Xingbin LIChief Representative

AMT-Beijing Representative Office

China Market Update

Market Update Breakfast – China September 8, 2006

CONTENTSCONTENTS

The China automotive industryThe China automotive industry Production & growth rateProduction & growth rate OpportunityOpportunity

Production capacity Production capacity (current production, production capacity (current production, production capacity and expansion plan)and expansion plan)

Key automakers Key automakers

The China components industryThe China components industry Production & growth rateProduction & growth rate OpportunityOpportunity

Demands Demands (purchasing plans of major global automakers)(purchasing plans of major global automakers) New measures and tariff New measures and tariff (technical barrier)(technical barrier) Key suppliers Key suppliers (global suppliers and domestic suppliers)(global suppliers and domestic suppliers)

FactsFacts 44thth Largest economy in the world in 2005 Largest economy in the world in 2005

GDP: USD 2.263825 trillion GDP: USD 2.263825 trillion GDP growth rate: 9.9% GDP growth rate: 9.9%

22ndnd Largest auto market in the world in 2005 Largest auto market in the world in 2005 Production: 5.75 million units of vehicleProduction: 5.75 million units of vehicle Growth rate: 13.4%Growth rate: 13.4%

The largest machine tool market in the world The largest machine tool market in the world USD10.9 billionUSD10.9 billion Growth rate: 15%Growth rate: 15%

The China Automotive IndustryThe China Automotive IndustryProduction & growth rateProduction & growth rate

China's Vehicle and Car Production From 1998 to 2005

1.631.83

2.072.34

3.25

5.07

5.75

0.50 0.57 0.60 0.701.09

2.062.26

2.95

4.44

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1998 1999 2000 2001 2002 2003 2004 2005

Year

Milli

ons

of U

nits

The China Automotive Industry The China Automotive Industry Production & growth rateProduction & growth rate

117 Registered Automakers, Of which 90 company’s capacitiesAre less than 10,000 units a year.

Vehicles (Million of Units)(Million of Units)

2002 2003 2004 20052006

(1 – 6)

Production 3.25 4.44 5.07 5.753.63

Changes, % 38.8 36.6 14.2 13.428.9

Source: China Auto Industry Year Book

The China Automotive IndustryThe China Automotive IndustryProduction & growth rateProduction & growth rate

China Car ProductionsChina Car Productions(Million of Units)(Million of Units)

2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006e (1-6) 2006e (1-6)

ProductionProduction 0.7 0.7 1.09 1.09 2.06 2.06 2.262.26 2.952.95 1.801.80

Change %Change % 15.1 15.1 55.7 55.7 89.0 89.0 9.79.7 30.530.5 46.946.9

Production of Top 8 Chinese automakers from January-June, 2006 (in units)

1. Shanghai Automotive Industry Corp 621,400 54.85%2.  First Automotive Works Corp 562,900 23.28%3.  Dongfeng Motor Corp 454,200 26.1%4.  Chang'an Motor Corp 369,100 8.39%5.  Beijing Automotive Industry Corp 337,100 11.94%6.  Chery Automobile 144,200 72.15%7.  Geely Automobile 105,900 55.62%8.  Guangzhou Automobile 105,700

(Source: China Association of Automobile Manufacturers)

The China Automotive IndustryThe China Automotive IndustryOpportunity – Production capacityOpportunity – Production capacity

Production in 2005: 5.75 million units Production in 2005: 5.75 million units Production capacity in 2005: 8 million unitsProduction capacity in 2005: 8 million units Production capacity expansion plan: 16 million units by Production capacity expansion plan: 16 million units by

20102010

PRODUCTION CAPACITY OF MAJOR AUTOMAKERS IN CHINA

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

FAW SAIC DONGFENG CHANGAN BAIC GAIG CHERY GEELY

AUTOMAKERS

UN

ITS

OF

VE

HIC

LE

S

Production in 2005 Current production capacity Planned production capacity in 2010

