Auto Sector Group - InterChinaPartners

InterChina

Strategy | Corporate Finance

AutoSector Group

www.InterChinaConsulting.comwww.InterChinaPartners.com

Exclusive China Partner of

© InterChinaConfidential

Index

• Sector Dynamics• Our Auto Services & Team• Perspectives On China’s Auto Sector• Consulting Cases• Deal Tombstones

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345

2


Summary: Faster and more sophisticated in this maturing No. 1 auto market globally

Source: InterChina Interviews and Analysis

M&A (both inbound and outbound), JV and tech transfer for various inorganic approaches.

Find the right approach for inorganic growth in ICE consolidation and faster entry into new opportunities.

Localize operations and production, acquisition of local companies to be ‘more Chinese’.

Out-of-box strategy development for traditional business with step-change drivers (e.g. deregulation in AF).

Deal with cost inflation for both short-term optimization and long-term strategic moves.

Identify specific new opportunities (NEV, AD, AF, LW etc.) and with the right time of window to enter

3

Aggressive Consolidation.“Re Emergence” of the Joint Venture

Continued growth, Market finally pays for Quality.

Tomorrow’s battle field

Speeding upChina as Global Innovationcenter

• Still driven by China’s megatrends (urbanization) • OEM will grow at 3-4%. Local leaders are

consolidating and trading up (Geely,G.Wall,Chang’An).• Foreign Component Manufacturers planning double

digit growth. Capitalize on better quality demand, Green China trends and revamped localized (good enough, local R&D) product portfolios.

• Increasing pressure on cost/price, quality, service, R&D.

• Smaller, low-quality players face challenges; natural attrition and now open to Sale outs.

• Shift to quality, Environment and scale benefits international players.

• Steady M&A and JV activity, mainly focusing on “Access to Chinese OEMs”.

• Likely to be a growth driver in next 3-5 years. • Many MNC players are forecasting high double

digit growth. • Distribution and service capability will be key to

success.

• Emerging local players (currently, too many, future consolidation to come). Change in sector status quo with uncertainty for foreign OEMs and suppliers.

• Accelerated development through government support and increased customer acceptance.

• BEV / PHEV are the key focus. • Autonomous/ connected driving early local

innovation trade ups.

Market

Consolidation

Aftermarket

NEV-Autonomous


Global Weighting: In both PV and CV, China takes a key role globally

Source: OICA, CAAM

Note: The definition by OICA is slightly different than CAAM in China. For both truck and bus sectors, the statistics above use OICA figures globally and in China. In Truck sector, it includes vehicles intended for the carriage of goods. Maximum authorised mass is over the limit (ranging from 3.5 to 7 tons) of light commercial vehicles, including tractor vehicles designed for towing semi-trailers. In Bus sector, Buses and coaches are used for the transport of passengers, comprising more than eight seats in addition to the driver's seat, and having a maximum mass over the limit (ranging from 3.5 to 7 tones) of light commercial vehicles.

PV Production China vs Global(Unit: million vehicles)

201720102005

46.0

58.2

13.9(24%)

China

ROW

3.1(7%)

73.5

24.8(34%)

3.0

0.6(19%)

ROW

2.3(54%) China

2010

4.2

2005 2017

4.1

2.3(55%)

2005

China0.16(45%)

ROW

2010

0.36

0.08(30%)

0.26

2017

0.18(56%)

0.32

Heavy Truck Production China vs Global(Unit: million vehicles)

Bus Production China vs Global(Unit: million vehicles)

4


050

100150200250300350400450500550600650

0 10,000 20,000 30,000 40,000 50,000 60,000

S1 2035

China 2020

Australia

S3 2035

S2 2035

France

Germany

India China 2015

USA

Canada

United Kingdom

Italy

South Korea

Japan

Cars owned per 1,000 people in 2015

GDP per capita measured at purchasing power parity in 2015 (USD)

Global Comparison of Auto Penetration and GDP

China Prospects: Likely further growth in ownership (though well below the levels of developed countries by 2035) will support the long-term development of China’s auto industry

Source: Chinese Yearbook, World Bank, OICA, Trading economics, various other statistics collected by InterChina

S1 2035:5-year disposal scenario

S2 2035: 7-year disposal scenario

S3 2035: 10-year disposal scenario

(Refer to the last slide)

5


China PV production will still experience relatively strong growth, with the growth rate fluctuating around the GDP growth rate

Global Gravity: Both the OEM production and the after-market value chains will be the global No 1 with 1/3 of global share

China’s PV Production – History & Forecast

Source: CAAM, InterChina Interviews and Analysis

2035E

33

14

45

2005 2022E2016

4

2010

24

CAGR CAGR 25% 18% 5% 4%29% 10% 5% 3%

Unit: million cars

Ownership in 2035 will provide the next momentum for the market growth

China’s PV Ownership – History & Forecast

Unit: million cars

2035E

350

20162010

58

2022E2005

19

160

220

6


Emerging Battlefields: Sector step-changes (e.g. NEV, AD, AF, LW etc.）bringing both opportunities and challenges require tailor-made solutions in China

7

China has a huge market for these emerging tech market, but

not an easy one…

Other challenges (e.g. infrastructure etc.)

