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Booz & Company         July, 2010    Discussion Document
Synergistics Limited




The Eight Overarching China
Automotive T...
China’s explosive automobile market growth slowed considerably
  in 2008
    Although slowed by the weakened global econo...
In terms of passenger vehicle market, China has become the most
important country in the world
      CAGR                 ...
China’s auto market has been experiencing explosive growth, in
2009 China exceeds US to become the world largest auto mark...
China has only recently entered the accelerated growth phase
typical of emerging market…

                                ...
…and China’s strong economic performance will further stimulate
its car industry

                                        ...
China has a clear and compelling need to reinvent the propulsion
technology of the automobile

                           ...
As the leading automotive market, China has the opportunity to
fundamentally transform the global auto industry
Shanghai: ...
The Eight Overarching China Automotive Trends That Are
Revolutionizing The Global Auto Industry

1                        ...
1   Policy-driven Consolidation Of Chinese VMs



To achieve economies of scale, the government is accelerating
domestic c...
1       Policy-driven Consolidation Of Chinese VMs



In 2009, China government announced plan to build up a “Top 10”
grou...
2      Global redistribution of assets to capture China market growth



While GM is unloading underperforming assets to e...
3     Acquisition of foreign assets and key development competencies by Chinese companies



China’s automotive companies ...
4     China’s investment in new energy vehicles and related infrastructure



Comparing to mature markets, China appears r...
4    China’s investment in new energy vehicles and related infrastructure



China has a clear and compelling need to rein...
4       China’s investment in new energy vehicles and related infrastructure



China’s 863 program provides an overall su...
4       China’s investment in new energy vehicles and related infrastructure



China’s Ministry of Science and Technology...
4       China’s investment in new energy vehicles and related infrastructure



Initially mandated by the China government...
4      China’s investment in new energy vehicles and related infrastructure



In view of the large market potential in Ch...
4     China’s investment in new energy vehicles and related infrastructure



A combination of business and government eff...
5    Utilization of China’s automotive capacities for global expansion



Multi-national companies are increasingly levera...
6       Hyper-competition across the China auto market segments



While muti-national brands are expanding their portfoli...
6       Hyper-competition across the China auto market segments



…Chinese brands are expanding their portfolio into larg...
7      China VMs push to build brand equity



Local VMs are growing market share significantly but
international OEMs sti...
7   China VMs push to build brand equity



Chery and Geely are most aggressive in revitalizing their brand
portfolio



 ...
8       China’s rapidly changing demographics and growing demand in lower tier cities



Urbanization is the trend, China'...
8       China’s rapidly changing demographics and growing demand in lower tier cities



In urban areas, the new mid-class...
Implications of eight overarching China automotive trends for the
future of personal mobility
     Eight Overarching China...
Thank You!




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Eight China Automotive Trends: World Ecological

