Final presentation - CITIZEN ACT 2011

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Low Emission Auto Future Loan (China)

  1. 1. LEAF Loan --Low Emission Auto Future(LEAF) Loan for Sustainable Development China Team CO2 IS KILLING OUR EARTH!! -Glaciers melt at a rising speed due to global warming -Arctic summer glacier will disappear by 2100 -More and more polar bears are drowned -Polar bears will be distinct by 2100 or even earlier -Half of species on earth will disappear by the end of this century Make the Change with Société Générale And CHINA TEAM!!!
  2. 2. Concept | Implementation | Business Model | Benefits Why LEAF Loan? LEAF LoanUse Amount>99% Use Amount<1% 15.9% Traditional Green Cut 45% CO2: Better Horrible results Gas Cars environment Main Contributor powered carsTraditional gas powered cars: Green Cars:1 Gallon gas=20 pounds of CO256 billion tons CO2per year Gap: High Price Greatly cut CO2 by 20%~45%
  3. 3. Concept | Implementation | Business Model | Benefits What is LEAF Loan?LEAF Loan is a Car Loan to Green Car buyers at lower interest rate.Lower Car Emission level Lower interest loan rateTarget Chinese Middle class young citizens Families with children preferredGood News for You !!!Société Générale is planning to expand car loan business into China!-CGL(Compagnie Générale de Location dEquipements),subsidiary ofSociété Générale, has set up BYD Auto Finance Company Limited.Jointly with BYD Co., Ltd in 2010
  4. 4. Concept | Implementation | Business Model | Benefits Product Details Green Car Type Emission level Discount rate Full Hybrid Car Lowest 9% Mild Hybrid Car Medium 6% Micro Hybrid Car Highest 3%
  5. 5. Concept | Implementation | Business Model | Benefits Overall PlanYear 2012 Year 2016 Year 2021 HEV (Hybrid Electric Vehicle) EV (Electric Vehicle) Other The Whole worldChina Developing countries
  6. 6. Concept | Implementation | Business Model | Benefits Implementation Schedules: Phase 1: Preparation & Phase 2: Market Phase 3: Regular Operation Start-up TrialAction 2 weeks 10 weeks First Half year Half Year Half Year 1 Year ..1.1 Form LEAF Team1.2 SelectCooperating Partners1.3 Design & AuditLEAF Loan2.1 Promotion2.2 Give out loan2.3 Risk Control3.1 RegularOperation3.2 Periodical Review
  7. 7. Concept | Implementation | Business Model | Benefits Implementation Schedules -- Promotion 3 months before Startup Next 1 year Early Promotion Publicity Continuous PropagandaAim Concept Promotion Increase popularity Attract more applicants Promotion at branches Internal promotion Press Conference & Car 4S stores Building partnership Direct mailing, Buzz share, SG official websiteHow Ad/Publicity CSR media Extensive promotion at BYD Auto stores Directly promote to existing customers, Display items in SG branches
  8. 8. Concept | Implementation | Business Model | Benefits Implementation Schedules -- Risk Control Green Cars Green CarsConsumers Retailers Car manufacturers Credit risk: Operational risk: Cooperation Cooperation LEAF Loan Policy Market risk: risk: Société Générale
  9. 9. Concept | Implementation | Business Model | Benefits Implementation Schedules -- Risk ControlPossible risk Suggested solutionsPolicy risk: change of monetary policy Apply for special support of reserve ratio, provision rate etc. 1. Adjust cooperating car modelsMarket risk: price of green cars slash 2. More strict evaluation to prevent default Strict application evaluation criteria:Credit risk: default mortgage, years living in one city, job hopping frequency, and car loan insurance is requiredOperational risk: 1. More transparent application mechanism1. Too many people apply for LEAF Loan 2. Monthly report updating evaluation results2. Use LEAF Loan to buy traditional cars 1. Car number plate check3. Partnership with car manufacturers andretailers breaks up Diversify cooperating car manufacturers and retailers
  10. 10. Concept | Implementation | Business Model | Benefits Implementation Schedules – Periodical Review Improvement for LEAF Loan? -Update selected car models -Seek more cooperators -Reset interest rates -Adjust max amount of money for LEAF Loan. Changes for the LEAF project team? -Whether new staff is needed, assessment of team members’ performance