Multiple tech routes for cars, but also along the supply chain.

Growing Chinese competition.

Note: NEV = New Energy Vehicle, AD = Autonomous Driving, AF = de-regulated after-market, and LW = Lightweight Tech

Immature but changing pricing mechanism.

Dynamic regulatory environment (new policies, deregulation etc.).

…it asks for FIEs to think globally while acting locally

Global and China Strategy

Parity

In-depth China Market Assessment

Investment Vehicle & Partner

Selection

Government Lobbying

On-going Competitive-

ness

Operational Improve-

ments

Localized solutions required.


Inorganic Growth: Cross-border transactions in automotive sectors is still a hot area

8

1417

1515

91010

18

2010 2012 20132011 2014 201720162015

Volume of cross-border automotive deals in China

Value of cross-border automotive deals in China (RMB m)

2,263.0

1,180.0

5,312.0

1,875.81,661.01,229.4

176.5

1,513.0

201420132011 20122010 201720162015

Source: FactSet, Mergermarket, Bloomberg, EMIS Deal Watch, InterChina Analysis

Representative Recent Transactions

The electronic vehiclesmanufacturer NextEVsecured a funding led byUS investment firmSequoia Capital andChinese firm Joy Capital.

Sep. 2015

Asset dealUSD 500 m

Cooper Tire & RubberCo acquired 65% stakein Qingdao Ge Rui DaRubber Co Ltd, amanufacturer of truckand bus radial tire tiresbased in Shandong.

Jan. 2016

65%USD 92 m

Daimler AG announcedthe acquisition of aminority stake in BeijingElectric Vehicle Co. Thedeal has been approvedby NDRC.

Jun. 2017

MinorityUSD 92.61 m

• Nio deal: RMB 3205 m (USD 500 m)

• Others: RMB 2107 m


Index


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345

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Service Needs (1/2): Our strategy and corporate finance teams support our client’s profitable top-line growth along the value chain of auto components and services

• What could be the “realistic” opportunity scale and the “right” time of window to enter(feasibility from all aspects e.g. regulatory, value-chain wise, competition, technicallyetc.)

• How to deal with dynamic and less transparent regulatory environment in decision-making, and in effective communication of China reality back to HQ

• How to shortlist on the “right” tech to go forwards among various competition tech,which is often influenced by the drivers beyond tech advantages

• How to adapt the offerings and positioning to echo the needs in this maturing automarket

• How to develop in-China-for-China capability and capacity to deal with the speed ofmarket development in China

• How to profitably work with Chinese OEMs with more weighting in ICE and NEV butwith rather different client behavior than JV OEMs

• How to capture adjacent product opportunity into emerging battlefields• How to defend the existing portfolio against the threat from new battlefields (e.g. NEV

might make some ICE components redundant)

Consolidate Commercial

Strategy

Capture Component Opportunity

Business Opportunity

Assessment (esp. in emerging

battlefields*)

10Note: The emerging battlefields refer to for example NEV (New Energy Vehicle), AD (Autonomous Driving), AF (de-regulated After-Market), LW (Light Weight tech and materials) and Service etc.


Service Needs (2/2): Our strategy and corporate finance teams themes support our client’s profitable top-line growth along the value chain of auto components and services

• How to revamp the business model in China, adapting to the new trends in China (e.g.from multi-step distribution model in aftermarket to one-step model with efficiency andsustainability)

• How to develop out-of-box initiatives to outperform the competition, (e.g. alliance withretail for growth, or distribution platform model in aftermarket, or diversified channelsin auto assistance)

• How to revamp or optimize the route-to-market structure and partners, to respond tothe new differentiation needs

• How to capture the growth opportunity leveraging the sector’s consolidation trend?• How to conduct bolt-on acquisition for further growth• How to develop JV (OEMs, other partners with synergy) to accelerate the growth• How to know and access below-the-radar targets or non-traditional-type targets to

enter into emerging battlefields

• How to develop new sourcing partners to deal with further localization needs• Sourcing best practice benchmarking• How to divest the periphery assets, which is less fit with the core China strategy

Speed-up via Inorganic Approach

Practical Investment

Support

Revamp Service Strategy

11Note: The emerging battlefields refer to for example NEV (New Energy Vehicle), AD (Autonomous Driving), AF (de-regulated After-Market), LW (Light Weight tech and materials) and Service etc.


Cases: Deeply engaged with auto clients and projects in China’s front-line in the auto sector

Recent Auto Projects(Selection)

• New Energy Vehicle (NEV) Strategy: We advised a leading European mechatronic players on the design of itsroadmap into NEV. This compromised the assessment of e-mobility in China’s high dynamics regulatory environment, theopportunity product identification, and the investment vehicle strategy.

