China Powertrain Trend in The New Environment. Tianshu Xin Director of Global Powertrain Forecasting

China Powertrain Trend in The New Environment Tianshu Xin Director of Global Powertrain Forecasting Presentation Outline • What challenges are we fa...
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China Powertrain Trend in The New Environment Tianshu Xin Director of Global Powertrain Forecasting

Presentation Outline • What challenges are we facing in China? • How does legislation address energy and environmental concerns? • How will China respond to the challenges? – What impacts will the government’s latest development plan have on the market? – Will EV achieve breakthrough in China?

Copyright © 2009 IHS Global Insight. All Rights Reserved.

GLOBAL AUTOMOTIVE CONFERENCE

What Challenges Are We Facing? Nation Challenges • Environmental concerns • Lack of oil resources • Traffic jam

Copyright © 2009 IHS Global Insight. All Rights Reserved.

Auto Industry Challenges • Irrational industry structure • Lack of technology knowhow • Weak independent R&D capabilities • Incomplete market demand/incentive policy

GLOBAL AUTOMOTIVE CONFERENCE

Legislation Addresses Energy and Emission Concerns. But It Might Not Be Enough Sustainable Growth can only be achieved with appropriate regulatory guidance 2007 2005 •New Official Vehicle Classification System •New Local Content Regulation •Auto Distribution Regulation •Phase I Fuel Consumption Standard •Hybrid Standards

2004 1994 Auto Industry Policy Copyright © 2009 IHS Global Insight. All Rights Reserved.

• National Climate Change Programme • Euro III Emission Standard • Govern Alternative Fuel vehicle development

2006

2008 •Phase II Fuel Consumption Standard •Revised Consumption Tax

•New Consumption Tax •New Fuel Price Policy

•Overloading Restriction •New Auto Industry Policy •EURO II Emission Standard Implementation •Auto Loan Policy GLOBAL AUTOMOTIVE CONFERENCE

Can Diesel Cars be the Solution in China? Strength • • • •

Fuel Price

30% fuel efficiency 25% better torque 30% less CO2 emission Mature diesel technology

7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 20 00 20 01 20 Fe 02 b M -03 ay J u 03 l-0 D 3 ec M -03 ar M -04 ay Au -04 g M -04 ar M -05 ay J u 05 n0 Ju 5 l-0 M 5 ar M -06 ay J a 06 nN 07 ov J u -07 n M -0 8 ay -0 9

Weakness • Higher initial cost

Opportunity • Uncertain market: Dieselisation or Hybridisation? • Lack of oil resource • Increasing consumer fuel economy awareness

Copyright © 2009 IHS Global Insight. All Rights Reserved.

Threat • • • • •

Poor customer perception Hybrid technologies No difference on fuel price Poor diesel quality Lack of government’s financial support GLOBAL AUTOMOTIVE CONFERENCE

Diesel Solution is Unlikely to Be the Winner 2.0%

Jetta was and still is the only diesel sedan with mass production. 1.3%

1.3%

1.2%

0.9%

1.0%

0.7%

0.6%

0.9%

2008

2009

1.3%

1.3%

0.8%

0.0% 2005

2006

Copyright © 2009 IHS Global Insight. All Rights Reserved.

2007

2010

2011

2012

2013

2014

GLOBAL AUTOMOTIVE CONFERENCE

Can Gasoline Technologies Provide the Solution? The power density gap has been closing very quickly

52

• The localisation of advanced engines help to reduce the gap of power density between locally produced and imported gasoline engines.

Gasoline Engine Power Density (kw/l)

50

48

• Technical support from the independent engineering houses such as AVL and FEV also assists local OEMs in designing more advanced gasoline engines.

46

44

42

40 2003

2004

2005

2006

2007

2008

Local Engine KW/L

Copyright © 2009 IHS Global Insight. All Rights Reserved.

2009

2010

2011

2012

2013

Imported Engine KW/L

GLOBAL AUTOMOTIVE CONFERENCE

Is the Evolution of Gasoline Technologies Significant Enough? Gasoline turbocharger will rise due to trend of downsizing

8%

60%

7% 50% 6%

Variable valve train will become popular

40%

5%

30%

4%

3% 20% 2%

Gasoline direct injection will only achieved modest growth due to poor fuel quality and higher cost

1%

10%

0%

0% 2005

2006

2007

2008

2009 Turbocharger

Copyright © 2009 IHS Global Insight. All Rights Reserved.

