Inside China’s Auto Market - University of · PDF fileSUE YINGZI SU Senior Economist, General Motors Inside China’s Auto Market ¶

SUE YINGZI SUSenior Economist, General Motors

Inside China’s Auto Market

¶ Growth in Chinese auto industry surprised most experts

¶ Having reached 20+ million units in annual sales, China auto industry still has great potential – Low vehicle ownership density

– Room for growth in smaller cities

¶ Yet, pace of auto sales will be slower than before– Slower growth in Chinese economy

– Restrictions on auto purchases and uses

– Rising costs of owning and operating a vehicle

INTRODUCTION

It has been a spectacular run

13.7

18.3 18.719.4

51%

34%

2% 4%

-

5

10

15

20

25

-10%

0%

10%

20%

30%

40%

50%

60%1

99

1

19

92

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93

19

94

19

95

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96

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97

19

98

19

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00

20

01

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03

20

04

20

05

20

06

20

07

20

08

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09

20

10

20

11

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12

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13

Tho

usa

nd

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Growth of China Auto IndustryGrowth %

Volume (Mil.)

Average growth rate 1991-2008: 17%

WTO

China vehicle sales v.s. the World

0

5,000

10,000

15,000

20,000

25,000

30,000

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Vehicle Sales by Region

China Total Europe North America Other Markets

Growth in vehicle sales returned to double digit in 2013

-

500

1,000

1,500

2,000

2,500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Tho

usa

nd

s

2013 2012 2011 2010 2009 2008

China Industry Monthly Volume

Real GDP growth is slowing

9.89.5

9.28.9

8.17.6

7.4

7.97.7

7.5

7.8

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2011 2012 2013

Trend of GDP Growth

Rebalancing Chinese economy will have profound impact

49.5%

47.8%

2.8%

36.0%

-20%

0%

20%

40%

60%

80%

100%

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12Consumption Investment Net Exports Household Consumption

Major Components of China GDP2012

Great potential remains for China

8

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10

20

30

40

50

0 3,000 6,000 9,000 12,000 15,000 18,000

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GDP Per Capita (2012 EKS$)

1990-2012China

1988-1999Korea

1984-1994Taiwan

1965-1976Japan

Country 2012 Car Parc/1,000 People

U.S. 813

Australia 693

Japan 585

Korea 385

Russia 308

Taiwan 306

Thailand 193

Brazil 187

China 81

Egypt 36

India 24

Source: Conference Board Total Economy Database, GM calculation

Challenges in China – aging population

9

0

5

10

15

20

25

30

35

40

45

0

200

400

600

800

1000

1200

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

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95

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98

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01

20

04

20

07

20

10

20

13

20

16

20

19

20

22

20

25

20

28

Million

Median Age Working Age Population 15-64

Source: United Nations

Age

Challenges in China - pollution

10

Challenges in China - congestion

11

More cities will restrict vehicle purchase after Beijing, Shanghai, Guangzhou and Guiyang

城市 青岛 天津 重庆 武汉 深圳 石家庄 成都 杭州 全国

2009 57% 36% 62% 54% 20% 58% 77% 65% 56%

2010 21% 18% 30% 25% 28% 28% 13% 38% 26%

2011 14% 8% 17% 12% 4% 11% -2% -2% 4%

2012 7% 10% 24% 10% 12% 17% 6% 8% 16%

2013.1-8 21% 30% 22% 33% 31% 21% 21% 24% 16%

Growth rate of vehicle sales in cities that could restrict purchases

City

Source: China State Information Center

Qing Dao

Tian Jin Chong Qing

Wu Han ShenZhen

Shi jiaZhuang

Cheng Du

Hang Zhou

Nation

Rising cost of owning a vehicle - Shanghai license plate auction price topped RMB80,000 ($14,000) in October

-

20,000

40,000

60,000

80,000

100,000

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9

2010 2011 2012 2013

Yuan

Motivations to trade up

14

110.8%

86.9%

11.2%

24.9% 19.4%

59.4%

31.7% 47.5%

85.7%

25.9%

17.9%

35.6%

62.9% 65.6%

13.8%

26.1%29.5%

23.7%

7.3%

51.4%

37.4%

8.8%6.8%

13.7%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

SUV Growth Rate

Passenger Vehicle Growth Rate

Chinese Passenger Vehicle Market

80% PV is just 4 Segments. PV is global brand dominated (73%)

Car C is the largest segment, with

over 5 million units sold in 2012, the

size of total industry of Japan

0

4,000

8,000

12,000

16,000

2000

200

1

200

2

200

3

200

4

2005

200

6

200

7

200

8

200

9

201

0

201

1

2012

Ind

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try V

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Global Brands

Local Brands

20%

68%

30%78%

73%

26%

Over 85% CV is just 3 segments Local Brands Dominate CV markets

Chinese Commercial Vehicle Market

It is a fragmented market

2012 Total China Industry (incl. CVs)~ 19.4 million units

w/ 30+ local OEM groups supported by

provincial/municipal Government

Veh Type 2012

1 Wuling Sunshine CV 522,933

2 Wuling Rong Guang CV 466,428

3 BJ 10 Series CV 429,035

4 Changan Star Light CV 325,554

5 Wuling CN100 PV 316,235

6 Ford Focus PV 296,360

7 Hyundai Elantra PV 279,121

8 Buick Excelle PV 277,071

9 Toyota Corolla PV 276,418

10 VW Lavida PV 246,687

Model Name

Top 10 Vehicles in 2012

Changan Star

9

4

10

BJ 10 SERIES

Hyundai New Elantra

Source: China Sales

3

Toyota Corolla

7

6

VW LavidaBuick Excelle

Wuling RongguangWuling Sunshine

Volume

Wuling CN100 Ford Focus

1 2

5

8

Top 10 Passenger Cars in 2012

Hyundai Elantra

VW LavidaBuick Excelle

VW New BoraVW Jetta

Toyota Corolla

3

1

4

2

65

7

8

9

10

Chevrolet Cruze

2012

1 GM CN100 316,235

2 Ford Focus 296,360

3 Hyundai Elantra 279,121

4 GM Excelle 277,071

5 Toyota Corolla 276,418

6 VW Lavida 246,687

7 VW Jetta 242,528

8 GM Cruze 232,592

9 VW Bora 222,735

10 GM Sail 218,090

Model Name

Wuling CN100 Ford Focus

GM Sail

GM’s Footprint in China

Shanghai (SGM/ PATAC)

Shenyang (SGM)

Liuzhou (SGMW)

Yantai (SGM)

Qingdao (SGMW)

HK Office

Beijing Office

China/IO Office

Changchun (FGL)

Ha’erbing (FGL)

Qujing (FGL)

Shanghai OnStar

GM China 2012/13 Passenger Cars

ATS CTS SLS SRX Escalade

Excelle NB/SW New Excelle HB/NB Enclave Regal LaCrosse

First Land GL8 Park Avenue CN100 MPV-B Encore

Astra Astra GTC Astra Twin-Top Zafira Antara

Spark Captiva Aveo/Lova Sail NB/HB Epica Cruze Malibu

¶ China economy is slowing as Chinese government pursues more sustainable growth

¶ Auto sales will grow at a slower pace following restrictions on owning and operating vehicles

¶ But, demand for vehicles in China remains very strong and market potential remains huge

SUMMARY

EVERYTHING STARTS AND ENDS WITH GREAT PRODUCTS