Annex I. Annex II. Annex III. Annex IV. Annex V. Annex VI. Annex VII. Annex VIII. Annex IX.

Transcription

1 Annex I. Annex II. Annex III. Annex IV. Annex V. Annex VI. Annex VII. Annex VIII. Annex IX. Relations Between Foreign and Chinese Automobile Manufacturers Brands Produced by the Main Chinese Manufacturers SWOT Analysis of Each of the Ten Main Players Overview of the Location of the Production Centers/Offices of the Main Chinese Players Overview of the Main Auto Export/Import Ports in China An Atlas of Pollution: The World in Carbon Dioxide Emissions Green Energy Vehicles Further Analysis in the EV vehicles Shifts Towards E-mobility

2 Annex I. Relations Between Foreign and Chinese Automobile Manufacturers. Shanghai Kolben schmitt piston xingfu motor IVECO VOLVO (AB Group) NAVECO NAC Yuejin Yuejin Yanfeng SDS shanghai 4.25% visteon sunwin bus UAES NAC 90% VW Transmission 53% 20% SAIC SALES Beijing Hyundai BBAC Beiqi Invest 55.6% Beiqi Motors Beilu Automotive 39% Beiqi 33.3% Manafacture BAIC Cumins Beiqi Foton Cumins 49% 34% Beijing Foton Beiqi Foton Daimler 10% GAC Hino Daimler 70% Holdings Daimler Invest FIAT Guangzhou Hino Guangzhou Toyota Guangzhou Toyota Engine 91.94% 30% Guangzhou Denway motorl Zhonglong Invest Guangzhou FIAT GAC Group Guangzhou Denway Bus Mitsubishi 30% GTE GAC Mitsubishi GTMC 51% Guangzhou Isuzu Bus Guangzhou Motors Dongfeng Motor 25% Guangzhou Honda 10% Honda Auto (China) 49% Wuyang Honda 65% DYK 25% DCD Dongfeng Yuan 20% DFM 65% DET DCVC 20% FAW Haima FAW Foundry SAIC MG-Rover Shanghai Jinbei Transmission Shanghai Automotive FAW Changchun Light Vehicle SAIC Motor Commercial FAW Harbin light vehicle factory 51.4% SAIC Yizheng 74.3% 99% Shanghai Automotive FAW Hongta FAW-GM Light vehicle FAW Jilin PATAC SAIC Motor SFTM Chengdu FAW 49% ZF Shanghai Steering SGM Dongyue FTMS 51% Shanghai GM 47.73% SGM Dongyue Power 80% Tianjin FAW Xiali 38% 45% 32% 25% 20% Shanghai Huizhong 30% FAW Car 50.1% SGM Norsom TFTM 70% 5% SIH 49% 48% Shanghai VW Shanghai Sachs Shanghai Valeo Shanghai GM Wuling 34% FMMS 25% Beiqingqi Hyundai GM TOYOTA KIA Mazda Daimler VW Cumins Ford SUZUKI BMW Chrysler Automarkers in China Honda Mitsubishi Nissan Isuzu Peugeot- Citroen Southeast Motor Kinglong % 60% Xiamen Gloden Dragon 19.09% 51% Xiamen Gloden Dragon Bus FJMG Jiangxi Isuzu Xiamen KLM 60% 45% Kinglong Suzhou Dongan Mishubishi Dongan dongli 36% Haerbin Auto Grop 51.41% 19% 10% CCAG DF Nissan Disell Dongfeng Peugeot Citroen 49% Changhe SUZUKI 66.86% DFL 36.44% DFG Dongfeng Electric Vehicle 44% Dongfeng Honda Parts Dongfeng \ Honda Dongfeng Engine Honda 90% DF Xiangfan 83.33% DF Changzhou 51% DF Yutong 5% DCEC 45.55% DFMC Equipment DFMC Parts and Components 70% DF Nissan Passenger vehicle Dongfeng Motor % Zhenzhou 30% Nissan FAW Sichuan FAW Sichuan special purpose vehicle FAW special purpose vehicle FAW changchun Fengyue 25% 49% Fawer Automotive parts 31.57% FAW GROUP FAW siping special purpose vehicle FAW BUS 75% 53.03% VW FAW 60% Engine 40% 30% 60% FAW-VW FAW VW FAW Shangdong Sales Auto Remanufacture 5% FAW FAW Jiefang jiefang wuxi Diesel Engine FAW FAW linyuan jiefang dalian Diesel Engine FAW Huali FAW Qingdao Ankai Brilliance Auto JAC Coaches 28.12% BM\W Brilliance 51% Brilliance 49% Jinbei Jinbei JAC JMC JMC New power Remanufacture 51% JMC Special Purpose Vehicle JMC Group JMC Holding 31% 41.3% JMC Motor Changan jinling Changan FORD MAZDA 35% 15% Changan Auto Changan FORD MAZDA engine 51% 83.22% 93.45% Changan suzuki Nanjing Changan JMC Holding Heibei Changan Dalian BUS Wuxi BUS FAW Bus (chengdu) JAC %

3 SAIC Motor SDS UAES SAIC SALES SIH xingfu motor NAC Yuejin 53% 90% 20% SAIC 74.3% Shanghai Kolben schmitt piston Yanfeng visteon shanghai sunwin bus VW Transmission Shanghai Sachs Shanghai Valeo Shanghai GM Wuling 50.1% Shanghai VW Shanghai Huizhong Shanghai GM 51% ZF Shanghai Steering PATAC 49% Shanghai Automotive 4.25% NAC Yuejin NAVECO Shanghai Jinbei Transmission SAIC Yizheng Shanghai Automotive 51.4% SGM Norsom SGM Dongyue SGM Dongyue Power 99% SAIC Motor Commercial VW GM 34% 49% IVECO AB VOLVO Group

4 Toyota GM FAW Harbin light vehicle factory FAW Hongta 45% 48% SFTM TFTM 32% FAW Changchun Light Vehicle FAW-GM Light vehicle FAW Jilin Chengdu FAW FTMS 25% 20% 30% Mazda FAW Haima FAW Foundry 80% Tianjin FAW Xiali 38% 47.73% FAW Car 70% 5% FMMS 25% 49% 53.03% FAW Sichuan 25% 40% VW FAW Engine 60% FAW Sichuan special purpose vehicle FAW GROUP 60% FAW-VW 30% VW FAW special purpose vehicle FAW Shangdong Auto Remanufacture VW FAW Sales 5% FAW changchun Fengyue 31.57% 75% FAW Jiefang FAW jiefang wuxi Diesel Engine Fawer Automotive parts FAW siping special purpose vehicle FAW BUS FAW Huali FAW linyuan FAW Qingdao FAW jiefang dalian Diesel Engine Dalian BUS Wuxi BUS FAW Bus (chengdu)

5 DFG DFL 25% DFM 66.86% DYK DCD Dongfeng Electric Vehicle 36.44% Dongfeng Honda Parts 44% Dongfeng \ Honda Engine Dongfeng Honda Dongfeng Peugeot Citroen DFMC Parts and Components Dongfeng Motor DET DF Nissan Disell Cumins KIA 70% 65% DFMC Equipment DCVC DF Nissan Passenger vehicle 51% Zhenzhou Nissan DCEC DF Yutong DF Changzhou DF Xiangfan 5% 51% 83.33% 90% 30% Nissan DFSK Honda PSA 14% DFM AB Volvo DFCV 55% 45% Dongfeng Renault Renault Yulon Brilliance Auto BMW Brilliance Brilliance Jinbei BMW Jinbei 51% 49%

6 Changan Auto 36% CCAG 45.55% Dongan Dongli Mitsubishi Haerbin Auto Grop 45% Dongan Mishubishi 51.41% 19% Changhe SUZUKI SUZUKI 49% 10% Changan SUZUKI Changan MAZDA Nanjing Changan Changan Jinling Changan FORD MAZDA Engine Heibei Changan 93.45% 83.22% 51% FORD MAZDA Jiangling Holding JMC Jiangling Group Ford 31% 41.3% JMC New power JMC Remanufacture JMC Special Purpose Vehicle 51% (JMCG) Motors Changan FORD Changan SUZUKI 51% 49% Isuzu Jiangxi Isuzu

7 BAIC Cumins Daimler 10% 40% BBAC Beiqi Invest Beiqi Motors 51% 55.6% Beiqi Foton 49% Beiqi Foton Cumins Beijing Foton Daimler Daimler Holdings Daimler Invest Beilu Automotive 39% Beiqi Manafacture 33.3% Beiqingqi 20% Beijing Hyundai Hyundai Motor BAIC Group 51% 12% CH JDZ 70% BJEV 60% 32.8%

8 GAC Group GAC 91.94% 51% Guangzhou Honda GTMC GTE Guangzhou Denway Bus 30% Zhonglong Invest Guangzhou Denway motorl Guangzhou Motors Honda Guangzhou Isuzu Bus 25% Honda Auto (China) 65% Dongfeng Motor 10% Wuyang Honda ISUZU 49% Guangzhou Toyota Guangzhou Toyota Engine 30% TOYOTA Guangzhou Hino Hino 50.2% 70% FIAT Mitsubishi Guangzhou FIAT GAC Mitsubishi BYD 49% GAC BYD Bus 51%

9 Annex II. Brands Produced by the Main Chinese Manufacturers.

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18 Remarks on Annexes III and IV 1. Only Chinese brands are included. 2. The annexes focus on the passenger vehicle segment, though part of the commercial vehicle segment is also listed, e.g., SINOTRUK. 3. Commercial vehicle series are illustrated by only one picture, even though there are many different models. Thus, for example, JMC light trucks are represented by only one picture, the CARRY model, but other models, such as the CARRY, SHUNDA, KAIWEI and BOARDING, are also included. 4. SAIC bases include the Yuejin, SAIC-GM-Wuling and MG brands. 5. Changan bases include the Hafei and JMC brands. 6. BAIC bases include the Foton and BAW brands. 7. The data source from 2011 and 2013 is the China Customs database and interviews with professionals in auto companies. 8. Not all overseas bases are totally owned by automotive companies; some are owned in cooperation with Chinese companies for assembly only.

19 Annex III. SWOT Analysis of Each of the Ten Main Players. SAIC SAIC Motor Corporation Ltd. is China s largest automobile manufacturer with an over 20% market share. It is owned by the Shanghai municipal government as a majority shareholder, and also listed on the Shanghai Stock Exchange. SAIC Motor is a Fortune Global 500 Company (2015 rank: No. 60; revenue: $102.2 billion). PRODUCTION AND SALES Units Production 3,972,909 4,479,378 5,148,024 5,610,558 5,836,156 Sales 3,966,003 4,461,393 5,073,338 5,583,699 5,863,497 (Million RMB) Turnover 434, , , , ,374 Profit 42,028 20,752 24,804 27,973 29,794 ROS 9.67% 4.31% 4.38% 4.46% 4.

20 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). Cooperating MNC: VW, GM, AB VOLVO and IVECO. Production bases: o China: Chongqing, Liaoning, Shandong, Shanghai, Jiangsu, Guangdong, Zhejiang etc. o Overseas: United Kingdom, India, Egypt, Vietnam etc. SWOT

21 DONGFENG Founded in 1969, Dongfeng Motor Corporation, previously named Second Automobile Works Co., is one of the three giant automakers in China. It is owned by Chinese central government. Dongfeng Motor Group is a Fortune Global 500 Company (2015 rank: No. 109; revenue: $79 billion). PRODUCTION AND SALES Units Production 3,059,120 3,079,279 3,532,298 3,830,507 3,824,593 Sales 3,058,587 3,078,494 3,534,946 3,802,530 3,872,502 (Million RMB) Turnover 21,393 17,700 19,306 17,471 16,875 Profit ROS 1.96% 0.12% 0.26% 0.80% 2.04% * The above financial data are for Dongfeng Automobile Co., Ltd. (DFAC).