2010

2011

Gasoline DI

VVT

2012

2013

2014

GLOBAL AUTOMOTIVE CONFERENCE

But Chinese OEMs Are Still Behind Gasoline Engine Power Density

60 kW/L

China is behind Japan for more than 10 years

Japan

55

50

>10 years China

45 4 years 40

35

30 1990

1992 Japan

Copyright © 2009 IHS Global Insight. All Rights Reserved.

1994

1996 USA

1998

2000 W. Europe

2002

2004 World

2006

2008

2010

China

GLOBAL AUTOMOTIVE CONFERENCE

More Drastic Changes are Needed… 2009 • Fuel Tax • Development Plan to Aid Auto Industry • Stimulus Package for New Energy Vehicles 2007 • National Climate Change Programme 2005 • Euro III Emission Standard •New Official Vehicle • Govern Alternative Fuel 2008 Classification System vehicle development •Phase II Fuel •New Local Content Consumption Regulation Standard •Auto Distribution Regulation •Revised •Phase I Fuel Consumption Consumption Tax Standard 2006 •Hybrid Standards •New Consumption Tax •New Fuel Price Policy

2010 … •Euro IV Emission Standard •Government subsidies on alternativepowertrain •Emission Tax •Stricter Fuel Consumption Standards •Euro V/VI Emission Standards

2004

1994 Auto Industry Policy Copyright © 2009 IHS Global Insight. All Rights Reserved.

•Overloading Restriction •New Auto Industry Policy •EURO II Emission Standard Implementation •Auto Loan Policy GLOBAL AUTOMOTIVE CONFERENCE

Impact of Fuel Tax on Consumers is Marginal 18,000

Fuel Price Structure

Fuel Cost and Road Maintainence Cost rmb/year

16,000 14,000

rmb/l

6 4 4.2

4.08

Tax:1

Tax:0.8

2 0

Gasoline

12,000

Diesel

10,000 8,000 • Fuel consumption: Excelle 1.6L MT 8L/100km;

6,000

CR-V 2.0L 2WD AT 10L/100km • Road Maintenance Fee: 1200 RMB/Year

4,000

• Gasoline Price: 5.2 RMB/L, including 1 RMB/L fuel tax

2,000

Disadvantage

Advantage 0 10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000 km/year

1.6L with fuel tax

Copyright © 2009 IHS Global Insight. All Rights Reserved.

1.6L with RMF

SUV with fuel tax

SUV with RMF

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Ambitious Target? Will China Become a Kei Car Market Purchasing Tax Cut

80%

China 1.6L

70% Japan 1.5L

60% 50%

China 1.5L

40% Target 1.5L Japan 1.0L

30% 20% 10%

Target 1.0L China 1.0L

0% 2005

Copyright © 2009 IHS Global Insight. All Rights Reserved.

2006

2007

2008

2009

GLOBAL AUTOMOTIVE CONFERENCE

Learn from Best Practice with an Opportunity to Leapfrog

Legislation& Technology

•Stricter emission stand. •Gasoline valve train •Automatic Trans

•C02 Focus •Diesel CMR •Strong downsizing •DCT

•GDI •Strong downsizing •Hybrid focus •Small car •CVT

•Downsizing •Gasoline valve train •European emission standards •DCT

Gasoline Diesel Non Plug-in Hybrid Plug-in Hybrid EV

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GLOBAL AUTOMOTIVE CONFERENCE

There is No Shortage of Innovation… ChangAn

FAW Bestun B50

JAC

BAIC

Roewe 750 Shanghai EV Shanghai FCV

FC

Bingyue

863

GAIC Concept car

SAIC

Jiexun

Concept car

DFM

Haima

Nissan Shuaike EV

Aeolus

Nuvu

me I-Car

Hafei Saibao

Hyundai

AVANTE

Geely Panda

Liebao

Liebao

Toyota

Kylin

Greatwall

Lifan 320 EV

Camry Kulla2 EV

Chery Tiggo 3

Fulwin

Riich m1

BYD ZOTYE

e6

Mini E

2008EV Copyright © 2009 IHS Global Insight. All Rights Reserved.