  11. 11. Concept | Implementation | Business Model | Benefits LEAF Loan Cost No hardware purchase! No system change! Small initial investment! Cost per Totals Type of cost Month (Euro) HR Related Expenses Staffing Training 100 200 Staff (4) 600*4 manager (1) 1,000 10,200 Communication Expenses Start up Cost Public Relation Fee 2,500 5,000 Marketing Promotion Expense with car 2,500 5,000 manufacturers and 4S storesMain cost Promotion material printed for the following three months 1,500 3,000 Others (Transportation, Telephone) 300 900 TOTAL 23,400 HR Related Expenses HR Related Expenses Staffing Salaries 3,400 40,800 Intern Salaries 1,000 12,000 Operational Communication Expenses Communication Expenses Cost Public Relation fees 10,000 Promotion: material printing 5,000 Others 4,000 TOTAL 71,800
  12. 12. Concept | Implementation | Business Model | Benefits LEAF Loan Cost (Euro)Your Cost: < 390,000 EU for 5 years
  13. 13. Concept | Implementation | Business Model | Benefits LEAF Loan Income (Euro) Your Income: Around 770,000 EU for 5 years
  14. 14. Concept | Implementation | Business Model | Benefits LEAF Loan profit (Euro) Income Cost Profit 770,000 390,000 380,000
  15. 15. Concept | Implementation | Business Model | Benefits Benefits Société Générale Banking Industry Help SG expand business in Lead the industryChina Benefits Bring new CSR practice to Excellent public image the industry Good customer relationship Inspire banks Increased employees loyalty LEAF LOAN CO2 CUT Better environmental =32280 grown trees awareness > SG’s emission in 2009 Green lifestyle LEAF LOAN Environment Public
  16. 16. Concept | Implementation | Business Model | Benefits Benefits to SG In the field of carbon reduction, most banks’ CSR practices are CO2 trading or CO2 reduction from building use or air travel. No such CSR practice like LEAF Loan exits! People --CO2 tradeInfluenced --Cut business travel --Buy environment report software Société Générale LEAF Loan BNP Paribas Deutsche Bank HSBC Citi Bank CO2 Reduction
  17. 17. Concept | Implementation | Business Model | Benefits Benefits to SG CSR Business Line Stakeholders SG is planning to expandFirst mover advantage loan business to China, and Excellent public imageSG sets CSR new model, LEAF Loan will be an eye- Good customer relationshipbecome industry leader catching start. Loyalty of employeesin banking CSR SG gets to know its main customers (middle class) in China better
  18. 18. Concept | Implementation | Business Model | Benefits High Feasibility Simple Implementation Low Cost Great BenefitsWHAT ARE YOU WAITING FOR ?!
  19. 19. Thank You! LEAF TEAM, CHINA
  20. 20. Concept| Product Details| Implementation|Business Model| Benefits 1.Concept 2.Product Details What is LEAF Loan How to set interest rate Why LEAF Loan How to choose car brands Innovation How to determine market rate Feasibility Analysis 4.Bussiness Model 3.Implementation LEAF Loan cost Overall plan Financial forecast Implementation schedule Communication plan 5.Benefits Risk control
  21. 21. Concept| Product Details| Implementation|Business Model| Benefits 1.Concept 2.Product Details What is LEAF Loan Green car types Why LEAF Loan Choose cooperation brands Innovation Set loan interest rate Feasibility Analysis 4.Bussiness Model 3.Implementation LEAF Loan cost Overall plan Financial forecast Implementation schedule Communication plan 5.Benefits Risk control
  22. 22. Concept| Product Details| Implementation|Business Model| BenefitsAction What LEAF Loan Project do 1. Provide car loans at lower interest rates to young green cars buyers. 2. Promote green driving and green lifestyle. What is special Different interest rates are offered to different types of green cars depending on how much carbon dioxide (CO2) their cars produce. Lower CO2 level Lower interest rateVision Target Group ScheduleWhat we aim to achieve Who we are targeting What the steps areReduce CO2 by Middle class young citizens Start in Chinaencouraging more green Families with children preferred Then other developing countriescar purchases.Good News for You Société Générale is planning to expand car loan business into China! -CGL(Compagnie Générale de Location dEquipements),subsidiary of Société Générale, has set up BYD Auto Finance Company Limited. Jointly with BYD Co., Ltd in 2010 -BYD is one of the largest auto manufacturers in China, with sales ranking No.1 among local brands in 2010 with 520,000 cars sold. -BYD is also the largest green car manufacturer in China.