22 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). SWOT Cooperating MNC: PSA, KIA, RENAULT-NISSAN, HONDA and AB VOLVO. Production bases: o China: Henan, Hubei, Guangxi, Yunnan, Guangdong, Sichuan, Jiangsu, Zhejiang, Hunan, Xinjiang, Fujian etc. o Overseas: Iran, Vietnam, Malaysia, Egypt, Thailand, Uruguay, Russia, Nigeria, South Africa, Ukraine, Namibia, Ghana etc.

23 FAW Founded in 1953, FAW Group is a top three player in Chinese vehicle manufacturing industry and owned by Chinese central government. FAW Group is a Fortune Global 500 Company (2015 rank: No. 107; revenue: $80.2 billion). PRODUCTION AND SALES Units Production 2,566,718 2,657,469 2,935,344 3,120,946 2,820,042 Sales 2,601,351 2,645,924 2,908,399 3,086,134 2,843,774 (Million RMB) Turnover 32,653 23,385 29,675 33,857 26,664 Profit 195 (756) 1, ROS 0.60% (3.23%) 3.39% 0.48% 0.20% * The above financial data are for FAW Car Co., Ltd.

24 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). Cooperating MNC: VW, GM, TOYOTA and MAZDA. Production bases: o China: Sichuan, Yunnan, Hainan, Jilin, Tianjin, Heilongjiang, Guangdong, Shanghai, Liaoning, Jiangsu, Hunan etc. o Overseas: Ukraine, Vietnam, Mexico, Iran, Pakistan, Kazakhstan, Russia etc. SWOT

25 CHANGAN Changan Automobile has marketed a wide range of product lines such as sedans, micro cars, buses, trucks, SUVs and MPVs. It is indirectly owned by Chinese central government. Changan s parent, China South Industries Group, is a Fortune Global 500 Company (2014 rank: No. 169; revenue: $58.8 billion). PRODUCTION AND SALES Units Production 2,003,102 1,930,889 2,246,125 2,630,173 2,781,368 Sales 2,008,540 1,956,391 2,203,307 2,547,751 2,776,523 (Million RMB) Turnover 26,552 29,463 38,482 52,913 66,772 Profit 949 1,446 3,506 7,561 9,953 ROS 3.57% 4.91% 9.11% 14.29% 14.91%

26 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). SWOT Cooperating MNC: FORD, MAZDA, VOLVO, SUZUKI and PSA. Production bases: o China: Shanxi, Chongqing, Hebei, Jiangsu, Jiangxi, Heilongjiang, Anhui, Beijing etc. o Overseas: Malaysia, Mexico, Vietnam, Colombia, Ecuador, Iran, Russia, Philippines, Sri Lanka, Uruguay, Nigeria, Vietnam, Brazil, Syria, Burma etc.

27 BAIC Founded in 1958, Beijing Automotive Group is considered the fifth largest domestic Chinese automaker and owned by the Beijing municipal government. BAIC is a Fortune Global 500 Company (2015 rank: No. 207; revenue: $50.6 billion). PRODUCTION AND SALES Units Production 1,513,695 1,672,974 2,068,372 2,425,560 2,501,037 Sales 1,526,336 1,691,117 2,111,115 2,400,901 2,488,970 (Million RMB) Turnover 3,314 4,271 12,782 56,370 84,112 Profit 2,567 3,478 3,013 5,841 6,322 ROS 77.46% 81.43% 23.57% 10.36% 7.52% * The above financial data are for BAIC Motor Corporation Ltd.

28 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). Cooperating MNC: HYUNDAI, DAIMLER, SUZUKI and BORGWARD. Production bases: o China: Inner Mongolia, Hunan, Chongqing, Beijing, Guangdong, Hubei etc. o Overseas: Russia, Kenya, Pakistan, South Korea, Malaysia, Burma, Indonesia, Vietnam, Mexico, Zimbabwe etc. SWOT

29 GAC Guangzhou Automobile Group Company Limited (GAC Group) is China s sixth largest automaker and owned by the Guangzhou municipal government. GAC is a Fortune Global 500 Company (2015 rank: No. 362; revenue: $33.2 billion). PRODUCTION AND SALES Units Production 744, ,270 1,007,018 1,218,513 1,274,277 Sales 740, ,164 1,004,203 1,172,264 1,303,108 (Million RMB) Turnover 10,984 12,964 18,824 22,376 29,418 Profit 4,167 1,133 2,669 3,186 4,232 ROS 37.94% 8.74% 14.18% 14.24% 14.39%

30 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). SWOT Cooperating MNC: FIAT-CHRYSLER, MITSUBISHI, HONDA, TOYOTA and HINO. Production bases: o China: Anhui, Inner Mongolia, Jiangsu, Henan, etc. o Overseas: Ukraine, Russia, Egypt, Iran, Burma, Malaysia, Venezuela, Brazil, Uruguay, Senegal, Zimbabwe etc.

31 BRILLIANCE Brilliance Auto has six vehicle manufacturing subsidiaries and four engine making subsidiaries, with around 50,000 employees and assets of over 100 billion yuan. It is owned by the Liaoning provincial government. PRODUCTION AND SALES Units Production 553, , , , ,026 Sales 566, , , , ,067 (Million RMB) Turnover 6,443 5,916 6,103 5,515 4,863 Profit 1,891 2,237 3,316 5,300 3,280 ROS 29.36% 37.81% 54.34% 96.10% 67.46% * The above financial data are for Brilliance China Automotive Holdings Limited.

32 PRODUCT LINE SWOT *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). Cooperating MNC: BMW. Production bases: o China: Shaanxi, Guangdong, Hunan, Beijing, Shanghai, Tianjin etc. o Overseas: Russia, Egypt, Syria, Sudan, Canada etc.

33 GREAT WALL Great Wall Motor Company Limited produces passenger cars, SUVs, MPVs and pickups. It is a private company and controlled by entrepreneur Mr. Wei Jianjun, the world s 351 st richest man according to Forbes (2016 wealth: $4.3 billion). PRODUCTION AND SALES Units Production 486, , , , ,592 Sales 486, , , , ,693 (Million RMB) Turnover 30,089 43,160 56,784 62,591 75,955 Profit 4,131 5,692 8,224 8,041 8,059 ROS 13.73% 13.12% 14.48% 12.85% 10.61%

34 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). Production bases: o China: Hebei and Tianjin. o Overseas: Russia, Bulgaria, Malaysia, Philippines, Brazil, Sri Lanka, Egypt, Sudan, Ethiopia, Senegal, etc. SWOT

35 JAC Founded in 1964, Jianghuai Automobile Co., Ltd. (JAC) is a comprehensive manufacturer of passenger vehicles, commercial vehicles and auto parts. It is listed on the Shanghai stock exchange and controlled by the Anhui provincial government. PRODUCTION AND SALES Units Production 485, , , , ,038 Sales 494, , , , ,943 (Million RMB) Turnover 30,471 29,128 33,641 34,169 46,386 Profit ROS 2.32% 1.67% 2.73% 1.55% 1.85%

36 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). Production bases: o China: Anhui, Jiangsu etc. o Overseas: Malaysia, Morocco, Philippines, Ethiopia, Pakistan, Russia, Burma, Iran, Vietnam, Brazil etc. SWOT

37 GEELY Geely was the first Chinese private company approved for making sedans in 2001, and successfully acquired Swedish Volvo Cars in It is listed on the Hong Kong stock exchange and controlled by entrepreneur Mr. Li Shufu. Geely is a Fortune Global 500 Company (2015 rank: No. 477; revenue: $25 billion). PRODUCTION AND SALES Units Production 435, , , , ,005 Sales 432, , , , ,853 (Million RMB) Turnover 20,965 24,628 28,708 21,738 30,138 Profit 1,716 2,050 2,680 1,449 2,289 ROS 8.18% 8.32% 9.34% 6.67% 7.59%

38 PRODUCT LINE *Remarks: 1. Broken line rectangles show price ranges for a given brand. 2. Prices are not available for commercial brands (without a rectangle). SWOT Cooperating MNC: VOLVO. Production bases: o China: Hunan, Sichuan, Gansu, Zhejiang, Shandong, Shanghai and Shanxi. o Overseas: Belgium, Ukraine, Ethiopia, Egypt, United Kingdom, Sweden and Belarus.

39 Annex IV. Overview of the Location of the Production Centers/Offices of the Main Chinese Players. SAIC Group 2. Xinjiang 3. Liaoning 1. Chongqing 4. Shandong 6. Jiangsu 5. Shanghai 1. Chongqing 2. Xinjiang 3. Liaoning 4. Shandong 5. Shanghai 6. Jiangsu 7. Guangxi 7. Guangxi CEIBS, Shanghai 2014 SAIC Motor Overseas 1. UK 3. Egypt 2. India 4. Vietnam 1. UK 2. India 3. Egypt 4. Vietnam CEIBS, Shanghai 2014

40 Dongfeng Group 10. Xinjiang 6. Sichuan 1. Henan 9. Hunan 2. Hubei 7. Jiangsu 8. Zhejiang 11. Fujian 1. Henan 2. Hubei 3. Guangxi 4. Yunnan 5. Guangdong 6. Sichuan 7. Jiangsu 8. Zhejiang 9. Hunan 10. Xinjiang 11. Fujian 4. Yunnan 3. Guangxi 5. Guangdong CEIBS, Shanghai 2014 Dongfeng Motor Overseas 2. Russia 8. Ukraine 7. Egypt 1. Iran 9. Thailand 12. Ghana 5. Nigeria 3. Vietnam 4. Malaysia 10. Namibia 11. Uruguay 6. South Africa 1. Iran 2. Russia 3. Vietnam 4. Malaysia 5. Nigeria 6. South Africa 7. Egypt 8. Ukraine 9. Thailand 10. Namibia 11. Uruguay 12. Ghana CEIBS, Shanghai 2014

41 FAW Group 6. Heilongjiang 4. Jilin 9. Liaoning 2. Yunnan 1. Sichuan 11. Hunan 5. Tianjin 8. Qingdao 10. Jiangsu 8. Shanghai 1. Sichuan 2. Yunnan 3. Hainan 4. Jilin 5. Tianjin 6. Heilongjiang 7. Guangdong 8. Shanghai 9. Liaoning 10. Jiangsu 11. Hunan 7. Guangdong 3. Hainan CEIBS, Shanghai 2014 FAW Motor Overseas 5. Russia 6. Ukraine 4. Kazakhstan 2. Mexico 1. Iran 3. Pakistan 7.Vietnam 1. Iran. 2. Mexico. 3. Pakistan 4. Kazakhstan 5. Russia 6. Ukraine 7. Vietnam CEIBS, Shanghai 2014

42 Chery Group 2. Inner Mongolia. 3. Henan 1. Anhui 4. Jiangsu 1. Anhui 2. Inner Mongolia 3. Henan 4. Jiangsu CEIBS, Shanghai 2014 Chery Group Overseas 9. Russia 5. Ukraine 11.Venezuela 10. Senegal 4. Egyp t 6. Iran 3. Burma 16.Vietnam 8. Malaysia 2. Brazil 1. Zimbabwe 7. Uruguay 1. Zimbabwe 2. Brazil 3. Burma 4. Egypt 5. Ukraine 6. Iran 7. Uruguay 8. Malaysia 9. Russia 10. Senegal 11. Venezuela CEIBS, Shanghai 2014

43 BYD 1. Beijing 5. Tianjin 6. Shaanxi 3. Shanghai 1. Beijng 2. Hunan 3. Shanghai 4. Guangdong 5. Tianjin 6. Shaanxi 2. Hunan 4. Guangdong CEIBS, Shanghai 2014 BYD Motor Overseas 5. Canada 2. Russia 4. Syria 1. Egypt 3. Sudan 1. Egypt 2. Russia 3. Sudan 4. Syria 5. Canada CEIBS, Shanghai 2014

