AUTOMOTIVE The Slowdown and the Stimulus: The China Production Outlook 27 th Oct 2016 Shanghai Gao TAO, Manager, Great China Light Vehicle Production, 0086-21-2422 9116, gao.tao@ihsmarkit.com 2016 IHS Markit. All 版权所有 Rights Reserved.
Contents AGENDA 2 REGIONAL OUTLOOK 3 DYNAMIC CHANGE SINCE 2015 7 Seasonality 8 Reason analysis 9-11 Scenarios 12 TREND IN THE FUTURE 13 Deceleration 14 Diversity 21 Expansion 30 2016 IHS Markit 82
Regional Outlook As main contributor despite of economy acceleration 2016 IHS Markit 83
Chinese GDP growth Slowing down gradually over years, not collapsing overnight GDP development 2006-2016 Percent change 16 14 12 10 8 6 4 2 GDP Growth 2016: 6.6% 2017: 6.2% 2018: 6.4% 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Y/y cumulative Y/y non-cumulative Source: IHS Markit 2016 IHS Markit 84
Easy period for Eurozone import sourced models is over The Yuan is in a new phase - making premium imports more expensive relative to localized models for the next several years Yuan per currency unit 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 Long Term Yuan appreciation Slow Yuan depreciation Exchange Rate (per USD) Exchange Rate (per euro)
World Light Vehicle Selling Rates China remains key to industry growth Total LV Sales Millions 100 90 80 70 2009-2015 World +61% China +202% No China +35% 60 50 40 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: IHS Markit 2016 IHS Markit 86
Dynamic Change Since 2015 Recovery from recession by stimuli 2016 IHS Markit 87
Production volume 2015 2018 by quarter Significant decline in Q3 2015 was main cause of dynamic fluctuation Seasonality Millions 8 7 6 5 4 3 2 1 0-7% Tax-cut policy as main stimulus 15% 17% 20% 15% 10% 5% 0% -5% -10% Source: IHS Markit Prod Volume Growth rate y/y 2016 IHS Markit 88
Reason1: Inventory Pressure Vehicle Inventory Level Business structure of dealer Month 2.5 2 1.5 Sales structure 4% 7%2% Margin structure 5% 1 40% 55% 0.5 High inventory from Q42014 Pressure relief 87% 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2014 2015 New vehicle Financial service After sales Others New vehicle Others After sales Source: CADA Source: Gasgoo 2016 IHS Markit 89
Reason2: Over capacity Capacity development Millions 40 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 4, 0 0 0, 0 0 0,0 0 0,0 00CNY? Investment! Production Over capacity % Utilization Source: IHS Markit 2016 IHS Markit 90
Reason3: Turbulence in financial market Stock index & production growth 7000 6000 5000 4000 3000 2000 1000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Shanghai Shenzhen Prod growth rate Registration growth 50% 100% 45% 40% 80% 35% 30% 60% 25% 40% 20% 15% 20% 10% 0% 5% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0% -20% 2012 2013 2014 2015 Source: IHS Markit 2016 IHS Markit 91
Scenarios by stimulation of tax-cut policy Expiration of Tax-Cut Policy as main impact Seasonality abnormality from 2015 to 2017 Millions 8 7.5 7 6.5 6 5.5 5 4.5 4 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 200-300K units shift from Q42016 to 2017 Q2 2016 Q3 2016 +1% -3% Q4 2016 Growth Rate Policy ends 2016 Policy ends 2017 2014: 8.1% 2014: 8.1% 2015: 4.7% 2015: 4.7% 2016: 7.5% 2016: 6.5% 2017: 1.0% 2017: 3.0% 2018: 3.0% 2018: 1.0% Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Source: IHS Markit Tax policy ends in 2016 Tax policy ends in 2017 2016 IHS Markit 92
Trend in the future Full with opportunities and challenges by entering maturity phase 2016 IHS Markit 93
Deceleration Start to decelerate in long term future 2016 IHS Markit 94
Production long-term development Slowing down gradually after 2019, a decline still not expected Production volume development Millions 35 30 25 Growth phase Adjustment phase Mature phase 60% 50% 40% 20 15 30% 10 20% 5 10% 0 0% Source: IHS Markit PV LCV Growth rate y/y 2016 IHS Markit 95