The China Automotive IndustryThe China Automotive IndustryOpportunity - Key automakersOpportunity - Key automakers

The China Components IndustryThe China Components IndustrySales & growth rateSales & growth rate

“A Fragmented Industry”1,540 Registered Enterprises3,500-8,500 Non-Registered

Components Statistics ($ billion)

2002 2003 20042005

Total Sales 34.2 47.9 62.7 71.9

Domestic 32.3 42.1 52.1 56.1

Imports 3.4 9.3 11.3 10.4

Exports 1.9 5.8 10.6 15.8

Average Annual Sales Per Supplier:

$5.0 to $10.0 million

Source: China Auto Industry Year Book

The China Components IndustryThe China Components IndustryOpportunityOpportunity - Demands- Demands

Daimler-Chrysler Daimler-Chrysler (for China operation)(for China operation) To spend $840 million in buying parts in 2008 To spend $840 million in buying parts in 2008 ($100 million in 2005)($100 million in 2005)

BMW BMW (for China operation)(for China operation) To spend $300 million in buying parts in 2007To spend $300 million in buying parts in 2007

Volkswagen Volkswagen (for overseas operations)(for overseas operations) To spend $1.0 billion in buying parts in 2006 To spend $1.0 billion in buying parts in 2006 ($300 million in 2005)($300 million in 2005)

Volkswagen Volkswagen (for China operations)(for China operations) To spend $2.5 billion in buying parts in 2006To spend $2.5 billion in buying parts in 2006

Multinational firms totally Multinational firms totally (for overseas operations)(for overseas operations) To spend $35 billion in buying parts by the end of 2007To spend $35 billion in buying parts by the end of 2007

The China Components IndustryThe China Components IndustryOpportunityOpportunity – New tariff– New tariff

CarsCars

DisplacementDisplacement 20012001 20022002 20032003 20042004 20052005 20062006

<3.0 L<3.0 L 7070 43.8543.85 38.238.2 34.234.2 30.2830.28 2525

>3.0 L>3.0 L 8080 50.750.7 4343 37.637.6 30.330.3 28.2528.25

Parts & ComponentsParts & Components

20012001 20022002 20032003 20042004 20052005 20062006

1010

The China Components IndustryThe China Components IndustryOpportunityOpportunity – New measures– New measures

““Measures for the Administration of Import of Automobile Measures for the Administration of Import of Automobile Components and Parts Featuring Complete Vehicles”Components and Parts Featuring Complete Vehicles” Promulgated by the Customs of China, MOC, MOF and NDRC Promulgated by the Customs of China, MOC, MOF and NDRC

on April 1, 2005on April 1, 2005 Go into effect on July 1, 2006Go into effect on July 1, 2006

The China Components IndustryThe China Components IndustryOpportunityOpportunity – New measures – Key Points– New measures – Key Points

Article 21 - Under any of the following circumstances, the imported Article 21 - Under any of the following circumstances, the imported automobile components and parts shall be considered bearing the features automobile components and parts shall be considered bearing the features of a complete vehicle:of a complete vehicle:

Importing CKD or SKD to assemble automobiles.Importing CKD or SKD to assemble automobiles. The total price of the imported components and parts is not less than 60% of The total price of the imported components and parts is not less than 60% of

the total price of the complete vehicle type.the total price of the complete vehicle type. If, within the scope as prescribed in Article 4 of the present Measures:If, within the scope as prescribed in Article 4 of the present Measures:

Importing both the vehicle body (including the cab) assembly and engine Importing both the vehicle body (including the cab) assembly and engine assembly to assemble vehicles;assembly to assemble vehicles;

Importing either the vehicle body (including the cab) assembly or engine Importing either the vehicle body (including the cab) assembly or engine assembly and 3 or more other assemblies (systems) to assemble vehicles;assembly and 3 or more other assemblies (systems) to assemble vehicles;

Importing 5 or more assemblies (systems) other than the vehicle body (including Importing 5 or more assemblies (systems) other than the vehicle body (including the cab) assembly and the engine assembly to assemble vehicles.the cab) assembly and the engine assembly to assemble vehicles.