44 Chana Group 7. Heilongjiang 1 Beijing 3. Chongqing 2. Shanxi 5. Hebei 8. Anhui 6. Jiangxi 4. Jiangsu 1. Beijing 2. Shanxi 3. Chongqing 4. Jiangsu 5. Hebei 6. Jiangxi 7. Heilongjiang 8. Anhui CEIBS, Shanghai 2014 Chana Motor Overseas 1. Algeria 2. Chile 3. Colombia 4. Ecuador 5. Iran 6. Malaysia 7. Mexico 8. Panama 9. Peru 10. Philippines 11. South Africa 12. Sri Lanka 13. Turkey 14. Uruguay 15. U.S.A 16. Vietnam 15. U.S.A 7. Mexico 8. Panama 3. Colombia 4. Ecuador 2. Chile 9. Peru 14. Uruguay 1. Algeria 13. Turkey 5. Iran 11. South Africa 12. Sri Lanka 16. Vietnam 10. Philippines 6. Malaysia CEIBS, Shanghai 2014

45 JAC 1. Jiangsu 2. Anhui 2. Anhui 1. Jiangsu CEIBS, Shanghai 2014 JAC Overseas 2. Russia 4. Morocco 5. Iran 1. Pakistan 3. Ethiopia 7. Burma 8. Vietnam 10. Philippines 6. Malaysia 9. Brazil 1. Pakistan 2. Russia 3. Ethiopia 4. Morocoo 5. Iran 6. Malaysia 7. Burma 8. Vietnam 9. Brazil 10. Philippines CEIBS, Shanghai 2014

46 Great Wall 1.Hebei 2.Tianjin 1. Hebei 2. Tianjin CEIBS, Shanghai 2014 Great Wall Motor Overseas 5. Russia 11. Korea 7. Egypt 1. Brazil 10. Senegal 8. Sudan 9. Ethiopia 6. Sri Lanka 4. Philippines 3. Malaysia 2. Indonesia 1. Bulgaria 2. Brazil 3. Malaysia 4. Philippines 5. Russia 6. Sri Lanka 7. Egypt 8. Sudan 9. Ethiopia 10. Senegal 11. Korea CEIBS, Shanghai 2014

47 BAIC Motor 2. Inner Mongolia 1. Beijing 1. Beijing 2. Inner Mongolia 3. Hunan 4. Chongqing 5. Guangdong 6. Hubei 4 Chongqing 3. Hunan 6. Hubei 5. Guangdong CEIBS, Shanghai 2014 BAIC Motor Overseas 3. Russia 2. Pakistan 4. Korea 9. Mexico 6. Burma 8. Vietnam 1. Kenya 5. Malaysia 7. Indonesia 10. Zimbabwe 1. Kenya 2. Pakistan 3. Russia 4. Korea 5. Malaysia 6. Burma 7. Indonesia 8. Vietnam 9. Mexico 10. Zimbabwe CEIBS, Shanghai 2014

48 Geely Group 5. Gansu 4. Sichuan 2. Shanxi 7. Shandong 1. Shanghai 6. Zhejiang 1. Shanghai 2. Shanxi 3. Hunan 4. Sichuan 5. Gansu 6. Zhejiang 7. Shandong 3. Hunan CEIBS, Shanghai 2014 Geely Motor Overseas 5. Sweden 8. Russia 4. UK 3. Belgium 6. Belarus Ukraine 1. Egypt 2. Ethiopia 1. Egypt 2. Ethiopia 3. Belgium 4. UK 5. Sweden 6. Belarus 7. Ukraine 8. Russia CEIBS, Shanghai 2014

49 Annex V. Overview of the Main Auto Export/Import Ports in China.

50 Annex VI. An Atlas of Pollution: The World in Carbon Dioxide Emissions.

51 Annex VII. Green Energy Vehicles. Pure Electric Vehicles (EVs) Electric vehicles (EVs) use a battery to store the electrical energy that powers the motor. The battery is recharged by plugging the vehicle into a power source. However, the goodness of the green cycle actually depends on how this electricity is generated. In general, all electric vehicles are classified as zero-emission vehicles because they emit no direct gases. Since electric vehicles do not run on fossil fuels, their widespread use could dramatically reduce oil consumption. EVs are commercially available but are more expensive than similar conventional and hybrid vehicles. However, some costs can be recovered thanks to fuel savings and government incentives. Accelerator at The core of an electric vehicle is the combination of: The electric motor The motor's controller The batteries 96 Volts--- 0 Volts---- thousands of pulses per second 48Volts average to motor Figure 205. Simple DC controller connected to the batteries and the DC motor. Source: How Stuff Works 1. There are a lot of differences between gasoline and electric autos: The gasoline engine is replaced by an electric motor. The electric motor gets its power from a controller. The controller gets its power from an array of rechargeable batteries. Driving Range The EVs currently available have a shorter range per charge than most conventional vehicles have per tank of gas. EV manufacturers typically target a range of 100 miles (161 Km) on a fully charged battery. For longer trips, it is necessary to charge the vehicle or swap the battery. The efficiency and driving range of EVs varies substantially based on driving conditions and habits. Extreme outside temperatures tend to reduce the vehicle s range, because more energy must be used to heat or cool the cabin. High driving speeds reduce its range because of the energy required to overcome increased drag. Compared to gradual acceleration, rapid acceleration reduces range. Hauling heavy loads and driving up significant inclines also reduces range. 1

52 Advantages Disadvantages Energy efficient: Electric motors convert 75% of the chemical energy from the batteries into power for the wheels. Electric autos create less pollution than gasoline-powered automobiles so they are an environmentally friendly alternative to gasoline-powered vehicles (especially in cities). Some academics argue that this statement should be qualified by taking into account the source of electricity. Performance benefits: Electric motors provide quiet, smooth operation and stronger acceleration and require less maintenance than ICEs. 51 Any technological improvements in hybrid vehicles are usually also applied to electric vehicles, so a lot of resources are being applied to this technology. Fuel cells are getting a lot of attention right now in the news and vehicles powered by fuel cells are electrics autos. There are at least six significant problems with the current lead-acid battery technology: They are heavy (a typical lead-acid battery pack weighs 1,000 pounds or more) They are bulky (measuring roughly 6"x 8"x 6") They have a limited capacity (a typical leadacid battery pack might hold 12 to 15 kilowatt hours of electricity, thus giving an automobile a range of only 50 miles or so). They are slow to charge (the typical recharge time for a lead-acid pack ranges from four to ten hours for full charge, depending on the battery technology and the charger). They have a short life span (three to four years; perhaps 200 full charge/discharge cycles). They are expensive.

53 Fuel Cell Vehicles 2 A fuel cell converts the chemicals hydrogen and oxygen into water and produces electricity in the process. With a fuel cell, chemicals constantly flow into the cell so it never goes dead. Therefore, as long as there is a flow of chemicals into the cell, electricity flows out of the cell. The chemicals used in most fuel cells today are hydrogen and oxygen. Pollution reduction is one of the primary goals of the fuel cell. By comparing a fuel-cellpowered auto to a gasoline-engine-powered auto and a battery-powered auto, you can see how fuel cells might improve the efficiency of vehicles today. If the fuel cell is powered with pure hydrogen, it has the potential to be up to 64% efficient overall. Figure 206. Components of a fuel cell vehicle. Source: American Honda Motor Co. Combustion engines like the turbine and the gasoline engine burn fuels and use the pressure created by the expansion of the gases to do mechanical work. Batteries convert chemical energy back into electrical energy when needed. Fuel cells should do both tasks more efficiently. A fuel cell provides a direct current (DC) voltage that can be used to power motors, lights and any number of electrical appliances. There are several different types of fuel cells, each based on a different chemistry: Polymer exchange membrane fuel cell (PEMFC) Solid oxide fuel cell (SOFC) Alkaline fuel cell (AFC) Molten-carbonate fuel cell (MCFC) Phosphoric-acid fuel cell (PAFC) Direct-methanol fuel cell (DMFC) 2

54 Advantages Disadvantages Fewer Greenhouse Gas Emissions: Gasoline- and diesel-powered vehicles emit greenhouse gases (GHGs), mostly carbon dioxide (CO 2 ), which contribute to global climate change. Producing the hydrogen to power fuel cell vehicles (FCVs) can generate GHGs, depending on the production method, but much fewer than those emitted by conventional gasoline and diesel vehicles. Fewer Air Pollutants: Highway vehicles emit a significant share of the air pollutants that contribute to smog and harmful particulates. FCVs powered by pure hydrogen emit no harmful pollutants. If the hydrogen is produced from fossil fuels, some pollutants are produced, but much fewer than the amount generated by conventional vehicle tailpipe emissions. Reduced Oil Dependence: FCVs could reduce dependence on foreign oil, since hydrogen can be derived from domestic sources, such as natural gas and coal, as well as renewable resources such as water. That would make the country's economy less dependent on other countries and less vulnerable to oil price shocks from an increasingly volatile oil market. Fuel cells might be the answer to the power problems, but first scientists will have to improve on a few major drawbacks: Cost: Many of the component pieces of a fuel cell are costly. In order to be competitively priced (compared to gasoline-powered vehicles), fuel cell systems must cost 35 USD per kilowatt. The current projected high-volume production price is 73 USD per kilowatt. Durability: Because you start and stop an auto relatively frequently, it is important for the membrane to remain stable under cycling conditions. Membranes currently tend to degrade while fuel cells cycle on and off, particularly as operating temperatures rise. Hydration: Researchers must find a way to develop fuel cell systems that can continue to operate in sub-zero temperatures and lowhumidity environments, and at high operating temperatures. At around 80 C, hydration is lost without a high-pressure hydration system. Solid oxide systems also have material corrosion problems. Delivery: The air compressor technologies currently available are not suitable for vehicle use, which makes designing a hydrogen fuel delivery system problematic. Infrastructure: For fuel cell vehicles to become a viable alternative for consumers, hydrogen generation and delivery infrastructure must be available. This infrastructure should include pipelines, truck transport, fueling stations and hydrogen generation plants. Storage and Other Considerations: 300 miles is a conventional driving range (the distance you can drive in an automobile with a full tank of gas). In order to create a comparable result with a fuel cell vehicle, researchers must overcome hydrogen storage considerations, vehicle weight and volume, cost and safety.

55 Challenges Several challenges must be overcome before FCVs will be a successful, competitive alternative for consumers. Onboard Hydrogen Storage: Some FCVs store enough hydrogen to travel as far as gasoline vehicles between fill-ups (about 300 miles), but this must be achievable across different vehicle makes and models and without compromising customer expectations in terms of space, performance, safety and cost. Vehicle Cost: FCVs are currently more expensive than conventional vehicles and hybrids. Manufacturers must bring down production costs, especially the costs of the fuel cell stack and hydrogen storage, to compete with conventional technologies. Fuel Cell Durability and Reliability: Fuel cell systems are still not as durable as internal combustion engines, especially in some temperature and humidity ranges. Getting Hydrogen to Consumers: The extensive system used to deliver gasoline from refineries to local filling stations cannot be used for hydrogen. New facilities and systems must be constructed for producing, transporting and dispensing hydrogen to consumers. Public Acceptance: Finally, fuel cell technology must be embraced by consumers before its benefits can be realized. Consumers may have concerns about the dependability and safety of these vehicles, just as they did with hybrids.

