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September 17, 2019Shanghai, China
2019 AmCham ShanghaiAutomotive Conference
Navigating China in the 20’s
Connect with Bill Russo:
Presentation by Bill Russo, Founder & CEO, Automobility Ltd. &Chairman of AmCham Shanghai Automotive Committee
The China Context
Status of the China Auto Market
Automobility Ltd
There are critical ingredients that are unique to the China context that are altering the mobility consumption pattern
3
*Note: Includes CV and PVSource: Statista, Forrester Research, iResearch, Financial Times, Ipsos, China Bureau of Statistics, Automobility analysis
Motor Vehicles* per 1,000 People (2018)
Low Penetration of Vehicle Ownership
173
910
China U.S.
Prevalence of Mobile PaymentTransaction Value of Mobile Payments ($tn)
Continuing Urbanization
Urbanization Rate, 1980-2017
19%
20171980 201220001990 20152010
26% 36% 48% 53% 56% 59%+3%
Commercial Aggressiveness of Digital Ecosystem Players
Emergence of On
Demand Mobility (ODM)
1.8
5.57.9
10.312.9
0.1 0.2 0.2 0.3 0.3
2015 2016 2018F2017 2019F
USChina
THE CHINA CONTEXT
Automobility Ltd
China has been the growth engine of the global auto industry for several decades
USACAGR 0.7%
ChinaCAGR 12.4%
RussiaCAGR 5.8%EU*
CAGR 1.8%
South AfricaCAGR 3.3%
IndiaCAGR 4.8%Brazil
CAGR 1.3%
New Car Sales Worldwide (2007 vs 2017, M)
16.1 17.2
2.5 2.2
17.114.3
2.91.6
3.22.0
0.7 0.5
8.8
28.9
2007 2017
Note: EU new car sales includes UKSource: CAAM, focus2move, ACEA (European Automobile Manufacturers Association), Society of Indian Automobile Manufacturers, National Association of Automobile Manufacturers of South Africa, Association of European Businesses, LMC Automotive, Automobility analysis
THE CHINA CONTEXT
Gao Feng Advisory Company
There are a wide range of modalities serving mobility demand in the global markets
5
Traditional Automotive Form Factors
Global Passenger Mobility Patterns, Passenger Kilometers (PKM) in 2015
Source: International Energy Agency, Automobility analysis
Automotive
THE CHINA CONTEXT
Gao Feng Advisory Company 6
The global automotive markets can be segmented into 3 worlds based on mobility pattern
W1: China
W3: Rest of the world - Emerging
W2: Rest of the world – DevelopedVehicle penetration per 1000 people 400
Vehicle penetration per 1000 people < 400
Source: Automobility analysis
THE CHINA CONTEXT
Vehicle penetration per 1000 people = 173
Automobility Ltd 7
Emerging markets, with low car penetration, will follow China’s embrace of shared mobility
Public Transportation
Owner-ShipWhite Space
ODM Services
Public Transportation
Ownership
§ Recent development of ODM has caused a significant number of people in W1 to upgrade from public transportation to ODM services
§ Ownership is a multi-generational habit in W2 where ODM only addresses use cases in metro areas
§ The market evolves incrementally from the current status quo
§ W3 has low private car penetration and insufficient public transit
§ It’s more difficult for W3 consumers to upgrade from bottom of the pyramid due to expense of personal mobility
Public Transportation &Un-organized Fleets
Owner-Ship
White Space
ODM Services
W1 W2 W3
§ Before 2025, shared mobility has positive impact on PV sales- It is supplementing ownership, rather than replacing owned vehicles; also upgrading users from public
transport to on-demand mobility (ODM) services, which is more obvious in W1 and W3 - Vehicles used in shared mobility will accelerate replacement cycles: 4 years vs. 10-20 years
Source: Automobility analysis
THE CHINA CONTEXT
Gao Feng Advisory Company
A new multi-dimensional and disaggregated value chain is emerging – the emergence of a “new mobility” ecosystem
8
Source: Gao Feng analysis
Future Mobility Value Chain
Service Sales &Distribution Marketing Manufacturing Sourcing
Product Develop-
mentR&D
Intersection between the Automotive and Internet Service Value Chains forms the New Mobility Value Chain
ILLUSTRATIVE
§ The mobility industry landscape is rapidly changing with the emergence of new ecosystem with new non-traditional players
§ The cooperation and competition between auto OEMs, IT players and other non-traditional players will create a new “co-opetitive” landscape
§ The traditional linear value chain will become multi-dimensional and disaggregated
§ New operating and business model will emerge:- New service models will emerge
and the product and service life-cycles will be shortened
- Shift from asset ownership to consumption of mobility services
- New players can target narrower but under-served segments/niches
Comments
Traditional Automotive Value Chain
THE CHINA CONTEXT
The China Context
Status of the China Auto Market
Automobility Ltd 10
Overall China Auto Industry by Sales Segments (2008-2018, volume: ‘000)
0
5,000
10,000
15,000
20,000
25,000
30,000
3,330
Sales volume(‘000)
10,316
3,791
2,634
2009
28,028
6,746
17,929
2008
4,313
13,749
2010
24,590
4,020
2011 2014
3,811
2018
15,495
2012
4,055
23,491
28,879
20172013
23,71019,7009,380
2019 thru. Aug.