The China Components IndustryThe China Components IndustryOpportunityOpportunity – New measures-Key points– New measures-Key points

Article 22 - under any of the following circumstances, the imported Article 22 - under any of the following circumstances, the imported automobile components and parts shall be considered bearing the automobile components and parts shall be considered bearing the features of an automobile assembly (system)features of an automobile assembly (system)

Importing whole sets of KD components and parts to assemble an Importing whole sets of KD components and parts to assemble an assembly (system)assembly (system)

Importing key components and parts or sub-assemblies to assemble Importing key components and parts or sub-assemblies to assemble an assembly (system), and the import of key components and parts an assembly (system), and the import of key components and parts or sub-assemblies reaches or exceeds the specified quantity.or sub-assemblies reaches or exceeds the specified quantity.

The total price of the imported components and parts is not less The total price of the imported components and parts is not less than 60% of the total price of the assembly (system)than 60% of the total price of the assembly (system)

The China Components IndustryThe China Components IndustryOpportunityOpportunity – New measures– New measures

““Measures” REALLY means thatMeasures” REALLY means that Discouraging automakers from using imported car parts for

vehicles they assemble in China and making car by CKD & SKD increases production cost (from 10% to 25%)

Creating an incentive for car parts makers to shift production to China

The China Components IndustryThe China Components IndustryOpportunity – changes for global suppliersOpportunity – changes for global suppliers

From shareholding to share controllingFrom shareholding to share controlling From JV to WOFEFrom JV to WOFE From market penetration to market monopoly From market penetration to market monopoly

MAP OF CHINA

Where are the Major Component Where are the Major Component Suppliers Located in China?Suppliers Located in China?

NortheastNortheast(Jilin, Liaoning)(Jilin, Liaoning)

Yangtze river deltaYangtze river delta(Shanghai, Jiangsu, Zhejiang)(Shanghai, Jiangsu, Zhejiang)

Greater Beijing areaGreater Beijing area(Beijing, Tianjin)(Beijing, Tianjin)

Middle ChinaMiddle China(Hubei)(Hubei)

Pearl river deltaPearl river delta(Guangdong, Fujian)(Guangdong, Fujian)

SouthwestSouthwest(Chongqing, Chengdu)(Chongqing, Chengdu)

The China Components IndustryThe China Components IndustryOpportunityOpportunity – key suppliers– key suppliers

Major global suppliersMajor global suppliers

ASIMCOASIMCO EatonEaton Delphi Delphi DanaDana TRW TRW Visteon Visteon LearLear BorgWarnerBorgWarner Johnson ControlsJohnson Controls BoschBosch Siemens VDOSiemens VDO ThyssenKrupp ThyssenKrupp GKNGKN FreudenbergFreudenberg FaureciaFaurecia ValeoValeo Aisin Seiki Yazaki Denso ArvinMeritorArvinMeritor AutolivAutoliv MagnaMagna

Major domestic suppliersMajor domestic suppliers

FAW Fawer Auto Parts Co.FAW Fawer Auto Parts Co. Dongfeng Motor Co., Ltd Parts & ComponentDongfeng Motor Co., Ltd Parts & Component

s Business s Business Wanxiang GroupWanxiang Group Sanhua Holding GroupSanhua Holding Group Wanfeng Auto Holding GroupWanfeng Auto Holding Group

Global Suppliers in ChinaGlobal Suppliers in China

ASIMCOASIMCO Parkview Center, 4/F, 2 Jiangtai Road (s), Chaoyang District 100016, P. R. ChinaParkview Center, 4/F, 2 Jiangtai Road (s), Chaoyang District 100016, P. R. China