• Light-weight Component Strategy: We advised the client how to accelerate its development in the light-weightcomponent sector via the localization strategy, via the full assessment of customer voices, the various competingtechnologies, and the likely competition landscaping with the associated key success factors required.

• After-market Strategy: On behalf of a leading US after-market player, we identified the opportunity to deep dive inone-step distribution model in China’s de-regulating auto after-market. In addition, the investment strategy of regionalcluster model via regional alliance and M&A is recommended with the partner screening and evaluation.

• Localization Feasibility: Our client receives mandate to localize in China from one of its global key account OEMs, andour client has three investment options (different models with OEMs in different locations in China). We conducted theassessment of the possible revenues and production cost of the three options and recommended the preferred option.

• Strategy Workshop: For a top international component player, we facilitated a two-day Asia Strategy Workshop withcountry GMs and AP BD VP, and AP President by designing a systematic the strategic planning structure, process andtools, facilitating the efficient discussion on-site and concluding with a set of aligned strategic initiatives.

• Partnership Evaluation: For a leading auto electronics company, we conducted systematic screening and evaluationof the BMS (Battery Management System) related R&D companies in 22 related product sectors (e.g. BMS, DCDC,AutoSAR, ESP, ADAS etc.).

• Auto Service Strategy: Our client is the globally top 3 auto assistance company with the ambition to accelerate itsChina business. With the full-blown customer voices and competition benchmarking, the re-prioritization of the channelsand the re-positioning of the offerings are recommended, with strengthened localization features.

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Client Issues InterChina’s Approach Client Benefits

• What is the size of theaddressable market?

• Regulatory monitoring?• What is the window of

opportunity likely to be?• How to maintain a

competitive advantage inthe long run?

• Whether to enter/expand inChina or not?

• What is the likely downsideif no entry/expansion?

• We use a primary research drivenapproach to piece together a picture fromthe bottom-up

• Given the dynamic and complex evolutionof the auto sector, we use scenarioanalysis to assess the attractiveness ofsectors/segments and the client’s abilityto compete

• In addition, the relevance of China in thecontext of the client’s global strategy iscarefully evaluated

• Our clients are able to take wellinformed ‘go or no go’ decisions onwhether and how to proceed

• Along the way, we encourage theclient to participate in the process,allowing a transfer of understandingto the client, and ultimately the buy-in of the client’s organization intothe strategy

• Moreover, we place ourrecommendations within a strategicframework, so that the client hasreference points for decision-makingnot just for the initial next steps, butalso for expansion thereafter

• Ultimately, our clients benefit from apractical solution in a complex andchallenging environment

The issues above, plus• What is the market

entry/expansion point(target segments, productoffering, value proposition,etc.)?

• What is the route-to-market?• Which investment model?• Expected financial return?• The role of China in the

global strategy?

• Based on the understanding of themarket opportunity, InterChina developsand tests a series of competitive andworkable entry/expansion options for theclient

• In addition, InterChina works with theclient to review the full range of issuesneeded for the client to be ready to startimplementation of the strategy

Approach (1/2): Practical solutions to help our clients to tackle challenges & seek success

Opportunity Assessment

Strategy Development

13


Approach (2/2): Practical solutions to help our clients to tackle challenges & seek success

Client Issues InterChina’s Approach Client Benefits

• Which partner to work with?• Which form of alliance?• What trade-off in terms of

what to pay and what togain?

• Implications in terms of thethreat to home markets infuture?

• InterChina develops a comprehensiveand practical framework regardingpotential synergies and risks in thealliance before starting the target searchprocess

• For each shortlisted alliance candidate, atailor-made approach will be developedand tested

• Finally, the implications of the alliance inthe global context will be jointly exploredwith the client (e.g. the alliance partnermight become a threat in future)

• Our clients are able to take wellinformed decisions on whichpartners/ suppliers/ targets topursue, knowing not only theassociated strengths and risks, butalso their relative significance in theChina context

• Our clients have the advantage of usproviding continuity from start tofinish, putting execution within astrategic framework, and therebyincreasing the chances of asuccessful outcome

• Ultimately, our clients benefit fromhaving the right partners/suppliers/targets, a good starting point fortheir relationships, and a robuststructure to work within

• The necessity for sourcing?• What synergies to achieve

through sourcing fromChina?

• What portfolio?• Which partners?• Potential risks and

mitigation plan?

• InterChina conducts a comprehensivestakeholder analysis to explore all therelevant sourcing issues to come up witha realistic action plan

• Then InterChina takes a hands-onapproach to searching for the rightpartners and advising the client on howto best cooperate with these partners

• Acquisition strategy?• Ideal target profile?• Available targets?• Best target?• Deal breaking issues?• How to close in China?

• We conduct systematic target searches,adjusting the ideal target profile duringthe process according the realities wefind, and select the best target usingcomparative analysis

• We also provide technical services (duediligence, valuation) as well astransaction support (negotiation advisory,deal structuring)

Strategic Alliance

Sourcing Strategy

Merger & Acquisition & Alliance

14


InterChina’s 20-year experience in China’s consulting sectordifferentiates ourselves from the service by pure strategy firms or bymarket research firms

Abundant sector experience in the varioustraditional and emerging auto sectors.

