www.pwc.com Autofacts Inside China Conference: China s Automotive Future
Global Overview Light Vehicle Outlook By the numbers 104 million: The number of light vehicles that will likely be produced in 2017 5.5%: The CAGR for global light vehicle assembly between 2010-2017 83%: Emerging markets contribution to growth between 2010-2017 Source: Autofacts 2011 Q4 Data Release 2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Assembly Outlook Global Emerging markets in the driver's seat Global: Light Vehicle Assembly by Market Type 2000 2017 (millions) 110 100 90 80 70 60 50 40 11 11 12 14 16 19 21 25 26 27 35 38 44 49 54 57 60 61 30 20 10 45 43 44 44 44 44 44 44 40 30 36 38 40 41 42 42 42 43 0 Emerging Mature Source: Autofacts 2011 Q4 Data Release 3
Assembly Outlook Global Much ado about something... in Asia Global: Contribution to Growth by Region 2000 2017 (percentage) AP China 38.5% India 12% NA EU SA Brazil 6.4% EE Russia 6.2% MEA 0% 10% 20% 30% 40% 50% 60% Source: Autofacts 2011 Q4 Data Release 4
Market Overview China Understanding China Already the largest automotive market in the world, China is poised to eclipse the 20 million mark in 2013. Understanding the underlying dynamics of this market is critical to participating in China s growth story. From providing much needed growth opportunities to spawning alternative technologies, China will play a pivotal role in the evolution of the auto industry. Domestic Demand Government s Role Emerging Domestics Alternative Technologies Export Ambitions 5
Sales Outlook China Will China achieve Western standards of living? US, UK, Germany, China: Light Vehicle Penetration 2010 (number of vehicles) 900 800 700 600 China s vehicle PARC would have to grow by more than 650 million to achieve penetration levels of the Western World 500 400 300 200 100 0 Vehicles/1000 People Vehicles/Mile of Road Vehicles/Sq Mile USA UK Germany China Source: Wards Auto 6
1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013F 2015F Sales Outlook China China is just firing up all its cylinders Japan Korea China Take-off Years 1962-1972 1989-1997 2007-2015 GDP per Capita (PPP) Growth 8.9% 9.0% 10.4% Median Age 26-29 27-29 33-36 Japan, Korea and China PV Penetration Comparison 1955 2015 (Units/1000people) 250 200 150 100 50 0 Japan Korea China Source: Autofacts Analysis 7
Sales Outlook China Sales will grow rapidly, but unlikely at 2009/2010 levels China: Light Vehicle Sales 2000 2017 (millions) 28 24 2009 Stimulus Plan Sales Forecast 60% 50% 20 40% 16 30% 12 8 20% 4 10% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0% Sales Annual Growth Rate (R-Axis) Source: Autofacts 2011 Q4 Data Release 8
GDP Economic Outlook China 2015 focus lies on economic optimization & sustainability China: GDP Growth 1981 2016 (RMB trillions) Growth focus Reforming & opening Export & low wages Domestic demand & services Optimization & sustainability 6 th FYP 7 th FYP 8 th FYP 9 th FYP 10 th FYP 11 th FYP 12 th FYP 60 14.9% 15.8% 26.8% 10.4% 13.3% 16.9% 7-8% (f) 50 40 30 20 Megacities and maritime regions (Shanghai, Tianjin, Beijing ) Maritime regions and eastern provinces Western and central China / rural regions 10-1981 1986 1991 1996 2001 2006 2011 2016 Note: Nominal GDP at current prices Source: Statistical Yearbook 2010, MIIT, MOST 9
Sales Outlook Inland China Catering to a new set of consumers China: Vehicle Density by Province 2009 (cars per thousand people) China: Fixed Asset Investment by Province 2010 Heilongjiang Heilongjiang Xinjiang Inner Mongolia Beijing Jilin Liaoning Xinjiang Inner Mongolia Beijing Jilin Liaoning Tibet Gansu Qinghai Tianjin Hebei Shanxi Ningxia Shandong Shaanxi Henan Jiangsu Hubei Anhui Shanghai Sichuan Chongqing Zhejiang Hunan Jiangxi Guizhou Fujian Yunan Guangxi Guangdong Hong Kong Tibet Gansu Qinghai Tianjin Hebei Ningxia Shanxi Shandong Shaanxi Henan Jiangsu Hubei Anhui Shanghai Sichuan Chongqing Zhejiang Hunan Jiangxi Guizhou Fujian Yunan Guangxi Guangdong Taiwan Hong Kong Hainan Hainan Passenger Vehicle Density (cars/1000 ppl) 70+ 51 70 31-50 0-30 2010 FAI YoY Growth less than country average 2010 FAI YoY Growth more than country average Source: National statistic bureau, Autofacts Analysis 10
Sales Outlook China s Smaller Cities Catering to a new set of consumers China: Household Disposable Income by City Tier 1995 2012(f) (RMB thousands) 100 China: Sales by City Tier 2010 2017 (millions) 28 90 26.6 80 70 60 Tier 2 cities gain affordability as Tier 1 cities in 2008 24 7.8 50 RMB38,000 for a basic model 20 40 30 20 10 Tier 3 cities gain affordability as Tier 1 cities in 2010 0 2000 2002 2004 2006 2008 2010(f) 2012(f) Tier 1 City Tier 2 City Tier 3 City 16 12 5.2 0.9 14.1 2010 Tier 1 Tier 2 Tier 3 2017 Source: Autofacts 2011 Q4 Data Release 11
