overseas prospects for the chinese automotive … prospects for the chinese automotive industry:...

Overseas Prospects for the Chinese Automotive Industry: Exports and New Opportunities Developing

for Overseas Operations

Lin HuaibinSenior Market Analyst

Copyright © 2009 IHS Global Insight. All Rights Reserved. GLOBAL AUTOMOTIVE CONFERENCE

Content

• Vehicle Export 2003–2008

• Export Destination and OEMs Export Performance

• Chinese OEMs Global Footprint

• Export Forecast 2009–2014

• Export Prospect in EU and the U.S.

• Mergers and Acquisitions


20052003 2004

2007

2006

2008

6%

12%

18%

36%31%

27%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

50

100

150

200

250

300

Thou

sand

s

PC Export Volume As of Total Vehicle Export

Passenger Car Export 2003–2008

NOTE: Number Including Honda Fit Export


Passenger Car Export Destination by Region 2007–2011

13%

5%

57%

12%

13%

18%

3%

46%

17%

3%

10%

2%

21%

6%

38%

21%

3%

9%

2%

20%

7%

32%

28%

2%

6%

4%3%

6%

3%

27%

34%

7%

20%

0% 20% 40% 60% 80% 100%

Africa

Asia

East Europe

Middle East

North America

South America

West Europe

2007 2008 2009 2010 2011

NOTE: Chinese OEMs Only


Passenger Car Export Destination by Country 2008–2011

3%2%

9%1%

17%

8%26%

3%8%

3%2%

11%3%

5%21%

11%9%

14%

2%21%

2%1%

12%2%

2%27%

7%8%

11%

1%27%

2%1%

12%2%

3%28%

9%8%

10%

1%25%

19%

3%

0% 20% 40% 60% 80% 100%

Chile

Colombia

Egypt

Malaysia

Mexico

Middle East

Russia

South Africa

Ukraine

Venezuela

Other

2008 2009 2010 2011

NOTE: Chinese OEMs Only


Passenger Car Export Performance by OEMs’ Sales Volume 2007–2011

3 1

99

16 19

0 16 4

117

28 216 13 3

61

15 11 8 23 4

110

23 29

3 6413

181

57 54

6 10

0

20

40

60

80

100

120

140

160

180

200

BYD

CHAN

GAN

CHER

Y

GEEL

Y

GREA

TWAL

L

FAW

TIA

NJIN

ZHON

GHUA

Thou

sand

s Y2007 Y2008

Y2009 Y2010

Y2011


Export Performance by OEMs’ Market Share 2007–2011

0% 10% 20% 30% 40% 50% 60% 70% 80%

BYD

CHANGAN

CHERY

GEELY

GREATWALL

ZHONGHUA

Y2007 Y2008 Y2009 Y2010 Y2011


Export Performance by Model in 2007–2011

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

CHERY A-15

CHERYQQ3

GEELYFREE

CRUISER

CHERY A-5

CHERYQQ6

CHERYA1

GEELYKING

KONG

BYD F3

Y2007 Y2008 Y2009

From 2010

Sal

es U

nits


Export Performance by FOB Pricing 2005–2007

0 2000 4000 6000 8000 10000

Russia

Ukraine

Venezuela

Syria

Algeria

Egypt

Chile

Colombia

Average

Unit:USD

Y2005 Y2006 Y2007

Average FOB Increased Partly due to USD Depreciation


Footprint in Africa

• Chery production in Egypt began in 2006• Chery sales in Egypt were approximately 12,000 units in 2008• China Brilliance production in Egypt began in 2006• Lifan should commence production in Egypt and Ethiopia by Q4• Chinese OEMs sales in Egypt are expected to reach 36,500 units by 2011

• Chery production in Egypt began in 2006• Chery sales in Egypt were approximately 12,000 units in 2008• China Brilliance production in Egypt began in 2006• Lifan should commence production in Egypt and Ethiopia by Q4• Chinese OEMs sales in Egypt are expected to reach 36,500 units by 2011