Senior interviewers; conducted hundredssenior-level interviews.

Transparent process towards clients.

Strong access to the different level of themarket.

Strategic thinking, in addition tostructured analysis data process.

Value-added to The Client’s Project

• Reliability

• Credibility

• Depth

• Practicality

• Transparency

Practical thinking and solutions, alignedwith the client’s decision-making.

InterChina’s Service

Offerings

Our Value: Rely on a practical approach to align with the client’s decision-making process

High senior involvement in projects(partners and sector group members).

15


Our Value: InterChina Corporate Finance is different from global and big-4 investment banking firms

• 90% buy-side advisory; skill sets more towards strategic considerations

• Has the boutique focus; Cross-border M&A advisory is the main service offering

• Ability and resources to identify the below the radar acquisition targets

• Better access channels and databases than most bulge bracket firms, and commit serious resources on target screening and identification (instead of opportunistic)

• Knows how to understand and motivate the sellerand handle the early stage communication

• 70% sell-side, 30% buy-side; skill sets more towards marketing

• Investment banking is often a supplement to other financing activities which are the core revenue drivers

• Because of overhead structure, cannot commit to smaller deals. Attention is mostly focused on large transactions. POEs

• More analytical/desktop driven.. They lack the focus and skills to develop complicated family owned transactions, where subjective skills are needed.

Global Investment Banking FirmsInterChina

Deal Origination

Transaction Execution

• On the ground resources (sizeable team in China,larger than some regional and global i-banks)

• Commit senior resources to every stage of the transaction. Act as an extension to client’s in-house team. Easy to work with

• Knows how to manage Target’s expectations• Early red flag identification: Knows the intricacy

of dealing with local entrepreneurs, SOEs, and listed companies

• In-depth sector and commercial knowledge

• Fly in senior resources (HK or Singapore regional team)

• Mostly involved in valuation and structure; less hands on day to day aspects. • Ivy league background. Interact with clients

well, but less effective with the Chinese target (perceived as too cold or distant on their approach).

16


Customer Base: We provide tailored strategy and M&A advisory for over 100+ auto component and service players in China

17

OEMs & Organization

Auto Component

Player

Auto Service / Materials

17


Project Impact: We receive high notes from our clients regarding the impact on their development in China, on both our service quality and their actions upon our recommendations…

Company Sponsor Feedback

A global top 50 auto component player

Asia & Europe BD VP

"Your guys have done a pretty good job. The findings are quite solid in such a fragmented and emerging market…This will be an important part of China strategy going forwards, and we have already recruited a new director for distribution business…"

A leading European player

Global BD Director

"As you can see in our feedback on your performance sheet, we were highly satisfied with your work and the results and would work with you again in the future. We would like to highlight especially the insights from your interviews and market analysis, which clearly is a unique advantage. "

A top int’l glass company

Group Vice President

“I appreciate all the hard work you put in ... You have a hard-working and committed team that is polite, considerate and easy to communicate with ... We have been very comfortable working with InterChina ... Overall you have taken a very professional approach to our project”

A niche auto solution provider

China Senior Advisor

“Your team had done an outstanding job, even from the perspectives of the 'specialists' in our company.”

A leading US player

Global BD Director

“I think the analysis and recommendation is very comprehensive…We are very happy and satisfied with the work done by you"

A auto component group in Nordic

President & CEO "Very good conclusion... Thanks so much…I will send this to the board of the company, and I plan to have a trip in China to further discuss about next steps."

A global top 3 auto assistance company

Asia Director “We are pretty much satisfied with your work, though the project is a difficult one….You are very serious…We worked with KPMG in India for the same type of project, and the solution they recommended just can't be done (e.g. the recommendation to add 45 people for 3 new business lines)."

18


… 2/3 of our business is with long-term clients who regard InterChina as a trusted advisor

19

• Nearly 20 year relationship from early 2000s to present, despite leadership succession.

• Supported various JV, WFOE and M&A engagements, with 5+ successful transactions.

Long-Term Client Relationships(Selected Examples)

13Engagements

• Recently established relationship, supporting this globally top 10 component players for their expansion in China.

• Supported in the acquisition in both traditional components and next generation tech fields.

3Engagements

• Example of supporting the client with strategic feasibility study and then moving to M&A actions.

• Engagements spanned (a) opportunity assessment and entry point identification (b) deal origination (c) transaction advisory.

3Engagements

• Worked with this global leading component players cross various BU.

• Projects were focused on both NEV components and after-market in China.

• Were trusted to advise on the fast changing market and competitive environment in China.

4Engagements

• Maintained with a decade relationship with various BU including auto glass and other auto components.

• Supported the expansion in this highly competitive China market.

4Engagements

• Example of starting with inorganic growth support and moving to organic growth support.

• Supported the client with M&A and JV with OEMs for the growth in the traditional ICE sector, and then supported organic growth strategy in NEV.