GDP in long term The GDP growth decelerates smoothly in next decades GDP growth 16 14 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Growth Rate % Source: IHS Markit 2016 IHS Markit 96
PARC Vehicle population grew rapidly before due to low base PARC volume development Millions 400 350 300 Growth phase Adjustment phase Mature phase 250 200 150 100 50 0 20002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022202320242025 Source: IHS Markit PV LCV 2016 IHS Markit 97
Urbanization Big deviation among different regions, a moderate growth still be expected growing Urbanization rapidly rate generally; but slow down gradually 1,600 1,400 1,200 1,000 800 600 400 Urbanization rate: 50% 7% 6% 5% 4% 3% 2% 200 1% 0 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Millions Source: IHS Markit Urban population Rural population Urban popul. growth 2016 IHS Markit 98
China demographic structure Potential vehicle consumer is shrinking Share of demographic by age 100% 90% 80% Peak population in 2028: 1416.4 M 70% 60% 50% 40% 30% 20% 61% 53% 48% 10% 0% 195019551960196519701975198019851990199520002005201020152020202520302035204020452050 Source: IHS Markit 0-19 20-59 60 up 2016 IHS Markit 99
Road construction Keeping moderate increase after frenzied investment Road mileage Thousand KM 7,000 6,000 5,000 4,000 CAGR 2005 2014: 3.5% 2014 2030: 1.6% 3,000 2,000 1,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2030 Source: IHS Markit Normal road Highway 2016 IHS Markit 100
DIVERSITY To fulfill the diversified requirements 2016 IHS Markit 101
New OEM entrances and brand expansion New entrants from other industries drives brand expansion Mega Tech Companies New OEMs Brand number 25 62 78 94 Existing small OEMs Sharing Economy 2000 2010 2015 2025
Modular platform of JV & China OEMs Total number of platforms increase, while decrease per OEM by modular platform JV Brand JV & Local Brands Local Brand
Body types diversity SUV sales keeps expanding over-proportionally in long term The Slowdown and the Stimulus in China / October 2016 CHINA North America EUROPE 1% 3% 4% 8% 8% 3% 8% 5% 9% 12% 11% 10% 13% 3% 7% 4% 18% 36% 44% 38% 45% 13% 65% 15% 2010 44% 2010 47% 2010 39% 39% 2025 2025 2025 34% SUV Hatchback Wagon Convertible Sedan MPV Coupe SUV Hatchback Coupe Convertible Sedan MPV Wagon Roadster SUV Sedan MPV Convertible Hatchback Wagon Coupe Roadster 104
Shift between ages Auto consumer becoming younger Consumer share by age group Key elements for younger user >45 years old Value maintenance Appearance Quality Trafficability Price 41-45 36-40 Reputation Comfortability 31-35 Brand Safety 26-30 <25 years old 26% 36% Source: Autohome Service Space Maintenance Cost Controllability 2013 2014 2015 Source: Roland Berger 2016 IHS Markit 105
Shift between genders Female auto consumer becoming more relevant Female consumer increasing China vs Mature markets Millions 5 4 29% 29% 46% 45% 3 17% 2 1 Female Male 72% 54% 55% 0 2010 2011 2012 2013 2014 2015 China US Europe Source: Roland Berger 2016 IHS Markit 106
Requirements by female consumer Female shows different interests from male Acquisition price Body type & Size Brand >400k 250k - 400k 33% 26% MPV SUV German French Korea US 76% 62% 180k - 250k Big Japan China 120k - 180k Medium Others 80k - 120k Compact 49% 45% <80k Small Female Male Female Male Female Male Source: Roland Berger 2016 IHS Markit 107
NEV development in China EV is exploding in near future; Hybrid as main driver in long term EV/Hybrid PV production in China 2015 2025 The Slowdown and the Stimulus in China / October 2016 0% 1% 13% 4% 7% 41% 27% 86% 21% Electric Hybrid-Full Electric Hybrid-Full Hybrid-Mild ICE Hybrid-Mild ICE ICE: Stop/Start ICE: Stop/Start Source: IHS Markit 2016 IHS Markit 108
EXPANSION Next expansion wave? 2016 IHS Markit 109
