Gai webinar 15 sep 2011 - 11 09 13 ep


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Gai webinar 15 sep 2011 - 11 09 13 ep

  1. 1. Financing the Automotive Sector in Emerging Markets …… in this incredibly fast changing world ! Global Auto Industries Webinar Series 15 Sept 2011 Emmanuel POULIQUEN Principal Industry Specialist, Energy Efficient Machinery
  2. 2. How fast things go ….11 years analysis … •2018 - 31.9M •2011 -12.8M •2011 - 19.7M •2011 - Japan 18.3M 2007-2018 •2007 - 8.7- 11.0 M North 15.0M European •2007 - •2018 -16.5MAmerica Cluster 8.3M Korea •2007 - China 2007 - 2018 21.9M 3.7M - 4.5 M •2018 - 26.9M •2018 - 10.4M ASEAN •2011 - 3.8M India •2007 - •2007 – 1.9M 2.2M Mercosur •2011 – Sub-Saharan 3.8M •2007 – 3.2M Africa •2018 – 2007-2018 6.0M •2011 – 0.7M- 1M 4.6M •2018 – 5.9M 2 Source: JD Power 2011
  3. 3. So China will make 32 M Cars ? Well, you know …• “… Chinese cars are not American cars ! (and even less European or Japanese ones !)”  Crash test !  Emissions !  Quality !  Bells and whistles (?)  Efficiency (!?)• “Anyway, China is still an emerging country for long and they only make cheap cars for lower income people !”• … but, well, perhaps we should pay attention a bit more ?  BYD ?  Tibet ?  Africa ? 3
  4. 4. China emerging country for long … 4
  5. 5. … but should not we look a bit closer ? 5
  6. 6. The path to 50 M Chinese Cars per year• How many cars per year in China in the end ?• In 2010:  Japanese model: 128.3 M People – 60 M Car Parc – 5 M Light Vehicles Sold Car Sales = Car Parc (U.S. model: Car Sales = Car Parc / 20) 12  China: 1 331.4 M People – 40 M Car Parc • The Japanese model would give 622 M Car Parc in China  50 M Light Vehicles Market (U.S. model: 30 M Light Vehicles Market)• How long will the growth last ?  2003: 2.36 M Cars Sold  2010: 9.6 M Cars Sold  CAGR = 22.1% !  At 22.1% growth per year, 50 M Cars yearly sales would be reached in less than 9 years  … 600 M cars on the Chinese roads by the end of next decade ??? 6
  7. 7. How fast ? The E-Bikes model• 2009, Chinas output of electric bikes (E2W) reached 22.2 M• 2011, about 120 M e-bikes on Chinese roads, more than 30 M produced 7
  8. 8. Not a Chinese Tsunami ! (but …)• 中国 = Country in the Middle = Self Centric – and pragmatic !• Not a Japanese or Korean export model  Largest internal market in history  No former American protectorate• 1980-2000: Get hard currencies to pay for technology  Export whatever you can (From Barbie dolls to TV sets and PCs)  Import technology and business know-how• 2000-2010: Prime the internal demand era  Grow the industry and expand technical know-how towards hi-tech• 2011 and later: Internal demand attractiveness beats all markets  Similar to the U.S. from 1900 to 1929 … but 15 times larger  Exports still needed for offsetting raw materials/energy imports  Flows of exports accelerate with Africa and South-America in line with imports  Yuan becomes the reference trade currency for Africans … and others (?) 8
  9. 9. In the mean time …• Confederate Europe expands its cluster to Middle east (500 M consumers with Oil, Gas, Solar and Nuclear Energy)  North Africa and Turkey complement Eastern Europe as growth centers  Cluster stability around the Euro  Internal cluster industrial exchanges most important• Astonished America challenged as number one and must turn to frugality  The Illness: • Hardest hit by inflation of oil and raw materials • Hardest hit by the diminishing power of the Dollar • Hardest hit by its national deficit  Cures: Considers “the confederation of NAFTA” - Strengthened Cluster – Open borders• South-America (Brazil cluster) grows well and learns to love China• Japan and Korea towards China economic protectorates• India continues a difficult adolescence and re-explores links with Russia 9
  10. 10. Cars: Enough oil for the world ?Oil prices will keep growing robustlyChina can’t afford a petrol/diesel engine model for long term growthChina will be THE driving market for (H)EVs 10
  11. 11. Fossil-fuel CO2 emissions, 2007 •World emissions: 30.7 billion tons CO2
  12. 12. Implications – Macro Level• For China:  Control of strategic raw materials sources • Oil ? Yes, but it’s not the long term solution • Batteries, permanent magnets: Lithium, rare earths  Western China • Grid electricity: Uranium  Western China • Others: (Copper, Iron, Lead, Nickel, etc …)  Africa, Latin America, Australia  “Thrifty” high-tech to save as much energy and material as possible  ICE cars  Serial Hybrids, E-Cars – Top-Down and Bottom-Up  E-Bikes  E-Micro-Cars (or “Segway-QiChe” ?)• For developed countries:  Cars downsizing  Some hybrid  Europe, Japan used to smaller cars, dear oil, Nuclear energy  Easier adaptation  North-America issues – Lobbies, Driving Distances, “Big and Plentiful” mentality• For India and Russia:  India comes years after China “first come, first served” natural resources policy in Africa and South America and could turn to Russia 12