  23. 23. Concept| Product Details| Implementation|Business Model| BenefitsWhy LEAF Loan? LEAF LoanUse Amount>99% Use Amount<1% 15.9% Traditional Green Cut 45% CO2: Better Horrible results Gas Cars environment Main Contributor powered carsTraditional gas powered cars: Green Cars:1 Gallon gas=20 pounds of CO256 billion tons CO2per year Gap: High Price Greatly cut CO2 by 20%~45%
  24. 24. Concept| Product Details| Implementation|Business Model| BenefitsIs LEAF Loan Innovative? In the field of carbon reduction, most banks’ CSR practices are CO2 trading or CO2 reduction from building use or air travel. No such CSR practice like LEAF Loan exits!Peoplereached BNP Paribas -CO2 trading LEAF Loan: -buy environmental reporting software (ENABLON) Lifetime influence on car Société Générale buyers’ lifestyle Measurable, visible CO2 Deutsche Bank: reduction -CO2 trading Profound Generational BNP Paribas influence on Children -environmentally friendly headquarter HSBC: Close Correlation with -Reduce business travel -CO2 trading SG’s business Deutsche Bank HSBC Citi Bank Citibank: -consolidated 52 data centers to 24, reducing 300 CO2 Reduction tons CO2
  25. 25. Concept| Product Details| Implementation|Business Model| Benefits Legal and Policy Feasibility Market Feasibility Financial Feasibility -90.86million cars, 65.39million -Startup cost: around-Favorable private cars, still rising 30000Euro,policies to encourage green -59.2% think green cars are too -Operating costs: aroundcar purchases in China expensive 70000Euro/year-Car loan Rules and -67.5% are willing to buy green -1st, 2nd year: lossRegulations have no cars if loan rate is attractive -3rd, 4th, 5th year: profitregulation on car loan interestrates -Total: around breakeven point. Operational Feasibility Operational Ready/ not? Details Resources Needed Initial launching fund to YES 2010 SG net income:offer LEAF loans 4302 million Euro Product Team YES Old hire within SG(China) or new hire Marketing Team YES Old hire within SG(China) or new hire Risk Management Team: YES Old hire within SG(China) or new hire Public Relation with Processing Already build relationship with China Banking Regulatorygovernment Commission Public Relation with car Yes CGL(Compagnie Générale de Location dEquipements), subsidiarymanufacturers and 4S store of Société Générale has set up BYD auto finance company jointly with BYD Co., Ltd, which is the largest green car manufacturer in China.
