The motor vehicle industry in China

1. China’s Automotive Industry
THE MADE IN
CHINA
PHENOMENON
GROUP 1
Mark Lombardi
Serena Raymon
Llewellyn Tsang
Marcela Flores
Daniela Arriagada

2. An Economic Superpower
• Population: 1.3 Billion
• GDP: USM$4,446,852.6 (2008:
10.1%)
• Reserve of US-Gold: 2.0 trillion
• FDI: US$758 billion (2007)
• Industrial Growth Rate:
2007 (22.90%) 2008 (12.9%)
• Import: USM$1,134,098.0
• Export: USM$1,332,688.5
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Bullish, Bullish Bullish
(A wish in Year of OX)

3. An Attractive Destination
An attractive market and low cost supply base
Low cost – Sustainable ?
MGSM985U Doing Business in/with China 2

4. Current Affairs
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5. Economic Initiatives – Car Industry
• Stimulus package of Rmb4,000bn(US$585bn) to avert economic
crisis.
• Halve to 5% the sales tax on purchases of cars with engines under
1.6 lts capacity.
• Give a one-off cash subsidies of Rmb5bn to owners of high
emission vehicles who trade them for cleaner ones.
• The State Council would not allow new steel capacity expansion
projects.
• Establishment of a Rmb10bn fund to promote new technology
vehicles.
• Encourage consolidation in the crowded auto industry.
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6. Car Industry Facts – Did you
know …
• 3rd largest producer after Japan and USA.
• 4,355,021 cars produced in 2008
• Over 100 manufacturers.
• JV with key global players. A land of contrast:
27 million cars and 0.8billion Bicycles.
• Assembly plants in emerging markets.
• 30 cars per 1,000 Chinese. World avg 120 per
1,000.
• 10% of Chinese cars must run on alternative
fuels by 2010.
MGSM985U Doing Business in/with China 5

7. A Crowded Auto Industry
Some of the main Chinese branded car companies
Great Wall Motor Company Ltd
长城汽车 or 長城汽車
• The majority of the above Chinese companies have formed
strategic alliances with major global auto manufacturers.
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8. Key Strategic Alliances – Major
brands Represented
• SAIC/Volkswagen joint venture is today China’s largest car
manufacturer.
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9. Challenges – Brand
Name
• The “Made in China” Brand as a Challenge.
• Perception of poor quality, low safety and
cheap.
• Quality Scandals and over coverage by
Western media
• History Lessons: The Japanese and Korean
experience
• Governments key Role in protecting
brand image
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10. Challenges – Safety
Are Chinese cars safe ?
• Chinese learn fast from poor
EU crash test results.
• Safety issues resolved
• Working on brand image, eg.
Great Wall Car – Model name
“SAFE” launched in Chile.
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Great Wall car – Model name “SAFE”

11. Industry Opportunities
To be Green…
Drivers for Green Cars
• Kyoto Protocol
• The pollution from car increase as no. of cars increases
• China’s own target to cut fossil fuel consumption by 40%
Current Market
• 17 brands in existing market and 20+ new brands in next 2 – 3 years
• World First EV in production – F3DM from BYD
Opportunities
• Domestic Market
• International Market for cheap and domestic transportation.
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12. Chery Motors – A Success
Story
• Strong seller - Pictured Chery QQ –
N1 Compact car sales in 2008 (China Association
of Automobile Manufacturers) .
• Largest Independent car maker (State-Owned) founded in 1997.
• Top Chinese passenger-car exporter for five consecutive years. In 2007,
it sold 119,000 units abroad, accounting for 30% of that year´s total
sales.
• Today in 70 countries and have 7 foreign assembly plants: Egypt,
Indonesia, Malaysia, Iran, Russia, Ukraine and Uruguay.
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13. Chery Motors – A Success
Story in Developing Markets
A Latin American Focus
• Chery Tiggo launched
• Engines exported to
Chery founded the US • Launched in Argentina, Peru,
as car parts Ecuador, Colombia and Venezuela
supplier • First export
to Syria
1997 1999 2001 2003 2005 2006 2007 2008 2009
• Chery QQ Launched • Targeting entry in Australia.
• Launched in Chile
• First car produced
• MOU Signed with FIAT
• “Feng Yun”
• Plant set up in Uruguay
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14. Chery Motors – Successes &
Challenges
Successes
• Technical cooperation with overseas companies
• Car exports
• Overseas assembly plants Chery Tiggo
Challenges
• Accelerated the pace of its globalization:
Quantum
• Quality, in the whole concept
• Environmental issues
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15. A Strategic Alliance –
Shanghai Volkswagen (SVW)
• Passat SVW in production
• POLO in production • SVM – “Most Influential JV in China”
• POLO Jinging & Jingu in production
First Negotiation with
• NEEZA concept car developed
Chinese Partner
• Set up Skoda dealer network
• Accredited
ISO 9001
1984 1997 Next
1978 1995 1999 2002 2004 2005 2006 2007
Oct Dec page
• Accredited
ISO 14001 • July – VW AG & SVW
development on B-Platform
• Mar - Santana 3000 in production
• SVW Established
• Nov – Touran SVW in production
• Santana B2 in production
• Offical partner for 2008 Beijing
Olympic
• Oct – TechCare established
• Nov - Passat LingYu in production
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16. A Strategic Alliance –
Shanghai Volkswagen (SVW)
• Passat LingYu with
hydrogen cells in production
• Top passenger car seller
Last 2008 2009 2010
page
• Retain dual brand to
boost domestic sale
• 20 Years strong alliance brings Chinese Automotive
Industry to the front tier of car innovation in 21st
Century
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17. Leap Forward for Chinese Car
Industry
• Central Government continues revising policies
• Stimulate Package of US$4 trillion
• 5S standard facilities are in operational
• Access to experts and professional
• More understanding about their competitors
Made-in China • Strong Domestic Market
From 1978 - 2003
• Beijing have policies for EV is ready
• Monetary policies will be ready
• Infrastructure is ready
• Low cost structure from companies is ready
• Domestic market is supportive and ready
• Energy reduction target is here and ready
• The competitors are, unfortunately, not ready Invented-in China
• The economy is at downturn and ready (for entry) The vision from President Hu Jintao
11/1/09, Salon.com 16

18. “We Are Ready”
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19. 謝
Q&A Session – 謝謝
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