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Xingbin LI Chief Representative AMT-Beijing Representative Office China Market Update

Xingbin LI Chief Representative AMT-Beijing Representative Office China Market Update. Market Update Breakfast – China September 8, 2006. CONTENTS. The China automotive industry Production & growth rate Opportunity

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Xingbin LI Chief Representative AMT-Beijing Representative Office China Market Update

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  1. Xingbin LI Chief Representative AMT-Beijing Representative Office China Market Update Market Update Breakfast – China September 8, 2006

  2. CONTENTS • The China automotive industry • Production & growth rate • Opportunity • Production capacity (current production, production capacity and expansion plan) • Key automakers • The China components industry • Production & growth rate • Opportunity • Demands (purchasing plans of major global automakers) • New measures and tariff (technical barrier) • Key suppliers (global suppliers and domestic suppliers)

  3. Facts • 4th Largest economy in the world in 2005 • GDP: USD 2.263825 trillion • GDP growth rate: 9.9% • 2nd Largest auto market in the world in 2005 • Production: 5.75 million units of vehicle • Growth rate: 13.4% • The largest machine tool market in the world • USD10.9 billion • Growth rate: 15%

  4. The China Automotive IndustryProduction & growth rate

  5. 117 Registered Automakers, Of which 90 company’s capacities Are less than 10,000 units a year. The China Automotive Industry Production & growth rate Vehicles (Million of Units) 200220032004 2005 2006 (1 – 6) Production 3.25 4.44 5.07 5.75 3.63 Changes, % 38.8 36.6 14.2 13.4 28.9 Source: China Auto Industry Year Book

  6. The China Automotive IndustryProduction & growth rate China Car Productions (Million of Units) 2001 2002 2003 2004 2005 2006e (1-6) Production 0.7 1.09 2.06 2.26 2.95 1.80 Change % 15.1 55.7 89.0 9.7 30.5 46.9

  7. Production of Top 8 Chinese automakers from January-June, 2006 (in units) • Shanghai Automotive Industry Corp 621,400 54.85% •  First Automotive Works Corp 562,900 23.28% •  Dongfeng Motor Corp 454,200 26.1% •  Chang'an Motor Corp 369,100 8.39% •  Beijing Automotive Industry Corp 337,100 11.94% •  Chery Automobile 144,200 72.15% •  Geely Automobile 105,900 55.62% •  Guangzhou Automobile 105,700 (Source: China Association of Automobile Manufacturers)

  8. The China Automotive IndustryOpportunity – Production capacity • Production in 2005: 5.75 million units • Production capacity in 2005: 8 million units • Production capacity expansion plan: 16 million units by 2010

  9. The China Automotive IndustryOpportunity - Key automakers

  10. “A Fragmented Industry” 1,540 Registered Enterprises 3,500-8,500 Non-Registered The China Components IndustrySales & growth rate Components Statistics ($ billion) 200220032004 2005 Total Sales 34.2 47.9 62.7 71.9 Domestic 32.3 42.1 52.1 56.1 Imports 3.4 9.3 11.3 10.4 Exports 1.9 5.8 10.6 15.8 Average Annual Sales Per Supplier: $5.0 to $10.0 million Source: China Auto Industry Year Book

  11. The China Components IndustryOpportunity- Demands • Daimler-Chrysler (for China operation) • To spend $840 million in buying parts in 2008 ($100 million in 2005) • BMW (for China operation) • To spend $300 million in buying parts in 2007 • Volkswagen (for overseas operations) • To spend $1.0 billion in buying parts in 2006 ($300 million in 2005) • Volkswagen (for China operations) • To spend $2.5 billion in buying parts in 2006 • Multinational firms totally (for overseas operations) • To spend $35 billion in buying parts by the end of 2007

  12. The China Components IndustryOpportunity– New tariff Cars Displacement2001 2002 2003 2004 2005 2006 <3.0 L 70 43.85 38.2 34.2 30.28 25 >3.0 L 80 50.7 43 37.6 30.3 28.25 Parts & Components 2001 2002 2003 2004 2005 200610

  13. The China Components IndustryOpportunity– New measures • “Measures for the Administration of Import of Automobile Components and Parts Featuring Complete Vehicles” • Promulgated by the Customs of China, MOC, MOF and NDRC on April 1, 2005 • Go into effect on July 1, 2006

  14. The China Components IndustryOpportunity– New measures – Key Points • Article 21 - Under any of the following circumstances, the imported automobile components and parts shall be considered bearing the features of a complete vehicle: • Importing CKD or SKD to assemble automobiles. • The total price of the imported components and parts is not less than 60% of the total price of the complete vehicle type. • If, within the scope as prescribed in Article 4 of the present Measures: • Importing both the vehicle body (including the cab) assembly and engine assembly to assemble vehicles; • Importing either the vehicle body (including the cab) assembly or engine assembly and 3 or more other assemblies (systems) to assemble vehicles; • Importing 5 or more assemblies (systems) other than the vehicle body (including the cab) assembly and the engine assembly to assemble vehicles.

