Jean Van der hasselt CEO Russia and the Nordics
Market Overview Russia Population 140.4 million Language(s) Russian Currency Ruble Capital City Moscow GDP US$1.465 trillion Source: IMF Russia is the largest country in the world, covering more than a ninth of the Earth's land area
Commercial Overview Stable economic growth Well balanced economic structure Substantial economy, with strong growth prospects GDP = ~US$1.5 trillion 7 th largest economy in the world at PPP* 14.8% CAGR GDP projected through 2015 Low unemployment Unemployment dropped from 9.0% in 2010 to 6.7% in 2011 supported by government programs GDP growth (CAGR) 2005-2010 2010-2015 13.9% 14.8% Population (CAGR) -0.3% -0,3% Natural resources driven export economy Key exporter of oil and gas to Europe Unemployment rate 8.0% 7.4% Inflation 8.0% 5.0% Russia experiencing strong and stable growth Source: IMF *GDP at Purchasing Power Parity
Economic growth drivers 2010-2015 High oil prices and strong demand for gas Stable government system Well educated population Government focus on modernization and innovations GDP 2010-2015 US $bn Russian GDP forecast to experience strong growth with 14.8% CAGR 2010-2015 Source: IMF
Automotive Overview One of the largest countries Vast country, low population density Great potential for car penetration growth Population preferences 4x4 segment popularity Petrol Dominance 140m people Around 17% of population live in 2 major regions Moscow and St. Petersburg Population density = 8.4 people per sq km (vs 255 in UK) 243 registered cars per 1000 people (vs 494 in UK) In Russia car ownership is viewed as indicator of social status, thus there is stable interest for premium brands car segment Poor road quality and extreme weather conditions 4x4 viewed as sign of wealth Low fuel prices Poor quality of diesel No taxation initiatives on fuel economy Rising personal wealth drives interest in new car purchases Source: IMF/JD Power
Total Industry Volume Russia Car Market recovering after 2009 crisis Scrappage scheme played important role in supporting car market with 500k certificates issued The regions are growing faster than Moscow and St Petersburg after a severe downturn million vehicles Source: Global Insight Market increased by 35% in 2010
Car Penetration 2008-2015 Key driver Strong Russia GDP growth 2010-2015 CAGR of 15.2% Penetration growth forecasted at 4 5% annually Moscow and St. Petersburg car penetration already above 300 cars per 1000 people Still big gap vs Western Europe car penetration levels (Germany - 558 and UK - 494 vehicles per 1000 people) Per 1000 people Source: IMF/JD Power Car penetration projected to increase to 298 cars / 1000 by 2015
Total Industry Volume projected to reach 3.0m by 2015 000 vehicles Source: Global Insight 2010 2015 TIV CAGR of 9.2%
Foreign brands dominate the market Key Drivers - Growing population wealth and sophistication resulted in migration to foreign brand cars Consumers want more stylish and reliable products, higher customer experience & standards, vehicles to handle challenging weather conditions Share of foreign brands in Russian car market (%) Source: Global Insight Market premiumisation will drive future growth
Russia market strength Market growth potential Low car penetration per capita Strong GDP and disposable income upside post downturn Customer aspiration for premium brands Capital efficient footprint Fewer retail points Site capacity built for growth Scale operations Better customer experience Sustainable retail margin High margins Used vehicles untapped opportunity Vehicle parc growth will drive Aftersales Higher returns Higher revenues per square meter Lower people costs Stronger operational gearing
Retail Locations Moscow St. Petersburg Moscow 13 Retail Centres St. Petersburg 7 Retail Centres Inchcape represents strong foreign / premium brands in 20 sites
Large scale 3S facilities provide superior retail economics Borishof, Yaroslavka Total size of 5K sq. meters Workshop zone of 900 sq. meters 18 working bays Musa motors, Moscow Located in on 3 rd Moscow ring road (less than 5 km from Kremlin) Total size of 4K sq. meters Workshop zone of 800 sq. meters with 17 working bays Audi Vitebskiy Total size of 3K sq. meters Workshop zone of 1.5K sq. meters which includes body shop 26 working bays
Inchcape invested in best in class retail facilities Toyota Piskarevskiy, St. Petersburg Opened in 2009 Retail center of 12k sq. m. one of the largest in Europe 18 car Showroom of 1.3k sq. m. AFS area of 4k sq. m. operates with 36 workshop and 20 bodyshop bays Toyota Vnukovo, Moscow Opened in Dec 2010 as Joint Venture with Independence Retail center of 9.6 sq. m. includes two showrooms for new and used cars AFS area of almost 5k sq. m. includes more then 20 workshop and 20 bodyshop bays each
