Outline. Urbanization. Prospect of automobile industry in process of the Mega city develpment in China. 1. Urbanization development in Great China

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1 Outline 1. Urbanization development in Great China 2. Mobility development in the process of China s urbanization Prospect of automobile industry in process of the Mega city develpment in China Die Zukunft der Automobilindustrie im Zeichen der Mega-City-entwicklung in China 3. Prospect July School of Automotive Studies, Tongji Universität Prof. Ma Jun Page: 2 / 31 According to United Nation s report, the global population growth is fully absorbed by urbanization, the most dramatic future urban increase will exist in Asia & Africa 1. Urbanization development in Great China Urbanization 2. Mobility development in the process of China s urbanization 3. Prospect Global population growth Urban Populations Share Worldwide Percentage Source: UN Population Division, Deutsch Bank Page: 3 / 31 Page: 4 / 31

2 As one of the most important regional country in Asia, China also need to face all relevant challenges & opportunities of urbanization China s urbanization could be divided into 3 phases from year 1949 till now, urbanization is the only way for china s modernization Year 1949 Year 1978 Year 1992 Vs Stagnation of urbanization Urbanization / Industry rate China Initial stage of urbanization Large-scale development stage of urbanization Modernization vibrant urban construction frail urban ecological Transforming Urbanization for China, opportunities with challenges! National Policy: strict binary system under planned economic system Urban and rural population are strictly fixed, there is no flow of population Artificial restrictions on the process of urbanization Industrializing National Policy: Reform and opening-up The development of coastal economies have attracted a lot of well-off rural labor force Led to the start of urbanization National Policy: Comprehensive national strength increased National Strategy of western region development, the 4 th central section of the economies rise Led a nationwide process of urbanization Page: 5 / 31 Page: 6 / 31 Huge Urbanization potential in China: till year 2025, the urban population share would reach 66%, about 0.3 billion new inhabitants, which equals to USA s population of year 2006 China Urban Population Growth from 2007 to billion billion 45% of China s Population 66% of China s Population Y 2007 Y billion = USA Four main city clusters (Bohai Circle Yangzi River Delta Pearl River Delta West Delta) have came into being, which will leader the economic of China in the future 20 years Overview of China s Urbanization till main city clusters in China 1. Bo Hai Circle city cluster Area: 498,000 Km 2, 20 cities Population: 120 million GDP: 2.5 Trillion RMB (2003), 23% of total GDP 2. Yangzi River Delta city cluster Area: 99,600 km 2, 14 cities Population: 75 million GDP: 2.9 Trillion RMB (2004), 21% of total GDP 3. Pearl River Delta city cluster Area: 45,000 km 2, 9 cities Population: 27 million GDP: 1.1 Trillion RMB (2003), 10% of total GDP 4. West Delta city cluster Area: 220,000 km 2, 47 cities Population: 118 million GDP: 1.5 Trillion RMB (2003), 6.3% of total GDP Expert forecast, in future 10 city clusters will come into being in China Source: Mckinsey&Company, AMMI Research Source: Mckinsey&Company, AMMI Research Page: 7 / 31 Page: 8 / 31