(86)10-6438-2750, (86)10-6438-2750, www.asimco.comwww.asimco.com

Asimco Meilian Braking System (Langfang) Co.Asimco Meilian Braking System (Langfang) Co. Langfang, Hebei ProvinceLangfang, Hebei Province Air-compressor, brakeAir-compressor, brake Asimco International Costing Co.Asimco International Costing Co. Jiang County, Shanxi ProvinceJiang County, Shanxi Province Casting for engine block and headCasting for engine block and head Beijing Asimco Tianwei Fuel Injection Pump & Nozzle Co.Beijing Asimco Tianwei Fuel Injection Pump & Nozzle Co. BeijingBeijing Fuel injection pump, oil nozzleFuel injection pump, oil nozzle Zhong Ding Automotive Components CoZhong Ding Automotive Components Co Ningguo, Anhui ProvinceNingguo, Anhui Province Rubber productsRubber products Nanyue Fuel Injection & Pump Co.Nanyue Fuel Injection & Pump Co. Hengyang, Hunan ProvinceHengyang, Hunan Province Fuel injection pumpFuel injection pump Sichuan Dan Chi Industry Co.Sichuan Dan Chi Industry Co. Sichuan ProvinceSichuan Province TransmissionsTransmissions Hubei Super-Elec. Auto Components Co.Hubei Super-Elec. Auto Components Co. Shashi, Hubei ProvinceShashi, Hubei Province Generators, startersGenerators, starters Harbin Feibeng Auto-Elec. Co.Harbin Feibeng Auto-Elec. Co. Harbin, Heilongjiang ProvinceHarbin, Heilongjiang Province Igniters, ignition coils, relays, switchesIgniters, ignition coils, relays, switches Asimco Braking System (Zhuhai) Co.Asimco Braking System (Zhuhai) Co. Zhuhai, Guangdong ProvinceZhuhai, Guangdong Province Disc & Drum type brakes, vacuum boostersDisc & Drum type brakes, vacuum boosters Asimco Braking Braking System (Guangzhou) Co.Asimco Braking Braking System (Guangzhou) Co. Guangzhou, Guangdong ProvinceGuangzhou, Guangdong Province Disc & Drum type brakes, boostersDisc & Drum type brakes, boosters Asimco Shuangtai Components (Sichuan) Co.Asimco Shuangtai Components (Sichuan) Co. Sichuan ProvinceSichuan Province WheelsWheels

EatonEaton Floor, 300 Huai Hai Zhong Road, Hong Kong New World Tower, Shanghai 200021, P. R. China  Floor, 300 Huai Hai Zhong Road, Hong Kong New World Tower, Shanghai 200021, P. R. China  

(86)21- 6278-5090, (86)21- 6278-5090, www.eaton.comwww.eaton.com

Eaton Electrical (Suzhou) Co., Ltd. - EES Eaton Electrical (Suzhou) Co., Ltd. - EES Suzhou, Jiangsu ProvinceSuzhou, Jiangsu Province Electrical circuit protection devicesElectrical circuit protection devices Eaton Fast Gear (Xi'an) Co., Ltd. Eaton Fast Gear (Xi'an) Co., Ltd. Xi’an, Shaanxi ProvinceXi’an, Shaanxi Province TransmissionsTransmissions Eaton Fluid Power (Jining) Co., Ltd. Eaton Fluid Power (Jining) Co., Ltd. Jining, Shandong ProvinceJining, Shandong Province Hydraulic pumps and motorsHydraulic pumps and motors Eaton Fluid Power (Shanghai) Co., Ltd Eaton Fluid Power (Shanghai) Co., Ltd ShanghaiShanghai Fluid connectors Fluid connectors Eaton Senstar Automotive Fluid Connector (Shanghai) Co.Eaton Senstar Automotive Fluid Connector (Shanghai) Co. ShanghaiShanghai Fluid connectorsFluid connectors Eaton Truck and Bus Components (Shanghai) Co., Ltd Eaton Truck and Bus Components (Shanghai) Co., Ltd ShanghaiShanghai TransmissionsTransmissions Hangzhou Switches Power Systems Co., Ltd. Hangzhou Switches Power Systems Co., Ltd. Hangzhou, Zhejing ProvinceHangzhou, Zhejing Province SwitchesSwitches Shanghai Eaton Engine Components Company, Ltd. Shanghai Eaton Engine Components Company, Ltd. ShanghaiShanghai Engine valves and hydraulic tappetsEngine valves and hydraulic tappets Zhenjiang Eaton Electrical Systems Co., Ltd. Zhenjiang Eaton Electrical Systems Co., Ltd. ZhejiangZhejiang Electrical devicesElectrical devices FAW Eaton Gear-Box Co.FAW Eaton Gear-Box Co. Changchun, Jilin ProvinceChangchun, Jilin Province TransmissionsTransmissions Guangzhou Eaton Piston Ring Co.Guangzhou Eaton Piston Ring Co. Guangzhou, Guangdong ProvinceGuangzhou, Guangdong Province Piston ringsPiston rings Ningbo Eaton Shenglong Co.Ningbo Eaton Shenglong Co. Jingbo, Zhejiang ProvinceJingbo, Zhejiang Province Hydraulic hose fittings and adaptersHydraulic hose fittings and adapters