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  1. 1. Booz & Company July, 2010 Discussion Document Synergistics Limited The Eight Overarching China Automotive Trends That Are Revolutionizing The Global Auto Industry Presented at the World Ecological Forum
  2. 2. China’s explosive automobile market growth slowed considerably in 2008  Although slowed by the weakened global economy, China PV sales were still up 9% YoY  Passenger vehicles consistently represent an increasing share of total automobile demand  China’s compact segment is still the dominant force (i.e. 34% of total PV in 2008) Total Vehicle Industry including Import: China 2008 Sales 2007 Sales 9% 9.67 Million - 22% 8.98 Million 2006 Sales 25% 7.34 Million Truck 2005 Sales Truck 21% 2004 Sales 11% 5.90 Million 22% 2003 Sales 15% 5.24 Million Truck PV Bus 4.56 Million 21% PV Bus 61% 2% Truck Van 25% Bus 60% 2% Truck 2% Van 16% PV Van 16% Truc 26% PV Bus k24% PV 3% 59% 18% PV 51% Bus 53% Van PV Bus 51% 3% 51% Van 2% 19% Van 21% 22% PV=2.36Million PV=2.66 Million PV=3.23 Million PV=4.45 Million PV=5.43Million PV=5.91Million Source: CAAM auto market press release 2
  3. 3. In terms of passenger vehicle market, China has become the most important country in the world CAGR Size and Growth of Global Passenger Vehicle(1) Market 2001-2009, % (Major Countries) China Ma r k et Em erging Iran Turkey India Argentina Saudi Arabia Indonesia Brazil Thailand Russia Germany CAGR of Global Market =1.6% France Korea UK Japan Italy US Spain 2009 Market Size (Million Units) Bubble size: 2009 market size (1) Includes segment of A, B, C, D, E, F, MPV SUV Source: Global Insight Booz & Company analysis (million units) 3
  4. 4. China’s auto market has been experiencing explosive growth, in 2009 China exceeds US to become the world largest auto market Total China Auto Sales Top Five Auto Market in the World(1) 2005 - 2009, in Million Units 2008 - 2009, in Million Units 66 63 +23% Others 4.62 5% Brazil Jan 4% Germany 1.21 Feb Japan 1.74 Mar 16% US 2005 2006 2007 2008 2009 2010 20% 1st Quarter 21% China 13% Vehicle sales in the 1st quarter of 2010 in China rose 71.8% from the same period last year to 4.62 million 2008 2009 1) : Data does not include heavy truck Source: Global insight, CAAM auto market press release, Literature research, Booz & Company analysis 4
  5. 5. China has only recently entered the accelerated growth phase typical of emerging market… Canada 600 Australia Discussion Germany The S- U.K.   A country’s threshold of 500 curve mobility lies near US U.S. $10,000 GDP per capita Poland (PPP), where Cars per 1,000 People 400 Malaysia automobile ownership accelerates Russia 300 Argentina   China is at the early Mexico taking-off stage of the S- Brazil curve 200 Turkey   Due to enormous Thailand growth potential, China 100 Iran is likely to be a “game- changer” for the global Indonesia auto industry China 0 India 1,000 10,000 100,000 China GDP Per Capita (Logarithmic Scale) Note: Each line of symbols represents a 19-year progression for one country, from 1990 through 2008, GDP Per Capita is in Purchasing Power Parity (PPP) Source: Booz & Company analysis 5
  6. 6. …and China’s strong economic performance will further stimulate its car industry China Passenger Vehicle Installed Base (PARC) Key Drivers Forecast (2005-2030)  Car ownership in China is powered by the Increase in growing economy – the upside is High Forecast substantial 327 Car Ownership Base Forecast Passenger Vehicle PARC (million units) Low Forecast  Government has been continuously guiding Government’s and supporting the industry’s development Support to across manufacturing and distribution Auto Industry 153  China’s financial system is less exposed China and GDP growth is still very fixed Economy’s investment driven, thus is less vulnerable Resilience to recent financial turbulence impact 87  Highway network development provides Infrastructure foundation for more motor vehicle-based Development based transportation  China is investing in infrastructure to support alternative propulsion Note: Passenger vehicles contain sedans, MPVs and SUVs Source: Global Insight, OPEC, DGS Report, Booz & Company analysis 6
  7. 7. China has a clear and compelling need to reinvent the propulsion technology of the automobile   Bejing, Xi’an, Shenyang, Shanghai and Guangzhou have been listed among the Top 10 cities with the worst Air Pollution air pollution   The rapid growth of the automotive market worsens the problem   China imports two-thirds of its oil, and its ever-increasing Energy thirst has had a dramatic impact on global energy prices. Consumption   The gasoline and diesel consumption has accounted for half of the total consumption of petroleum products.   The rapid growth of the personal automotive sales Traffic outpaced infrastructure development. Traffic congestion Congestion has been a major problem in big cities like Beijing, Shanghai, Guangzhou, etc.   China will have over 150 million vehicles in 2020 Source: Synergistics, Booz & Company analysis