56 Hybrid Vehicles The gasoline-electric hybrid auto is just a cross between a gasoline-powered auto and an electric auto. It attempts to significantly increase mileage and reduce the emissions of a gaspowered auto while overcoming the shortcomings of an electric auto. Supporters of the hybrid technology state that any automobile should be able to: Drive at least 300 miles (482 km) before refueling. Be refueled quickly and easily. Keep up with other traffic on the road. A gasoline vehicle meets these requirements but produces a relatively large amount of pollution and generally gets poor gas mileage. An electric vehicle, however, produces almost no pollution, but it can only go 50 to 100 miles (80 to 161 km) between charges. The disadvantage of the electric vehicle is that it is very slow and inconvenient to recharge. A gasoline-electric hybrid vehicle combines these two setups in one system that leverages both gas power and electric power. There are two main benefits: fewer tailpipe emissions and improved mileage. Some of the advanced technologies typically used by hybrids include: Regenerative Braking: The electric motor applies resistance to the drivetrain, which causes the wheels to slow down. In return, the energy from the wheels turns the motor, which functions as a generator by converting energy normally wasted during coasting and braking into electricity that is stored in a battery until needed by the electric motor. Electric Motor Drive/Assist: The electric motor provides additional power to assist the engine when accelerating, passing and hill climbing. This allows a smaller, more efficient engine to be used. In some vehicles, the motor alone provides power for the low-speed driving conditions where internal combustion engines are least efficient. Automatic Start/Shutoff: Automatically shuts off the engine when the vehicle comes to a stop and restarts it when the accelerator is pressed. This prevents energy from being wasted while idling. 3 3 How Hybrids Work, U.S. Department of Energy,

57 Gasoline-electric hybrid autos contain the following parts: Figure 207. The Mercedes-Benz M-Class HyPer, a hybrid concept vehicle. Source: Daimler Chrysler. The two power sources found in a hybrid auto can be combined in different ways. One way, known as a parallel hybrid, has a fuel tank that supplies gasoline to the engine and a set of batteries that supplies power to the electric motor. The engine and the electric motor can turn the transmission at the same time and the transmission then turns the wheels. By contrast, in a series hybrid, the gasoline engine turns a generator and the generator can either charge the batteries or power an electric motor that drives the transmission. Thus, the gasoline engine never directly powers the vehicle. Figure 208. The two most common types of hybrid vehicle powertrains compared to the conventional gasoline engine powertrain. Source: Freedom CAR & vehicle technologies program. U.S. department of Energy/ Office of Energy Efficiency and Renewable Energy. 4 All of the hybrid autos on the market utilize some or all of these efficiency tricks. 4

58 Advantages Hybrids help the environment by using less fuel. Since an electric auto runs off a battery charged from electricity rather than fuel from an internal combustion engine, it produces far less pollution than a conventional automobile, because electrical power plants can produce energy more efficiently than internal combustion engines. Recover energy and store it in the battery. A hybrid auto can capture some of the energy lost when braking and store it in the battery for later use. It does this by using "regenerative braking." Sometimes shut off the engine. A hybrid auto can sometimes turn off the gasoline engine and use the electric motor with the batteries. Disadvantages Much slower acceleration times than a normally aspirated automobile. The Prius has a 0 to 60 acceleration time in excess of 10 seconds, which about the same as a Honda Civic and other small autos. Price. Hybrid vehicles are more expensive, although you make up the price difference if you drive it long enough. If you were to buy a similar sized automobile like a Honda Civic or a Toyota Corolla, you would have to drive the Prius for six years to make up the price difference. Environmental impact. Little research has been done to determine the best way to dispose of the batteries used in hybrid autos. These batteries are highly toxic and have a significant environmental impact. While these batteries are recyclable, no manufacturers have created an end-to-end solution for battery disposal. Electrical system maintenance must be done by a professional. Hybrid batteries are different from gas-powered vehicles. You can risk electrocution if you attempt maintenance by yourself.

59 Annex VIII. Further Analysis of the EV vehicle 1 Chinese OEMs Strategic Plans The Chinese automotive OEMs have implemented strategic initiatives in the EV market in terms of technological development, market cooperation and capital investment. The tables below illustrate the main initiatives implemented in recent years by the 10 main Chinese automotive OEMs and the work done in electric vehicle development. Long-term Targets: By 2020, SAIC plans to invest over 20 billion RMB in the NEV sector and introduce over 30 new world-class models including 13 BEVs and 17 PHEVs. By 2020, the group s NEV sales will reach 600,000 units including 400,000 for its JV brands and 200,000 for its own brands. By 2020, the group s own passenger brands (Roewe & MG) will sell around 300,000 fuel efficient and new energy vehicles with annual revenue of 40 billion RMB. By 2020, the group s own commercial brands (e.g. Maxus) will sell 22,000 NEVs with annual revenue of 6.8 billion RMB Sales: SAIC Roewe 550 plug-in hybrid car sold 10,711 units, up 296% from a year ago. SAIC Roewe E50 electric car sold 412 units, up 116% from a year ago. SAIC-GM Sail Springo electric car sold 68 units, up 84% from a year ago. SAIC Maxus also produced 445 electric vans. Technology Development: The group owns Chinese leading BEV, PHEV and FCEV technologies. Its subsidiary Shanghai E-Propulsion has been able to develop the three key syst ems of batteries, electric motor and electric controller. The SAIC EDU is known a s one of the global top three plug-in hybrid systems (along with Toyota THS & G M Voltec). JV & Cooperation In December 2014, SAIC established a 51:49 joint venture with America s A123 Systems to supply vehicle batteries. In January 2016, SAIC invested in America s SolidEnergy to develop advanced ba ttery technology. In February 2016, SAIC announced an electric car-sharing JV with the Jiading district government. Long-term Targets: By 2020, Dongfeng plans to sell 300,000 NEVs a year and take a 15-18% domestic market share, accumulating world-leading green vehicle technologies. In 2016, DFPV aims to launch 3 new electric sedans and sell 4,000 units in total Sales: Dongfeng Nissan Venucia E30 electric car sold 1,273 units, up 119% from a year ago. Dongfeng Fengshen E30 electric car sold 511 units, versus last year s zero. Dongfeng also produced over 6,000 electric trucks and over 5,000 electric buses. Technology Development: Dongfeng unveiled China s first pure electric sedan in 1999 and is one of the fro nt-runners in this area. It has applied for around 370 NEV patents. JV & Cooperation In August 2015, Dongfeng announced technical partnership with NEVS (the succ essor to Sweden Saab).

60 Dongfeng has also co-developed electric vans for logistics purpose with battery maker Shenzhen OptimumNano. Long-term Targets: By 2020, FAW plans to raise its market share to 15% in Chinese NEV market, featuring six platforms and 16 models. By 2018, FAW plans to fully meet the State-IV fuel economy standard (5L/100km) for new passenger vehicles, or two years ahead of the 2020 deadline. In 2016, FAW focuses on developing electric motor and battery systems and marketing several key models Sales: N.A. Technology Development: One battery electric car platform; three plug-in hybrid car platforms; and two bu s & truck platforms. JV & Cooperation In January 2016, FAW announced partnership with PetroChina on constructing charging stations. In July 2016, FAW agreed to co-produce 6,000 electric vans and buses with battery maker Shenzhen OptimumNano. Long-term Targets: By 2025, Changan plans to invest 18 billion RMB in the NEV sector, achieve cumulated sales of 2 million units and develop 34 new models (including 27 BEVs and 7 PHEVs). By 2020, Changan plans to achieve cumulated sales of 400,000 units Sales: JMC E100 electric car sold 5,268 units, versus last year s zero. Changan Eado electric car sold 1,500 units, versus last year s zero. Changan also produced 825 electric trucks. Technology Development: By 2025, Changan will expand its NEV research and development team to 1,500 people and fulfill the 518 product strategy (5s acceleration for 0-100km/h, 1L /100km for plug-in hybrid models and 8kWh/100km per tonne for BEVs). By 2025, Changan BEVs will have a driving range of 400km and its PHEVs will h ave a range of 100km; By 2020, the ranges will be 350km and 80km respectivel y. JV & Cooperation In February 2016, Changan agreed to invest 200 million RMB and become a shar eholder in Corun Hybrid System Technology Co. (CHS). In March 2016, Changan announced strategic partnership with charging facilities builder Qingdao Teld.

61 Long-term Targets: By 2020, BAIC s new energy business BJEV will sell 500,000 units (including three star models with over 100,000 units each) and post an annual revenue of 60 billion RMB. By 2020, BJEV s production capacity will top 800,000 per year. By 2020, BJEV will have become a publicly traded company with a 100 billion market cap Sales: BAIC E-series electric car sold 16,488 units, up 198% from a year ago. BAIC Senova D50 electric car sold 329 units, versus last year s zero. BAIC Senova D70 electric car sold 243 units, up 1520% from a year ago. BAIC & Foton also sold thousands of electric buses and trucks. Technology Development: By 2020, BJEV s research and development team will expand to 5,000 people, wi th five overseas R&D centers in Silicon Valley, Detroit, Aachen, Turin and Japan. By 2020, BJEV will focus on BEV models with 400km-range and 12kWh/100km capabilities. JV & Cooperation In February 2014, BAIC agreed to acquire 20% of American EV maker Atieva. BJEV has set up a joint venture with Pang Da to sell electric vehicles in northern China and another joint venture with Foxconn for car sharing services. BAIC has set up joint ventures with Siemens and Broad Ocean respectively to pr oduce electric motors. BAIC has also partnered with Planet Battery and SK Battery respectively to develop batteries. Long-term Targets: By 2020, GAC Group plans to sell 200,000 units a year, half of which will be contributed by GAC Motor (the Trumpchi brand). By 2020, GAC Motor will launch four PHEV models and three BEV models. GAC Motor will invest 2 billion RMB in the NEV sector and build a production base in Xinjiang Sales: GAC Trumpchi GA5EV plug-in hybrid car sold 1,266 units, up 1483% from a year ago. Technology Development: The group will expand its NEV research and development team to 4,000 people and develop pure electric, plug-in hybrid and range-extender technologies. JV & Cooperation In August 2014, GAC agreed to form a 49:51 joint venture with BYD to produce e lectric buses. In December 2015, GAC announced investment in Uber China and the two sides would jointly promote electric vehicles. Long-term Targets:

62 Brilliance Jinbei brand will develop electric vans for logistics purpose. Brilliance also co-operates the Zinoro electric car brand with BMW Sales: Brilliance BMW 5-Series plug-in hybrid car sold 800 units, versus last year s zero. Technology Development: N.A. JV & Cooperation In October 2015, Brilliance announced EV technical tie-up with German Bosch. In August 2016, Brilliance formed strategic partnership with Yinlong on electric buses. Long-term Targets: Great Wall Motor will invest around 12 billion RMB in the NEV sector. By 2017, Greatwall and Haval brand will develop 5 new models Sales: N.A. Technology Development: The company focuses on the BEV route for sedans and the PHEV route for SUVs. JV & Cooperation N.A. Long-term Targets: JAC plans to invest 2.4 billion RMB in projects regarding new-energy passenger cars and related parts. By 2025, NEVs will account for over 30% of JAC s total sales volume. By 2020, NEVs will account for 20% of JAC s total sales revenue Sales: JAC IEV electric car sold 10,420 units, up 287% from a year ago. Technology Development: JAC has focused on the pure electric car route and developed six generations of t he IEV series since JV & Cooperation In May 2016, JAC agreed to produce 50,000 electric cars a year for NextEV as its contract manufacturer. JAC is also interested in potential cooperation with German Volkswagen. Long-term Targets: By 2020, Geely plans to sell 2 million units per year, over 90% of which (or 1.8 million units) will be green vehicles, including 1.17 million hybrid vehicles and 0.63 million BEVs, according to the Blue Geely strategy. Geely promises to fulfill the state-iv fuel economy standard (5.0L/100km) ahead of the 2020 deadline Sales: Geely Kandi electric car sold 20,390 units, up 138% from a year ago. Geely Zhidou electric car sold 6,164 units, versus last year s zero. Geely Volvo S60L plug-in hybrid car sold 470 units, versus last year s zero.

