Inside China’s Auto Markets

Yingzi SuSenior EconomistGeneral MotorsNovember 2011

A growth path that surprised the world

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-10%

0%

10%

20%

30%

40%

50%

60%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Growth Path of China Auto IndsutryGrowth %

Volume (Mil.)

Average growth rate 1991-2010: 19%

China joined WTO

Stimulus package of RMB 4

trillion to fight global recession

2011 – a “slow” year for China

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500,000

1,000,000

1,500,000

2,000,000

2,500,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2008

2009

2010

2011

Vehicle sales increased 2.5% Y/Y for the first 10 months in 2011

Policy-Induced Slowdown

-10

-5

0

5

10

15

20

25

Jan

-99

Jul-

99

Jan

-00

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00

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-08

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09

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-11

Jul-

11

China Inflation

CPI

PPI

Source: China National Bureau of Statistics

%

Food

0

2

4

6

8

0

5

10

15

20

25

Jan

-00

De

c-0

0

No

v-0

1

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-02

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-03

Au

g-0

4

Jul-

05

Jun

-06

May

-07

Ap

r-0

8

Mar

-09

Feb

-10

Jan

-11

Reserve Requirement Ratio and Prime Lending Rate (%)

Prime Lending Rate ->

<- Reserve Requirement Ratio

Risk remains for further slowdown

5

Long term outlook still very positive

Source: GMIA (Oct 2010)

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Ve

hic

le P

arc

(Mil

lio

n U

nit

s)

Un

its

of

Ve

hic

les

pe

r 1

00

0 P

eo

ple

China Parc China USA Japan S. Korea World Average

China has been following the pattern of the other successful countries in the region

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10

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30

40

50

60

70

0 5 10 15 20 25 30 35 40 45

Ne

w V

eh

icle

Sa

les

pe

r 1

,00

0 P

eo

ple

Year 0= $3,000 GDP per Capita (approx)in 2010 US$ (converted to 2010 price level with updated 2005 EKS PPPs)

New Vehicle Sales After Reaching $3,000 GDP per Capita

Japan South Korea Taiwan China

0

50

100

150

200

250

300

350

Below RMB 30K 30K - 90K 90K - 240K 240K+

Num

ber

of h

ouse

hold

s in

each

inc

ome

brac

ket

(Mill

ion)

2000 2005 2010 2015

Vehicle ownership increases

rapidly in this income range

Growing middle class will continue to support

Source: GMIA (Oct 2010)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

1990

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Pe

rce

nt

(%)

of

Po

pu

lati

on

th

at

is U

rba

n

China: Percent (%) Urban PopulationHistory Forecast

Many provinces are equivalent to mid-sized countries

195177

57

245

684

243

178

328

160

253

211 399

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382

201

344

467

272

393

271

909

353

371394

866

919

704705

1,256

952

616

219

1,215

615

524

124

1,071

0

2500

5000

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10000

12500

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17500

20000

22500

25000

0 10 20 30 40 50 60 70 80 90 100 110 120

GD

P p

er

cap

ita

(U

S$

)

Provincial or Country Population (Million)

Bubble size and number correspond to vehicle registrations/sales (‘000)

Population, GDP/Capita and Vehicle Sales: Chinese Provinces versus Other Countries(2009 data for China, 2008 data for other countries)

Netherlands [17] Australia [22]Canada [33] Spain [46] UK [61]France [62] Germany [82] Population of developed economies

S. Korea

Argentina

Columbia

Turkey

Thailand

Philippines

Mexico

TB

QHNX

HN

TJBJ

SH

IM

XJ

GS

JL

CQ

SX

FJ

SaX

HLJ

LN

GZ

JX

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YN

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HuB

AHHuN

JS

HeB

SC

GD

SD

HeN

AH: AnhuiBJ: BeijingCQ: ChongqingFJ: FujianGS: GansuGD: GuangdongGX: GuangxiGZ: GuizhouHN: HainanHeB: HebeiHLJ: HeilongjiangHeN: HenanHuB: HubeiHuN: HunanJS: JiangsuJX: JiangxiJL: JilinLN: LiaoningIM: Inner MongoliaNX: NingxiaQH: QinghaiSaX: ShaanxiSD: ShandongSH: ShanghaiSX: ShanxiSC: SichuanTJ: TianjinXJ: XinjiangTB: TibetYN: YunnanZJ: Zhejiang

Public buses and bicycles still the dominant form of transportation

Source: GMIA, Mar’09

Public bus

Bicycle

Private Car

Walk

Electric Bike

Taxi

Subway

Own Motorcycle

Company Offered

Communiting

Bus

Company Car

11

All Roads (km) Highway (km)

2004 1,870,000 34,000

2010 2,300,000 55,000

2016 75,000

2020 3,000,000 85,000

Web of “7918”7 diagonal, 9 vertical and 18

horizontal expresswaysCovering areas with 1 bn

population and 85% of GDP90% East

83% Center70% West

National Highway Construction

Highway system development enables more driving

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95

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18

China: Population

Total Population

Age 15-64

Percentage of aged 15-64 (Right axis)

Source: UN Population Statistics

Million

Aging population may dampen future economic growth as well as vehicle market growth

Restraints from resources also are concerns

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Oil Prices China GDP Growth

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Commodity Prices China GDP Growth

Where is the future growth?

