China Light Vehicle Outlook - UMTRI · “China NAQS (National Air Quality Standards): In 2013 96%...

© 2014 IHS

Presentation

ihs.com

IHS AUTOMOTIVE

China Light Vehicle Outlook

University of Michigan

Transportation Research Institute

Inside China Conference

November 12, 2014

Charles ChesbroughSenior Principal Economist

IHS Automotive - Detroit

[email protected]

© 2014 IHS

IHS AUTOMOTIVE

Introduction

Charles ChesbroughSenior Principal Economist– IHSAutomotive

Charles joined IHS in 2006, and is responsible for developing and integrating statistical models

and economic scenarios into IHS worldwide global automotive forecasts. Charles also

presents IHS forecasts and research to organizations, clients and media, and is often invited

as a speakeror panelist at various professionalseminars and international industry events.

Prior to joining IHS, Charles was a senior consultant in Ford Motor Company's North American

marketing strategy group. Charles has also worked for two technology start-up companies,

and he began his career as a floor trader at the Chicago Board of Trade. Charles also is an

expert in market research, data mining and econometric analysis through many years as a

consultant to Fortune 500companies.

Charles earned a bachelor’s degree in economics from Michigan States University, and a

master’s degree in economics from the University of Illinois at Chicago. He was also a student

in Michigan State University’s economicsPhDprogram.

Charles has won numerous economic forecasting accuracy awards, and serves on Oakland

University’s Expert Economist Panel. He is also board member and former President of the

Detroit Association for Business Economics, and is also a member of the National Association

for Business Economics.

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IHS AUTOMOTIVE

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IHS AutomotiveAnalysts based all over the world and provide global industry coverage and perspective

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IHS products utilized for this presentation:

• Automotive forecasting

• Energy forecasting

• Economic forecasting

© 2014 IHS

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Agenda

• Light Vehicle Forecast

• Economic and Market Development D

• Threats to the Forecast

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“In June 2014 Ford opened 88 new car

dealerships in China - in one day.”

With primary focus on less competitive Tier 4 cities!

© 2014 IHS

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6

“Audi China plans to open one dealership

per week all the way through to 2017.”

“China NAQS (National Air Quality Standards):

In 2013 96% of major Chinese cities subject to

NAQS failed to meet their goal.”

“Incoming investment into China for local vehicle

manufacturing is estimated to be around 35.7

billion USD in the next 5 years.”

“The average price of a new 4S dealership in

China lies between 3 and 5 million USD.”

© 2014 IHS

IHS AUTOMOTIVE

World Light Vehicle Selling RatesChina providing most of global sales growth

45

50

55

60

65

70

75

80

85

90

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

LV

Sa

les S

AA

R, in

mill

ion

s

World

SAAR

World Without

China SAAR

Source: IHS Automotive Analysis, X12 Seasonal Adjustment

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© 2014 IHS

IHS AUTOMOTIVE

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

Ja

n'0

7

Ja

n'0

8

Ja

n'0

9

Ja

n'1

0

Ja

n'1

1

Ja

n'1

2

Ja

n'1

3

Ja

n'1

4

LV

Sa

les S

AA

R,

Ind

exe

d 2

00

7=

1

Source: IHS Automotive Analysis, X12 Seasonal Adjustment

2007

Sales Level

Lehman

Collapse

China

S America

India

ASEAN

J/K

WE

CE

NA

Region Light Vehicle Selling RatesChina remains on different path than rest of world

EE

© 2014 IHS

IHS AUTOMOTIVE

World Light Vehicle Sales ForecastOutlook optimistic from US/Euro recovery and China market growth

Source: IHS Automotive Sales Forecasts

85.7

88.6

50

60

70

80

90

100

110

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Total Sales 2006-2013:

577 Million Vehicles

Total Sales 2014-2021:

767 Million Vehicles

An

nu

al sa

les, in

mill

ion

s

9

© 2014 IHS

IHS AUTOMOTIVE

Light Vehicle Sales ForecastAutomotive world changing quickly

0

10

20

30

40

50

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

Mature Markets

China

Others

Source: IHS Automotive, Mature Markets = US, Canada, Japan, S Korea, Australia, NZ, W Europe

Change 2001 - 2021:

MM down 5%

China up 1400%

Others up 200%

10

An

nu

al sa

les, in

mill

ion

s

© 2014 IHS

IHS AUTOMOTIVE

21.4

23.3

24.9

15.0%

8.9%7.1%

0%

10%

20%

30%

40%

50%

60%

70%

0

5

10

15

20

25

30

35

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

An

nu

al c

ha

ng

e

Source: IHS Automotive

China Light Vehicle Sales ForecastMarket to reach 30 million by end of decade

Sa

les (

in m

illio

ns)

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© 2014 IHS

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Agenda


• Economic and Market Development


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© 2014 IHS

IHS AUTOMOTIVE

0

100

200

300

400

500

600

700

800

900

$0 $10 $20 $30 $40

Light Vehicle PenetrationScatterplot Reveals Strong Economic - Vehicle Need Relationship

Vehic

les In U

se P

er

1000 P

eople

GDP Per Capita (thousand US$)

US

Sweden

Russia

S Korea

Japan

Australia

Brazil

ItalySlovenia

Spain

China

Poland

Czech Rep

Canada

UK

France

Germany

India

Thailand

Hungary

Mexico

Turkey

Chile

Development Path – economic

success creates millions of new

consumers, and they want cars !

Source: IHS Automotive, CY 2013

Slovakia

Indonesia

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© 2014 IHS

IHS AUTOMOTIVE

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0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

Un

ite

dS

tate

s

Ch

ina

Ja

pa

n

Ge

rma

ny

Fra

nce

Ind

ia

Bra

zil

Ru

ssia

2000 2014 2021

Total Population (millions)

World: Human Population

Source: IHS Consumer Markets

© 2014 IHS

IHS AUTOMOTIVE

15

0

10,000

20,000

30,000

40,000

50,000

60,000

Un

ite

dS

tate

s

Ch

ina

Ja

pa

n

Ge

rma

ny

Fra

nce

Ind

ia

Bra

zil

Ru

ssia

Real GDP Per Capita (2010 US$)

World: Economic Development

Source: CY 2000-2014-2021, IHS Consumer Markets

© 2014 IHS

IHS AUTOMOTIVE

16

0

100

200

300

400

500

600

700

800

900

Un

ite

dS

tate

s

Ch

ina

Ja

pa

n

Ge

rma

ny

Fra

nce

Ind

ia

Bra

zil

Ru

ssia

Vehicles in Operation Per 1000 People

World: Vehicle Penetration Rates

Source: CY 2000-2014-2021, IHS Automotive

© 2014 IHS

IHS AUTOMOTIVE

17

0

4,000,000

8,000,000

12,000,000

16,000,000

20,000,000

24,000,000

28,000,000

32,000,000U

nite

d S

tate

s

Ch

ina

Ja

pa

n

Ge

rma

ny

Fra

nce

Ind

ia

Bra

zil

Ru

ssia

Annual Volume

World: Light Vehicle Sales Forecast


© 2014 IHS

IHS AUTOMOTIVE

18

0

50

100

150

200

250

300

350

Un

ite

dS

tate

s

Ch

ina

Ja

pa

n

Ge

rma

ny

Fra

nce

Ind

ia

Bra

zil

Ru

ssia

Total Car + LCV in Operation (millions)

