global industry trends & china market update industry trends & china market update december...
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Global Industry Trends & China Market Update
www.pwc.com
December 2016Autofacts Seminar
Pw C Autofacts ®Pw C Autofacts ®
Growth of a Global Industry
2
1 Grow th of a Global Industry
Pw C Autofacts ®Pw C Autofacts ®
The global automotive industry is a growth industry and China continues to be the most important growth driver
57.9
13.2
12.15.0 88.2
4.5
9.7
8.8 111.2
-
40
80
120
2009 Triad China ROW 2015 Triad China ROW 2022F
Global Light Vehicle Assembly2009 vs. 2015 vs. 2022 (millions)
Source: Autofacts 2016 Q4 Forecast Release Triad = EU, NAFTA, Japan *Compound Annual Growth Rate
CAGR*09 – 22
3.6%
5.0%
5.2%
8.6%
CAGR*15 – 22
1.4%
5.2%
3.4%
5.1%
Total
Triad
China
ROW
Additional production volume+23.0m
Additional production volume+30.3m
Annual growth: 6.2%+4.3m per year
Annual growth: 3.4%+3.3m per year
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1 Grow th of a Global Industry
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Sales
Assembly
2016 2022 2016 2022
Global: Light Vehicle Sales vs. Assembly2016 – 2022 (millions)
Source: Autofacts Analysis, Autofacts 2016 Q4 Forecast Release
China
4.9m2016 2022 2016 2022
31.8 25.5 33.024.9
NAFTA
19.821.0 21.6 17 .7
Japan
2016 2022 2016 2022
4.7 4.8 8.28.2
South Korea
2016 2022 2016 2022
4.11.6 1.5 4.3
Growth in global vehicle assembly follows demand, but also leverages location factors and free trade agreements
18.3m 15.8m2016 2022 2016 2022
EU + EFTA
20.217 .0 20.1 19.0
23,4
RoW
2016 2022 2016 2022
24.3 32.1 25.516.7
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1 Grow th of a Global Industry
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Global production capacity is growing almost exclusively in Asia-Pacific
1.3
2016 2022
European Union
19.3 22.5
2.9
2016 2022
North America
5.8 6.4
0.6
2016 2022
South America
1.1
2016 2022
Eastern Europe
3.7 4.4 0.7
2016 2022
Middle East & Africa
68.1 77.0
9.0
2016 2022
Asia-Pacific
Global Light Vehicle Assembly Capacity2016 – 2022 (millions)
Source: Autofacts 2016 Q4 Forecast Release
+7 plants
+209 product launches
+6 plants
+301 product launches+6 plants
+133 product launches
+0 plants
+98 product launches
+5 plants
+62 product launches
+14 plants
+978 product launches
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1 Grow th of a Global Industry
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Question
Who will be the leading global OEM by assembly volume by 2022?
“
a
b
c
GM
VW
Toyota
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1 Grow th of a Global Industry
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Top Five OEMS all forecast to capitalise on global demand growth
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1990 1995 2000 2005 2010 2015 2020
Top 5 OEMs by Global Assembly Volume1990 – 2022F (millions)
VW Group
Toyota Group
GM Group
Renault-Nissan
Hyundai Group
CAGR1990 – 2022F
4.2%
2.6%
1.3%
7.6%
2.0%
Source: Autofacts 2016 Q4 Forecast Release
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1 Grow th of a Global Industry
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1.5% 1.6%
2.6% 2.6%
3.2%3.5%
4.1%
4.9%
5.8%
6.8%7.2%
8.0%8.5%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
0
2
4
6
8
10
2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F 2022F
Alternative Fuel Vehicles2010 – 2022F (millions)
Hybrid (Mild + Full) Plug-in (PHEV) Pure Electric (PEV) Fuel Cell (FCV) Market Share (R-Axis)
Strict fuel economy limits in all major global markets are expected to drive a significant increase in alternative fuel vehicle production
Looming emission standards, particularly in Europe, are expected to drive a significant increase in alternative fuel vehicle production as manufacturers fight low oil prices and waning consumer demand for fuel efficient products.
Source: Autofacts 2016 Q4 Forecast Release *Includes mild & full hybrid
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1 Grow th of a Global Industry
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China Automotive market 2016 and beyond
9
2 China Automotive market 2016 and beyond
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Housing Bust
Risk
Economy outlook – A slow but sustainable growth will be the trend in the following few years. Challenge will be coexist with opportunities.