3Engagements

MAP STP


Contribution: Auto contributes between 15% - 20% of InterChina’s Net Revenues

17% 21%

31%

20% 18%19%

13%14%

14%

20% 13%

14%

21%

14%

18%22%

32% 40%29%

25%24%

20%

16% 14% 15% 9%16%

23%

8%8%

23%

2014

Automotive

1%

201520131%

Other1%

2017

Industrials

4%

2016

Chem/Energy

C&R/F&B

2018 YTD

2%

Healthcare

Net Revenues By Sector Group

20


SG Team: Our team of consultants and advisors focused on auto-related projects re. strategy issues and M&A projects

InterChina’s standing team of project managers and team members InterChina’s senior advisors

Mr. Simon Zhang, Partner, SH• 20 years of consulting/management experience in

China.• Specialist strategy consultant with focus on

chemicals/materials, auto and industrial sectors.• 7 years with Sinopec in corporate development in

Sinopec.• Manager and Supervisor of ~100 projects.• Auto Sector Group Leader.

Ms. Ling Wu, Senior Advisor• >15 years of corporate development,

capital markets and investment bankingexperience

• Previously leadership role in KPMGAdvisory in China and Amherst Partners inUS

• Extensive experience in the automotiverelated sectors

Mr. Eduardo Morcillo, ManagingPartner, SH

• 20 years China M&A experience in F&B, Machinery,Chemical sectors, also some complex JV projects.

• Expertise in negotiation with Chinese companies.• Fmr Marketing manager of Carlsberg Huizhou• Fmr Head of Project Management Dept., Hong Kong

Singlee Investment Management Co., Ltd

Mr. Jan Borgonjon, President, BJ• Resident in China for over 20 years.• Established InterChina in 1994.• Management of over 50 projects in various industries in

China, including chemicals and auto.• Top level negotiation and lobbying.

Mr. Luo Bo, Principal, SH• >10 years work experience in finance field.• Previously worked with Maersk, Hertz and investment

bank with functions in M&A, JV, partnership and FP&A• Extensive experience in investment structuring,

financial modeling, project management and financialplanning and analysis.

Ms. Jane Zhu, InfoCenter Head, BJ• Specialist in industrial data and info research and

analysis. • 10 year experience in supporting InterChina projects in

auto, chemicals and machinery sector, incl. OEMs, comp, aftermarket, machine tools, construction machinery, home appliances, agriculture equipment, etc.

Mr. Anderson Mo, Analyst, SH• Specializes in market intelligence of consumer goods

and machinery, industrial equipment; working withclients sectors such as automotive components, railway,elevators, and chemicals.

• Fmr Supply Manager of Philips Healthcare• Fmr Process Improvement Analyst of Cleveland Clinic• Six Sigma green belt / LEAN certified.

Mr. Jay Cheng, Senior Advisor• Over 25 years of management and

leadership experiences in top tier globalautomotive component companies

• Currently the president of Halla VisteonClimate Control in China

• Formerly with Eaton, GE Hydro and severalBlack Stone Group portfolio companies

Mr. John Mack, Senior Advisor• Previously president and CEO of CIE

Automotive in China• Previously president and CEO of Fiat Group

in APEC region• Other leading roles in GM, BMW and other

top automotive related companies inEurope and Asia

21

Mr. Sylvia Zang, S. Manager, SH• Over 12 years experience in InterChina.• Extensive consulting experience for M&A, strategic

advisory, target search, negotiation support and DD.• Previous project experience in automotive sectors

including automotive comp. and automotive design.• Advised overseas companies incl. Gentherm,

Cooperstandard, IDIADA, Cikautxo, Metalsa, etc

Ms. Emily Zhang, Analyst, SH• 2 years with InterChina.• Previously working with BDO, UK• Primary research expert involved in automotive &

components, chemicals, manufacturing, F&B,renewable energies, incl. clients such as Emerson,SABIC, Gamesa, Dupont, Schindler, Hella, and Brose.

Mr. Shawn Zhang, Associate, Shanghai• Specialized in target search, negotiation and

coordination among parties• Conducted CDD and investment research for clients,

covering industry, HC and auto sectors.• BA in Arts (Nanjing Normal Univ., China). MA in Finance

and Management (University of Melbourne, Australia).

Mr. Delia Zhang, Manager, SH• Over 8 years of investment banking, financial advisory

and M&A advisory experience.• Extensive project experience in M&A and Private Equity

Financing in various sectors.

Mr. Angie Gao, Manager, SH• Actively involving in M&A deal sourcing, business

development, financial analysis, business DD, workingclosely with overseas companies and domestic investors.

• Deals involved in 1) Israel surgeon room interface for$25millions 2) tourism resort in Korean for sale, 3)China Top 500 corporation looking for overseas targetsto acquire etc. Has been involved in post acquisitionmanagement in China & data analysis and project mngt.

Mr. Dow Zhou, Associate, SH• 3 years of equity investment, M&A, and strategic

planning experience.• Formally with the overseas investment team of Fosun.• Industry experience in consumer products, auto,

intelligent manufacturing and TMT.