3 Till Year 2025, China will have 8 cities with population more than 10 million, megacities will play more and more important role in China s economic However, China also has to face several challenges, which may deeply influence the future urbanization s development City distribution by size Buildings in Shanghai Resources and pollution Cities 9 Cities Percentage Demand for resources from urban China will double Mega city >10 Million Large size city 5~10 Million Middle size city 1.5~5 Million Small size city 0.5~1.5 Million Town <0.5 Million 8 Megacities by 2025: Beijing Shanghai Guangzhou Shenzhen Tianjin Wuhan Chongqin chengdu Land and spatial development the addition of more than 350 million urban residents over the next 20 years will require unprecedented construction Challenge 2 Challenge 1 Challenge 3 Funding Challenge 4 Labor and skills While migrant labor may still be plentiful, aspiring city officials will face challenges in finding sufficient university graduates New Cities Cities will face increased costs in providing services Source: Mckinsey&Company, AMMI Research Source: Mckinsey&Company, AMMI Research Page: 9 / 31 Page: 10 / 31 So, it is critical for central government to make a better developing strategy for China, which could integrate each urbanization mode s advantage Regardless of urban shape, the adoption of urban productivity ( ) will be no doubt encouraged by China s central government City developing Mode 1 City developing Mode 2 Hub and spoke Distributed growth Example: Shanghai, China Example: Ingolstadt, Germany Measure for urban productivity Plan for integrated, dense development 1 Highest per capita GDP 2 More efficient use of energy 6 Shanghai & Manage demand for, not just supply of, resources Invest in labor and skills development More efficient mass-transit 3 Target of urban productivity Lowest rate of loss of arable land 5 Enhance public sector productivity More effective control of pollution 4 Availability of talent Page: 11 / 31 Page: 12 / 31

4 1. Urbanization development in Great China 2. Mobility development in the process of China s urbanization 3. Prospect 7918 Network new highways contain 7 radiation roads from Beijing, 9 longitude roads, and 18 latitude roads Target of expressway for 2016 is 75,000 km and 85,000 km for 2020 The network will connect all provincial capitals, large cities with over 500,000 urban residents & middle tier cities with population of over 200,000 Source: National Traffic bureau, AMMI Research Page: 13 / 31 Page: 14 / 31 Industry Cluster - With merger, acquisition and reorganization, 5 main automotive clusters and big groups are taking form in China, which have close relationship with the city clusters Northeast China region FAW Percentage Growth Growth vs. penetration of global PC market (2004) 50% 40% China: 2,512 China in % Central China 20% 10% 0% -10% Japan: 4,768 U.S.: 16,830 Germany: 3,267 UK: 2, Canada: 820 Penetration (Passenger car per 1,000 population) Chongqing Chang an DFM Yangtze River Delta SAIC Pearl River Delta -20% Note: Size depicts sales units of market (millions) GAIG Source: KPMG China automotive and component market 2005, AMMI Research Page: 15 / 31 Page: 16 / 31

5 As the very driving force of China s Industrial upgrading, urbanization requires more manufacturing with intensive technology & capital, by which automotive industry would play more and more important role 1 st / 2 nd / 3 rd Industry GDP Share GDP Share of China automotive industry Also, automotive industry must face the challenges which exist together with the urbanization, by which the whole value chain would be deeply influenced a b c Raw Material & Fuel Manufacture by OEM & Supplier Sales & Service for customers Percentage 2.5% % % % % Tertiary industry Secondary industry Primary industry 0% Year Main challenges: fuel resources / CO2 & pollution / material price Main challenges: Vehicle mode / Dealer network extend Main challenges: New driving behavior / new lifestyle Source: National statistic Division, AMMI Research Page: 17 / 31 Page: 18 / 31 Fighting for pollution, central government launched new China emission implement schedule to guide the automotive industry development in China NEV development, as a national strategy, in China has gone through three main stages till now 9th Five-Year Plan 10th Five-Year Plan 11th Five-Year Plan 12th Five-Year Plan + OBD Other light vehicles New model Current model Euro 1 Euro 1 Euro 2 Euro3 in Beijing Euro 2 Euro 3 Euro 4 + OBD Fuel passenger cars + OBD Other light vehicles Euro 3 Euro 4 + OBD Fuel passenger cars Developed Vehicle Milestone LPGV CNGV Bio-diesel Fuel Ethenol Fuel Mathenol DME H2ICE BEV HEV FCEV Clean Auto Action National 863 Program Electric Vehicle Key Project in 863 Program Energy Saving and New Energy Vehicle Key Project? Source: China automotive industry institute, AMMI Research Page: 19 / 31 Page: 20 / 31