Passenger Vehicle Registration by Tier

31.9% 28.6% 27.7% 25.9% 23.9% 24.2%

28.4%29.5% 29.4% 28.6% 28.4% 28.6%

21.9% 23.0% 23.2% 24.1% 25.3% 25.2%

17.8% 18.9% 19.7% 21.4% 22.4% 22.0%

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010

Tier 4

Tier 3

Tier 2

Tier 1

Source: China registration database

One country, many markets

CoastCenter

West

The West: Tier 3 & 4 The Center: Tier 2 & 3 The Coast: Tier 1 & 2

Sparsely populated − Population center − Forefront of modernization

Region of minorities − Rapid urbanization & − Political & economic center

Rich in mineral resources infrastructure development − Rich, urban & open to the world

Tier City Classification Update

Definition Number of Cities City example

Registered sales vol.

('000 units, 2008)346 -

Tier 1 >= 100 9

Beijing, Shanghai, Guangzhou,

Shenzhen, Suzhou, Hangzhou,

Chongqing, Chengdu, Tianjin

Tier 2 30-100 30Nanjing, Qingdao, Changsha,

Changchun, Xiamen, Wuhan,

Taiyuan, Ninbo, Wuxi

Tier 3 10-30 72

Haikou, Handan, Baotou, Jinan,

Weihai, Huzhou, Huhehaote,

Wulumuqi, Luoyan

Tier 4 <10 235

Sanya, DaLi, Guilin,Lianyungan,

Yichan, Huaiyin, xianfan,

Jiaozhuo, Zhunyi

Tier cities

237

Passenger Vehicle Market

0%

40%

80%

2000 2002 2004 2006 2008 2010

Car A

LuxuryMPV

SUV

Car D/E

Car C

Car B

80% PV is just 4 Segments. PV is global and local (31%)

0

4,000

8,000

12,000

16,000

2000 2002 2004 2006 2008 2010

Ind

ust

ry V

olu

me

(000

un

its)

Global Brands

Local Brands

78%

71%

69%

31%29%

22%

Car C is the largest segment, with the size of total industry of Japan

Over 90% CV is just 3 segments Local Brands Dominate

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1000

2000

3000

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7000

2006 2008 2010In

du

stry

Vo

lum

e (0

00 u

nit

s)

Global Brands

Local Brands

98%

98%

2%

2%

Commercial Vehicle Market

0%

20%

40%

60%

80%

100%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Mini CV

Truck M/H

Truck L

Pickup D/EVan D/E

It is a fragmented market

56%

44%

Chinese BrandsGlobal

Brands

2010Total China Industry (incl. CVs)~ 18.3 million units

w/ 30+ localOEM groups supported by provincial/municipal Gov’t

Veh Type CY2010

1 Wuling Sunshine CV 669,719

2 BJ 10 SERIES CV 485,834

3 Chang'an CV 373,597

4 Wuling Rongguang CV 335,952

5 VW Lavida PV 251,615

6 Hyundai New Elantra PV 233,344

7 VW Jetta PV 224,523

8 Dongfeng Xiaokang CV 223,385

9 Buick Excelle PV 222,494

10 BYD F3 PV 201,138

Model Name

Top 10 Vehicles: CY2010

VW Jetta

Changan Star

2

9

4

10

BJ 10 SERIES

Hyundai New Elantra

Source: China Pivot Sales

3

BYD F3Dongfeng Xiaokang

8

1

7

65

VW Lavida

Buick Excelle

Wuling Rongguang

Wuling Sunshine

Volume

Top 10 Passenger Cars: CY2010

Hyundai Elantra HDCVW Lavida

Buick Excelle BYD F3

VW New Bora Ford Focus

VW Jetta

Toyota Corolla

31

4

2

65

7 8 9 10

FAW Xiali

Chevrolet Cruze

Summary

• Growth of vehicle sales in China has surprised most experts

• China has more or less followed the growth path of other economies in the region

• Short term vehicle sales growth slows down

• Long term outlook is still very positive

• Substantial room for growth exists in the interior and in lower tier cities