  13. 13. Scenario for 2010-2030• A decade of inflation worldwide (2010-2020)• 2020: Yuan challenges the USD as the preferred currency for commodities• 1 USD = 1 EUR = 2 CNY ?• Western countries and Japan GDP per head stagnant since 2010• India “Small Car Hub” for Developed countries• 2015-2030: Africa economy booming• Global Industry Growth will stay dynamic – but driven essentially by Emerged (China) or Emerging Markets• Boom in Energy management, Electricity Grids, E-Cars supply Chain• Wind+Solar+Atomkraft ? Ja Bitte ! (or we’ll all suffocate !) 13
  14. 14. What does this mean for the Car Industry ?(… and how can my automotive business survive ?)• Thrifty, Thrifty, Thrifty (even if you make Ferraris !)  Know your shop floor, look for Muda !• Serial Hybrids or EVs (small ones preferred)• Light weighting, compatible with EV architecture  Technology will evolve very fast BUT Quality will still stay paramount !  “Reserved for future use”• Cluster organization  One Head Quarter in each cluster + Global R&D, Purchasing & Finance coordination – Strong, empowered China HQ  Looking for Low Cost should be next door ! (Logistics, Currency Zone)  Next door emerging market have still growth potential !• … and integrate Chinese, Spanish/Portuguese, Arabic and Russian ! 14
  15. 15. Finance: manage in a wild world• Currency fluctuations (not-so-low cost sourcing)• Market fluctuations• Accelerate in emerging markets – with the right Banker  Bankers support (Knows east/west/south)  Hands on experience in your trade  Development AND investment banker  Present in all emerging countries  World class understanding of your industry  Long term view• Promoting efficient products and processes 15
  16. 16. Who We Are, What We Do• IFC, part of the World Bank Group, is the largest global development finance institution focused on the private sector – the global leader in private sector development finance• We create opportunity for people – to escape poverty and improve their lives• Driven by our vision and purpose, we make a unique contribution to development• We invest, advise, mobilize capital, and manage assets – providing solutions for an inclusive and sustainable world 16
  17. 17. Expertise: How we can help• Financial expertise  55+ years focused on sustainable projects financing in emerging markets• Country expertise  Part of the World Bank - hands on experience in fast growth countries and access to governments• Industries expertise (Manufacturing, Infrastructure, Retail, VC )  Unique combination of manufacturing expertise with VC experience  A different VC model … • Not just technology but scaling up operations • Higher variable costs (hardware) and higher breakeven points • Requirement for a global understanding of combined emerging and developed market  Evolution of grids and automotive energy issues are closely monitored • Renewables (Wind, Solar, Biomass, …) • Batteries (Vehicles, Grid storage) • Inverters, BMS, smart meters, RFID, Billing … • H-EVs/EVs 17
  18. 18. IFC’s Business (What we do) Investment Services• Loans and intermediary services• Equity and quasi-equity• Syndications• Structured and securitized products• Risk management products• Trade finance• Subnational finance• Treasury operations• CleanTech Venture Capital 18
  19. 19. IFC Strategic Priorities• Strengthening the focus on frontier markets – IDA countries, poorer regions of middle-income countries, conflict affected and fragile states, and industries with the broadest potential for development impact• Building enduring partnerships with emerging market players• Addressing climate change and ensuring environmental and social sustainability• Promoting private sector growth in infrastructure, health, education, and the food supply chain• Developing local financial markets 19
  20. 20. Combating Climate Change • The developing world has great demand for energy, but cannot afford to increase emissions due to climate change concerns. • Solar, wind and other forms of renewable energy pose great opportunities for private investors – if risks can be overcome. • IFC invested $1.6 billion in renewables in fiscal 2010, a 60 percent increase from the previous year. 20
  21. 21. What we can do together (Feature)• Help grow your business overseas in Emerging Markets• “Neutral Broker” with local partners  Joint-Ventures, Clients, Suppliers  Corporate Governance (JVs)  Transparency  Intellectual Property  Ethics and Social dimensions• First range knowledge of policies – means to influence  Ex: World Bank report on China New Energy Vehicles program … … triggering policy support project on EV deployment in WuHan and ShenZhen  Close follow-up from WB shareholders at board level - United States (15.85%), Japan (6.84%), China. (4.42%), Germany (4%), Britain (3.75%) and France (3.75%).• Look for win-win cases  Sustainable economic growth effects in emerging countries  Dividends in capital, experience and technology in developed countries  Climate change mitigation 21