  8. 8. As the leading automotive market, China has the opportunity to fundamentally transform the global auto industry Shanghai: A Lean, Green Detroit … In acquiring a stake in BYD, Buffett broke a couple of his own rules. "I don't know a thing about cellphones or batteries," he admits. "And I don't know how cars work." But, he adds, "Charlie Munger and Dave Sokol are smart guys, and they do understand it. And there's no question that what's been accomplished since 1995 at BYD is extraordinary…” Source: Literature research 8
  9. 9. The Eight Overarching China Automotive Trends That Are Revolutionizing The Global Auto Industry 1 5   China automotive capacities and Policy-driven   China market is highly fragmented Globalization Of   The government is accelerating the capabilities are integrating into the Consolidation Of China Automotive consolidation of the domestic industry value-chain of multinational auto Chinese VMs Capacities companies and suppliers to drive scale economies 2   In the face of a Global downturn, China 6 Hyper-competition   Higher share of sales in entry-level, Global Redistribution continues enjoy non-linear growth lower margin segments Across The China Of Assets To Capture   Shift in the global automotive “center of   Multinational brands expand into Auto Market China Market Growth gravity” to the East small segments while local players Segments expand into larger segments 3   Chinese VMs attempt to integrate 7   Local VMs’ market share increase Acquisition Of Assets And Key foreign acquisitions Local VMs Push To significantly but Multinational brands Development   Challenges and transactional barriers Build Brand Equity retain majority share Competencies of M&A remain   Local VMs push to build their brand equity and upgrade capability 4   Government is willing to keep investing 8 China’s Changing   Growth fueled by urbanization trend Investment In   Challenges of consumer acceptance and the emerging new middle-class Demographics and Infrastructure & New remain Growing Demand in   Low-tier cities developing with Energy Vehicles   Active engagement of both increasing wealth Lower Tier Cities multinational and local players 9
  10. 10. 1 Policy-driven Consolidation Of Chinese VMs To achieve economies of scale, the government is accelerating domestic consolidation Major Chinese Auto Manufacturers and JV Partners Selected Recent Consolidations in the Auto Industry   Changan and AVIC merger (Nov 2009)   Dongfeng’s Hangzhou unit took a 20% stake in Luxgen Motor (June 2009)   Chery and JAC proposed cooperation   BAIC is planning to purchase shares in Fujian Daimler (in progress) 10
  11. 11. 1 Policy-driven Consolidation Of Chinese VMs In 2009, China government announced plan to build up a “Top 10” group of globally competitive automakers Existing Situation and Challenges   Over 120 registered VMs, locals cannot compete with MNCs in terms of scale Tier 1 & 2 Auto Group in China   Highly fragmented structure cannot provide for a stable development of the current domestic players   Government has long expressed desire to consolidate Tier 1 Group Tier 2 Group the industry and develop a handful of home-grown champions Definition  Has annual capacity of 2  Has annual capacity of 1 million units million units Main Objectives of Policy  Encouraged to acquire  Encouraged to acquire smaller companies smaller companies within   Boost sales and production in 2009 to 10 million units countrywide surrounding region and keep growth at about 10 percent in the next 3 years   Raise market share of domestic brand PV from 34% to Candidates  SAIC  BAIC 40%  FAW Group  GAIG   Consolidate small regional manufacturers into bigger  Dongfeng Automobile  Chery Automobile Co. national auto groups Co.  China Heavy Duty Truck   Encourage more fuel-efficient, lower-polluting vehicles  Chang’An Automotive Corp. (CNHTC) –  Market share of ≤1.5L PV to increase to 40%, among Co. which ≤1.0L to 15% –  Building 500K new energy vehicle (NEV) capacity, and increase NEV market share to 5% of PV sales Source: China Automotive Industry Stimulus Plan; Booz & Company analysis 11
  12. 12. 2 Global redistribution of assets to capture China market growth While GM is unloading underperforming assets to ensure survival , they are rapidly expanding their China business GM’s Sales in China Expansions of GM’s Corporate Operations (2005-2009, in Million Units) in China   At present, China is GM's largest overseas market, GM has established in China a total of eight joint ventures +29%   Recently, GM announced a a plan to set up Shanghai GMIO headquarters, managing the unified management of all overseas business, which indicates an the central role China plays in GM's global strategy   GM and SAIC also announced to set up a GM-SAIC Motor Investment Co. in Hong 2005 2006 2007 2008 2009 Kong with a total investment of $1 billion split equally between the two for use in   GM aims to sell 3 million vehicles a year there by 2015 purchasing 100 percent shares of General as it adds new, more fuel-efficient models to meet demand Motors India   “ China GM’s largest single market worldwide and GM will –  GM-SAIC India is expected to make launch 25 new models in China in 2010 and 2011 in a bid small cars and commercial vehicles in to maintain its leading position” - Gan Wenwei, President India and General Manager of GM Source: Automotive News, Company profile, Booz & Company analysis 12
  13. 13. 3 Acquisition of foreign assets and key development competencies by Chinese companies China’s automotive companies attempting to integrate foreign acquisitions into their operations will face challenges An inorganic approach to globalization-the Marriage of Geely and Volvo Key Challenges and Risks   Chairman Li has committed to keep independence of Strategic Volvo operations Geely’s Inorganic Approach Alignment and   Bridging the huge gap between Volvo’s traditional Opportunities Governance European (and some would argue “Scandinavian”) management mode and Geely’s dynamic family business mode   Learn the Volvo “eco-system” and get in the global game   Volvo maintains their current business structure, processes and supply base   Use this opportunity to Cost Structure   Geely may need to subsidize the Volvo global promote the corporate Geely operation with the very thin margins generated from name worldwide Geely’s local brand operations, which poses high risk and places pressure on Geely’s working capital   Learn to manage a high-end car brand: essential skills for a   Geely faces a number of product portfolio and platform global car company decisions regarding Volvo product offerings for China Market and the global markets Positioning   Volvo products would need to be repositioned in order to serve a mass-market instead of merely following the luxury-market leader Audi 13
  14. 14. 4 China’s investment in new energy vehicles and related infrastructure Comparing to mature markets, China appears ready to address the challenges in introducing electric vehicles Readiness for EV Key Forces in China Mature Market China   Ample resources to achieve low cost production   More battery manufacturing experience with larger scale, i.e. Technology lithium battery for cell phone   Relatively short driving history makes it easier to cross over to Consumer new products Acceptance   Less stringent requirement on performance due to short community distance and crowd traffic   China faces much greater environmental pressure, there is huge Infrastructure & need to switch into cleaner energy Legacy   The Chinese government has been a strong driving force behind the development of industry technology and infrastructure   Local VMs are looking to leverage EV to get ahead in the automotive market, thus resistance from market incumbents is low Source: Booz & Company analysis
  15. 15. 4 China’s investment in new energy vehicles and related infrastructure China has a clear and compelling need to reinvent the propulsion technology of the automobile   Bejing, Xi’an, Shenyang, Shanghai and Guangzhou have been listed among the Top 10 cities with the worst Air Pollution air pollution   The rapid growth of the automotive market worsens the problem   China imports two-thirds of its oil, and its ever-increasing Energy thirst has had a dramatic impact on global energy prices. Consumption   The gasoline and diesel consumption has accounted for half of the total consumption of petroleum products.   The rapid growth of the personal automotive sales Traffic outpaced infrastructure development. Traffic congestion Congestion has been a major problem in big cities like Beijing, Shanghai, Guangzhou, etc.   China will have over 150 million vehicles in 2020 15
  16. 16. 4 China’s investment in new energy vehicles and related infrastructure China’s 863 program provides an overall support platform for the development and demonstration of all types of new energy vehicles New R&D Mode of 863 Project in 11th Five-Year-Plan Product All types of vehicle products Development FCEV HEV BEV CAFV Vehicle Platform Battery Technology Fuel cell engine, traction battery, ultracapacitor... Key Technology Electric Drive System Drive motor, motor driving system, engine... for CAFV Basic Technology New material, new component, infrastructure... Public Support Test, standard, policy, demonstration, financing, intellectual property, technology Information Platform Energy Saving and New Energy Vehicle Key Project in 863 Program during 11th five-year Plan (2006-2010) Source: MOST; Synergistics Limited analysis 16
  17. 17. 4 China’s investment in new energy vehicles and related infrastructure China’s Ministry of Science and Technology is driving a plan to support development of “New Energy Vehicles” (NEVs)   In April 2009, Prof. Wan Gang announced an ambitious plan in cooperation with the Ministry of Finance & the NDRC –  Promote the use of NEVs initially targeting 13 pilot cities, expanding to 20 pilot cities in 2010 –  Support the development of energy-saving technology for use in government fleets, including buses, postal, and sanitation vehicles. –  Deploy 60,000 energy saving vehicles in China by 2012   Key Objectives of Ministry of Science & Technology –  Promote industrial development and expansion of 863 project and HEV & EV development plan. –  Technically support the development of NEV, R&D for NEV, and their promotion and industrialization   Tenth Five Year Plan introduced goal to commercialize and industrialize EVs –  3 Vertical Plans: force assembly, driving electric motor and dynamic battery –  3 Horizontal Plans: FCEV, HEV and EV Source: Literature research; Booz & Company analysis 17