63 Technology Development: Geely will build a 2,500-strong research team and focus on the BEV, PHEV and c onventional hybrid routes. It will also study FCEV and lightweight technologies. JV & Cooperation In November 2014, Geely founded a joint venture with Corun to launch hybrid powertrain systems. Geely has also invested in two electric minicar makers (Zhidou and Kandi). Long-term Targets: By 2020, Chery plans to sell 200,000 NEVs a year, including various passenger and commercial vehicles. In 2016, Chery sets a sales target of 35,000 units, up 247% from a year ago, by launching three new models. Four platforms (small PEV, midsize PEV, 4WD PEV, and PHEV); five general syst ems (battery, motor, etc.); and seven core technologies (battery management, li ghtweight, etc.) 2015 Sales: Chery QQ electric car sold 6,885 units, down 24% from a year ago. Chery EQ electric car sold 7,262 units, up 1240% from a year ago. Technology Development: Chery will focus on battery electrification for A00, A0 and A car segments, as wel l as plug-in hybrid electrification for B-plus car segments. JV & Cooperation Chery is still interested in selling stake in its NEV subsidiary to a strategic investor (its acquisition deal by Anhui Conch failed in mid-2016). Long-term Targets: BYD plans to raise its annual NEV production capacity from 62,000 units in 2015 to 1 million units by 2020, while reducing its unit production cost by 30% over the five years. 542 performance goal for BYD PHEVs: 5 seconds for 0-100km/h acceleration; 4-wheel-drive; 2 liters per 100km. 7+4 all-market strategy: seven normal sectors (city bus, taxi, highway bus, urban goods logistics, urban construction logistics, urban sanitation, and private car); four special purposes (storage, mining, airport and port).

64 2015 Sales: BYD Qin plug-in hybrid car sold 31,898 units, up 117% from a year ago. BYD Tang plug-in hybrid SUV sold 18,375 units, versus last year s zero. BYD E6 electric car sold 7,029 units, up 87% from a year ago. BYD Denza electric car sold 2,888 units, up 2088% from a year ago. BYD also sold 106 electric trucks and thousands of electric buses. Technology Development: BYD has successfully developed three core technologies for electrification: batte ry, electric motor and electric control. BEV technical roadmap is mainly for the p ublic sector while PHEV mainly for the private sector. JV & Cooperation In July 2016, Samsung invested 3 billion RMB in BYD for a 1.9% stake. In 2014, BYD and GAC established a joint venture for making electric buses. In 2010, BYD and Daimler established a joint venture for producing Denza EVs. Long-term Targets: Lifan s cumulated NEV sales will reach 500,000 units during , according to its I.Blue 1.0 development strategy. Lifan will launch 21 new pure electric and plug-in hybrid models over the five years performance goal: 8 kwh per 100km; 2 liters per 100km; 3 minutes for battery swapping. Lifan plans to raise 2. 8 billion RMB from the stock market to invest in NEV related projects (its previous plan was 5.2 billion RMB). Lifan plans to build a total of 500 energy stations across China by 2020, enabling battery swapping by EV owners. Lifan plans to build a car leasing network with annual capacity of 300,000 units Sales: Lifan sold 6,885 standard-speed electric cars, versus last year s 15 units. Lifan sold 4,846 low-speed electric cars, up 513% from a year ago. Lifan also produced 3,600 electric trucks. Technology Development: Developing both lead-acid and lithium-ion batteries; promoting battery swap JV & Cooperation Lifan announced strategic partnership with Sichuan Energy Investment Group in December 2015 to co-build energy stations. Long-term Targets: Zotye aims to sell 60,000 NEVs in 2016, 150,000 units by 2018 and 350,000 units by Zotye will develop 8 all-new models over the next five years, including three BEV minicars, one BEV midsize car, one BEV midsize SUV and three PHEV cars. Zotye plans to raise its BEV driving range from 200km to 300km and even to 500km Sales: Zotye Yun100 electric car sold 15,467 units, up 569% from a year ago.

65 Zotye E20 electric car sold 6,385 units, down 13% from a year ago. Zotye TT electric car sold 2,092 units, versus last year s zero. Zotye E30 electric car sold 572 units, versus last year s zero. Technology Development: Zotye has been focusing on developing pure electric minicars for many years. JV & Cooperation Zotye produced electric minicars for the Zhidou brand in year Long-term Targets: Sinotruk will develop Howo-branded electric buses and CDW-branded electric trucks Sales: Sinotruck CDW produced 426 electric trucks. Technology Development: Focused on pure electric bus/truck technologyexports of Chinese Brands.

66 2 Infrastructure Construction in China Classification of Charging Infrastructure There are three types of charging infrastructure in China: Public charging station. It consists of charging equipment and charging piles for multiple users. It has two types of charging patterns: fast charging (approximately 10 minutes) and slow charging (can take hours, depending on the facility). Charging pile. It can be built in public parking areas, residential areas, private garages and along the roadside. Slow-charging piles (8-10 hours) are most common because of their low power. Battery swapping station. It provides EVs with the services of battery swapping and battery maintenance. The following table illustrates the advantages and disadvantages of different charging infrastructure. Charging Infrastructure Public Charging Station Advantages 1. Two types of charging patterns 2. Higher equipment use rate Disadvantages 1. Requires a lot of space 2. Huge investment in facilities Charging Pile Battery Swapping Station 1. Requires little space 2. Less investment in facilities 1. Requires little space 1. Charging takes longer 2. Lower equipment use rate 1. Logistic systems needed for battery delivery 2. Battery swapping is fast 2. Professional operation and equipment needed to maintain battery Figure 173. Advantages and disadvantages of different charging infrastructure. Investment Models for Infrastructure in China China is now home to more than 300 charging station operators, with three main types of investment models: state-owned enterprises (SOEs), private companies and some automotive OEMs. The central government welcomed foreign and private capital to prop up the fledgling charging market in mid-2014, before which there had been only a few state-owned players. First, deep-pocketed SOEs have natural advantages when it comes to building charging facilities and providing services. Examples include the two traditional electricity providers the State Grid and China Southern Power Grid; leading gasoline station chains Sinopec and PetroChina; industrial giant Potevio; and national wireless infrastructure owner China Tower Corp. The second type of investment model is operated by a growing number of private companies, attracted by the government s charging infrastructure subsidies. They are smaller in size than

67 SOEs but tend to offer better customer-centric, value-added services. Examples include: Qingdao TELD, having constructed around 50,000 charging terminals in 150 cities; Tellus Power, committing 3.6 billion RMB to build 28,800 charging piles in 2016; and Dianzhuang, a Beijing-based operator backed by Internet firm LeTV. The third type of investors is automotive OEMs, which provide charging services for their EV owners to extend the value chain. BYD set up charging stations for buses and taxis. American Tesla has constructed its 100th Chinese supercharger station. BMW s ChargeNow program will include over 1,500 public piles by the end of BAIC Group s subsidiary BJEV plans to operate 10,000 piles by that yearend through self-investment and external partnership. Chinese charging facilities market is set to expand to 40 billion RMB in value by 2016 and further to 100 billion RMB by 2020, as a result of booming EV sales and substantial government subsidies. However, some analysts warn that the over 300 charging operators will brace for consolidation with a lot of them going insolvent, mainly because of private firms financing difficulties and the tightened regulations on charging safety/ compatibility. The table below reviews a selected number of major charging service providers: Operator Operating Areas Investment Achievement Target State Grid China Southern Power Grid Potevio Qingdao TELD Chinese main cities and freeways Five southern provinces (including Guangdong) Over 10 big cities (by 2015) 81 cities (by 2015) 5 billion RMB (for year 2016) 3 billion RMB ( ) 2 billion RMB in Shenzhen (by mid-2016) 1 billion RMB (by 2015) Figure 174. Selected charging Infrastructure operators. 1,537 charging and swapping stations; 29,600 terminals (by 2015) 265 charging and swapping stations; 13,723 piles (by 2015) 80 charging stations and 5,000 piles 1,800 charging stations and 30,000 terminals (by 2015) 6,100 public stations and 59,000 piles (by 2020) 674 charging stations and 25,000 piles (by 2020) To become one of China s biggest EV infrastructure operators To become China s largest EV charging network Current Development of Infrastructure in China The period can be regarded as the emerging stage of EV infrastructure development. In this period, the government placed more importance on popularizing EVs instead of enhancing infrastructure. Therefore, the major development was only seen in the pilot cities. Some global events, such as the Beijing Olympic Games in 2008 and the Shanghai World Expo in 2010, also promoted the development of EV infrastructure in these cities. However, since 2014, the Chinese central government and local governments have issued plenty of favorable policies for infrastructure development. A more comprehensive charging

68 network started to be implemented and more incentives were provided to cut down on charging costs. By June 2016, China owned a network of 81,780 public piles (up 65% from yearend-2015) and 55,378 private piles (up 12% from yearend-2015). Under the state s long-term initiative, between 2015 and 2020, China will newly build 12,000 centralized charging/swapping stations and 4.8 million distributed charging piles (Figure 158). To fulfill this ambitious goal, China has set different tasks for three regions. The prosperous eastern region including Beijing, Shanghai, and Guangdong, etc. is required to construct 7,400 stations and 2.5 million piles; the central and northeastern region including Jiangxi, Hunan, Hubei, etc. is required to construct 4,300 stations and 2.2 million piles; the western region including Xinjiang, Tibet, Qinghai etc. is required to build 400 stations and 100,000 piles. Figure 175. China's charging network development plan ( ). Number of Centralized Charging/Swapping Stations. Source: Chinese Government. Figure 176. China's charging network development plan ( ). Number of Distributed Charging Piles. Source: Chinese Government. The central government has also promised to reward those local governments for being able to promote a certain level of NEV sales in each year between 2016 and 2020, with the aim of subsidizing local charging infrastructure construction (Figure 160). Year Group A (Beijing, Shanghai, Tianjin, Hebei, Shanxi, Jiangsu, Zhejiang, Shandong, Guangdong and Hainan) Group B (Anhui, Jiangxi, Henan, Hubei, Hunan and Fujian) Group C (Other Local Governments)

69 Threshold of Reward* Size of Reward Threshold of Reward* Size of Reward Threshold of Reward* Size of Reward ,000 units Between 90 and 120 million RMB 18,000 units Between 54 and 120 million RMB 10,000 units Between 30 and 120 million RMB ,000 units Between 95 and 140 million RMB 22,000 units Between 59.5 and 140 million RMB 12,000 units Between 32.5 and 140 million RMB ,000 units Between 104 and 160 million RMB 28,000 units Between 67 and 160 million RMB 15,000 units Between 36 and 160 million RMB , 000 units Between 115 and 180 million RMB 38,000 units Between 80 and 180 million RMB 20,000 units Between 42 and 180 million RMB ,000 units Between 126 and 200 million RMB 50,000 units Between 90 and 200 million RMB 30,000 units Between 54 and 200 million RMB * Note: The threshold of reward fund applies to the promotion of standard NEVs. One standard NEV can be either a pure electric passenger car (range: 150 km or above) or a plug-in hybrid passenger car. Other NEV types need to be converted to the standard NEV at a premium/discount. Figure 177. Charging infrastructure reward funds for local governments ( ).

70 3 Case Analysis 3.1 Foreign Brand---Tesla Introduction Established in Silicon Valley in 2003, Tesla Motors is different from conventional automotive companies in that it only designs, manufactures and sells BEVs. At the same time, Tesla also develops core EV powertrain components such as the battery pack. The vehicles it produces are widely recognized as pioneers in terms of shape, acceleration capabilities and technological content. Its founder Elon Musk and investor Martin Eberhard plan to build the best BEVs in the world and thereby influence and change people s driving patterns so they are environmentally friendly and save energy. In the long run, Tesla aims to build BEVs that most people in the world can afford and to eventually become the leading automotive company in the future. The figure below shows Tesla s development strategy. Initial Phase: Develop BEVs targeting at high-end vehicle segment to open the EV market Developing Phase: Cooperate with other auto OEMs by supplying core BEV components; Co-develop BEV models Final Phase: Achieve sound BEV penetration in public by launching BEVs with low price Figure 178. Tesla s development strategy. With capital investment from Daimler and Toyota, Tesla first received world attention when it launched the Roadster, its first BEV, in As the first pure electric sport vehicle in the world, the Roadster became popular in 28 countries and achieved a sales volume of 50,580 in Most of the orders came from world celebrities who were willing to pay about 110,000 USD to purchase the BEV. The Tesla Model S was launched at a price of about 80,000 USD in 2012 and also targeted the high-end vehicle segment. According to Tesla s official website, the BEV had a maximum driving range of 480 kilometers and could reach a maximum speed of 200 kmh. This outstanding performance allowed Tesla to sell more than 25,000 Model S around the world in Model X is another BEV that has been recently lanuched, whose impressive design has received worldwide attention. Tesla has announced that in the coming years it will launch another BEV, Tesla Model 3, to achieve better BEV penetration on the global EV market. The graph below shows Tesla s development since it was founded. Figure 179. Tesla s development from 2003 to 2013.

