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China Auto Market Prospect and Strategy of Dongfeng Motor Co., Ltd

China Auto Market Prospect and Strategy of Dongfeng Motor Co., Ltd. April 19 th , 2005 Dongfeng Motor Company LTD President, Katsumi Nakamura. Contents. 1. What is Dongfeng Motor Co., LTD? 2. China Market : Development and Business Environment 3 . Strategy of Dongfeng Motor Co., LTD.

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China Auto Market Prospect and Strategy of Dongfeng Motor Co., Ltd

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  1. China Auto Market Prospectand Strategy of Dongfeng Motor Co., Ltd April 19th, 2005 Dongfeng Motor Company LTD President, Katsumi Nakamura

  2. Contents 1. What is Dongfeng Motor Co., LTD? 2. China Market : Development and Business Environment 3. Strategy of Dongfeng Motor Co., LTD

  3. Dongfeng Automotive Industry Investment Co., Ltd. （Dongfeng holding company） Nissan Motor Co. LTD 50% 50% Cash investment 8.35 billion RMB Asset investment 8.35 billion RMB andcore business transfer Dongfeng Motor Co. LTD Core automotive operations Non-auto- motive companies, etc. PSA/Honda JVs Passenger car division Commercial vehicle division Equipment division Parts division Partnership Structure

  4. One Company, Two Brands DFL A single full-line auto company TRUCKS, CV’S & BUSES PASSENGER VEHICLES Sunny Bluebird Tiida Teana (Produced by Zhengzhou Nissan) Pickup Paladin

  5. Contents 1. What is Dongfeng Motor Co., LTD? 2. China Market : Development and Business Environment 3. Strategy of Dongfeng Motor Co., LTD

  6. Continuous mid & long term market expansion The toughest competitive market Risks on the market growth to be controlled through the governmental policies China Market Prospect

  7. 10K units 846 900 Actual Forecasting 772 CV 748 800 319 659 700 610 303 294 566 600 525 276 272 457 500 PV 266 254 400 343 222 528 300 469 245 383 203 213 454 183 160 338 157 200 144 271 300 160 144 235 126 109 110 100 106 140 85 69 51 57 47 38 0 CY96 CY97 CY98 CY99 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY1996-2010 TIV Remark：Including CBU Data source : (1) CY96-CY04 : CAAM+CPVIA (2) CY05-CY10 : DFL Study

  8. (10K.Unit) 600 CY2010 CY1990 500 400 CY2004 CY1973 300 200 Japan:CY1964 100 China:CY1996 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 (Years) PV Growth Speed：Japan vs. China Data Source : (1) Japan data : Japan Auto Handbook (2) China data : CAAM & DFL Study

  9. Population Structure of Japan(CY1970) Population of CY1970：104.67 Million 80-84 70-74 Female Male 60-64 50-54 40-44 30-34 20-24 10-14 0-4 MIL 6 4 2 0 2 4 6 (Mil.)

  10. <Japan> Population ratio of age 37- 40 & Land Price Increase in six big cities Source：Daiwa Institute of Research (Japan)

  11. 100---- 90-94 80-84 70-74 60-64 50-54 40-44 30-34 20-24 10-14 0-4 MaleFemale 80 40 80 (百万) 0 40 Population Structure of China ( CY2000 ) Population of CY2000：1242.6 Million (Not including 2.5 million army man of Liberation Army) 10 years MIL

  12. Number of Auto Enterprise ChinaCY2003over 100 Global 27 brands + α < United States ： 3 > GM Ford DCM (C) Dongfeng Faw Shanghai Beijing GuangzhouTianjin Nanjing Fujian Changan Brilliance Heavy truck Geely Chery Hafei Great wall Zhongxing < Japan： 11 > 3 Nissan Toyota Honda Mazda Mitsubishi Suzuki Daihatsu Isuzu Subaru Nissan Diesel Hino < Europe： 10 > VW・Audi PSA. Fiat BMW, DCM (D) Renault, Volvo Styer, Man 11 10 3 < Korea： 3 > Hyundai Kia Daewoo

  13. 120 14 100 Newly introduced models 41 80 60 15 101 40 12 60 9 7 45 33 20 24 17 Existing models 0 1999 2000 2001 2002 2003 2004 No. of Models in China Market Source: Fourin　（Japan)