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Assembly Outlook China Assembly growth overtaking capacity additions China: Light Vehicle Assembly Outlook 2000 2017 (millions) 33 30 27 24 21 18 15 12 9 6 3 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 0% Assembly Volume Excess Capacity Utilisation (R-Axis) Source: Autofacts 2011 Q4 Data Release 12
Assembly Outlook China Western vs. Chinese view of the market China: Current Alliance Group Assembly Outlook* 2000 2017 (millions) China: Current Automaker Assembly Outlook 2000 2017 (millions) GM VW Hyundai Chang'an Toyota R-N Geely Chery Honda Ford PSA Great Wall BYD FAW Dong Feng Others * R-N = Renault-Nissan 5.0 SAIC Dongfeng FAW Chang'an GAIC BAIC Chery Geely Great Wall BYD Brilliance Jianghuai Zoyte Jiangling Southeast Others 0 1 2 3 4 2017 2010 0 1 2 3 4 2017 2010 Source: Autofacts 2011 Q4 Data Release 13
Assembly Outlook China Fragmentation limits China s potential China: Number of produced series and platforms in selected countries* 2000 vs. 2015 (quantity) 450 400 402 350 300 267 250 200 150 100 50 116 145 204 203 67 108 115 52 51 48 64 78 28 28-2010 2015 2010 2015 2010 2015 2010 2015 China Japan USA Germany Nameplate Platform 5.0 Note*: Series reflect the base model - without division by variant, like sedan or wagon Source: Autofacts 2011 Q4 Data Release 14
Assembly Outlook China Consolidation: China s plan for a new industry structure China: Current Industry Structure 2010 China: Ideal Industry Structure 2015 Chinese Foreign Chinese Foreign Number of OEMs* >50 14 Number of OEMs* 5-8 n/a Average utilization 80% 95% Average utilization ~100% ~100% Market share ~40% ~60% Market share >50% <50% Export share ~3.9% Export share >10% Global Player none many Global Player some n/a Note: *With local production in China Source: MIIT, MOST, NDRC, CAAM, Autofacts (Q2/2011) 15
Industry Outlook China China s perspective on new propulsion technology China: Overtaking Without Catching Up Fossil Post-fossil Hybrids (HEV) Plug-in Hybrids (PHEV) Battery EV (BEV) Fuel Cell EV (FCEV) ICE New Energy Vehicle Source: Manufacturer Websites 16
Industry Outlook China China s new energy vehicle policies China: Significant programs and regulations to develop the New Energy Vehicles 12th five-year plan 863 -Plan Project for EVs New Energy Vehicle Industry Development Plan 2011-2015 2011-2015 2011-2020 National people s congress: Development of seven strategic industries including the industry New Energy Vehicle (NEV) Ministry of Science and Technology (MOST): Goals for 2015 concerning the battery and EV production (1 million vehicle units) RMB 738 million for programs in the years 2011-2013; 42% of the development with focus on battery technology (about RMB 300 million) Ministry of Industry and Information Technology (MIIT) & Ministry of Science and Technology (MOST): Planned subsidies of around RMB 100 million (~$15 million) to 2020 Announced the biggest share of those subsidies for R&D, especially in battery technologies Goals for EVs till 2020 (5 million existing units) Up to RMB 60,000 incentive for private buyers Source: Press releases and documents of MOST, MIIT 17
Final Thoughts China Question is not IF but rather HOW China gets to 30 million China: Light Vehicle Assembly Scenario Forecast 2010 2017 (millions) 32 28 Cumulative additional quantity upside vs. base case ( 11-17): +16.3 million units 24 20 16 Cumulative shortage downside vs. base case ( 11-17): -17.0 million units 12 2010 2011 2012 2013 2014 2015 2016 2017 Scenario Range Baseline Source: Autofacts 2011 Q4 Data Release 18
Presented by richard.hanna@us.pwc.com The information contained in this report represents the culmination of proprietary research conducted by Autofacts, an analytical group within the Research & Analysis Organisation. All material contained in this report was developed independently of any client relationship and does not represent the firm s view as an auditor to any legal business entity. While every effort has been made to ensure the quality of information provided, no representation or warranty of any kind (whether expressed or implied) is given by as to the accuracy, completeness or fitness for any purpose of this document. As such, this document does not constitute the giving of investment advice, nor a part of any advice on investment decisions. Accordingly, regardless of the form of action, whether in contract, tort or otherwise, and to the extent permitted by applicable law, accepts no liability of any kind and disclaims all responsibility for the consequences of any person acting or refraining from acting in reliance on this document. 2011. All rights reserved. "" refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, other member firms of PricewaterhouseCoopers International Ltd., each of which is a separate and independent legal entity.
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