71 Specification Model S Model X Power (peak) 310 kw 386 kw Torque (peak) 600 nm 660 nm Driving range 502 km 528 km Battery capacity 85 kwh 90 kwh Figure 180. The specifications of Tesla s 85 kwh Model S and Model X 90D. Box 8: Why Is Tesla a Success? Objectively speaking, Tesla by no means has a long development history compared to other OEMs such as Benz and BMW. However, its outstanding performance has shocked experts, who were not optimistic about Tesla s future, and has generated huge attention from conventional automotive OEMs. The upward trend in its share price is strong evidence of its positive development, especially after the launch of Model S in Here are some irreplicable reasons behind the boom. Figure 181. Tesla s share price from 2011 to Source: Sina. The founder is irreplicable. The founder of Tesla is Elon Musk, who has been successful in several business ventures, including investment, IT, aerospace, solar energy and EVs. His rich and successful experience provides him with management capability, as well as many potential customers he has come in contact with in previous working relationships and who may be interested in buying a Tesla vehicle. The fortune base is irreplicable. Before Tesla Motors was established, the founders had already earned more than 4 billion USD in previous business ventures, such as Paypal, SpaceX and Solarcity. Tesla also has an extremely strong gift for financing. Between 2009 and 2013, it received more than 2 billon USD in funding from different sources. The technology is irreplicable. Tesla is the only company that uses the 18,650 battery to power vehicles. It has acquired advanced technology in battery management systems by perfectly combining IT with automotive design. Tesla also has advanced human-computer interaction systems that improve the driving experience. It is therefore regarded as the Apple of the automotive industry. The customers targeted are irreplicable. The customers targeted by the brand are all wealthy individuals who are highly aware of the importance of environmental protection. The operating method is irreplicable. 1. All vehicles are ordered on line and consumers have to provide a deposit. 2. Tesla sells vehicles directly without intermediate dealers. 3. Tesla also supplies the EV powertrain solution for the Toyota RAV4, the Daimler EV and to Panasonic. Its products include the battery, control system, electric motor and transmission. 4. Tesla provides free charging services at supercharging facilities, thus reducing usage costs for consumers. Other factors are also irreplicable. 1. When Model S started production in 2009, the GM-

72 Toyota joint venture applied for bankruptcy. It only cost Tesla 42 million USD to acquire factories with a production capacity of 400,000 units. 2. Tesla receives ZEV credits (zero emission vehicle) from the U.S. government and sells them to third parties and other automotive OEMs. This contributes about 12% of the company s revenue. 3. Government support for Tesla is critical. Tesla has achieved good sales records in countries where generous government subsidies are provided, e.g., Norway. Tesla in China As the biggest automotive market in the world, China has also attracted Tesla s interest. Tesla launched online reservation of Model S for Chinese consumers in August 2013 and finally delivered the first batch to them in early Although detailed sales numbers have not been published by Tesla, it is estimated that 8,000 Model S will be sold on the Chinese EV market in the first year of entry. For Model X, Chinese consumers already had their first ride in the middle of Tesla took the following steps to enter the Chinese market: 1. Online Reservations. In August, 2013, it became possible for Chinese consumers to reserve the Tesla Model S on Tesla s official Chinese website and provide the 250,000 RMB deposit to make their reservation. For Model X, consumers can order it online with a first payment of only 100,000 RMB in June, Stores and Service Centers. In November 2013, Tesla opened its first store in Beijing. The store is in downtown Beijing and attracts thousands of visitors every day. In April 2014, the brand s second store was opened in Shanghai. At the same time, Tesla set up two service centers in Beijing and Shanghai, and plans to build another six service centers in different Chinese cities to facilitate repair and maintenance of Tesla vehicles. Until 2016, Tesla has opened 18 stores around China, with 4 in Shanghai, 5 in Beijing, and 5 in Guangdong. 3. Pricing Strategy. At the end of January 2014, Tesla announced that the Model S would cost 734,000 RMB on the Chinese market. In America, the price ranges from 70,000 to 80,000 USD. Chinese import tariffs and other taxes amount to 36,700 USD. If logistics costs and other operational costs are added, the Model S profit margin is extremely limited on the Chinese market and can hardly compare to the profit earned by other brands vehicles at the same level, whose prices are marked up to ensure at least 20% profitability. This pricing strategy demonstrates Tesla s sincerity in its aims to attract more Chinese consumers without sacrificing the company s high-end image. In the long run, selling at a lower price could reduce the time it takes to make inroads in the Chinese market and achieve higher penetration among Chinese consumers. At the same time, it will also have an impact on imports of the vehicles of other brands. 4. Charging Network Construction. Tesla offers free charging services in its charging network, which may be enormously attractive to Chinese consumers when making purchasing decisions. As was done in the United States and other countries, Tesla is attempting to build charging stations all over China. It has started by setting up super-charger stations along the highway between Shanghai and Beijing. There are basically two kinds of charging stations: destination charging stations and super-charger stations. Destination charging stations are set up by Tesla and its cooperative partners while super-charger stations are paid for by Tesla with support from the Chinese government. When charging at destination stations, electricity for driving 100 kilometers can be charged in one hour; when charging at super-charger stations, of the battery can be filled in 20 minutes. Tesla has finished setting up a total of 11 super-charger stations in big cities such as Beijing, Shanghai, Hangzhou and Nanjing. In the first half of 2016, Tesla announced that it has set up more than 1,300 destination charging stations and 100

73 super-charger stations, covering most major cities in China. The map below shows how Tesla's super-charger network will be distributed in the near future in China. Figure 182. The framework of Tesla's super-charger network in China. Source: Tesla s official website. Figure 183. Tesla s super-charger station in Shanghai, China. Source: Sina.

74 5. Free Vehicle Registration. Tesla actively seeks opportunities to cooperate with Chinese local governments. Acquiring car license plates is a major problem Tesla is currently working on because car license plates are issued in most major cities through auctions and lottery systems at high prices and low winning rates. Free license plates would definitely be a decisive factor to attract consumers who are hesitant to purchase a Tesla. The Shanghai government awards 3,000 free NEV license plates to imported NEVs. As an imported BEV, Tesla is included within the scope of the incentives; Until 2016, the Beijing, Hangzhou, Guangzhou and Shenzhen government have also agreed to provide free license plates to the Tesla. Challenges for Tesla in China Despite Tesla's efforts, there are still several natural challenges the company must overcome before it can completely penetrate the Chinese market. 1. Tesla's vehicles do not qualify to apply for NEV subsidies in China. Tesla is not eligible to receive subsidies from the central government or the local government. This is logical, given that the Chinese government wants to encourage development of its own EV industry. As a foreign brand, Tesla has not set up joint ventures with Chinese firms to share its technology. Instead, it sells its own vehicles directly through its own channels. Therefore, the government cannot reduce the Tesla price even further to attract more Chinese customers to the brand. 2. Although Tesla has decided to build many charging facilities in China, critics always raise doubts as to whether there will be sufficient charging stations in the country to meet the demand for charging all the Tesla vehicles if the brand becomes increasingly popular. However, Tesla has not actually earned widespread popularity, so if other factors block the company s development on the Chinese market in the future, such as government policy changes and vehicle safety issues, it is not clear if Tesla will remain as popular in China. If Tesla loses market share in China, it will be a huge waste in terms of the company s investment in charging facilities. 3. There have been several battery-related accidents in the United States. Safety issues are always the top concern when Chinese consumers make buying decisions. The maturity of battery technology on the Chinese market will therefore be under scrutiny in the future.

75 3.2 Joint Brand---Denza Denza is a vehicle brand produced by the joint venture Shenzhen BYD Daimler New Technology Co., Ltd. The technological cooperation company was created by BYD and Daimler to focus on the development of EVs on the Chinese market. It took the company approximately four years to design, manufacture (by BYD) and launch the first BEV model on the market. The steps it took are discussed below. 1. Company Establishment. On May 2, 2010, BYD and Daimler signed the official agreement to set up a joint venture with a 50:50 investment ratio named Shenzhen BYD Daimler New Technology Co., Ltd. The mission of the company is to develop a new EV brand on the Chinese market. Both parties are responsible for design, development and sales of the brand. In addition, a technology center will be set up by both parties to develop, design and test vehicles under the new brand. The cooperation is beneficial to both parties. Though Daimler has set up cooperative relationships with other automotive OEMs around the world to build different types of new energy vehicles, the company was still unable to find the right battery technology to meet the requirements of the Chinese market. BYD was invested in by Warren Buffett and had focused on battery development for many years. It had successfully generated battery technology that was different from yet complementary to Daimler s. Moreover, Daimler agreed with BYD that EV development had a bright future on the Chinese automotive market. Before the cooperation agreement, Daimler had not completely understood the importance of strategically entering the Chinese EV market and had lagged behind competitors such as BMW and Audi. Cooperation with BYD could help Daimler acquire market share through its technology exchange with BYD. For BYD, cooperating with a global automobile giant with more than 100 years of car manufacturing experience could improve BYD s brand image and make up for its lack of experience. Furthermore, BYD s brand value is low, so it has to price its products below 150,000 RMB. By joining up with Daimler, BYD s brand value may increase, so the joint brand can be priced higher to completely cover the R&D and production costs of the new vehicles. BYD and Daimler are truly equal in this cooperative relationship. Traditionally, in automotive joint ventures, the Chinese partner is not able to take a leading position in decision-making processes due to the gap in technology with the foreign partner. However, the cooperation between BYD and Daimler effectively reverses the foreign company s dominance, because neither has an absolute technological advantage. BYD excels in battery technology while Daimler fully understands vehicle manufacturing technology. Only by combining their respective advantages will it be possible to successfully launch new vehicles. 2. Denza Model Release. On March 30, 2012, Shenzhen BYD Daimler New Technology Co., Ltd. released the Denza, its new vehicle model. The Denza is positioned on the Chinese market as a medium- to high-end BEV and an independent brand not included in BYD s lineup: the vehicle was designed by an independent R&D team; it is produced on newly built production lines at BYD s factories; the Denza is sold at separate dealerships rather than go through BYD s sales channels. This strategy is especially helpful when the Denza and BYD target different market segments with different brand values. It was also announced that in terms of product development, BYD is responsible for development of the battery and electric motor while Daimler is in charge of vehicle manufacturing aspects such as production platform construction, manufacturing standard control and model design. In terms of the supply chain, the Denza s core components come from BYD, while other parts are bought from worldrenowned suppliers.