  14. Market Price Trend Representative models’ weighted ave. price by segment MSRP: K RMB [Price down rate vs. ’03/Q4] D-segment 260.7 258.1 250 251.7 -5.3% 249.3 246.8 C-segment 152.0 151.0 145 141.8 134.2 -13.6% 130.4 B-segment 94.8 90 89.6 89.7 88.2 79.5 -16.1% '03/Q4 '04/Q1 '04/Q2 '04/Q3 '04/Q4

  15. 2004 1st Q 2005 1st Q Shanghai VW Shanghai VW 1 100,884 62,962 FAW-VW Beijing Hyundai 2 68,945 56,064 Shanghai GM FAW-VW 3 62,496 52,799 Changan Suzuki GZ Honda 4 34,763 42,888 Tianjin-FAW Tianjing-FAW 5 30,988 42,294 Jili Shanghai GM 6 27,827 39,704 Cherry Cherry 7 24,487 34,695 GZ Honda Shenlong PSA 8 24,424 32,976 Shenlong PSA DF Nissan 9 22,273 29,191 Beijing Hyundai Jili 10 21,910 26,029 Top 10 Sales PV Makes units Data source: CPVIA

  16. Oku-ton Oku-ton 0.55 0.6 2.0 1.78 1.8 0.5 0.40 1.6 1.22 0.4 1.4 1.12 1.43 0.40 1.2 0.22 0.3 1.21 1.0 0.30 0.8 0.2 0.86 0.6 Supply Demand 0.16 Supply Demand 0.1 0.4 0.2 0 0 ‘10 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘10 ‘09 170 160 Cold rolled steel Hot rolled steel Hot rolled steel in coil Steel plate Zinc plate steel Overall Index 150 140 130 120 110 100 04/5/17~21 04/8/23~8/27 2003/12/end 04/12/6~10 05/3/28~4/1 Raw Material Price Hike Supply and Demand Cold rolled steel Hot rolled steel Steel Market Economics Trend >10% approx. 20%

  17. 5.0 Oil consumption Oil production 4.0 Oil import 3.0 2.0 1.0 0.0 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05F '10F '15F Energy Consumption – Oil G ton Data source: CPEA

  18. Social & Environmental Issues Emission Control Fuel Consumption ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 New regulation EUR1 Step 1 Step 2 EUR2 Jul/’05 Jan/’08 New model EUR3 Jul/’06 Jan/’09 Existing <Beijing> EUR4 Safety Infrastructure • Stalled Traffic • Lack of Parking • Traffic Fatalities: 104,372 (’03) 99,217 (’04) 43.3 times of JPN <per UIO, 2003> Source) China: MPS, Japan: NPA, JAIA

  19. Contents 1. What is Dongfeng Motor Co., LTD? 2. China Market : Development and Business Environment 3. Strategy of Dongfeng Motor Co., LTD

  20. Strategy of DFL • Market and Customer Focus • Ability of “Producing Excellent Products”

  21. Brand Promise NISSAN: “Bold and Thoughtful” SHIFT_ • products beyond the expectations • “value for our customers”

  22. TEANA Proposal of New “Innovative Luxury Car”

  23. TEANA Proposal of New “Innovative Luxury Car”

  24. TEANA – VQ35DE Engine World’s 10 Best Engine <’93-’04>

  25. TEANA “Car of the Year in 2005 Award in China”

  26. TIIDA “All New Specious and Comfortable Sedan”

  27. TIIDA “Brand-New Comfort Car”

  28. TIIDA – HR16DE New Engine

  29. Products Introduction Plan New introduction Full model change Passenger vehicle serious Minor change 2003 2004 2005 2006 2007 Upper, middle & entry class cars and multi-purpose vehicle（MPV）

  30. 2007 <objective> 2003 2004 SSI Top level No. 10 No. 5 CSI Top level No. 9 No. 5 Sales & Service Network NSSW (Nissan Sales & Service Way) Number of Dealers *) incl. 2nd tier dealers Customer Satisfaction

  31. State-of-the-art Technology New Plant • Huadu Vehicle Plant: May/’04 SOP (150K units) • Xiangfan Plant: Sep/’04 SOP (70K units) • Engine Plant: Beg/’06~ (360K units) NPW (Nissan Production Way) • “Zero” inventory by synchronized production R&D Site • PV New R&D Center: End/’05~ (330M RMB, 200,000m2) QCD “KAIZEN” • GENBA-KANRI, IE, Quality Management, etc.

  32. Our Destination To be; One of the Best Brand in China, providing “Value for our customers”

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