6 Since 2002, the government decided to highlight the development of new energy vehicle as national strategy, thus a 3 3 R&D mechanism was initiated to develop EVs through 863 Program Close cooperation between universities and enterprises ensures the achievement of FCEV, which is capable of small scale production Milestone in phase 2: Electric Vehicle Key Project in 863 Program during 10th five-year Plan ( ) Government Investment: 880 Million RMB R&D Roadmap of FCEV International NEV demonstration in California, USA 3 3 R&D Mechanism Achievements Fuel Cell Car Research Team: Whole Vehicle Platform FCEV HEV BEV Vehicle Development Prototypes of BEV, HEV and FCV developed BEV and HEV are qualified to be produced Platform Key Tech Powertrain Control System Electric Drive Motor Demonstration BEV and HEV started demonstration in 7 cities Model Start 1 Start 2 Start 3 Shanghai Fuel Cell Small scale production from 2008 Passat Lingyu Fuel Cell 20 models for Olympic 2008 Traction Battery Others 26 national standards established 796 patents applied Prototype Small Scale Production, China Daily Page: 21 / 31 Page: 22 / 31 The development of urbanization has deeply influenced people s lifestyle, mobility pattern, what the government will encourage in the central city is public traffic rather than private car Travel distance less than 20km The model of trip region The flexibility of mobility will concentrate more on the weekend trip usage, not the normal living and working Trip flexibility Work day 1 Work day 2 Work day 7 Flexibility of mobility Weekend 1 Work day4 Travel distance in between 20km-40km Work day 3 Work day 5 Weekend 2 Irregular usage Not so regular Regular usage Travel distance more than 100km Work day 6 conclusion Daily trips of go to or come off work are regular, but when the trip comes to the business activity, it will be very irregular. Normal life and entertainment are inner city. If they go to or come off work, the trip distance will not be so long, and if they do some business activities the distance can be much longer. Car usage: For normal life Car usage: For Car inner-city usage: for entertainment normal life Car usage: For business Car usage: Self-travel fan, For outer-city entertainment Page: 23 / 31 Page: 24 / 31

7 Urban infrastructure s development could not catch up with the people s increasing mobility requirement, PC market is on track toward small segment, more and more integrated model could be seen on the street Market by segment With the development of urbanization, the future network developing will focus more on the 3rd & 4th tier cities, traditional 4S dealer has to be faced up with new challenges Market contribution of top 10 regions S dealer sales mode 40% 35% % 25% % 15% Beijing, 13% Liaoning, 5% 10% 5% 0% Small car UKL0 UKL1 UKL2 KKL MKL GKL Cross & integrated auto model 1 st tier, market contribution>=10% 2 nd tier, market contribution>=5% 3 rd tier, market contribution>=3% 4 th tier, market contribution<3% Sichuan, 3% Hebei, 3% Shandong, 5% Jiangsu, 8% Shanghai, 8% Zhejiang, 17% Fujian, 3% Guangdong, 12% future?, China Daily Source: China automotive industry institute Page: 25 / 31 Page: 26 / 31 3 Prospect Under the economic globalization background, how Europe and World to confront the urbanization in China and Asia? Cooperation and together developing will be the very trend 1. Urbanization development in Great China 2. Mobility development in the process of China s urbanization 3. Prospect Page: 27 / 31 Page: 28 / 31

8 3 Prospect 3 Prospect School of Automotive Studies Tongji University shanghai international auto city Tongji Jiading Campus Subject orientation Before 2007 Dean, School of Automotive Studies with Subject Clusters oriented to sustainable city & industry development From 2007 Minister of Science and Technology, China Subject Cluster Orientation 1 Urban Construction & Disaster Protection Subject Cluster Orientation 2 Modern Transportation & related Facility Jiading campus located in the education area of Shanghai international automobile city, which covers an area of 2.2 million M 2 with a total investment of 2.8 billion RMB Automotive Design Automotive Engine Design Automotive Electronics Auto Body & Aerodynamics & New Energy Engineering Center Automotive Test Technology Automotive Marketing Automotive Logistics & info Vehicle Wind Tunnel Center Page: 29 / 31 Page: 30 / 31 Thank you! Page: 31 / 31