Made in China 2025 As long term strategy of government Energy saving & Intelligent auto Fuel-Efficient Vehicle New Energy Vehicle Intelligent Vehicle 110
Objectives in Made in China 2025 Fuel-Efficient Vehicle 2020 New Energy Vehicle (NEV) 2020 Autonomy CAFÉ=5.0L/100KM Market share of domestic fuelefficient vehicles reach 40% Localization rate of key components increase to >50% CAFÉ=4.0L/100KM Market share of domestic fuelefficient vehicles reach 50% Localization rate of key components increase to >60% CAFÉ=3.2L/100KM Market share of domestic fuelefficient vehicles reach 60% Localization rate of key components increase to >80% 2025 2030 Sales volume of domestic new energy vehicles reach 1 million, market share >70% Domestic suppliers of Battery and Start Motor account for 80% in China Sales volume of domestic new energy vehicles reach 3 million, market share >80% 2 domestic OEMs in Top10 OEM list, which oversee sales account for 10% of total sales Sales volume of domestic new energy vehicles dominate China market Export volume account for 30% of total production volume. 2025 2030 Penetration of vehicles in DA/PA level account for 50% Domestic vehicles in DA/PA level account for 40% Vehicles in DA/PA level maintain the heathy growth Penetration of vehicles in HA level account for 10%-20% Domestic vehicles in DA/PA/HA level account for 50% Penetration of vehicles in FA level account for 10% Domestic vehicles in PA/HA/FA level account for 50% Remark: PA=NHTSA L3, HA=L4, FA=L5 111
EV Charging Network Development Guide 2015-2020 Government aims to add 12k EV charging stations and 4.8 million charging piles nationwide by 2020 Construction route before 2015 Construction route between 2016 and 2020 112
Milestone of Autonomy by China local OEMs 2025 will be launch year of FA (Self-drive) for most of local OEMs 2011: 286 KM Autopilot experiment 2013: Model H6 with Function DA 2013: Strategic partner with CASIC 2012: Concept model Ant 2012: R&D 2015: Strategy 654 2015: Strategy Qintu 2015: Model igs with DA 2018: PA 2020: HA 2020: Next generation igs with HA 2016: 2000KM Autopilot experiment 2018: PA 2020: HA 2017: New models 2016: with Auto-Park Strategy 124 and 2016: ADAS experiment on H8&H9 2020: HA 2020: FA in highway FA L5 2025 Self-drive Only - Strategic Partner with Chinese Academy of Sciences - Concept vehicle WITSTAR 2014: Strategic Partner with I2R 2014: Strategic Partner with PUAWEI 113
Capacity expansion in China JV brands and COEM - NEV is a main driver for future capacity expansion Urumqi Huanghua Jinzhong Zhangjiakou Harbin Tianjin Cangzhou Qingdao Volkswagen - Qingdao & Tianjin Ford Harbin PSA Chengdu FCA Guangzhou Hyundai Cangzhou & Chongqing Honda Wuhan Renault Wuhan Karma - Hangzhou Tesla? 2M 1.3M Chengdu Chongqing Baoji Zhengzhou Ruili Yangzhou Changzhou Hefei Suzhou Wuhan Hangzhou Shangrao Guiyang Quanzhou Guangzhou BAIC - Huanghua & Ruili Geely Baoji, Jinzhong Zhangjiakou & Guiyang GAIG - Urumqi Chery Changshu FDG Hangzhou Hanteng Shangrao Joylong Yangzhou NEXTEV Hefei Shaolin Zhengzhou CH-Auto - Suzhou 114
China OEM expansion in Overseas Markets New plants and R&D centres, establishment reflect COEMs ambitions San Jose, USA R&D BAIC NEXTEV Detroit, USA BAIC Volvo: SOP2018 Ridgeville, USA Production facility Silicon Valley, USA BYD Sao Paulo, Brazil Jianghuai: SOP2016 Volvo Goteborg, Sweden Lifan: SOP2017 GWM: SOP2017 SAIC Geely Changan SAIC: SOP2017 Uzlovaya, JAC Lipetsk, Russia Birmingham, Russia London, Turin, Britain Kaliningrad, Britain Italy Jianghuai: SOP2015 Russia Changhe: SOP2018 Haima: SOP2015 Kostanay, FAW: SOP2015 Kazakhstan Docharkh, Khorasan, Algeria Iran Iran SAIC: SOP2017 Foton: SOP2017 GWM: SOP2018 Camacari, Brazil Pune, India Rayong, Thailand Chery: SOP2016 Great Wall Tokyo, Japan Foton: SOP2015 Gateway Thailand SAIC: SOP2017 Bekasi, Indonesia Manila, Philippines
Thank You! 2016 IHS Markit 116