(YTD)
3,450
21,140
2015
3,651
24,377
2016
13,646
4,161
24,718
4,371
18,506
2,782
13,322
28,081
14,486
21,984
18,06219,306
16,104
+25.4%
+7.7%
CV PV
For the first time in decades, China’s automotive market has experienced declining new car sales
Source: CAAM (China Association of Automobile Manufacturers), Automobility analysis
-2.8%
2018 CV: +5.0%2018 PV: -4.1%
2019 YoY CV: -4.2%PV: -12.3%Total: -11.0%
STATUS OF THE CHINA AUTO MARKET
Automobility Ltd
The SUV segment which has been the growth engine in the past few years peaked in 2017
11
Source: CPCA (China Passenger Car Association), Automobility analysis
China new car sales volume: Basic passenger car vs. SUV vs. MPV(2007-2018, Million Units)
2014
0.8
11.912.0
1.3
10.7
0.5
2008 20122009
2.5
0.5
2010 2013 2016
10.3
0.4
20182017 2019/1-7
5.7
11.5
1.6 1.70.7
2015
9.0
0.4
6.2
0.2
5.0
0.2
7.5
2.11.3
2011
10.1
2.0
12.1
3.01.9
9.5
2.1
12.411.7
10.0
5.04.1
-2.5%
MPVSUVBasic PV
CAGR (2008 – 2018)§ MPV: 24.3%§ SUV: 36.4%§ Basic passenger car: 8.6%
STATUS OF THE CHINA AUTO MARKET
Automobility Ltd
Local brands, once dominant in the SUV category, have lost significant volume and market share recently
12
International brand Local brand
Source: CPCA, CAAM, Automobility analysis
Top 10 selling sedans in 2019
Rank Model Manufacturer2019/1-7
sales
1 Lavida SAIC-VW 287,173
2 Sylphy Dongfeng-Nissan 229,374
3 Corolla FAW-Toyota 203,864
4 Excelle SGM-Buick 167,108
5 Bora FAW-VW 162,892
6 Santana SAIC-VW 140,108
7 Civic Dongfeng-Honda 139,137
8 Sagitar FAW-VW 137,028
9 Accord GAC-Honda 130,360
10 Levin GAC-Toyota 114,977
Note: Foreign brand occupies 7 of the top 10 selling SUV list comparing to 3 in 2017 and 5 in 2018
Top 10 selling SUVs in 2019
Rank Model Manufacturer2019/1-8
sales
1 Haval H6 GWM 212,737
2 Tiguan SAIC-VW 167,411
3 X-Trail Dongfeng-Nissan 140,697
4 Hongda CR-V Dongfeng-Honda 131,809
5 Baojun 510 SGMW 127,959
6 Qashqai Dongfeng-Nissan 111,117
7 Boyue Geely 105,771
8 GLC Mercedes-Benz 91,163
9 Hyundai ix35 Beijing-Hyundai 90,902
10 Binyue Geely 90,766
STATUS OF THE CHINA AUTO MARKET
Automobility Ltd 13
2018
44%
International56%
25
Local
2017
43%
57%
23
China PV sales breakdown by brand region(% in terms of sales volume, Million units, 2017 vs. 2018)
28%
Ford
43%
Honda
37%
GM
26%
Audi
39%
23%
Volkswagen
Mercedes
13%
27%
BMW
Nissan
17%
13%
Toyota
17%Hyundai
Kia
China sales as % of global sales by brand*(Partial list, 2018)
* Note: Volkswagen: Volkswagen brand only; GM includes Buick, Chevrolet, Cadillac, Baojun, and WulingSource: CAAM, Company announcement, Reuters, Nikkei. Automotive News. Sohu Auto, Sina Auto, Autohome, Focus2Move, Automobility analysis
§ Local OEM brand total PV sales surpassed 10M units in 2017
§ International brand is still the majorityof total PV sales in China
China is a significant market for global auto makersSTATUS OF THE CHINA AUTO MARKET
Automobility Ltd
Among the local players, SAIC was the fastest growing OEM in 2018
14
2017 Top 10 Local OEMsRanked by Car Production
2018 Top 10 Local OEMsRanked by Car Production
1,500,000 1,000,000 500,000 0
Note: Wuling includes JV indigenous brand Baojun volume. FAW local brands include FAW Car, FAW Xiali and FAW HaimaSource: Desktop research, AutoForesight, Automobility analysis
1,500,0001,000,000500,0000
10%
-18%
-24%
-1%
30%
-6%
-6%
25%
-27%
-32%
Wuling 1
Geely 2
Chang’an 3
Great Wall 4
Dongfeng 5
GAC 6
BAIC 7
SAIC 8
Chery 9
BYD 10
Geely 1
Wuling 2
Chang’an 3
Great Wall 4
SAIC 5
GAC 6
Chery 7
BYD 8
Dongfeng 9
BAIC 10
STATUS OF THE CHINA AUTO MARKET
Automobility Ltd
The luxury vehicle market is growing at a much faster pace in Tier 2-3 cities
15
219,734
364,644334,074 336,848
240,716
434,440
385,536 372,252
Tier 1 Tier 2 Tier 4-6Tier 3
+9.5%
+19.1%
+15.4% +10.5%
20172018
Major Luxury Car Brand Sales Volume (unit)
Source: Gasgoo, Automobility analysis
Comments
§ Tier 1 cities are no more the main force of luxury vehicle market, and its market share declined from 17.5% in 2017 to 16.8% in 2018