• Chinese OEMs sales in South Africa were approximately 15,000 units in 2008 (Geelyaccountedfor 40%)• Chinese OEMs in South Africa expected to reach 25,500 units by 2011

• Chinese OEMs sales in South Africa were approximately 15,000 units in 2008 (Geelyaccountedfor 40%)• Chinese OEMs in South Africa expected to reach 25,500 units by 2011


Footprint in Southeast Asia

20072009Vietnam

2008Thailand

20102010Taiwan

20072005Pakistan

20082009Malaysia

20092006Indonesia

• Chinese OEMs’ market share will remain modest due to political constraint (e.g. Malaysia) and local market structure(e.g. Thailand)• Chinese OEMs’ sales in ASEAN were around 4,600 units in 2008 but expected to reach 19,000 units by 2011

• Chinese OEMs’ market share will remain modest due to political constraint (e.g. Malaysia) and local market structure(e.g. Thailand)• Chinese OEMs’ sales in ASEAN were around 4,600 units in 2008 but expected to reach 19,000 units by 2011


Footprint in Middle East

• CKD assembly of Cherybegan in Iran in Q3 2003• Production of Lifan 520 is scheduled for 2009 in Iran• Production of ChangAnBenben will begin in Iran in 2010• UAE is the largest market for Chinese OEMs in 2008, whose sales topped 15,000 units• Chinese OEMs sales in Middle East stood at 30,000 units and are expected to surpass 78,500 units by 2011

• CKD assembly of Cherybegan in Iran in Q3 2003• Production of Lifan 520 is scheduled for 2009 in Iran• Production of ChangAnBenben will begin in Iran in 2010• UAE is the largest market for Chinese OEMs in 2008, whose sales topped 15,000 units• Chinese OEMs sales in Middle East stood at 30,000 units and are expected to surpass 78,500 units by 2011


Footprint in Europe

• Chery production in Russia and Ukraine began in 2006 but halted in late 2008• Geely production started in Russia in 2006 but stopped in 2008• Chery started assembling Tiggo in Italy via DR in 2007• Greatwall production in Russia and Ukraine started in 2007 but stopped in 2008• Greatwall will begin production in Bulgaria in 2009•Chinese OEMs export to East Europe currently is 80,000 units and could reach 88,000 units by 2011• Export to West Europe is around 3,000 units and could reach only around 7,500 units by 2011

• Chery production in Russia and Ukraine began in 2006 but halted in late 2008• Geely production started in Russia in 2006 but stopped in 2008• Chery started assembling Tiggo in Italy via DR in 2007• Greatwall production in Russia and Ukraine started in 2007 but stopped in 2008• Greatwall will begin production in Bulgaria in 2009•Chinese OEMs export to East Europe currently is 80,000 units and could reach 88,000 units by 2011• Export to West Europe is around 3,000 units and could reach only around 7,500 units by 2011


Footprint in South America

• Chery production in Uruguay began in 2008 and vehicles are exported to Argentina• Chery production in Brazil could start in 2010• In 2008,Chinese OEMs sales in Chile, Colombia and Venezuela reached around 5,000 units, 5,720 units and 4,500 units respectively• Chinese OEMs sales could decline to 19,000 units by 2011

• Chery production in Uruguay began in 2008 and vehicles are exported to Argentina• Chery production in Brazil could start in 2010• In 2008,Chinese OEMs sales in Chile, Colombia and Venezuela reached around 5,000 units, 5,720 units and 4,500 units respectively• Chinese OEMs sales could decline to 19,000 units by 2011


Footprint in North America (Mexico)

• There are uncertainties regarding ChangAn and FAW production plan in Mexico which was scheduled for 2010• Chery’s and Chrysler’s joint project to introduce Chery vehicles in Mexico failed in 2008• Chinese OEMS’ export to Mexico could stand around 6,000 units on assumption of CBU export

• There are uncertainties regarding ChangAn and FAW production plan in Mexico which was scheduled for 2010• Chery’s and Chrysler’s joint project to introduce Chery vehicles in Mexico failed in 2008• Chinese OEMS’ export to Mexico could stand around 6,000 units on assumption of CBU export