World: Light Vehicle Fleet


© 2014 IHS

IHS AUTOMOTIVE

19

0

100

200

300

400

500

600

700

800

900

Un

ite

dS

tate

s

Ch

ina

Ja

pa

n

Ge

rma

ny

Fra

nce

Ind

ia

Bra

zil

Ru

ssia

Nameplates In Markets

World: Product Availability


© 2014 IHS

IHS AUTOMOTIVE

20

0

5

10

15

20

25

Un

ite

dS

tate

s

Ch

ina

Ja

pa

n

Ge

rma

ny

Fra

nce

Ind

ia

Bra

zil

Ru

ssia

HHI Scores

World: Market Concentration


Mo

re F

rag

me

nte

dL

es

s F

rag

me

nte

d

© 2014 IHS

IHS AUTOMOTIVE

21

0

1

2

3

4

5

6

7

8

9

10

11

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Car MPV

PUP SPORT

SUV Van

0%

10%

20%

30%

40%

50%

60%

Ca

r

MP

V

PU

P

SP

OR

T

SU

V

Van

2011

2014

2021

Share of Market Average Product Age (years since launch)

China Vehicle SegmentsCars dominate but SUV share expected to increase significantly


© 2014 IHS

IHS AUTOMOTIVE

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013

2014

2015

2016

2017

2018

2019

2020

2021

Domestic Exported

Forecast by Platform Size Production Purpose

China Light Vehicle Production ForecastC and D sized vehicles will continue to dominate market


0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

2013

2014

2015

2016

2017

2018

2019

2020

2021

F+HVAN E D C B A

© 2014 IHS

IHS AUTOMOTIVE

China Dealership ExpansionOEMs expanding distribution dramatically

23

664

628

663 654

592 597 592

520

395372

749

718 711

678654

642 634

580

481

414

300

350

400

450

500

550

600

650

700

750

800

FA

W-V

W

FO

RD

Hyun

da

i

NIS

SA

N

FA

W T

OY

OT

A

CH

EV

RO

LE

T

BU

ICK

CIT

RO

EN

PE

UG

EO

T

DF

HO

ND

A

Dec-13 Jun-14

336

407

309

367

435

369

300

350

400

450

AUDI BMW MERCEDES

Dec-13

Jun-14

400

450

500

550

600

650

BYD CHERY

Dec-13

Jun-14


Nu

mb

er

of D

ea

lers

hip

s

© 2014 IHS

IHS AUTOMOTIVE

China Automotive FinancingStill primarily a cash market but major OEMs expanding significantly

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2009

2010

2011

2012

2013

24

10%

8%

3%

12%

17%

23%

17%

19% 20%

24% 24%

36%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Hyun

da

i

VW

Ch

ery

To

yo

ta

Audi

BM

W

2009 2013

Sh

are

of P

urc

ha

se

s F

ina

nce

d

Sh

are

of P

urc

ha

se

s F

ina

nce

d


© 2014 IHS

IHS AUTOMOTIVE

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China Premium Vehicle MarketAs market matures, higher priced vehicle share and volume continues to grow

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

2014

2015

2016

2017

2018

2019

2020

2021

Sept Forecast

Jan Forecast

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Pre

miu

m S

ale

s in

mill

ion

s

US

China

Sh

are

of LV

Sa

les


© 2014 IHS

IHS AUTOMOTIVE

Vehicle Penetration PathSome signals suggest a paradigm shift occurring

27

Economic Development

City of Today

Peak Car ?

Mature Market Track

Weak Car ?

Emerging Market Track

Vehic

le D

ensity

Rural Path

City of Tomorrow?