Inchcape occupies retail centres in the best locations Musa Motors 1 1 st and 2 nd Magistralnaya str. Very central location close to Third Transportation circle Musa Motors 3 Olimpiyskiy Busy and trendy area Musa Motors 4 Yaroslavka JV with Independence Vnukovo Near by airport and Luxury suburbs One of biggest and busiest city arteries Musa Motors 5 Balashikha Just outside MKAD Musa Motors 2 Profsouznaya One of the finest districts of Moscow Musa Motors 7 Hotel Ukraine City center Musa Motors 6 Varshavskoe One of biggest and busiest city arteries
Inchcape occupies retail centres in the best locations Concord 1 Rustavelli Mini automotive cluster of St. Petersburg Toyota Piskarevskiy Rustavelly Mini automotive cluster of St. Petersburg Concord 2 Leninskiy Conveniently located close to Leninskiy St. Petersburg roads Audi Vitebskiy Vitebskiy pr. Located close to the City center Concord 3 Sofiyskaya Largest Peugeot St. Petersburg RC In busy city area Toyota Pulkovo Sheremetievskaya St. Petersburg key road going to Pulkovo (city only airport)
Our top 5 Priorities Growing market share Growing aftersales Improving margin Controlling working capital Selective capital expenditure
Operational focus on our top 5 priorities to deliver our Customer 1 st strategy Growing market share Fully implementing Inchcape Advantage processes to leverage our superior customer service and create industry differentiation Focus of our new car sales executives on developing leads, offering test-drives and on increasing capture rate while leveraging vehicle supply from our OEMs Growth of used car business across the business supported by Inchcape expertise & leadership Inchcape brand partners launch new products on a regular basis, appealing to new customers and improving customer loyalty Traffic Leads/Traffic Test drives/traffic Order/ Traffic Growing aftersales Strategic focus on developing and promoting unique aftersales offers (i.e. warranty programs, parts wholesale programs, insurance packages with life insurance, car rental service, etc.) Upsell strategy within the warranty period; retention focus on post warranty customers Workshop productivity improvements increasing hours sold Focus on more profitable workshop mix, increasing share of more profitable customer groups Enquiries Booking/Enquiry Intakes/Enquiry
Operational focus on our top 5 priorities to deliver our Customer 1st strategy BMW: 1-series Cabrio, 6-series Cabrio Jaguar: XJ 3.0 Petrol Audi: A6 new, A8 3.0TDI, A8 W12 6.3, Q5 hybrid, RS3 Toyota: Land Cruiser Prado (anniversary edition), Land Cruiser 200 (anniversary edition), Land Cruiser Prado 2.7L Lexus: CT 200h Volvo: V60 BMW: 1-series, 6-series Coupe Land Rover: Range Rover Evoque Jaguar: XF (restyling) Audi: A5 and A5 Sportback restyling, Q3, S8, S7 Toyota: Camry (new generation), Hilux 2.5 Diesel, Hilux 3.0 Diesel, Alphard (Russia launch), Prius (restyling)
Operational focus on our top 5 priorities to deliver our Customer 1 st strategy Improving margin Benchmark existing new car sales discount / control management process Preinstalled value-added packages New F&I products launch Operational efficiency improvement on all levels: - Better mechanics / service advisers productivity - Efficient support from non productive units Controlling working capital 1.5 months stock cover Focus on aged stock
Operational focus on our top 5 priorities to deliver our Customer 1 st strategy Selective capital expenditure Opening of new retail centers in Moscow: BMW, Mini, Jaguar, Land Rover, Used car and bodyshop facilities Located on Moscow ring road Redevelop existing facilities and open new Musa Motors City retail centre: Jaguar, Land Rover and Volvo facilities Located in the business heart of Moscow (10 min. drive from Moscow City and around 20 min. drive from Kremlin) 26K sq. m. plot with total 14K sq. m. footprint Operational start scheduled for early 2012
Inchcape Russia Market premiumisation to drive growth Scale position in the two largest regions with highest margins Moscow and St. Petersburg Working with strongest brand partners: BMW, Audi, Volvo, Toyota, Jaguar and Land Rover 20 high-quality retail centres Stable and highly-experienced management and operational teams Investing in growth with the opening new scale facilities Musa Motors acquisition has given us a leading retail position in Moscow Uniquely positioned with a high quality operation in a fast - growing market