FCHV

BMW7

Honda Suzuki

Wande

Prius

BMW

Insight F6DM

Hi-CT

Civic

FCX Clarity

Benz SX4 FCV

S400

EV GLOBAL AUTOMOTIVE CONFERENCE

Short Term Target with a Long Term View Government Target: Establish 500K production capacity for new energy vehicles (HEV+BEV+FCV) by 2011 AND sales of these vehicles account for 5% of Passenger car sales (425K) by 2011

425K

The fuel saving only accounts for about 1.4% of 2008 imported oil. The fuel saving is NOT significant enough to reduce China’s reliance on oil import.

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GLOBAL AUTOMOTIVE CONFERENCE

What Chinese Government Would Like to Achieve… Build Infrastructure Quick battery recharging stations/swap stations Household charging facilities Infrastructure

Industry

Reduce Cost Vehicle Battery

Develop Industries Battery

Cost

Motor Control system Standard Behaviour

Set up Standards •Industries

Foster Demand

•Technical

Consumer education Financial incentives Copyright © 2009 IHS Global Insight. All Rights Reserved.

GLOBAL AUTOMOTIVE CONFERENCE

Actions From Chinese Government Subsidy on Public Use PCs and LCVs (rmb0000/unit) Vehicle Type

Fuel Saving

Hybrid

5%-10% 10%-20% 20%-30%

Maximum Electric Power Rate BSG*

10%-20%

20%-30%

0.4

2.8

3.2

3.2

3.6

4.2

4.2

4.5

30%-40%

30%-100%

>40%

5.0

Pure EV

100%

6.0

Fuel Cell

100%

25.0

*Belt Starter Generator Note: Plug-in hybrid are covered in the maximum electric power rate over 30% Copyright © 2009 IHS Global Insight. All Rights Reserved.

GLOBAL AUTOMOTIVE CONFERENCE

Cost is Too High for Consumers

BYD F3 1.6AT

BYD F3DM

Consider the following… Purchase Price: 68,000 RMB Combined Fuel Consumption: 12L/100Km

Purchase Price: 149,800 RMB Government Subsidy: 50,000 RMB Electricity Consumption: 16KWh/100Km

Adjusted Price Difference: 31,800 RMB Copyright © 2009 IHS Global Insight. All Rights Reserved.

GLOBAL AUTOMOTIVE CONFERENCE

And Payback Period is Too Long, But if…

Thousands rmb

Initial Outlay + Fuel (Electricity) Cost

Assume 15,000 Km/year, 10% annual increase of gasoline price and 2% rise of electricity price

150 140

Less sensitive to charge timing leads to more flexibility

130 120 110 100 90 80

Economy of scale achieved if 200K units reached. The cost to the government will be 10 billion RMB.

70 60

1

2

3

4

5

6

Year 1.6AT+Fuel Cost

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DM+Peakhour Charging

DM+Offhour Charging

Cost Reduced DM+Peakhour Charging

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And Cheap Oil Has Dried Up Meanwhile, Competition is on for Fuel Efficiency WTI Oil Price (Annual Averages)

120

100

Gasoline Retail Price (Annual Averages)

14

Short term volatility and long term return to high oil price and pressure for Fuel Economy

12 10 8

Tipping Point? 60

6

rmb/litre

US$/barrel

80

40 4 20

2 0

19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19

0

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GLOBAL AUTOMOTIVE CONFERENCE

Hybrids and EVs Will Have a Significant Role to Play in China All Hybrid and Electric Passenger Car Sales 14.0%

12.0%

China has an opportunity to leapfrog in Plug-in Hybrid and EVs.

10.0%

8.0%

6.0%

4.0%

2.0%

0.0% 2005

2006

Copyright © 2009 IHS Global Insight. All Rights Reserved.

2007

2008

2009

2010

2011

2012

2013

2014

2015

GLOBAL AUTOMOTIVE CONFERENCE

Points to Take Away… • Chinese government is taking a greater step to meet its challenges and the focus will move to sustainable growth • Conventional powertrain technologies will still play an important role in reducing fuel consumption and emission • However, China presents a great opportunity for new energy vehicle development • Develop your Winning Strategies - shift the attention from low cost to advanced technologies – “Bring the Global Powertrain to China” – Mr Fritz Henderson, GM CEO • BYD Phenomena!!!

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GLOBAL AUTOMOTIVE CONFERENCE

Thank You! Tianshu Xin Director, Global Powertrain Forecasting [email protected]