  18. 18. 4 China’s investment in new energy vehicles and related infrastructure Initially mandated by the China government, developing NEV is gradually integrated into local VMs long-term strategy Major Local OEM’s Involvement in BEV and HEV R&D BEV HEV(1) BEV HEV BEV Bus under Research Prototype E1 to be introduced at Beijing Auto Show 2010 To be introduced at Beijing Auto Show 2010 To be used at Shanghai Expo 2010 (2) (1) Includes Plug-in Hybrid Electric Vehicle (2) Acquired by Chang’an Covered Area Focus Area Source: Literature search, Booz & Company analysis 18
  19. 19. 4 China’s investment in new energy vehicles and related infrastructure In view of the large market potential in China, foreign VMs are prioritizing NEV development in China Product Promotion Cooperation with Chinese partner Concept introduction R&D in China Launch product Prius RX400h LS600h • Support the HEV R&D work of CATARC June 25, 2009 Civic HEV General Motors will build the Chevrolet Volt extended-range electric car in China beginning in 2011 as part of the automaker's plan to roll out its revolutionary technology in a wide variety of vehicles around the world, LaCrosse HEV the newsletter AutoBeat Asia reports. • Establish 2 NEV R&D centers in China • Cooperate with SGM and All Volts built in China are to be sold there. PATAC to develop new HEV Touran HEV • Take advantage of SVW to cooperate with SAIC to develop Touran HEV Fuel-cell bus Source: Synergistics, Booz & Company analysis 19
  20. 20. 4 China’s investment in new energy vehicles and related infrastructure A combination of business and government effort is needed to drive the public acceptance of this revolutionary change Demand Side: Consumer Acceptance Supply Side: Gov. Investment   Chinese consumers have less experience   The China government’s willingness to with gasoline-powered cars, and are invest in the infrastructure to support already accustomed to short distance, low- alternative propulsion technology speed commuting – conditions very –  For the development of NEVs, the favorable for electric cars infrastructure must come first - and this will drive supply-side innovation   But, consumers must be convinced that the –  This is where China has the opportunity to take the lead, and that will drive supply price and performance of the new energy side investment in new technology vehicle can in fact meet their expectations   Business also need government support to   We expect the China government to help develop the NEVs; Nowhere in the world is by offering incentives for the retail there a closer link between business and consumer to purchase new energy vehicles government than in China 20
  21. 21. 5 Utilization of China’s automotive capacities for global expansion Multi-national companies are increasingly leveraging China’s growing capabilities as platform for global expansion Stage 1 Product Sales & Circa early R&D Sourcing Manufacturing Marketing Service Development Distribution to mid 1990s  Start a few, isolated production facilities Stage 2 Product Sales & Circa mid to R&D Sourcing Manufacturing Marketing Service Development Distribution late 90s  Began to use China as a  Began to integrate  Built brand for the local procurement source production facilities market and local sales & within China distribution Stage 3 Product Sales & Early 2000s R&D Sourcing Manufacturing Marketing Service Development Distribution  Integrate China into global  Integrate China into global  Transfer global best practice to sourcing network manufacturing network China Stage 4 Present to Product Sales & R&D Sourcing Manufacturing Marketing Service 5-10 years Development Distribution hence  Build R&D and PD centers in China  Integrate China into global value chain 21
  22. 22. 6 Hyper-competition across the China auto market segments While muti-national brands are expanding their portfolio into small segments… C Focus Hatchback B SVW POLO SPORT  Engine:1.8L 2.0L  Dimension 4342*1840*1500  Wheelbase:2640 C Chevrolet Cruiz B GZ Toyota Yaris  Engine:1.3L 1.6L  Engine: 1.6L/1.8L  Dimension  Wheelbase: 2685mm 3750*1695*1545  Wheelbase:2460  MSRP: 9.2-12.56W RMB  Launch:2008-6-12 B PSA 207 Hatchback B Smart Fortwo  Engine:1.4L 1.6L  Dimension 3900*1680*1468  Wheelbase:2450mm  MSRP: 7. 18-10.48W RMB  Launch:2009-3-18 B Hyundai i30 B Kia SOUL 22