Simon Zhang

Partner In ChargeStrategy PracticeShanghai Office Chinese

Education & Qualifications

• MBA, Cranfield School of Management (U.K.)• Postgraduate Diploma in Marketing, Chartered

Institute of Marketing (U.K.) • BA, English Literature, Southeast University (China)

Sector Competencies

Profession Experience Functional Competencies

Project Experience

• Leader of InterChina’s Chemicals Sector Group• Energy and clean tech (incl. environment)• Automotive• Industrial Equipment

• Partner In Charge, Strategy Practice of InterChina Consulting

• Prior to joining InterChina, Mr. Zhang worked for SINOPEC Shanghai Petrochemical Co. Ltd, formerly as Marketing Manager and latterly as Enterprise Transformation Manager.

• Mr. Zhang is an Associate of the Chartered Institute of Marketing (ACIM) and in the process of qualifying to become a Certified Public Accountant (CPA).

• Opportunity identification.• Go-to-market strategy development.• Investment feasibility study.• Partnership strategy.• Lobbying strategy.• Acquisition strategies, deal origination.• Commercial due diligence.• Business model transformation.• Complexity management.

• Strategy Planning: Supervised and managed over 100 strategy projects in which he has helped to advise both global Fortune 500 and medium sized foreign companies on their organic and inorganic strategic needs in China and globally.

• Recent Clients served: BASF, Bayer, Dupont, Air Products, Honeywell, Johnson Matthey, Clariant, Hella, Federal Mogul, KSPG, Schindler, UTC, Gamesa, Zeiss, Abengoa, Warburg Pincus etc.

22

Tao Lin

Partner Strategy PracticeShanghai Office Chinese American


• MBA, INSEAD (France & Singapore)• Management Programs, University of Chicago Booth

School of Business (USA) • Chemistry & Biology, Illinois State University (USA)

Sector Competencies

Profession Experience Functional Competencies

Project Experience

• Digitalization• Sustainable manufacturing and automation• Industry 4.0 and Made in China 2025• Industrial Internet of Things

• Prior to joining InterChina, Mr. LIN was in leadership, business development and execution positions for boutique European firms such as goetzpartners and Value Partners in China.

• Mr LIN started his consulting career with Deloitte and was with the firm in the USA, UK/Europe and China.

• In 20 years in Strategy & Management consulting, Mr. Lin has gained experience and exceled in research-driven strategy work in market entry, competition, transformation and sustainability.

• Strategy Planning: Managed 100+ strategy and management projects with a variety of companies including MNCs, SOEs, POEs and governments.

• Recent Clients served: John Deere, Cummins, Caterpillar, Swarovski, Schunk, BMW, Schaeffler, Triton, RiverlandCapital, Yunnan Provincial Government, Taian (Shangdong) Government, Shaanxi Mining Corporation, MingRJewelries, etc.


Eduardo Morcillo

Managing PartnerShanghai Office Spanish


• BA in Law (Carlos III University, Spain).• MA in International Trade & Investment Law (University of

Newcastle upon Tyne, UK).• Executive MBA (IESE, Spain).

Sector Competencies

Project Experience

• Automotive (components- Stamping, HMI, Power Train, Electrical)

• Chemicals (mid and downstream)• Infrastructure (environment, energy)• Healthcare (pharma, equipment).

• Sinclair Roche & Temperley (United Kingdom).• Credit Suisse (Spain).• InterChina: 1999-2001: Beijing. Director; 2002-2006:

Shanghai. M&A Practice Director; 2006- 2010: Shanghai/ Madrid. EMEA Director; 2010- Current: Shanghai. Managing Partner.

• Other Experience: Board of Director Member (in three China corporations); Member of Executive Board of Directors (three global organizations CWI, IMAP, EUCCC); Associate Professor MBA Schools (IE, Cheung Kong Business School)

• M&A • Strategic Alliances and Investment projects• Corporate restructuring• Corporate lobbying

• M&A: 15 Transaction deals (Auto components, infrastructures, Chemicals, Steel, Foundry and Healthcare). Average Transaction Value: from 20 to 100 million Usd.

• Strategic Alliances: Establishment of 12 Joint ventures (Auto components, chemical/petrochemical, franchise, machine tool, elevator industry, Energy and food business). Average Transaction Value: 50 to 300 million Usd.

• 100% Controlled Investment Projects: 10 WFOEs (Auto components, chemical, petrochemical,). Average Investment volume ranging from 30 to 400 million Usd.

• Corporate Lobbying: Corporate restructuring strategy and negotiation (energy, infrastructure, mining) with government bodies and institutions.