  22. 22. What can be expected (Benefits)• Financing solutions not readily available elsewhere in those markets  Long tenor, grace periods  Equity, Quasi Equity  Syndication  Local currency (when regulations allow)  Global facilities• World Bank stamp of approval  Sustainable development  Corporate image  Credit enhancement• Industry, Financial and Global expertise sharing  Cross-fertilization  VC / PE partnership approach on a global scale with ethics  Portfolio supervision / follow-up 22
  23. 23. Virtuous partnership in the development cycleA case study Example:• Core technology and industrial practices from a U.S. company  Core system components from the best of U.S. technology  Patents combined with “secret sauces” in key areas• Tap into huge potential emerging market (ex: China)  Localize labor intensive, bulky product processes, local deployment  Leverage lessons learned to better U.S. products and operations  Second financing round to expand in • Other emerging countries (cheap, trimmed down solutions) • Developed countries (upscale solutions)• Raised VC (Mezzanine) Quasi-Equity financing from IFC  Co-investor joined IFC benefitting from due diligence and risk mitigation 23
  24. 24. Our Vision That people should have the opportunity to escape poverty and improve their livesWe foster sustainable economic growth in developingcountries by supporting private sector development,mobilizing private capital, and providing advisory and riskmitigation services to businesses and governments. 24
  25. 25. • IFC provides more than money • We spread innovative ideas, mobilizing money for clients from many sources• We blend investment and advice, helping the private sector find • As results come in, we influence the policy solutions debate and share our learning for wider impact 25
  26. 26. Questions ? Mr. Emmanuel POULIQUEN (普迈新) Principal Industry SpecialistIFC - Global Manufacturing & Services – Energy Efficient Machinery Financing production and deployment of equipment that efficiently generate, store, transport or transform energy 2121 Pennsylvania Ave., NW Washington, DC 20433 Tel: +1 (202) 473-9114 Fax: +1 (202) 974-4394 Email: 26
  27. 27. Appendixes 27
  28. 28. Investments by Industry, FY10 Commitments for IFC’s Account: $12.7 Billion Private Equity and Subnational Investment Funds 3% Finance 1% Oil, Gas, Mining Agribusiness 4% and Chemicals 8% Infrastructure 12% Global Financial Health and Markets 54% Education 3%• Global Manufacturing and Services 11% Global Information and • Low emissions Cars, EVs • Wind, Solar, Grids, Batteries Communication Technologies 4% • Low Emissions Machines • Other … 28
  29. 29. Investments by Region, FY10 Commitments for IFC’s Account: $12.7 Billion Global 1% Sub-Saharan Africa 19% Middle East and North Africa 12% East Asia and Pacific 13%Latin America and theCaribbean 24% South Asia 8% Europe and Central Asia 23% 29
  30. 30. IFC Financing IFC’s own account Mobilization* Loan Participants $20bn $15bn $10bn $5bn $0* “Mobilization” includes syndicated loans, structured finance, IFC initiatives and other, and IFC Asset Management Company. 30
  31. 31. IFC Offers to Clients (What we bring) Unparalleled Expertise• Knowledge of global industries and local markets• Financial sector influence• Long-term partnerships; countercyclical role• Sustainable investments• Leadership on corporate governance• Value-adding expertise 31
  32. 32. IFC Offers Clients A Unique Role• Emphasis on development impact World Bank affiliation• Market discipline• Risk-taking and risk management• Preferred creditor status• Political risk cover 32
  33. 33. How IFC differs from other Investors• IFC can provide debt, equity, or a combination of both depending on the client’s needs• IFC has a longer investment horizon (5-7 years) and is less cyclical than most financial investors• With its equity investments, IFC can act as an “honest broker” in joint venture situations, give additional comfort for minority shareholders, and be a catalyst for other investors.• Leading multilateral source of development finance – IFC’s breadth of investment expertise and years of experience in emerging markets add value to its clients• IFC strong reputation adds credibility to investee companies that access international capital markets• Best practice know-how on corporate governance, environmental management, local communities,and insurance requirements 33
  34. 34. IFC Customer Profile: Multinationals, Regional and Local•What is important about IFC to a company, by size and locationWhat IFC brings to an investment Multinational Regional LocalQuality stamp of approvalCountry risk mitigationExposure to country risk volatilityGood contacts/knowledgeCompetitive cost •AlwaysLong tenors •OftenAccess to local currency funding •SometimesComplementary funding source