  26. 26. Concept| Product Details|Implementation| Business Model| Benefits 1.Concept 2.Product Details What is LEAF Loan How to set interest rate Why LEAF Loan How to choose car brands Innovation How to determine market rate Feasibility 4.Bussiness Model 3.Implementation LEAF Loan cost Overall plan Financial forecast Implementation schedule Communication plan 5.Benefits Risk control
  27. 27. Concept| Product Details|Implementation| Business Model| Benefits Standard car loan with different loan rates according to the CO2 emission level Full Hybrid Car Mild Hybrid Car Micro Hybrid Car CO2 Lowest LEAF cut= Discount Base market LOAN Loan Cooperation CO2 plant ? rate Intere exercise Interest Down term CarCooperation green car emission grown based on st rate Interest Rate Pay (mon Price brand model Hybrid Type reduction trees CO2 cut (year) (year) (year) ment th) (Euro) TOYOTA CAMRY Full hybrid 45% 1.20 9% 6.10% 6.71% 6.11% 40% 36 20,000-30,000 Honda CIVIC Hybrid Mild hybrid 30% 0.81 6% 6.10% 6.71% 6.31% 40% 36 20,000-30,000 GM LaCrosse Micro hybrid 20% 0.54 3% 6.10% 6.71% 6.51% 40% 36 20,000-30,000 BYD F3DM Full hybrid 45% 1.20 9% 6.10% 6.71% 6.11% 30% 24 10,000-20,000 Changan Jiexun HEV Mild hybrid 30% 0.81 6% 6.10% 6.71% 6.31% 30% 24 10,000-20,000 Honda Insight Micro hybrid 20% 0.54 3% 6.10% 6.71% 6.51% 30% 24 10,000-20,000 Changan Zhixiang HEV Full hybrid 45% 1.20 9% 6.06% 6.67% 6.07% 20% 12 0-10,000 Changan Zhixiang HEV Mild hybrid 30% 0.81 6% 6.06% 6.67% 6.27% 20% 12 0-10,000 CHERY A5 BSG Micro hybrid 20% 0.54 3% 6.06% 6.67% 6.47% 20% 12 0-10,000
  28. 28. Concept| Product Details|Implementation |Business Model| Benefits 1.Concept 2.Product Details What is LEAF Loan Green car types Why LEAF Loan Choose cooperation brands Innovation Set loan interest rate Feasibility 4.Bussiness Model 3.Implementation LEAF Loan cost Overall plan Financial forecast Implementation schedule Communication plan 5.Benefits Risk control
  29. 29. Concept| Product Details|Implementation |Business Model| BenefitsOverall Plan Year 2012 Year 2016 Year 2021 HEV (Hybrid Electric Vehicle) EV (Electric Vehicle) Other China Developing countries The Whole worldWhy China?Carbon dioxide emission proportion of each country (region) -Currently China has become the biggest CO2 emitter. -Largest car sale growth rate in the world, 43.6% in 2010, still CO2 big emitter in future -Less than 10000 green cars were sold in 2010 in China - Chinese policy encouragement of green cars Data source: IEA, BOC international According to McKinsey’s estimation, if green cars are effectively promoted, by 2030 China’s CO2 emission will be reduced by 1.65 billion tons
  30. 30. Concept| Product Details|Implementation |Business Model| BenefitsImplementation Model Green Cars Green Cars Consumers Retailers Car manufacturers Cooperation Cooperation LEAF Loan Société Générale
  31. 31. Concept| Product Details|Implementation |Business Model| BenefitsImplementation Schedules:1.1 FormLEAF Team : Implementation Schedules:1.2 Select Cooperating Partners 1.10 Position Job Description No. Hire Type Item Team to choose cooperation brands? 1.1.1 How Leader Overall operation & management Brand List 1 Old hires within SGAction 2 weeks 10 weeks First Half year Half Year Half Year 1 Year .. 1 Product Development SGSelect cooperationpartnership Companies with which already had build brands, BYD 1.1.2 2 Old hires or new hires LEAF Companies design loan1.1 FormGroupTeam with advanced and reliable Hybrid Electric Vehicle (HEV) 2 1.1.3 Marketing Group LEAF Loan promotion 1 Old hires or new hiresGM Toyota, Honda, technology1.2 Select 1.1.4 Risk Managementwith low-end products in China control 3 Local Companies Group Qualification check, riskCooperating Partners 1 Old hires or new hires Changan, CHERY 1.1.5 Interns Assist LEAF Loan team 5 Campus students1.3 Design & AuditLEAF Loan2.1 Promotion2.2 Give out loan2.3 Risk Control3.1 RegularOperation3.2 Periodical Review Phase 1: Preparation & Phase 2: Market Phase 3: Regular Operation Start-up Trial