Passage to the West: Rocky Road

Emission

EU: EUROV (2009)/EUROV+(2011)

U.S.: Tier II/California (ZEV)

Safety Warranty

EURONCAP/NHTSA/IIHS

Anti-Corrosion WarrantyPowertrain WarrantyEmission Warranty

Lack of Competitiveness in spite of Improving

Safety

No EUROIV Engine Available

No Anti-Corrosion Warranty

No Powertrain WarrantyNo Emission Warranty

After Sales Service Dealer Management System Brand BuildingPlus

Export to Western Europe and the U.S. Can Be Expected Only After 2013


2005 2006

Set Up Europe Design Center in Turin, Italy

CHAN’AN

Set Up Design Center in Tokyo,

Japan

JiangHuai JiangHuai

R&D: Eager to Catch Up

Set Up Europe Design Center in Turin, Italy

2007

Set Up Ricardo 2010 in the U.K. Set Up SAIC

MOTOR U.K. Technical

Center (Birmingham)

Chan’An BenBenROEWE 750

ROEWE 550


New Model Launches in China by Country of Origin in 2009

Models to be launched by Chinese OEMs are usually designed to meet EUROIV and the latest EU safety standards. By meeting these standards, market share of Chinese OEMs is growing, thereby helping to increase export volumes.

30

10

7

1

7

0

5

10

15

20

25

30

35

CHINA JAPAN EUROPE US KOREA

JAC B MPV

Chery A6CC


Passenger Car Export Forecast

203

107

201

293

471

603

0

100

200

300

400

500

600

700

2008 2009 2010 2011 2012 2013

thou

sand

s

Note: Export Volume ex. Export from Global OEMs

By 2013, passenger car exports by Chinese OEMs will pass half a million units as more models with improving design and quality will be launched abroad

By 2013, passenger car exports by Chinese OEMs will pass half a million units as more models with improving design and quality will be launched abroad


Global OEMs Export from China

• Honda exported approximately 45,000 units of Jazz to Europe in 2008 (CBU likely to decline in 2010 after the start of UK assembly)• GM exported around 20,000 units of Lova and Aveo to Eastern Europe and South America in 2008. GM plans to export its NGS model from China mainly to emerging markets in 2010. Exports to the U.S. planned in 2011.

• Honda exported approximately 45,000 units of Jazz to Europe in 2008 (CBU likely to decline in 2010 after the start of UK assembly)• GM exported around 20,000 units of Lova and Aveo to Eastern Europe and South America in 2008. GM plans to export its NGS model from China mainly to emerging markets in 2010. Exports to the U.S. planned in 2011.


Mergers and Acquisitions

•To Buy?

•Or Not To Buy?

Chinese Brands Indicated in the potential M&A


Mergers and Acquisitions

International Management Experience and Cultural Difference

Labor UnionProduct Integration

At this stage, Chinese OEMs have no adequate experience in handling these hurdles to avoid the failure of SAIC-Ssangyong Alliance

At this stage, Chinese OEMs have no adequate experience in handling these hurdles to avoid the failure of SAIC-Ssangyong Alliance

Brand Positioning


Summary

• Emerging markets will remain the major export destination of Chinese OEMs for the next 5 years

• The dominance of Chery, Geely and Greatwall in the export market will be weakened as more Chinese OEMs will make inroads into overseasmarkets

• Although we will see more Chinese OEMs setting up plants overseas, market entry into the West will not be significant before 2013

• By 2013, passenger car export by Chinese OEMs will pass half a million units as models with improved design and quality will belaunched abroad

• There is uncertainty regarding whether China will become an increasingly important export base for Global OEMs due to GlobalOEMs’ capacity constraint and current foreign ownership restriction

• It is still premature for Chinese OEMs to acquire Global OEMs at this stage due to lack of expertise in managing large-scale international operations

Thank You!

Lin HuaibinSenior Market Analyst

[email protected]

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