© 2014 IHS

IHS AUTOMOTIVE

Province New Registrations DensityStage of market development varies greatly

28

Ne

w P

asse

ng

er

Re

gs

Pe

r 1

00

0 P

eo

ple

GDP Per Capita US$

Anhui

Beijing

Chongqing

Fujian

Gansu

Guangdong

Guangxi

GuizhouHainan

Hebei

Heilongjiang

Henan

HubeiHunan

Inner Mongolia

Jiangsu

Jiangxi

Jilin

LiaoningNation

Ningxia

QinghaiShaanxi

Shandong

Shanghai

Shanxi

Sichuan

Tianjin

Tibet

Xinjiang

Yunnan

Zhejiang

7

9

11

13

15

17

19

21

23

25

$3,000 $5,000 $7,000 $9,000 $11,000 $13,000 $15,000 $17,000

Established

MarketsNext

Wave

Rising

Tigers

Late Bloomers

Source: IHS Automotive, based on 2013 passenger vehicle registrations data and economic forecasts

© 2014 IHS

IHS AUTOMOTIVE

Province Passenger Vehicle RegistrationsCity restrictions and legislation changes impacting sales and development

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Sh

and

on

g

Jia

ng

su

Gu

ang

do

ng

Zh

ejia

ng

He

be

i

He

na

n

Sic

hu

an

Lia

onin

g

Be

ijin

g

Hu

na

n

An

hui

Hu

be

i

Sh

anxi

Sh

aan

xi

Fu

jian

Yu

nna

n

Inn

erM

on

go

lia

Tia

njin

Jia

ng

xi

Sh

ang

ha

i

Ch

on

gq

ing

Gu

ang

xi

Heilo

ngjia

ng

Jili

n

Gu

izh

ou

Xin

jian

g

Ga

nsu

Nin

gxia

Ha

ina

n

Qin

gh

ai

Tib

et

PV

re

gis

tra

tio

ns in

20

13

(m

illio

ns)

29

City restrictions already in place

City restrictions expected

No restrictions indicated yet

Source: IHS Automotive, China Province Forecast

© 2014 IHS

IHS AUTOMOTIVE

Province Passenger Vehicles in OperationRecent sales success differences will impact future vehicle fleet opportunities

30

0

50

100

150

200

250

300

350

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

PV

s in

mill

ion

s

Southwest China

South China

Plateau

Northwest China

Northeast China

North China

Middle China

East China

Source: IHS Automotive, China Province Forecast, Personal Vehicle Parc (Including minibus)

Passenger vehicle fleet now at

100m – will surpass 300m by 2025

© 2014 IHS

IHS AUTOMOTIVE

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World Passenger Vehicle HHI Scores

0

5

10

15

20

25

30

Sou

th K

ore

aIn

do

ne

sia

Ind

iaJa

pa

nM

ala

ysia

Th

aila

nd

Germ

any

Me

xic

oF

ran

ce

Ta

iwa

nS

ha

ngh

ai

Hong

Kon

gS

inga

po

reIt

aly

Bra

zil

Spa

inT

urk

ey

Yun

nan

Beiji

ng

Belg

ium

Un

ited

Sta

tes

Russia

Un

ited

Kin

gd

om

Guiz

ho

uC

hile

Jili

nU

rug

ua

yZ

hejia

ng

Gua

ngxi

Jia

ng

su

Sha

anxi

Sha

nxi

Hain

an

Gua

ngd

ong

Hena

nJia

ng

xi

Heilo

ngjia

ng

Ukra

ine

Sic

hua

nA

nh

ui

Inn

erM

on

go

liaF

ujia

nT

ian

jinH

una

nC

hin

a T

ota

lH

ebe

iQ

ingh

ai

Hube

iS

ha

ndo

ng

Xin

jiang

Lia

on

ing

Nin

gxia

Chon

gqin

gT

ibe

tG

an

su

Herfindahl-Hirschman Index (HHI)

Mo

re

Fra

gm

en

ted

Mo

re

Co

nc

en

tra

ted China’s highly fragmented market suggests

fierce competition with price constantly

under threat and weak profit margins.

Note: HHI market shares based on 2013 passenger vehicle data – Sales Parent Group

Some provinces less fragmented, possibly

more profitable than others. Shanghai has

the highest HHI score – top 2 companies

hold 52% of market share

China Light Vehicle Outlook - UMTRI · “China NAQS (National Air Quality Standards): In 2013 96%...

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