Inside China s Auto Market SUE YINGZI SU Senior Economist, General Motors
INTRODUCTION The China Slowdown shocked the world this year. Vehicle sales also grew much slower than expected Yet, China auto industry remains the most important growth market in the world Low vehicle ownership density Room for growth in smaller cities But, pace of auto sales will be slower than before Slower growth in Chinese economy Restrictions on auto purchases and uses
China was the biggest growth engine for the world during the past decade 5% 4% Contribution to World GDP Growth Brazil China India Russia U.S. Rest of World 3% 2% 1% 0% -1% -2% -3% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: World Bank
However, the Chinese economy is slowing 16 Real GDP Growth (%) 14 12 10 8 6 4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: China National Bureau of Statistics
Its traditional growth model faces significant challenges YTD Y/Y Change Fixed Assets Investment YTD Y/Y Change Housing Starts 45% 70% 35% 50% 25% 30% 10% 15% -10% 5% 2003 2005 2007 2009 2011 2013 2015-30% 2003 2005 2007 2009 2011 2013 2015 Y/Y Change (12-mma) 40% Exports 270% Loan as % of GDP 30% 250% 20% 230% 10% 210% 0% 190% -10% 170% -20% 2003 2005 2007 2009 2011 2013 2015 Sources: China National Bureau of Statistics 150% 2003 2005 2007 2009 2011 2013 2015
Impact of China slowdown is far-reaching China s share in world commodity consumption 6
Copper Price Y/Y Change China Real GDP Growth Commodity prices have collapsed, one major reason why commodity-exporting countries have fallen into recessions 160% Copper Price China Real GDP Growth 16% 120% 14% 80% 12% 40% 10% 0% 8% -40% 6% -80% 2001 2003 2005 2007 2009 2011 2013 2015 4% Source: China National Bureau of Statistics, Wall Street Journal
China s surprising devaluation of the yuan in August panicked the global financial market Kazakhstan: KZT Brazil: BRL Malaysia: MYR South Africa: ZAR Russia: RUB Turkey: TRY Colombia: COP Australia: AUD Indonesia: IDR New Zealand: NZD Mexico: MXN India: INR Taiwan: TWD Korea: KRW Israel: ILS Vietnam: VND Singapore: SGD Chile: CLP Thailand: THB Philippines: PHP China: CNY Canada: CAD UK: GBP Norway: NOK Hong Kong: HKD Poland: PLZ Switzerland: CHF Euro Zone: EUR Japan: JPY Appreciation % Change versus USD since August 10, 2015-10% -5% 0% 5% 10% 15% 20% 25% 30% Since 8/10/2015 Depreciation Sources: The Wall Street Journal, Financial Times, and Haver Analytics; Calculations: General Motors Company Note: Data is from August 10 th to September 7 th, 2015 Source: Wall Street Journal, Dow Jones, Financial Times
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 But China is transitioning from an investment/exports-driven economy to a consumption-driven one 49% Share in GDP Secondary Industry Tertiary Industry 18% Year-over-Year Growth Secondary Industry Tertiary Industry 47% 16% 45% 14% 43% 12% 10% 41% 8% 39% 6% 37% 4% Sources: China National Bureau of Statistics
Million Units Million Units Vehicle sales took off after China joined WTO. Total vehicle sales reached 24 million units in 2014. GM volume exceeded 3.5 million 30 25 20 15 10 5 0 Industry Sales GM Sales 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Sources: GM Global Sales Reporting
Million Units China has become the largest vehicle market in the world 30 China Europe North America All Other Markets 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: GM Global Sales Reporting
Top 10 GM vehicles sold in China in 2014 1 2 Wuling CN100 Wuling N1 5 Wuling CN112 Chevy Cruze 3 6 3 Buick Excelle 6 Wuling N300 Brand Vehicle Volume WULING CN100 470,083 WULING N1 308,645 BUICK EXCELLE 293,098 WULING CN112 279,933 CHEVROLET CRUZE 244,813 WULING N300 226,464 WULING N300 Pickup 215,489 BUICK EXCELLE GT 195,932 CHEVROLET SAIL 188,655 CHEVROLET MALIBU 125,547 7 8 9 10 Wuling N300 Pickup Source: GM China Sales Reporting Buick Excelle GT Chevy Sail Chevy Malibu
Sales were slowing much more sharply than expected in 2015 till recent months 60% Auto Sale Growth 50% 40% 30% 20% 10% 0% -10% Source: GM Global Sales Reporting