76 Figure 184. The Denza model. Source: Denza's official website. 3. Dealership Network Construction. As mentioned above, a completely different dealership network will be used when the Denza is marketed than BYD s own network. Therefore, construction of the Denza dealership network has begun in Beijing, Shanghai and Shenzhen, where the car will be launched first. Three dealerships have been chosen in these cities. The next step for Denza is to find dealerships in cities with heavy traffic, such as Hangzhou, Tianjin, Wuhan and Nanjing, enlarging its dealership network in China. 4. Car Exhibition and New Car Launch. Denza had already appeared several times at auto shows in Beijing, Shanghai and Hong Kong before it officially launched. At the 2014 Beijing Car Show, it was finally announced that the Denza would be priced at 369,000 RMB. As an EV model that qualifies to apply for government subsidies, the Denza s purchase price will be 255,000 RMB after incentives. Detailed Denza specifications were also published, as shown below. In September, 2014, Denza was firstly launched in Shanghai, followed by Beijing in October and Shenzhen in November of the same year. During 2015, Denza has achieved yearly sales volume of approximately 3,000 vehicles. Consumers who purchased Denza could receive the NEV subsidies both from central and local governments, and enjoy the policy of purchase tax reduction in certain cities. Power (peak/rated) Torque (peak/rated) Energy China cycle Driving China cycle Battery capacity 86 kw / 68 kw 290 nm / 177 nm 17.2 kwh / 100 km 253 km 47.5 kwh Figure 185. The specifications of the Denza. 5. Charging Network Construction. In early 2014, BYD announced that Denza would cooperate with the Swiss company ABB to plan the construction of the largest charging network in China by ABB is a leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. The scope of the collaboration focuses on the following applications: - Grid-connected energy storage - Micro-grid applications - Solar energy

77 BYD in Figures: 56 Figure 186. Sales of the NEV market. Source: prepared by CEIBS-CEDARS based on the CPCA 2015 database. 5 Locally produced brands only; excluding import brands like Tesla. 6 Figures are not numbered because this is annex like information.

78 Figure 187. Sales of BYD NEV vehicles. Source: prepared by CEIBS-CEDARS based on the CAAM database. Figure 188. BYD sales and Revenue. Source: prepared by CEIBS-CEDARS based on the CAAM 2015 database and BYD data. 4 Challenges for the EV Market in China Despite efforts made by the government and automotive OEMs, there are still several profound challenges that hinder the development of EVs in China. These challenges come from three sources: consumers, OEMs, and suppliers. Giving consumers greater choice in EVs both imported and locally produced battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), can stimulate EV demand and foster competition. According to the report by McKinsey and Company, China offers an attractive one-time financial incentive to encourage consumers to purchase EVs. Combined, national and local purchase subsidies in 2015 are worth up to USD 17,000, with additional savings available from a sales tax exemption. However, China provides less attractive recurring financial incentives for consumers such as free or reduced parking fees and highway tolls, utility rebates, or free charging at certain locations. China also currently offers only a small exemption on its annual vehicle tax. China has created a number of innovative non-financial incentives to encourage EV ownership, such as granting license plates without a lottery process, and lifting the usual driving restrictions by plate number in highly congested cities. However, it has yet to roll out other incentives at scale, such as dedicated toll booths, sharing of dedicated bus and carpool lanes, access to low-emission zones, dedicated parking in public and semipublic parking lots, and exemptions from waiting lists for parking permits. At the same time, people are concerned about the maturity of battery technology and related infrastructure.

79 For OEMs, the first concern lies with EV production costs. The battery itself accounts for approximately 60% of the total cost and thus contributes significantly to the price disadvantage compared to ICE cars. The huge R&D costs will certainly not be recouped in the short term and with even less certainty in the long term. Also, the McKinsey & Company report states that the lack of accepted industry standards could cast doubt on the feasibility of developing EVs on the Chinese market. OEMs fear to bet on the wrong battery technology and being unable to predict whether battery swapping or charging will finally win the market competition in a context of insufficient industrial standards. Another issue is the negative impact brought on by limited charging infrastructure. Finally, problems between local and foreign companies in China have not helped the development of the EV, since foreign brands are not willing to give away their core knowledge on EV technology even after setting up joint ventures. For example, Nissan and GM have preferred to pay the higher taxes required to import EVs and hybrid cars rather than share their extensive know-how with Chinese partners. Some experts consider that leaving the door open to non-traditional OEMs like Tesla to compete in the traditional automotive market could be an interesting example to consider. In the US Tesla has demonstrated to traditional OEMs the existence of market demand for EVs, and has spurred other OEMs to invest in their EV programs. In terms of EV parts suppliers, automotive OEMs are also faced with the dilemma of choosing qualified suppliers. Since EV components are different from those of conventional vehicles, most conventional vehicle suppliers lack the knowledge to produce EV parts. Few suppliers can satisfy demand from OEMs in terms of quality, cost and delivery times. However, if OEMs shift their cooperative relationship to new EV suppliers, problems may occur in terms of quality assurance, since few of these suppliers have ever worked with OEMs before and they may not have enough quality control systems to satisfy OEMs stringent standards.

80 Annex IX. Strategic Shift Towards E-mobility I. STRATEGIC SHIFTS TOWARDS E-MOBILITY Today's economies are dramatically changing, triggered by development in emerging markets, the accelerated rise of new technologies, sustainability policies, and changing consumer preferences around ownership. Digitization and new business models have revolutionized other industries, and automotive will be no exception. For the auto sector, these forces are giving rise to four disruptive technology-driven trends: diverse mobility, autonomous driving, electrification, and connectivity. 7 According to both KPMG Executive report and a McKinsey analysis, most industry players and experts agree that these four technology-driven trends will reinforce and accelerate one another, and there is a consensus that the sector is ripe for disruption. Although the widespread sentiment that game-changing disruption is already on the horizon, there is still no integrated perspective on how the automotive industry will look in 10 to 15 years as a result of these trends. As a result of these uncertainties China sees the opportunity to leapfrog the established automotive nations. During the past two years several Chinese or Chinese-backed players have entered the e-mobility field, such as NextEv, Faraday Future and Future Mobility Corp. For BCG, Autonomous driving promises to be one of the biggest changes in the industry since the invention of the car. Where self-driving vehicles (SDVs, which are also known as autonomous vehicles) are most likely to change for the better how people live, work, and, of course, get around in cities. Far fewer accidents and much lower costs, as well as higher traffic efficiency, improved productivity, and lower pollution are just some of the anticipated benefits. At the same time the recent Tesla S accident shows that autonomous driving is more challenging than some new entrants from Silicon Valley expected especially in urban environments. A set of sophisticated sensors (e.g., LIDAR, infrared, microwave and ultrasonic sensors) is required, whose data streams need to be coordinated and analyzed in a fast and reliable manner. At the moment, regarding car sharing, China presents a mixed picture. In tier 1 cities such as Beijing, Guangzhou, and Shanghai, young people are turning away from car ownership because of congestion and the difficulty and cost of obtaining a license plate. In lower-tier cities, however, private vehicles remain a potent status symbol for the emerging middle class. Nonetheless, as both business and private travel steadily increase, many people will opt for the convenience and flexibility of car sharing and other innovative mobility options. 7 Richard Samon, Evolution of Automotive Industry. July 26, 2016.

81 1 Autonomous Driving It is no longer a question of if but when autonomous vehicles (AVs) or self-driving cars (SDVs) will hit the road. In the auto industry s most significant inflection in 100 years, vehicles with varying levels of self-driving capability ranging from single-lane highway driving to autonomous valet parking to traffic jam autopilot became available to consumers in early Development of autonomous-driving technology is gaining momentum across a broad front that encompasses OEMs, suppliers, technology providers, academic institutions, municipal governments, and regulatory bodies. While technological development continues apace, AVs stakeholders are also addressing the societal, legal, and regulatory issues that will arise as these vehicles come to market. Urbanites policymakers, planners, companies, and ordinary residents who have a stake in the world s cities will want to be involved as the city of the future, which might be very different from the cities we know now, takes shape around AVs technology and other advances in mobility. 8 The US-defined autonomous driving is divided into six levels; currently, luxury cars could reach level 3, which leaves drivers several minutes to react and predict before accidents happen. As predicted, the level 6 will be realized in 2030, and level 4 & 5 are under testing. As Mr. Shoulong Xu from Jaguar Land Rover states, the current challenges for autonomous driving are data safety and legislation. Data safety and legislation will determine whether autonomous driving will be permitted and when it will be allowed.' He further adds: there are plenty of topics to be discussed like the safety of pedestrians and drivers or whether it could bring goodness for human beings. Also, how many mileages require the testing before it is accepted, on moral level, who should take the responsibility if any accidents occurred A potentially significant barrier to self-driving vehicles consumers' acceptance of a car that drives itself turns out to be a shrinking obstacle and one that will likely dwindle with experience and familiarity over time. In 2015, The Boston Consulting Group and the World Economic Forum (the Forum) conducted qualitative and quantitative research among more than 5,500 consumers in 27 cities in ten countries to date, the largest survey entirely dedicated to autonomous driving. From New York to Kolkata, Berlin to Beijing, consumers are surprisingly and remarkably knowledgeable about SDVs and their potential benefits, and, by and large, they are more than willing to give them a try. 58% of the respondents assured they would be ready to take a ride in a self-driving car. This fact shows that people are eager that self-driving cars become a reality. 62% of the respondents of KPMG Global Automotive Executive Survey 2016 expect autonomous driving features to be a more important purchasing criteria in the future. The current development in both hardware and software has still a way to go. As Mr. Shoulong Xu says The hardware techs have not fallen behind; sensor, PC operation speed even has competitive advantages on a global scale, which Baidu and BAIC already possessed. The software has its weaknesses. Chinese companies make products that have standard functions and are good at concept speculation. However those functions are still very basic, for example, microwave radar could not identify pedestrians in extreme environments or backlight situation. 8 BCG Report: Self-Driving Vehicles, Robo-Taxis, and the Urban Mobility Revolution. July 21, 2016.

82 Social pressure could also pose an obstacle. At present, the public is very enthusiastic about the technology, but that could change quickly. If for example, a horrible accident involving an AV occurred in the early stages of market introduction, regulators could face pressure to take a tough stand against such vehicles. To ensure strong, sustained public support, the industry will need to engage with the general public and be forthright about both the limitations and the benefits of the technology. 9 Another interesting point is that most people align the idea of autonomous driving with that of NEVs. As observed in the figure below 66% of the respondents expect autonomous cars to be either PHEV or BEV whereas only a 9% expect them to be the conventional ICE vehicles. Figure 198. Most Consumers expect SDVs to be electric or hybrid cars. Source: BCG Report self-driving taxis, robotaxis and the urban mobility revolution. There are more aspects to consider. For a city to be livable, the pace should be that of a pedestrian or a cyclist, not of a car, believes Jan Gehl, Ph.D. For more than 40 years, Gehl, a Professor Emeritus of Architecture and one of the world s most influential urban planners, has been studying how mobility and architecture in cities relate to the quality of life. The fact that his hometown Copenhagen has been named the world's most livable city three times testifies to his success. The movement that has seen pedestrians and cyclists slowly taking over the city sparked in 1962 when the first inner-city street closed for car traffic. At the time, shop owners protested out of fear that their sales would collapse, but in fact, the businesses have flourished. Over the subsequent years, more and more streets in Copenhagen were pedestrianized with scientific support from Gehl and his research team, side- walks were widened, and a complete citywide network of bike lanes was built. Today all 18 public squares in the inner city are carfree, 45% of Copenhagen residents cycle to work and taxi drivers are required to have a bike rack on their vehicle to get a license BCG Report: Self-Driving Vehicles, Robo-Taxis, and the Urban Mobility Revolution. July 21, Time to Change Direction. BASF USA. Web. 26 July, 2016.