China: GDP Growth2006-2021F
Sou rce: IMF Forecast
Excess
capacity
Potential Domestic
Consumption
Credit and Corporate
Debts
Expanding Service
Industry
Acceleration in
Urbanization
Industries
upgrade
Lack of Technology
Innovation
Consumer sentiment down as export and fix asset investments
began to slow down and consumption slowed
GDP growth drops below 10% due to the global financial crisis;Chinese government launches
40 trillion RMB economic stimulus package
While GDP continued to slow in 2015, several measures taken by the central government are likely
to keep growth between 6.0-6.5% in the near to midterm
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F
9.6%
7.7%6.9%
10
2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
Source: CBU
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
-
2
4
6
8
10
12
14
16
18
20
22
24
26
2006 2008 2010 2012 2013 2014 2015 2016Q3,YTD
Mil
lio
ns
China: Light Vehicles Sales by Segment2004 – 2016 (Millions)
PC SUV LCV Minivan MPV YOY (R-Axis)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 Q3,YTD
China: Sales by Segment2013 – 2016 (% Share)
PC SUV LCV Minivan MPV
Driven by SUVs,the YOY sales growth reach 13.3% by September.Passengercar was up 2.8%, SUV increased 45.1%, MPV was up 23.4%, minivan was down 31.5% and LCV almost have no changes in the volume
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2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
1 2 2 3 4 4 6 7 811
16 16 1820 22 23
27 28 29 30 32 32 33
2 2 11 2 2
23
5
3
34
5
5
8
11
1314 14
13 12 13 12
-
10
20
30
40
50
60
70
80
90
0
5
10
15
20
25
30
35
40
45
50
China : Light Vehicle Assembly2000 – 2022 (Millions)
Assembly Volume Excess Capacity Utilisation (R-Axis)
Autofacts expects 13.9 % growth in 2016 due to continuous tax stimulus and ~5.1% cagr growth between 2015 and 2022
The integration in automobile industry do benefits to
solve the problems in excess capacity for the domestic
brands.
Tier 2 and Tier 3 cities have unlimited potency to be
developed . Also, the demands for the premium
vehicles in tier 1 cities is another profitable market.
NEV is still booming the automotive market with a
dramatically growth thanks to a series of favour
policies.
Tax cut for vehicles below 1.6L will be expired by the
end of 2016 taking the knock for overall market.
OEMs are facing technology difficulties in stricter
emission reduction standard.
Uncertainty in China macro economy influence the
purchasing power directly
Hinders
Drivers
12
Source: AutofactsForecast
2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Car SUV MPV Minivan LCV
2006-2022 Product structure evolvement underlines trends of demographic structure changes and consumption upgrade
• With the stabilized demands and Product offering, the
phenomenal growth of SUV will moderate, but growth
rate is still expected to top all segments.
• Passenger car will keep the leading positioning in
volume. An increasing numbers of variant models will
be launched into the market to add its practicability.
41% of the domestic assembled vehicles is expected to
be sedan by 2022.
• Despte its past growth, OEMs are still lacking
confidence in MPV sector
• LCV will witness a decrease period since 2016 to 2022
and the CAGR figure is negative (-2.2%).
China: Assembly by segment2006-2022F PwC Insights
13
Source: Autofacts 2016 Q4 Forecast Release
2 China Automotive market 2016 and beyond
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Consumers’ shift from car ownership to car utilizing will fundamentally change the industry, breeding a series of new business, car sharing, Intelligent drive, and car connection
New Business generated
4
New dynamics to appear when the market turn matured and competition landscape changes
Growth moderated Market will continue the slowdown however some segments will grow higher
Consumption upgrade favored segments: middle sized and large car, SUV, MPV, luxury cars will enjoy higher growth
Government backed NEV sector will continue hyper growth in short term, however, with a clear schedule of exist of policy stimulus, sector growth remains uncertainty
1
Consolidation expected
At present, this industry suffers from excess capacity, especially in large state-owned enterprises and small and medium-sized companies.
Since automobile industry will be integrated, it will be hard to survive for some weak small and medium sized automobile companies.
The efficiency of automobile industry could be raised by eliminating excess capacity and effective integration.