Domestic Suppliers in ChinaDomestic Suppliers in ChinaFAW FawerFAW Fawer 245 Shenzhen Street, Economic Development Zone, Changchun, Jilin, P. R. 245 Shenzhen Street, Economic Development Zone, Changchun, Jilin, P. R.

ChinaChina

(86)0431-4659800, (86)0431-4659800, www.fawer.com.cnwww.fawer.com.cn

There are 23 manufacturing divisions/ companies under FAW Fawer Group.There are 23 manufacturing divisions/ companies under FAW Fawer Group.

Dongfeng Motor Co., Ltd Parts & Components BusinessDongfeng Motor Co., Ltd Parts & Components Business8 dong Bin Gu Tai, Dong Cheng Road, Shiyan 442000, Hubei, P. R. China8 dong Bin Gu Tai, Dong Cheng Road, Shiyan 442000, Hubei, P. R. China

(86)0719-8221934, (86)0719-8221934, www.dfap.com.cnwww.dfap.com.cn

There are 17 manufacturing/companies under Dongfeng Motor Co. Ltd Parts & Components Business.There are 17 manufacturing/companies under Dongfeng Motor Co. Ltd Parts & Components Business.

Wanxiang GroupWanxiang Group Wanxiang Road, Xiao Shan District, Hangzhou, Zhejiang, P. R. ChinaWanxiang Road, Xiao Shan District, Hangzhou, Zhejiang, P. R. China

(86)571-82832999, (86)571-82832999, www.wanxiang.com.cnwww.wanxiang.com.cn

There are 8 manufacturing/companies under Wanxiang Group making auto parts and components.There are 8 manufacturing/companies under Wanxiang Group making auto parts and components.

Sanhua Holding GroupSanhua Holding Group Xinchang, Zhejing, P. R. ChinaXinchang, Zhejing, P. R. China

(86)575-6222768, (86)575-6222768, www.sanhuagroup.comwww.sanhuagroup.com

There are 7 companies under Sanhua holding group making auto parts.There are 7 companies under Sanhua holding group making auto parts.

New Service – New Service – How AMT China Helps youHow AMT China Helps you

China Market Penetration Strategy China Market Penetration Strategy Development SessionDevelopment Session

Designed to help those AMT members who are new to Designed to help those AMT members who are new to China and want to develop their company’s sales & China and want to develop their company’s sales &

marketing strategy for today’s Chinamarketing strategy for today’s China

New Service – New Service – How AMT China Helps youHow AMT China Helps you

Review Session for your Existing Review Session for your Existing China Market Penetration StrategyChina Market Penetration Strategy

Designed to help YOU validate and invigorate your existing Designed to help YOU validate and invigorate your existing Sales & Marketing Strategy for today’s ChinaSales & Marketing Strategy for today’s China

Thank you!Thank you!