• Recent Clients served: Faurecia, Hella, Grupo Antolin, Grupo Maier, Federal Mogul, Bimbo, Girbau, Maxam Corp, Air Products, Abengoa, etc

Professional ExperienceFunctional Competencies

24


PresidentShanghai OfficeBelgian


• MBA (Henley, UK)• Chinese Language Specialization, Nanjing University,

1983-1985• BA Chinese Studies (Leuven University, Belgium)

Sector Competencies

Project Experience

• Chemicals• Automotive (components, Tier 1)• Industrial (Machinery, Machine Tools,

Components)

• 1985-1987:China Europe Institute, KU Leuven, Administrator

• 1988-1994: Adminstrator and later Director China Europe Management Insitute (CEMI), Beijing

• 1994: Acting President CEIBS, Shanghai• 1994-current: President InterChina• Other : Advisor to the Minister of Foreign Trade of

Belgium. Member of the Board of Directors CEIBS, Shanghai 2000-2014. Vice President and Member of the Executive Committee EUCCC (2002-2006). Commander in the Order of Civil Merit of Spain

• Strategic Alliances and Investment projects• Strategic Advise• Corporate lobbying

• Strategic advise: Leadership of over 50 projects related to market entry or business expansion for western companies in China. CEO level advise to large western corporations related to China operations

• Top level negotiation: corporate restructuring strategy and negotiation for several companies in China; alliances with Chinese groups; negotiation of numerous joint ventures and 100% controlled investments mainly in industrial sectors; acquisitions of Chinese companies.

• Government contacts & lobbying: has been in charge of several projects involving government contacts at both national and local level. Obtained approval for automotive distribution company, government relations advise to one of the largest global steel companies, establishment of GR structure for large paper MNC.

Professional Experience Functional Competencies

Jan Borgonjon

25


Luo Bo

DirectorShanghai OfficeChinese


• Bachelor of Business Administration, Simon Fraser University (Canada)

• MBA, INSEAD (France and Singapore)• CFA (Chartered Financial Analyst) chart holder

Sector Competencies

Project Experience

• Transportation • Automotive • Chemicals• Industrial/ Mining

• Senior Business Development Manager, Maersk• Associate Director, Somerley Investment Consulting• Senior M&A Manager, Hertz China• CFO, Xingwang Coal Mining Company• Other Experience: the founder of a truck components

trading company; and military experience in Chinese navy

• M&A • JV• Strategic Alliances and Investment projects• Corporate restructurings• Corporate lobbying

• M&A: Actively participated as lead negotiator in several Acquisition and Divestment projects: • Minority acquisition of the largest car rental company in China with the market value of USD 1 billion. • Establishment of Joint Venture via Acquisition between leading multinational and the sixth largest port

worldwide. • Established a partnership via M&A with the largest chauffeur-served car rental company in Japan to

enter into China. • Several M&A investments into coal mining (Jiangxi Province) and iron mine in China. • Participation in Divestment processes in the mining field in China.

• Main Role: Support on identification of targets/ partners/ investors; Coordination of Due diligence, financial modeling and valuations; Key document drafting and coordination of service providers (ie. Lawyers); Negotiations, closure, and integration

Professional Experience Functional Competencies

26


MNC Base: Supported top global auto comp. leaders, while serving sector niche leaders as well; maintaining / expanding contact base

InterChina MNC Contacts (Auto)• 700+ active decision-maker contacts at international companies

in the auto sectors.• 40% of these decision-makers are China-based, with the

balance at headquarters in Europe and the US.

InterChina Client Base in Global 100 Chemicals Co.• Out of 80 non-JP/KR top 100, we work with ¼ of those leading

players, while having regular contacts in China and globallyfrom another ¼ of those leading players.

27

ID Company Contact Contact Title Position email Office Office Office Mailing Sector L-1 Sector L-2 Country1152 Shanghai GM Hao Ren 任皓 Mr. Vehicle Line hao ren@s Shanghai Shanghai China 上海浦东金 Industrials Automobile Germany419 Shanghai Udo von Mr Dipl -ing udo klot@c Shanghai Shanghai China 中国上海安 Industrials Automobile Germany

8690 SIEMENS Jeff Zhou 周建峰 Dr. Vice jeff.zhou@ Shanghai Shanghai China 上海闵行区 Industrials Automobile Germany6816 Simoldes Jaime Sa Mr General Jaime sa@ Oliveira de Portugal Portugal Rua Industrials Automobile Spain2075 SKF Chenggui 柳承贵 Mr Project chenggui liu Shanghai Shanghai China 上海北京东 Industrials Automobile7946 SKF Hawking 张晶 Ms. Head of hawking.zh Shanghai Shanghai China 上海半淞园 Industrials Automobile Sweden6681 SKF Michel Ms BD michel zha Shanghai Shanghai China No 377 Industrials Automobile Sweden6794 SKF Rakesh Mr. President rakesh.ma Sweden SE-415 50 Industrials Automobile Sweden6682 SKF (China) Co., Ulrich A. 邬力 Mr. Director, ulrich.selig Shanghai Shanghai China No.377 Industrials Automobile Sweden8054 Sogefi Eric Liu 刘正 Mr Sales KAM eric liu@so Suzhou Zhejiang China No 1028 Industrials Automobile8141 Sogefi Marie- Ms. Head of marie- France Sogefi Industrials Automobile France8052 Sogefi Olivier 欧苙玮 Mr. China olivier.cuzin Suzhou Zhejiang China No.1028 Industrials Automobile8140 Sogefi RAUCY Mr Global cedric rauc France Industrials Automobile France8053 Sogefi Sebastien 博文 Mr. General sebastien.b Suzhou Zhejiang China No.1028 Industrials Automobile731 Somema Fernando Mr. Director somema@ Portugal Rualde Industrials Automobile Portugal

