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Market Overview
Population 1.34bn
Language Mandarin
Currency Chinese yuan(renminbi RMB) (¥)
Capital City Beijing
GDP US€5.9 trillion
Since the introduction of market-based economic reforms in 1978, China has become the world's fastest growing major economy
Source: IMF
Commercial Overview
2005-2010 2010-2015
GDP growth (CAGR) 21.1% 11.2%Population (CAGR) 0.5% 0.5%Unemployment rate ~4.0% ~4.0%Inflation ~6.0% ~6.0%
Fast growingeconomy
China is the major contributor to the recovery of world economy. Now the second largest economy in the world
Strong trade surplus but aiming at more domestic oriented
China is stimulating domestic demand to make the economy more domestic consumption-oriented instead of export-driven
Consistently medium low unemployment
Unemployment is at government acceptable level
Strong manufacturing base
Largest manufacturing base in the world, 20% of world output
Largest population base
China is still the world’s largest country by population
Source: IMF
Automotive Overview
Largest population base in the world
1.34 bn
Low level of car penetration
<50 vehicles per 1,000 population which is below 10% of the average for more developed countries50% of the world average
High investment in road infrastructure
308bn RMB is planned for highway construction in just the rural area in 2011 and 700bn RMB in city area
Fast growth of Passenger Car Market
Growth 2009: 51.1% (Global Insight)Growth 2010: 31.3% (Global Insight)
China’s economy continues to grow
Tier 1: above $60bn
Tier 2: $30bn
Tier 3a: $15bn income driven
Tier 4: $10bn
Tier 5: below $7bn
Tier 3b: $14-28bn population driven
…and expected to be even larger in 2020Above $1,000bnBetween $500bn - $1,000bnBetween $100bn - $500bnBelow $100bn
China GDP in 2020 by provinces (projected): a union of second-tier developed and top-tier developing countries
20102015
10.4M11.6M 11%
20102015 4.2M 27.8%
3.3M
20102015 2.7M 55.4%
1.9M
20102015 3.6M 15.7%
3.1M
20102015 25.1M 47.4%
17.0M
20102015 4.9M 79.2%
2.7M
20102015 4.8M 4%
4.9M
Source: Global Insight
China Car Market – Big and Growing
Global Total Industry Volume2009 vs. 2015
China Passenger Car Market by segment
Source: Global Insight (PC and LCV)
Luxury Premium Volume
Volume
CAGR (2010-15)
18%
4.8%
8.4%
000’ vehicles
Luxury demand driven by wealth creation
Distribution of millionaires in China in 2010
1 million USD millionaires
USA 413
CHINA 115
Russia 101
Others 581
Total 1,210
# of Billionaires in 2010
No. 2 USD billionaires in the world
China: Luxury Car Market
Source: Global Insight
China will be the 2nd largest luxury Passenger Car market in the world from 2013
000’ vehicles
Car Parc 2008 - 2015
Source: JD Power/IMF
Millions vehicles
Car Parc Units '000 44,321 51,199 58,735 66,934 75,794 85,306
Population millions 1,341 1,348 1,355 1,362 1,368 1,375Cars/'000 Population 33 38 43 49 55 62
35,496
1,33526
Inchcape China Strategy
3 Steps to build scale in the premium end of the market
China’s large size means scale needs to be focused on a regional basis
2007 2011 2016 2020>>>2010 2016
Step 1 Step 2 Step 3
Establish local presence, recruit strong management team and prove retail economics
Scale up presence in targeted regional markets with our preferred OEM brand partners
Accelerate expansion
3 sites 20 sites
Our top 5 Priorities
Growing market share
Growing aftersales
Controlling working capital
Improving margin
Selective capitalexpenditure
Operational focus on our top 5 priorities to deliver our Customer 1st strategy
Leverage OEM new product launches and programs
Leverage car shows and customer lifestyle events to drive quality traffic
Raise the bar on Customer Service Standards
Drive referrals from existing customers and aftersales customers
Data mining of existing customers service records
Build partnerships with Insurance to drive B&P business
Raise the bar on Customer Service Standards
Leverage Vehicle Health Check
TrafficTraffic
Leads/TrafficLeads/Traffic
Test drives/TrafficTest drives/Traffic
Order/ TrafficOrder/ Traffic
EnquiriesEnquiries
Booking/EnquiryBooking/Enquiry
Intakes/EnquiryIntakes/Enquiry
Growing market
share
Growing aftersales
Operational focus on our top 5 priorities to deliver our Customer 1st strategy
Weekly price setting and tracking by model Improve penetration of accessories, F&I Weekly tracking of margins for aftersales Control utilities, consumables costs
Inventory cover to maintain at lower than 1.5 monthsMaximize usage of Supplier Finance with minimum interest chargeNegotiate better payment terms with miscellaneous suppliers
No major investments planned in existing sites Focus on preferred brands and cities
Selective capitalexpenditure
Controlling working capital
Improving margin
We are now executing Step 2 of our China Strategy
2016 Vision
To operate 20 premium 4S sites
Scale up China presence in targeted provincial markets
with our preferred OEM brand partners
China: an attractive opportunity for Inchcape
800
600
400
200
0
50,00010,000 40,00020,000 30,0000
GDP per Capita (US$)
Veh
icle
den
sity
per
1,0
00 a
dults
Russia
BrazilChina
India
USA
Italy
UKFrance
Germany
Japan
Source: JD Power, IMF
Inchcape China
China’s economy will continue to grow from strength to strength
Low car penetration ensures that the automotive industry has significant growth potential
Increasing affluence will drive the luxury car market segment to grow even faster
Inchcape China is well positioned and ready to take advantage of this attractive opportunity:
Tested the retail unit economics,
Built a local organisation,
Localised our operating processes
We are confident that building a portfolio of scale retail businesses, with our core brand partners in the fast growing premium segment is the right expansion strategy for Inchcape China