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Banking on China’s Auto Market

Banking on China’s Auto Market. Karen Adams Senior VP Corporate Banking Head of Automotive HSBC China. 19 April 2005. Consumer Spending to Take Over…. Tight Credit Policy in China “Engineered Soft Landing” As investment growth eases, the consumer will take over

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Banking on China’s Auto Market

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  1. Banking on China’s Auto Market Karen Adams Senior VP Corporate Banking Head of Automotive HSBC China 19 April 2005

  2. Consumer Spending to Take Over… • Tight Credit Policy in China • “Engineered Soft Landing” • As investment growth eases, the consumer will take over • What will consumers spend their money on? CARS!

  3. China Auto Sales • China’s auto market continues to grow quickly • Continued investment by the OEMs

  4. China’s Auto Market: Trends • Price cuts & new model introductions • Decreased OEM margins • Components suppliers squeezed • Higher technology • Fuel efficiency & environmentally conscious design • Shift from institutional to private buyers • Auto finance market development

  5. Who Buys Cars in China Today? • Institutional buyers: SOEs, government bodies, military, fleets (taxis) • China’s car market has “led with luxury” Who Will buy in Future? • Shift from institutional to private buyers • China’s car market will “follow with affordability”

  6. What Will they Buy…?(Source: Automotive Resources Asia)

  7. Our Forecast for China’s Car Market… • 2005: a year of identifying winners & losers • Growth of small car segment (< 1.3L) • We will see another 15% overall growth in 2005 • Increasing to 20% growth in 2006 • Levelling off at 10-12% growth 2007-2010 • Auto Finance Market: slow start followed by rapid growth • By 2015: 50% of cars sold in China will be financed • Emergence of 1-2 domestic global players by 2015

  8. Risks for the Foreign Investor in China? • Overcapacity / Squeezed Margins • CPI softening but PPI still rapid • Competing products & services for consumer’s dollar • Failure of weaker domestic manufacturers • Failed “soft landing” / stangnant consumer spending Main Risk: Absence

  9. HSBC Corporate Banking Financing Trade Treasury Cash Management Regulatory Advice HSBC Investment Banking Project Finance M&A Advisory Debt Structuring & Advisory Equity Advisory Banking on China’s Auto Market…

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