2
The Chinese market begins to reflect some dynamics in matured market: the take off of after-market, opportunities will appear in such fields as automobile finance, second-hand car, maintenance, and automobile E-commerce.
Further development of after-market requires a set of optimizing mechanism for the whole industry
Aftermarket to be take off
3
Source:PwC Analysis
14
2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
0
10,000
20,000
0
50
100
The Chinese automotive industry is at a major inflection point
2014201220102008200620042002200019981996
OEMs
Source: Global Insight, Literature Research, PwC Strategy& analysis
Product Lifecycle (Production)
Industry Lifecycle (Independent OEMs)
“Chinese manufacturing presently faces the biggest
crisis in its history” – Chairman, Chinese
Automotive SOE
Annual sales expected to slow down from 21%
CAGR (2004-2014) to ~6% CAGR in the next
decade (2015-2025)
The product and industry lifecycles are beginning
to decouple, suggesting that an (orderly) shake-out
may be imminent
Competitive dynamics will start to resemble those
elsewhere
– Emergence of used vehicles and lease/ finance
– Price and margin pressure
– High level of overcapacity
China: Industry Dynamics1996 -2014 ( Thousands ) PwC Insights
15
2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
28.7% 29.0% 28.7%32.5%
37.0% 39.0%
20.3% 22.3% 22.5%21.8%
19.9%20.3%3.4%
3.4% 3.5%3.9%
3.5%2.7%
23.7% 20.8% 20.3%18.3%
18.4% 17.8%
10.4% 10.5% 10.4% 9.9% 8.1% 7.5%
13.5% 14.0% 14.6% 13.6% 13.0% 12.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 Q3,YTD
China : Market share by brand origin2011-2016Q3
China German France Japan South Korea U.S.
Competition Landscape: Market Share Gained by Chinese OEMs
The diesel emission turmoil cause the loss of the market share of
Germany brands in 2015 .However ,the effect has gradually passed.
The development of domestic brands were impressive thanks to the
improved manufacturing technology and comprehensive product profile
The deep anti Japanese sentiment in China continues to negatively
impacts Japanese vehicles' growth in the Chinese market..
Korean brands lack premium products which do harm to the brand
image.
The market share of U.S brands are stable. Also , U.S automakers are
investing more in Turbo charged engine to get rid of impression of large
displacement and high fuel consumption
Source: CBU
PwC Insights
16
2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F
Competition Landscape: Industry Consolidation Slowed
China : GDP Growth2006 – 2021
Source: Autofacts 2016 Q4 Forecast Release
Hinders
Drivers
• The local government is possible to
protect the development of local
automakers
• The integration of corporate culture is
one of the key factor influencing the
result of M&A
• Due to the shell companies problems,
small automakers will be closed or
acquired.
• The inefficient capacities is required to
be eliminated.
• As for the tier1 automakers, integration
is one of the most efficient method for
domestic brands to expand their
capacity, product line and company scale
SAIC
NAC
GAG
LIEBAO
Chang’an
HAFEI
GAG
CHANGHE GONGW
BAIC
CHANGHE
17
2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
Competition Landscape: New Entrants to the Market
Wangxiang & SAIC/BMW
Automotive Parts
Battery
Wind Power Generation
Natural Gas Generation
Cooperating with SAIC for NEV buses and BMW with Karma PV
Do-Fluoride & HongXing
Inorganic Fluoride
Fluorine Electronic Chemicals
Lithium Battery
Nanometallic Materials
Acquiring with Hongxing Auto for BEV development
Jiangte Motor & Joylong Auto
Electric Motor
Lithium Energy Products
Minerals and Highly Processed Products
Acquiring Joylong Auto for electric vehicles development
LeTV: LeEco & LeSEE
Leading Chinese Video website
LeSEE Plant will be founded in Zhejiang Qingde with 400k capacity
Cooperating with BAIC and Aston Marin for R&D
LeTV became a shareholder for Y idao for car sharing service
Chehejia
Startup founded by automotive experts from internet companies
The plants is constructing and the capacity is expected to be 200,000 units per year by the end of 2017. Also, they will built a battery plants
Tecent & Foxconn & Harmony Auto:
Future Mobility
Leading Chinese hi-tech company
Integrating with different industry (Internet & manufacturing & Automotive Dealer)
Traditional Value Chain Player Breakthrough Value Chain Player
18
Source:PwC Analysis
2 China Automotive market 2016 and beyond
Pw C Autofacts ®Pw C Autofacts ®
Topics: China NEV Market
19
3 Topics:China NEV market
Pw C Autofacts ®Pw C Autofacts ®
0.1% 0.1% 0.1%0.1%
0.2%
1.2%
2.3%
3.1%
3.6%
4.2%
4.6%
5.1%5.6%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
0
2
4
6
8
10
12
14
16
18
20
2010 2011 2012 2013 2014 2015 2016F2017F2018F2019F2020F2021F2022F
Pure Electric (PEV) Plug in Hybrid (PHEV)
Hybrid (Mild + Full) Market Share (R-Axis)
Assembly forecast - Alternative energy vehicles
• A large number of automakers are involved in the new energy
subsidy cheating scandal which will effect the policy of NEV
subsidy. NEV subsidies will gradually phase down by 2021.