Vehicle prices in China are falling faster this year 110 Mini Small Medium High Luxury Passenger Car 100 90 80 70 60 50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Cheshi.com.cn
SUV is the fastest growing segment 100% 80% 60% 40% 20% 0% -20% SUV Growth Total Market Growth -40% 2012 2013 2014 2015 Source: GM Global Sales Reporting
Growth has shifted from the large coastal cities to smaller inner cities Growth by Tier 25% Tier 1 Tier 2 Tier 3 Tier 4 20% 15% 10% 5% 0% -5% -10% -15% 2012 2013 2014 2015H1 Source: Polk
GM s Baojun 560 has become the second best selling SUV just several months after its debut, selling over 22,000 units in September Source: General Motors SHANGHAI, April 2015 SAIC-GM-Wuling (SGMW) today introduced its first SUV, the Baojun 560, at Auto Shanghai 2015. The latest Baojun model was developed by SGMW. The fashionable exterior of the Baojun 560 is based on the trendy, grand and strong design philosophy. A U-shaped mesh grille complements its V-shaped air intake with a honeycomb grid design for a dynamic effect. A sleek beltline and strong back-end design give it the identity of a true SUV. With a length of 4,620 mm, width of 1,820 mm and height of 1,750 mm, the Baojun 560 has a spacious interior true to SGMW s desire to offer a home on wheels for families. In addition, its 2,750-mm wheelbase is much longer than the wheelbase of most other models in its segment. The rear seats can be folded in a 60/40 split configuration to accommodate larger items.
A more upscale SUV, Buick Envision, is also selling very well with more than 10,000 units sold in September SHANGHAI, March 2015 Shanghai GM will launch the Buick Envision 20T, the newest member of its Envision mainstream SUV lineup, across China in April. The Envision 20T is powered by a 1.5T Spark Ignition Direct Injection (SIDI) engine that is matched with an intelligent sevenspeed DCG transmission. Like its sibling, the Envision 28T, it is available with frontwheel drive and intelligent all-wheel drive. The 1.5T SIDI turbocharged engine is the most powerful among GM's latestgeneration Ecotec small-displacement engines. It features mid-mounted direct injection, an integrated exhaust manifold and QuietTuning technology. The start/stop function, which comes standard, helps save fuel and reduce emissions. The engine generates maximum power of 124 kw and peak torque of 250 Nm. Source: General Motors
Fast backward to the year 1999 when GM s flagship vehicle was the luxurious Buick Regal, with government officials and wealthy businessmen being core customers. GM has witnessed the development of the Chinese economy and China s vehicle market General Motors and Shanghai Automotive Industry Corporation (SAIC) established a joint venture in 1997 called Shanghai General Motors Company Limited and began assembling the Buick Regal in Shanghai, China in 1999. The Regal has sold well in the Chinese market as a large, relatively luxurious model, despite its high price. Source: General Motors
Vehicle Pard Per 1,000 People What s next? Comparing to other more developed markets, China still has good potential 900 800 700 600 500 400 300 200 100 - Malaysia Russia Hungary Argentina Thailand Mexico Chile Brazil Turkey South Africa China Indonesia India United States Australia New Zealand Finland United Kingdom Poland Spain Canada France Japan Baltics Greece Italy Norway Portugal Switzerland Germany Sweden Czech/Slovakia Denmark South Korea Israel Taiwan Singapore Hong Kong Developing Markets Have Upside Potential In terms of vehicle density, developed markets are trending at levels that reflect market saturation 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Real GDP Per Capita (2005 USD) Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company
SUMMARY China remains a very attractive market Will account for 40% of the projected growth in global vehicle sales over the next decade GM plans to spend over $12 billion in the next five years to expand capacity and to offer new products We are not alone. Competitors have set equally ambitious targets
EVERYTHING STARTS AND ENDS WITH GREAT PRODUCTS