  32. 32. Concept| Product Details|Implementation |Business Model| BenefitsImplementation Schedules: 2.1 Promotion SG official website Online CSR website Next 1 year 3 months before Startup Email to employees Internal Train tellers in branches to directly promote LEAF Loan to existing customers. Aim Offline Promotion items in SG branches : brochures, display Continuous Propaganda and serving Early Display Publicity materials, banners, napkins Concept Promotion dishes Increase popularity Attract more applicants Direct Mailing: send ad emails through customer database of SG and cooperating partners Promotion at branches InternalSG Official Website: video,Conference promotion in SG’s home page lasting for one year promotion Press E-newsletter Online Buzz share: through renren( China’s facebook), weibo(& Car 4S twitter) whose users are Building partnership China’s stores mostly young citizens Direct mailing, Buzz share, SG official website External Advertisement: car magazines &websites, Radio, TV, car forums , CSR media How Start Press Conference,Ad/Publicity CSR media invited and celebrities can also be Place some SG sale employees at cooperating 4S Stores to directly do promotion Offline Extensive promotion at BYD Auto stores Set promotion desks, display brochures, flyers, and other promotion materials. Extensive promotion at BYD Auto stores Directly promote to existing customers, Display items in SG branchesAction 2 weeks 10 weeks First Half year Half BranchesHalf Year 1 Year .. SG Year Marketing Group LEAF loan Team Car 4S stores1.1Resources TeamPublic Connection Form LEAF Outsourced PR Co. IT professional Display Materials Clients Data Base Display Materials Partnership with car co. Display Materials Client data base1.2 Select MediaCooperating Partners BYD support Team manager: 1 Team manager: 1 Team manager: 1 Responsible Marketing Team: 2 LEAF Team: 4 Marketing Team: 21.3 Design & Audit Interns :3 Interns :5 Interns :3LEAF Loan Budget 15,400 EU 15,000EU 8,400 EU2.1 Promotion2.2 Give out loan
  33. 33. Concept| Product Details|Implementation |Business Model| BenefitsImplementation Schedules : 2.2 Give out loans 1. Receive 2. Check applicants’ Qualifications 3. Give Out 4. Send green Applicants loans driving -Young people aged 25-35 with brochure stable income - Family with children preferred -Good credit record: check with the central bank - Guarantee: housing, etc.Action 2 weeks 10 weeks First Half year Half Year Half Year 1 Year ..1.1 Form LEAF Team1.2 SelectCooperating Partners1.3 Design & AuditLEAF Loan2.1 Promotion2.2 Give out loan2.3 Risk Control
  34. 34. Concept| Product Details|Implementation |Business Model| BenefitsImplementation Schedules: 2.3 Risk Control Operational risk: Possible risk Suggested solutions Policy risk: risk: of monetary policy Credit change Apply for special support of reserve ratio, provision rate etc. Green Cars Green Cars Market risk: price of green cars slash 1. Adjust cooperating car models Consumers More strict evaluation to prevent default manufacturers 2. Retailers Car Credit risk: default Strict application evaluation criteria: mortgage, years living in one city, job hopping frequency, and car loan insurance is required Operational risk: Policy 1. More transparent application mechanism Cooperation Cooperation 1.too many people apply for LEAF Loan LEAF Loan 2. Monthly report updating evaluation results risk: 2. use LEAF Loan to buy traditional cars Car number plate check Market risk: 3. partnership with car manufacturers Diversify cooperating car manufacturers and retailers and retailers breaks up Société Générale Possibility SeverityImplementation Schedules :3.2Periodical Review Improvement for LEAF Loan?Update selected car models Benefits to SG Social BenefitsSeek more cooperators -Profit or loss? Whether the loss is -How muchReset interest rates under control? environmental benefits - How many new customers LEAF LEAF has brought?Adjust max amount of money for LEAF project has brought to SG? -How many people areLoan. -How much SG’s public image and improved in terms of Changes for the LEAF project team? public relation are improved? their knowledge onWhether new staff is needed, green car and lifestyle?assessment of team members’performance