• Battery technology including battery range, life and charging
period still needs to be improved progressively.
• The establishment of charging station hasn’t been popularized
yet which will effect customers’ confidence in purchasing
NEVs.
• Chinese government announced that new automakers who is
expected to produce fuel consumption vehicles will not
allowed to be founded in principle. It is a good news for the
development of alternative energy vehicles.
• Separate NEV license plates are issued to stimulate the NEV
growth, especially in combustion plate restriction cities.
• Policy in carbon emission restriction and carbon emission
trading accelerate the process of the transformation for NEVs
Hinders
Drivers
Assembly forecast - Alternative energy vehicles2010 -2022F ( Thousands )
20
Source: Autofacts 2016 Q4 Forecast Release
3 Topics:China NEV market
Pw C Autofacts ®Pw C Autofacts ®
Policy update: National and regional regulations with impact on other key drivers and NEVs sales volumes
“Push” “Pull”
Subsidy
Infrastructure
Tax regimes
City restrictions/ Licensing
Energy costs
• National: 25 ~ 55k RMB range depending subsidy, expected pay-out until 2020
• Regional: additional benefits on same level like national programs
• VAT exemption (2014-2017)• Exemption/ reduction of “Vehicle & Vessel Tax”• Consumption Tax omitted for BEV
• NEV as exception from licensing restrictions (e.g. Shanghai, Beijing)
• Planned exemption from toll and parking fees
• Dedicated NEV parking space in new buildings• Subsidy for charging stations
• Reduced electricity tariffs for NEV
Fleet consumption
Mandatory NEV share for Officials
NEV Demo Cities
Charging Standards
Penalties
• Phase III: 6.9l/100km• Phase IV: 5.0l/100km• Phase V: ~4.0l/100km
• 40 Cluster-regions / 88 demo cities• NEV target for 2015 in demo cities:
~330k vehicles
• Application of national charging standards from 2015 on (AC/DC)
• Mandatory NEV-quota for newly purchased vehicles of officials: ≥30% (2014-2016)
• Penalties phase III: “Name and Shame list”, no new projects approved
• Mandatory NEV production quota (ZEV) currently in discussion
R: Regulation I: Infrastructure
Impact
R
Emission quota trade
• The policy will be carried out in 2017• Selling quota is one of the capital source for NEVs
manufacturers
Impact
R
R
R
R
I
I
I
I
R
R
NEV-target of the Chinese Government: 5 million cars until 2020
21
Source:PwC Analysis
3 Topics:China NEV market
Pw C Autofacts ®Pw C Autofacts ®
In NEV race: Who’s doing what, and how
Te
chn
olo
gy
Business Model
Illustrative
Uber
Wanxiang
Denza
JAC
BMW
VW BYD
CAR2GO
SAIC
BAIC
ChANGJIANG EV
HARMONY AUTO
Chehejia
FOXCONN
Baidu Tencent
HUAWEI Alibaba
NEXTEV
LeSEE
XPENG
TESLA
TELD
Didi TaxiStar Charge
EZZY
Breakthrough Innovation Radical Innovation
Incremental Innovation Breakthrough Innovation
Clo
sin
g t
o e
xis
tN
ew
Closing to exist New
22
Source:PwC Analysis
3 Topics:China NEV market
Pw C Autofacts ®
Thank you for your attention!
Autofacts®
23
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