§ Tier 2 cities have increased its market share from 29% in 2017 to 30.3% in 2018
§ Tier 3 cities also increased its sales by 0.3%
§ The crackdown in P2P lending also influenced the major consumers in lower tier cities
STATUS OF THE CHINA AUTO MARKET
Automobility Ltd
China’s electric vehicle sales have sharply decelerated after removal of subsidies
16
China’s electric vehicle sales growth in 2019
Source: CAAM, Automobility analysis
Comments
§ The EV market started the year on a high - it grew at the rate of 138% in January 2019 - but then turned turbulent as China announced the removal of subsidies for EV manufacturers
§ A jump in sales in June 2019 as consumers made purchases before possible price increases was followed by a decline of 4.7% in July 2019
§ In August 2019, the decline was far steeper, dropping by 16% from a year earlier to 85,000 units
STATUS OF THE CHINA AUTO MARKET
Automobility Ltd
Used car segment is growing rapidly with an increasing supply of good quality cars
17
2018 Used Car Snapshot
§ Approx. 75% of used car transaction value were less than RMB 80,000. Lower than RMB 30,000 is the most attractive segment (39.35%)
§ Used car transactions happened most in East region(31.54%), followed by Mid-South (26.33%) and North (15.45%)
§ Cars aged between 3 to 6 years were traded most frequently (42.67%), followed by less than 3 years (23.87%)
Source: China Automobile Dealers Association, Auto.sina.com, Automobility analysis
4.3 4.8 5.26.1
9.410.4
12.4
13.8
8.1
0
2
4
6
8
10
12
14
20122011 2015 20182013 2014 2016 2017 2019
+8% +11%
Used cars Millions
China Used Car Sales by Volume (PV+CV)(2011-2018, Millions)
Used car sales : new car sales ≈ 1：2§ Basic car is the
most popular used car segment, accounting for roughly 59.49% of all transactions happen in 2018
thru. Jul. (YTD)
2019 YoY+4.3%
STATUS OF THE CHINA AUTO MARKET
Gao Feng Advisory Company
Strategic Challenges in the 2020s
18
§ Mobility demand will expand in the 2020s as the middle-class population expands and consumption rises, which ordinarily is cause for optimism
§ Despite this, we see increasing concerns over the impact of a deceleration in overall economic growth, with a significant impact already being felt in the automotive sector
§ Automakers are worried the industry has peaked. New car sales in China decreased in 2018, after decades of sharp growth, due to consumption patterns being altered by shared mobility, an increasing supply of used cars and supply chains are shifting due to rising costs and trade disputes.
§ In the face of this uncertainty, carmakers are faced with a significant capital investment burden for incorporating connected, electric and autonomous technology in their vehicles, with uncertain revenue and profit growth potential
§ These forces have the potential to reshape China's auto industry dramatically in the next decade. What can automotive companies do to succeed in a profoundly different economic and competitive landscape?
NAVIGATING CHINA IN THE 2020s
Automobility Ltd
What is Automobility?
19
§ Mobility needs are increasingly being served through “usership”
§ On-demand mobility services are a paradigm-changing development
§ It requires a complete rethinking of the way to deliver value to the market
§ To succeed, companies must expand their focus from the product (the automobile) to the utility derived from the product (“automobility”)
Automobility Limited is a strategy and investmentadvisory firm based in Greater China that helps its
clients to anticipate and profit from the future of mobility
We believe the new Automobility value chain expands focus beyond automotive product
manufacturing to the utility derived from the product
Automobility Ltd
Contact us
20
Please find below contact details for our officesin Shanghai or contact us at [email protected]
ShanghaiAutomobility LtdCorporate Avenue One,No.222 Hubin RoadShanghai China 200021Tel +86 139 1757 7148
Connect with Bill Russo:
