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

1

China Auto Market ProspectChina Auto Market Prospect

and and

Strategy of Dongfeng Motor Co., LtdStrategy 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

Partnership Structure

Dongfeng Automotive IndustryInvestment Co., Ltd.

（ Dongfeng holding company ）

Dongfeng Automotive IndustryInvestment Co., Ltd.

（ Dongfeng holding company ）

Core automotiveoperations

Dongfeng Motor Co. LTDDongfeng Motor Co. LTDDongfeng Motor Co. LTDDongfeng Motor Co. LTD

PSA/HondaJVs

Non-auto-motive

companies, etc.

Nissan Motor Co. LTDNissan Motor Co. LTD

Asset investment8.35 billion RMB andcore business transfer

Cash investment8.35 billion RMB

Commercial vehicle division

Passenger car division

Parts division

Equipment division

50% 50%

4

Sunny

(Produced by Zhengzhou Nissan)(Produced by Zhengzhou Nissan)Pickup Paladin

One Company, Two Brands

TRUCKS, CV’S & BUSES PASSENGER VEHICLES

Teana

DFLDFLDFLDFL

A single full-line auto company

Bluebird

Tiida

5

Contents

1. What is Dongfeng Motor Co., LTD?

2. China Market : Development and Business Environment

3. Strategy of Dongfeng Motor Co., LTD

6

China Market Prospect

Continuous mid & long term market expansionContinuous mid & long term market expansion

The toughest competitive marketThe toughest competitive market

Risks on the market growth to be controlled Risks on the market growth to be controlled through the governmental policiesthrough the governmental policies

7

Data source : (1) CY96-CY04 : CAAM+CPVIA (2) CY05-CY10 : DFL Study

CY1996-2010 TIV

0

100

200

300

400

500

600

700

800

900

CY96 CY97 CY98 CY99 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10

10K units

Actual Forecasting

144183

245

659

846

566

457

343

772 CV

PV

157 160213

525

610

748

38

106 110

47 51 57 69 85140

109 126144

160

203

222

235

254

271

266

300

272

338

276

383 454469

528

294303

319

Remark ： Including CBU

8

PV Growth Speed ： Japan vs. China

Data Source : (1) Japan data : Japan Auto Handbook (2) China data : CAAM & DFL Study

0

100

200

300

400

500

600

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

Japan:CY1964

China:CY1996

CY2010

CY1990

CY2004

CY1973

(10K.Unit)

(Years)

9

6 4 2 0 2 4 6

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80-84

(Mil.)

Female

Male

Population of CY1970 ： 104.67 Million

Population Structure of Japan (CY1970)

MIL

10-60

-30

0

30

60

90

120

150

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0％ ％

19696.20

6.171972

73/945.7

▲ 7.276/3

5.861977

19816.47

5.701983

19877.61 87/9

101.6

▲ 40.196/3

4.931997

20025.18

5.072003

20106.16

03/3

▲ 19.4

Population ratio

Land price increase

<Japan>Population ratio of age 37- 40 &

Land Price Increase in six big citiesSource ： Daiwa Institute of Research

(Japan)

11

Male Female

100----

90-94

80-84

70-74

60-64

50-54

40-44

30-34

20-24

10-14

0-480 40 0 40 80 (百

万 )

Population Structure of China ( CY2000 )

MIL

Population of CY2000： 1242.6 Million(Not including 2.5 million army man of Liberation Army)

10 years

12

< Japan ： 11 >

NissanToyotaHondaMazda MitsubishiSuzukiDaihatsuIsuzuSubaruNissan Diesel Hino

China 　 CY2003 　 over 100

　　 Global 27 brands + α 　DongfengFaw ShanghaiBeijingGuangzhouTianjinNanjingFujianChanganBrillianceHeavy truck

GeelyCheryHafeiGreat wallZhongxing

< United States ： 3 >

GM Ford DCM (C)

< Europe ： 10 >

VW ・ Audi PSA. Fiat BMW, DCM (D) Renault, Volvo Styer, Man

< Korea ： 3 > Hyundai Kia Daewoo

Number of Auto Enterprise

11

3

10

3

13

Source: Fourin 　（ Japan)