83 BOX 10. Autonomous Driving Breakthroughs and ethical issues A fully autonomous car is defined as a car which can perceive its environment, decide what route to take to its destination, and drive it. The development of this could allow significant changes to travel without the need for human supervision or operation, everyone in the car could be a passenger, or it could even drive with no occupants at all. This could allow productivity and leisure time to be reclaimed from commutes, transport accessibility to be widened for those previously unable to drive and greater traffic efficiency. Autonomous cars could have a positive environmental impact. Driving at more consistent speeds, with less accelerating and braking, as well as more efficiently chosen routes could result in lower carbon emissions from driving. 11 The benefits are very substantial, and there have been some major breakthroughs. Volvo is looking for a Chinese city that wants to run an experiment with its self-driving cars. In CES conference in Las Vegas 2015, CEO Jen-Hsun Huang revealed DRIVE PX 2, an automotive supercomputing platform that processes 24 trillion deep learning operations a second. 12 That's ten times the performance of the first-generation DRIVE PX, now being used by more than 50 companies in the automotive world. That is the software that runs in Volvo's cars. But looking beyond technology an interesting question is who should be held responsible for accidents of fully autonomous cars from a moral standpoint. According to an ethical analysis done by Alexander Hevelke and Julian Nida-Rumelin there are two possible approaches to this question. The first one is the duty to intervene. It states that there should be a possible action from the driver to anticipate effectively or prevent an accident it is his responsibility to do so. The second one is strict liability'. It points it is justifiable to hold users of autonomous cars collectively responsible for any damage caused by such vehicles even if they had no way of influencing cars behavior. A tax or a mandatory insurance seems the easiest and most practical means to achieve that. All in all, autonomous driving will reshape our ways of living and provide us with many new possibilities. Lifestyles will be influenced since long commutes might become more common and suburbs could spread further. New moral questions will raise and the race to develop the best technology is on. Overall global car sales will continue to grow, but the annual growth rate is expected to drop from the 3.6 percent of the last five years to ~2 percent annually by This decline will be largely driven by macroeconomic factors and the rise of new mobility services such as car sharing and e-hailing. A detailed analysis suggests that dense areas with a large, established vehicle base are fertile ground for these new mobility services, and many cities and suburbs of Europe and North America fit this profile. New mobility services may result in a decline in private vehicle sales, but this decrease is likely to be partially offset by increased sales of shared vehicles that need to be replaced more often due to higher utilization and related wear and tear Autonomous Vehicles, Lloyds of London. Web 26 July, NVIDIA Accelarates Towards Autonomous Driving Race Web 26 July, McKinsey Report. Automotive Revolution perspective towards 2030, January 2016.

84 The future is difficult to foresee, and many possible scenarios are open. Each scenario may develop in different kind of cities. Following BCG's research, there are four possible scenarios: the premium car that drives itself, SDVs rule the streets, RoboTaxis take over and the ridesharing revolution. In the first scenario, the premium car that drives itself represents a future where only costumers with high income can afford to buy an SDV. In this scenario, consumers own and use SDVs like traditional cars. The SDVs will be mainly shared within families and therefore instead of needing two vehicles per family only one will be necessary. In this scenario, there will be an increasing share of EVs and there will be no major public policies involvement. Figure 199. The premium car that drives itself. Source: BCG Report: Self-Driving Vehicles, Robo-Taxis, and the Urban Mobility Revolution. July 21, The scenario number two is that where SDVs rule the streets. In this case, the city takes a more active role in designing its urban mobility structure. The city promotes SDVs with all sort of incentives and as a result, SDVs replace most traditional cars and some public transportation options. As in the premium car that drives itself scenario the owner of the vehicle are private people and there is also an increasing percentage of EVs. The greater share of SDVs means there are 55% fewer accidents. Figure 200. SDVs rule the streets. Source: BCG Report: Self-Driving Vehicles, Robo-Taxis, and the Urban Mobility Revolution. July 21, The third scenario is Robo-Taxis Take Over. In this case, the city imposes discentives for private-car ownership. For instance, a prohibitive tax on private vehicles or an outright ban

85 with the purpose of making the self-driving taxi (and traditional public transportation) the main means of motorized transportation. As a result of this policy, private cars become rarities within the city and citizens use shared electric taxis. Also, SDVs replace some buses. In the scenario where Robo-Taxis Take Over a provider owns the fleet of cars. Figure 201. Robo-taxis take over. Source: BCG Report: Self-Driving Vehicles, Robo-Taxis, and the Urban Mobility Revolution. July 21, The fourth scenario is the ride-sharing revolution. It is the most transformative relative to the status quo. The city could provide incentives for ride sharing as well as for using SDVs, reducing the number of traditional cars even further. Therefore, cars become rarities in the city; self-driving electric-taxi rides are shared, and most buses are replaced. The accidents will sharply decline and the necessary parking spaces will also significantly reduce. Figure 202. The ride-sharing revolution. Source: BCG Report: Self-Driving Vehicles, Robo-Taxis, and the Urban Mobility Revolution. July 21, The benefits are enormous if SDVs are combined with ride sharing and electrification. What is clear is that the future will not follow any of the above scenarios but that there is a change coming is clear. As for OEMs, To retain their share of the automotive profit pool, OEMs need to find the right strategy for differentiating their products and services, which mainly means evolving their value proposition from "hardware provider" to "integrated mobility service provider." Product differentiation should be pursued through a digital end-to-end user experience with a customer focus similar to software companies keeping products attractive throughout the lifecycle. Given the trend towards centrally operated fleets of shared vehicles,

86 OEMs also need to further strengthen B2B sales and large-scale aftermarket services for those businesses. 14 One of the effects not mentioned in the BCG report is the changing product mix: established OEMs generate most of their operating profit from large cars (segment D, E and F). With autonomous drivining establishing itself in urban areas, there will be a move to smaller cars such of segments A, B and C. This will present an opportunitz for Chinese manufacturers and pose a threat to established international OEMs, who currently gnerate significant rents from selling medium and large cars in China. The same reflections apply to car sharing. On a more technical level, other challenges remain: if autonomous driving were to take hold, a reconfiguration of the passenger cell would take place: passengers would like to face each other to communicate while commuting etc. This, however, implies that they will be in nondefined positions during movement, which poses significant challenges to safety technologies such as airbags and safety belts. 14 McKinsey Report. Automotive Revolution perspective towards 2030, January 2016.

87 2 Car sharing The basic premise of the sharing economy is simple: everything every product and every service is sharable, for a price. The sharing economy addresses and meets the needs of both buyers and sellers. Those needs are the three core principles of the sharing model: value, coverage, and trust. 15 Car-sharing services began to emerge in the 1980s. Operation and usage of the services were motivated by a mixture of pragmatic reasons such as cost reductions for car use and idealistic reasons such as reducing the environmental effects of travel behaviour. 16 Now car sharing has become a choice. The Chinese consumers are still appealed by the owning a car. But as the graphic below reveals owning a car in contrast to before is not considered a symbol of status by 60% of the respondents. Also, 40% of people feel that they can live without owning a car. This trend is growing especially in first-tier cities where getting a plate is becoming very expensive, and other costs such as parking are also increasing. For 37 percent of the consumers surveyed, owning a car seems less important now that other forms of transport are available. Significant numbers of consumers believe they can meet their needs by renting (40 percent), leasing (34 percent), or co-owning cars (26 percent) rather than buying their own. Figure 203. Chinese consumers opinion on owning a car. Source: McKinsey Analysis. Finding the fast lane: Emerging trends in China s auto market. April If as the inquiry above suggests some consumer think that car-sharing can cover the needs then the question is. When does car-sharing stop making sense? A survey done by BCG has found the different breakeven depending on the type of car. For instance, it shows that the breakeven for a city car is 7,500 km. Below that number, it would financially make sense to 15 BCG Report. What s ahead for car sharing? February Do sharing people behave differently? Johanna Kopp. April 2015.

88 share a car. This breakeven was calculated comparing the costs of owning a city car with the costs of sharing a car. Figure 204. Total Yearly costs. Owned cars versus shared cars. Source: BCG Report. February Elon Musk, Tesla's CEO recently unveiled a plan that combines both autonomous driving and car-sharing. He restated his ambition to make all Tesla vehicles completely autonomous - capable of driving without a human driver. Once regulators approve the technology, he said, ''you will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation. In cities where demand exceeds the supply of customer-owned cars, Tesla will operate its own fleet,'' he added. It should be noted that in Q2 of 2016 Mr. Tesla came under pressure from shareholders for not delivering on his promises of generating profits or meeting quality standards (Tesla X) and safety standards (Tesla S autonomous driving accident. New players such as NextEV, Faraday Future, and Future Mobility Corp. are entering the Chinese e-mobility market. These new players along with the Chinese government huge subsidies may leapfrog the established players and as Prof.Dr. Sachon of IESE Business School says, 'unlike Tesla they may pull it off because of China s strategic interest in the technology, its experience in small cars and its being the largest car market in the world.' NEXTEV is a young Chinese company in Silicon Valley with an engineering facility. In 2015, the startup came out of stealth mode, and according to reports, it has already raised close to $1 billion. Just last month, the company announced that it had signed a contract with the Nanjing Municipal Government to build a 3 billion RMB ($465 million) electric vehicle factory. 17 The Chinese company plans to use a similar strategy as Tesla and launch cheaper vehicles, starting with a supercar. The supercar should be unveiled by the end of the year. To lead its U.S. operations, the company hired Padmasree Warrior last year. Warrior is a former Cisco and Motorola CTO. Besides, Henry Wang, a long-time engineering program manager at Tesla, joined the startup in a similar role earlier this year. Carmaker Faraday Future materialized in 2015 with word of significant funding from a Chinese backer and a list of designers that hail from Tesla, BMW, GM, and Ferrari. Their first model was officially announced at CES this year. Following the lead of its supposed competitor Tesla 17 A Key Tesla Autopilot Executive Joins NEXTEV. June 2016

89 Motors and the Gigafactory, Faraday said its $1 billion facilities would be located in Nevada near Las Vegas. 18 The other car maker that stands out is Future Mobility Corp. The company said it is getting ready to roll out a self-driving electric car in Future Mobility is backed by large investors, including internet giant Tencent Holdings, electronics manufacturer Foxconn, and car dealership group China Harmony New Energy Auto Holding. In March, Future Mobility was able to recruit its leadership team from BMW's electric vehicle line; in May, at least two executives from Tesla Motors came on board as well. CEO Carsten Breitfeld, who previously headed up the BMW's team for the i8 plug-in hybrid, said that unlike Tesla, Future Mobility will not focus on only one model at a time or have limited production of its models Faradya Future will build its Tesla-fighting EV in Nevada. December 10, Hybrid Cars: Future Mobility Prepares to Roll Out Self-Driving Electric Car. Newstec. July 12, 2016.

90 BOX 9. The future of Car sharing Car sharing is a membership-based, self-service system that contains a network of stations and vehicles an alternative to traditional car ownership for individuals and companies alike. In this system, vehicles are owned by a separate firm, organization, or individual and are shared by users for only a short period. Over the past three decades, car sharing has grown from a basic service provided by well-known organizations to a widely recognized urban transport industry, one that is quickly developing into a globalized industry, providing many transportation, land use, environmental and social benefits. 20 The car-sharing market in China is expected to grow at an average of 45% until In 2013 there were only 780 cars providing car-sharing services across China. This number reached 3640 in 2014 and was over 7000 in It is expected to be over in Figure 205. Comparison of Various car-sharing models. Source: Technavio Research. Cost advantages and sustainability are fueling the demand for car-sharing services in China. Growth in the megacity construction market will add to traffic congestion problems in the future, propelling the demand for alternative transportation services. Moreover, sustainability aims to reduce the number of cars on the road, thereby reducing air pollution and the total carbon footprint. Therefore, car sharing is expected to counter such problems. Car2Share and China Car Club are two of the main players in this market. The former is a major vendor in the Chinese market. It is a car-sharing scheme launched by Daimler, a vehicle manufacturing company. Through this system, a wide range of different brands' cars is available to customers. It caters to various industries and has designed the car- sharing policies based on their needs. Car Clubs is a domestic car rental company operating in the Chinese car-sharing market. It offers flexible renting schemes for users. Customers can access the company's services online, from booking to payment. It is penetrating the market by strategically attracting investments from investors. Their strategies are slightly different. Car2Share focuses on expanding into other cities in China and introducing new product offerings, technologies and widening its existing product range. On the other hand, the strategy of the Hangzhou-based Car Club is to expand the coverage of its stations into different locations in China, increasing its fleet size and introducing new and innovative technologies to enhance its service offerings. 20 Car-sharing Market in APAC Market Research www. Marketresearchreports.com