  35. 35. Concept| Product Details|Implementation |Business Model|BenefitsLEAF Loan Cost Type of cost Duation Cost per Totals Month (Euro) Start-up cost HR Related Expenses Staffing Training 100 200 Staff (4) 600*4 manager (1) 1,000 10,200Startup Cost Communication Expenses(3 months) Public Relation Fee 2,500 5,000 Marketing Promotion Expense with car 2,500 5,000 manufacturers and 4S stores Promotion material printed for the following three 1,500 3,000 months Others (Transportation, Telephone) 300 900 TOTAL 23,400 Operational cost HR Related Expenses Staffing Salaries 3,400 40,800Operational Intern Salaries 1,000 12,000Cost (1 year) Communication Expenses Public Relation fees 10,000 Promotion: material printing 5,000 Others 4,000 TOTAL 71,800
  36. 36. Concept| Product Details|Implementation |Business Model|BenefitsLEAF Loan Cost Opportunity Cost: If SG used the money to give out normal car loans at the same interest rate as the market, rather than LEAF LOAN, SG will gain 27000 Euro more from loan income. So the opportunity cost for the five years ==27000 Euro You Spend: Startup Cost 34,400EU +71,000EU/ year+ Opportunity Cost27,000 Less than 390,000 EU for 5 years
  37. 37. Concept| Product Details|Implementation |Business Model|Benefits Assumptions Category Item Comments 2012e 2013e 2014e 2015e 2016e Maximum Amount 20 cars per month, LOAN 4.8 4.8 4.8 4.8 4.8 Money for LEAF 20000 Euro per car QUATA million million million million million Loan 20*20000&12=4.8million Euro In 2012, only 50% money is lent 4.8*50% 4.8*60% 4.8*70% 4.8*80% 4.8*90% LEAF Loan Amount out for LEAF LOAN, and 60%, =2.4 =2.88 =3.36 =3.84 =4.32 Lent out (Euro/Y) 70%, 80%, 90% respectively from million million million million million 2013-2016 LOAN All green cars less than 10000 INCOME Euro, all LEAF Loan one year. Loan Income 40% for micro hybrids, Interest Rate 40% for mild hybrids, 6.31% 6.31% 6.31% 6.31% 6.31% (%/Y) 20% for full hybrids. 6.47%*40%+6.27%*40%+6.07%* 20%=6.31% Loan Cost 50% one-year demand deposit LOAN Interest Rate 50% one-year time deposit 1.70% 1.70% 1.70% 1.70% 1.70% COST (%/Y) 0.4%*50%+3.0%*50%=1.7% Operational cost will decrease byOperational Operational Cost 5% each year 71800 71800 61800 64200 61300 COST because of decreasing PR fees
  38. 38. Concept| Product Details|Implementation |Business Model|Benefits Financial Forecast from 2012 to 2016 (Euro) Year 2012e 2013e 2014e 2015e 2016e Loan Income 82030 156698 184252 228422 258710 Interest Expenses 25500 29240 32980 36720 40460 Operational Cost 71800 71800 68210 64620 61030 Startup Cost 24400 0 0 0 0 Total Profit -39700 55658 83062 127082 157220 Opportunity Cost: If SG used the money to give out normal auto car loans at the same interest rate as the market, rather than LEAF LOAN, SG will gain 27000 Euro more from loan income. So the opportunity cost for the five years ==27000 Euro
  39. 39. Concept| Product Details|Implementation |Business Model|Benefits 1.Concept 2.Product Details What is LEAF Loan Green car types Why LEAF Loan Choose cooperation brands Innovation Set loan interest rate Feasibility 4.Bussiness Model 3.Implementation LEAF Loan cost Overall plan Financial forecast Implementation schedule Communication plan 5.Benefits Risk control
  40. 40. Concept| Product Details|Implementation |Business Model|Benefits CSR Business Line Stakeholders First Société Générale mover advantage SG is planning to expand Banking Industry SG sets new CSR model, Benefits loan business to China, Excellent public image Help SG can lead CSR in in China which expand business and LEAF Loan will be an Lead the industryrelationship Good customer to further banking industry Excellent public image eye-catching start. implement Equator of Increase Loyalty Principle Good customer relationship SG gets to know its main employees Increased employees loyalty customers (middle class) Bring new CSR practice to the in China better industry SG will be the first bank which provides such product. their Inspire banks to combine1 2.6 services with creatively. 9Compared to gas-powered cars, eachgreen car cut CO2 by 25650 L/y, which Green lifestyle to 1200 families with childrenequals to planting 2.69 grown trees. 0LEAF Loan CO2cut 3228 Better environmental awareness 307,800 ton through green driving trainings 0 Green lifestyle will influence> cO2 CO2 emission in 2009 LEAF LOAN children when they are young Environment Public

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