24

33 4560

101

912

15

41

14

17

7

0

20

40

60

80

100

120

1999 2000 2001 2002 2003 2004

Newly introduced models

Existing models

No. of Models in China Market

14

Representative models’ weighted ave. price by segment

'03/Q4 '04/Q1 '04/Q2 '04/Q3 '04/Q4

MSRP: K RMB D-segment

250

260.7258.1

251.7249.3 246.8

141.8

90B-segment

94.8

89.6 89.7 88.279.5

-5.3%

145C-segment151.0 152.0

134.2130.4 -13.6%

-16.1%

[Price down rate vs. ’03/Q4]

Market Price Trend

15

1 Shanghai VW 100,884 Shanghai VW 62,962

2 FAW-VW 68,945 Beijing Hyundai 56,064

3 Shanghai GM 62,496 FAW-VW 52,799

4 Changan Suzuki 34,763 GZ Honda 42,888

5 Tianjin-FAW 30,988 Tianjing-FAW 42,294

6 Jili 27,827 Shanghai GM 39,704

7 Cherry 24,487 Cherry 34,695

8 GZ Honda 24,424 Shenlong PSA 32,976

9 Shenlong PSA 22,273 DF Nissan 29,191

10 Beijing Hyundai 21,910 Jili 26,029

2004 1st Q 2005 1st Q

Top 10 Sales PV Makes

units

Data source: CPVIA

16

0.86

1.211.12 1.22

1.78

1.43

00.20.40.60.81.01.21.41.61.82.0

‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10

Oku-ton

Supply Demand

Hot rolled steel Oku-ton

0.16

0.300.22

0.40

0.40

0.55

0

0.1

0.2

0.3

0.4

0.5

0.6

‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10

Supply Demand

Cold rolled steel

Raw Material Price Hike

Supply and Demand

100

110

120

130

140

150

160

170

2003/12/end 04/5/17~21 04/8/23~8/27 04/12/6~10 05/3/28~4/1

Cold rolled steel Hot rolled steel Hot rolled steel in coil

Steel plate Zinc plate steel Overall Index

Steel Market Economics Trend

approx. 20%

>10%

17

Energy Consumption – Oil

0.0

1.0

2.0

3.0

4.0

5.0

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05F '10F '15F

Oil consumption

Oil production

Oil import

Data source: CPEA

G ton

18

Social & Environmental Issues

Emission Control Fuel Consumption

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

Step 1 Step 2

New regulation

New model

Existing

Jul/’05

Jul/’06

Jan/’08

Jan/’09

EUR1

EUR3

EUR4

EUR2

’03 ’04 ’05 ’06 ’07 ’08

<Beijing>

’09 ’10

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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”Bold and Thoughtful”

products beyond the expectations

“value for our customers”

SHIFT_

22

TEANA

Proposal of New “Innovative Luxury Car”

23

TEANA

Proposal of New “Innovative Luxury Car”

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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

Passenger vehicle serious

Upper, middle & entry class cars and multi-purpose vehicle （ MPV ）

2003 2004 2005 2006 2007

New introduction

Full model change

Minor change

Products Introduction Plan

30

Sales & Service Network

100

>400*

150

0

100

200

300

400

500

2003 2004 2007

Number of Dealers

*) incl. 2nd tier dealers

Customer Satisfaction

SSI

CSI

2003 20042007

<objective>

No. 10 No. 5 Top level

No. 9 No. 5 Top level

NSSW (Nissan Sales & Service Way)

31

State-of-the-art Technology

New Plant

R&D Site

QCD “KAIZEN”

NPW (Nissan Production Way)

– “Zero” inventory by synchronized production

– GENBA-KANRI, IE, Quality Management, etc.

– Huadu Vehicle Plant: May/’04 SOP (150K units)

– Xiangfan Plant: Sep/’04 SOP (70K units)

– Engine Plant: Beg/’06~ (360K units)

– PV New R&D Center: End/’05~ (330M RMB, 200,000m2)

Our Destination

To be;

One of the Best Brand in China,

providing “Value for our customers”