  23. 23. 6 Hyper-competition across the China auto market segments …Chinese brands are expanding their portfolio into larger segments SUV Chery Rely V5 E Geely Dihao EX925  Engine:2.0L  Engine:2.2L 2.4L  Dimension Dimension 4970*1880*1900 4662*1820*1590  Wheelbase:2850  Wheelbase:2800  Highlights: NA  MSRP: RMB  Launch: D Chery Riich G6 D Shanghai Yinglun GE  Engine:2.0L  Engine: 3.5L  Dimension  Wheelbase: 3100 mm 4968*1845*1526  Highlights: Luxury feature  Wheelbase:2820 and superior space  Highlights: NA  Launch:2011  MSRP: RMB  Launch: C Dongfeng S30 D Brilliance Zunchi  Engine:1.6L  Engine:1.8L  Dimension  Dimension 4502*2610*1465 4880*1800*1450  Wheelbase:2610  Wheelbase:2790 MPV BYD M6 Spe BYD S8  Dimension  Engine:2.0L 4808mm×1802mm×1756mm  Dimension  Wheelbase: 2950mm 4490*1780*1405  Launch: 09/2009 (09Sep)  Wheelbase:2520 23
  24. 24. 7 China VMs push to build brand equity Local VMs are growing market share significantly but international OEMs still dominate INTERNATIONAL/ LOCAL OEM CHINA PV MARKET SHARE International OEMs/Brands International OEMs/Brands Top Local OEMs/Brands 8 Domestic OEMs VM 17.77% 3.87% 16.63% Chery 5.11% TOYOTA 10.32% 7.81% China PV sales 2008-2009 (incl. import, million units) 5.67% GM1 8.82% FAW 9.19% 4.62% 8.47% 8.6 Hyundai 10.13% 3.12% Geely 8.29% 3.66% Honda 6.73% 5.7 International 6.46% 71% 2.86% Nissan 6.18% BYD 5.17% FORD 2.96% 75% 2.95% 1.67% Brilliance PSA 3.18% 1.45% 3.19% 29% Local 3.14% 25% 1.08% Suzuki 2.67% Greatwall 1.76% MMC 0.67% 2008 2009 1.01% 1.54% 1.14% Chang’an2 BMW 1.07% 1.71% 2008 2009 1) Excluding CV volumes from SAIC-GM-Wuling 2) Including AVIC Source: Global Insight China Report 24
  25. 25. 7 China VMs push to build brand equity Chery and Geely are most aggressive in revitalizing their brand portfolio “Chery is ready to meet the challenge ““A brand is closely related to its of the global market. We've cultural background. Isolated from succeeded in launching four brands that background, it is worthless” of new cars this year" --Chery's -- Geely's chairman, Li Shufu, president, Yin Tongyao 25
  26. 26. 8 China’s rapidly changing demographics and growing demand in lower tier cities Urbanization is the trend, China's urban population is projected to rise by a whopping 150 million by 2020 China Population Breakdown by Urban and Rural (2008 Vs. 2020E, Million) Discussion   Clearly, the concentration of wealth will likely continue under this unmistakable 100% trend of urbanization, both through the 18% 26% development of currently rural areas and the permanent migration of rural 45% population to existing urban areas 65% Urban   It will be curious to see which one of these two modes of urbanization will gain 82% 74% more momentum as it will affect the geographical dispersion of demand for 55% luxury items 35% Rural 1978 1990 2008 2020E Source: EIU; <China 2040>; China regional economy statistic yearbook 2008 China Population Yearbook Booz & Company analysis 26
  27. 27. 8 China’s rapidly changing demographics and growing demand in lower tier cities In urban areas, the new mid-class is emerging fast, the total number of mid-class will reach 40 million in 2020 China’s Household Income Distribution China’s Mid-class Development (1990-2010F) (Mn Individuals) +35.5 +3.3 2000 2008 2020E Note: “Mid-class” is defined as people with more than RMB 150,000 annual income Source: Asian Demographics; Study commissioned by Beijing Young Post; China Auto Yearbook; China Statistical Yearbook; Morgan Stanley; Goldman Sachs; EIU analysis; Global Insight; Literature Research; Booz & Company analysis 27
  28. 28. Implications of eight overarching China automotive trends for the future of personal mobility Eight Overarching China Automotive Trends Implications for the Future of Personal Mobility 1 • China has a clear and compelling need to reinvent the Policy-driven Consolidation Of Chinese VMs propulsion technology of transportation in order to secure its continued economic development and address rising 2 environmental concerns Global Redistribution Of Assets To Capture China Market Growth 3 • China will attempt to lead the transition to new energy vehicles, but competency gaps create opportunities for Acquisition Of Assets And Key Development foreign players Competencies 4 Investment In Infrastructure & New Energy  Chinese government support for alternative propulsion will Vehicles help drive supply-side investment in the technology 5 Utilization of China’s automotive capacities for  Consumer acceptance of new energy vehicles is a major global expansion challenge – As a national priority, China is providing incentives for 6 the retail consumer to purchase NEVs Hyper-competition Across The China Auto Market Segments – Chinese consumers have less experience with ICE and are already accustomed to short distance, low-speed 7 commuting – conditions which favor NEVs Local VM Push To Build Brand Equity  It takes a combination of business and government 8 working together to make this revolutionary change China’s Changing Demographics and Growing possible and nowhere in the world is there a closer link Demand in Lower Tier Cities between business and government than in China. 28 28
  29. 29. Thank You! 29

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