  15. The China Components IndustryOpportunity– New measures-Key points • Article 22 - under any of the following circumstances, the imported automobile components and parts shall be considered bearing the features of an automobile assembly (system) • Importing whole sets of KD components and parts to assemble an assembly (system) • Importing key components and parts or sub-assemblies to assemble an assembly (system), and the import of key components and parts or sub-assemblies reaches or exceeds the specified quantity. • The total price of the imported components and parts is not less than 60% of the total price of the assembly (system)

  16. The China Components IndustryOpportunity– New measures “Measures” REALLY means that • Discouraging automakers from using imported car parts for vehicles they assemble in China and making car by CKD & SKD increases production cost (from 10% to 25%) • Creating an incentive for car parts makers to shift production to China

  17. The China Components IndustryOpportunity – changes for global suppliers • From shareholding to share controlling • From JV to WOFE • From market penetration to market monopoly

  18. MAP OF CHINA Where are the Major Component Suppliers Located in China? Northeast (Jilin, Liaoning) Greater Beijing area (Beijing, Tianjin) Yangtze river delta (Shanghai, Jiangsu, Zhejiang) Middle China (Hubei) Southwest (Chongqing, Chengdu) Pearl river delta (Guangdong, Fujian)

  19. Major global suppliers ASIMCO Eaton Delphi Dana TRW Visteon Lear BorgWarner Johnson Controls Bosch Siemens VDO ThyssenKrupp GKN Freudenberg Faurecia Valeo Aisin Seiki Yazaki Denso ArvinMeritor Autoliv Magna Major domestic suppliers FAW Fawer Auto Parts Co. Dongfeng Motor Co., Ltd Parts & Components Business Wanxiang Group Sanhua Holding Group Wanfeng Auto Holding Group The China Components IndustryOpportunity– key suppliers

  20. Global Suppliers in China ASIMCOParkview Center, 4/F, 2 Jiangtai Road (s), Chaoyang District 100016, P. R. China (86)10-6438-2750, www.asimco.com • Asimco Meilian Braking System (Langfang) Co. Langfang, Hebei Province Air-compressor, brake • Asimco International Costing Co. Jiang County, Shanxi Province Casting for engine block and head • Beijing Asimco Tianwei Fuel Injection Pump & Nozzle Co. Beijing Fuel injection pump, oil nozzle • Zhong Ding Automotive Components Co Ningguo, Anhui Province Rubber products • Nanyue Fuel Injection & Pump Co. Hengyang, Hunan Province Fuel injection pump • Sichuan Dan Chi Industry Co. Sichuan Province Transmissions • Hubei Super-Elec. Auto Components Co. Shashi, Hubei Province Generators, starters • Harbin Feibeng Auto-Elec. Co. Harbin, Heilongjiang Province Igniters, ignition coils, relays, switches • Asimco Braking System (Zhuhai) Co. Zhuhai, Guangdong Province Disc & Drum type brakes, vacuum boosters • Asimco Braking Braking System (Guangzhou) Co. Guangzhou, Guangdong Province Disc & Drum type brakes, boosters • Asimco Shuangtai Components (Sichuan) Co. Sichuan Province Wheels EatonFloor, 300 Huai Hai Zhong Road, Hong Kong New World Tower, Shanghai 200021, P. R. China   (86)21- 6278-5090, www.eaton.com • Eaton Electrical (Suzhou) Co., Ltd. - EES Suzhou, Jiangsu Province Electrical circuit protection devices • Eaton Fast Gear (Xi'an) Co., Ltd. Xi’an, Shaanxi Province Transmissions • Eaton Fluid Power (Jining) Co., Ltd. Jining, Shandong Province Hydraulic pumps and motors • Eaton Fluid Power (Shanghai) Co., Ltd Shanghai Fluid connectors • Eaton Senstar Automotive Fluid Connector (Shanghai) Co. Shanghai Fluid connectors • Eaton Truck and Bus Components (Shanghai) Co., Ltd Shanghai Transmissions • Hangzhou Switches Power Systems Co., Ltd. Hangzhou, Zhejing Province Switches • Shanghai Eaton Engine Components Company, Ltd. Shanghai Engine valves and hydraulic tappets • Zhenjiang Eaton Electrical Systems Co., Ltd. Zhejiang Electrical devices • FAW Eaton Gear-Box Co. Changchun, Jilin Province Transmissions • Guangzhou Eaton Piston Ring Co. Guangzhou, Guangdong Province Piston rings • Ningbo Eaton Shenglong Co. Jingbo, Zhejiang Province Hydraulic hose fittings and adapters

  21. Domestic Suppliers in China FAW Fawer245 Shenzhen Street, Economic Development Zone, Changchun, Jilin, P. R. China (86)0431-4659800, www.fawer.com.cn • There are 23 manufacturing divisions/ companies under FAW Fawer Group. Dongfeng Motor Co., Ltd Parts & Components Business 8 dong Bin Gu Tai, Dong Cheng Road, Shiyan 442000, Hubei, P. R. China (86)0719-8221934, www.dfap.com.cn • There are 17 manufacturing/companies under Dongfeng Motor Co. Ltd Parts & Components Business. Wanxiang GroupWanxiang Road, Xiao Shan District, Hangzhou, Zhejiang, P. R. China (86)571-82832999, www.wanxiang.com.cn • There are 8 manufacturing/companies under Wanxiang Group making auto parts and components. Sanhua Holding GroupXinchang, Zhejing, P. R. China (86)575-6222768, www.sanhuagroup.com • There are 7 companies under Sanhua holding group making auto parts.

  22. New Service – How AMT China Helps you China Market Penetration Strategy Development Session Designed to help those AMT members who are new to China and want to develop their company’s sales & marketing strategy for today’s China

  23. New Service – How AMT China Helps you Review Session for your Existing China Market Penetration Strategy Designed to help YOU validate and invigorate your existing Sales & Marketing Strategy for today’s China

  24. Thank you!

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