8331 SPJ Espejos y Victor Mr Area Sales victor pont Lleida Spain Poligono Industrials Automobile Spain10157 SRG Jason Plating jyang1@sr Zone, Industrials Automobile Global4259 SRG GLOBAL Dave Mr Business dingram@s Shanghai Shanghai China Room6F1 Z Industrials Automobile US3287 SRG Global Jon Mr Vice jdegaynor US 23751 Industrials Automobile

10564 STABILUS Alex Tian 田学峰 CEO/ xftian@sta Changzhou Jiangsu China No.8 Industrials Automobile Germany10589 STABILUS Thorsten Head of tschell@sta Koblenz Germany Wallershei Industrials Automobile Germany10063 Standard Motor Hap Acee Mr. VP/ hap.acee@ Hong Kong Hong Kong China Unit C, Industrials Automobile US1836 Strattec Thomas Mr. Product thermann WI US Strattec Industrials Automobile US8387 Streparava Carlo Mr Senior c bignardi@ Brescia Brescia Italy 13 Via Industrials Automobile Italy8386 Streparava Enrico Mr. Business E.Deltratti Brescia Brescia Italy 13, Via Industrials Automobile Italy8808 Streparava Francesco Mr. Supplier contact@st Brescia Brescia Italy 13, Via Industrials Automobile Italy6770 Streparava Pier Luigi Mr President contact@st Italy 13 Via Industrials Automobile Italy8809 Streparava Renato Mr. Product contact@st Brescia Brescia Italy 13, Via Industrials Automobile Italy2643 Sunred Joan Orus i Mr. General joanorus@ Barcelona Spain C/ Juan de Industrials Automobile Spain4745 Sunwin Bus Rune General rune lundb Shanghai Shanghai China 上海市闵行 Industrials Automobile9254 SUSPA Jin Shen 沈金鑫 Dr. General jshen@cn. Nanjing Jiangsu China No.2, West Industrials Automobile Germany8897 TE Gary Li 李万祥 Mr Sr Dir Sales gary li@te Shanghai Shanghai China Building 5 Automobile US8898 TE Kate Zhou 周宇君 Ms Manager kate zhou Shanghai Shanghai China Bldg 5 Automobile US8900 TE Peter W. Mr. General peter.cirino Singapore No. 26 Ang Automobile US7895 TE Thomas 刘沈明 Mr Vice thomas sh Shanghai Shanghai China Building 5 Industrials Automobile US286 Tecniacero Francesc Mr. Director francesc.fa Barcelona Spain Ctra. Industrials Automobile Spain994 Teco Barbettin Mr. General teco@teco. Italy Via Pio La Industrials Automobile Italy

2766 Think Global Richard P Mr MD U K & rbl@think n London UK Chenil Industrials Automobile Norway2321 TI Group Enric Jornet Mr. Comercial ejornet@es Barcelona Spain Muntaner Industrials Automobile Spain7143 Tianjin Santroll Guo Zhi Mr. Product yf16@sant Tianjin Tianjin China Industrials Automobile1601 Troqueleria Oscar Mr Director juan tobia Barcelona Spain P L Industrials Automobile Spain5472 TRW Mark Mr. Vice mark.stew Shanghai Shanghai China 6F, Building Industrials Automobile US7324 TRW Automative Eric NI Mr. Aftermarke eric ni@trw Shanghai Shanghai China 5F 62 Industrials Automobile7323 TRW Automative Kitty Zhu Ms Product kitty zhu@t Shanghai Shanghai China 5F 62 Industrials Automobile5471 TRW Automative Laurent Mr. Vice laurent.cro Shanghai Shanghai China 5F, Building Industrials Automobile US7325 TRW Automative Tim Ward Mr Aftermarke tim ward@t Shanghai Shanghai China 5F 62 Industrials Automobile7894 Tungray Shaojian Vice Chair shaojian z Shanghai Shanghai China City Industrials Automobile US8896 Tyco Electronics Carl Smiley Mr. Senior Vice carl.smiley Singapore No. 26 Ang Automobile US6699 UFI Filters Kelvin Mr Asia Pacific kelvin wang Shanghai Shanghai China 上海市青浦 Industrials Automobile

10306 UFI Filters Luca Biagini APAC COO luca.biagini No.9785 Industrials Automobile China6697 UFI Filters Rinaldo Mr. Chief rinaldo.facc Italy 1-37060 Industrials Automobile Italy3488 Ultra Parts Mark Mr Managing mpagliaroni US 33525 Industrials Automobile

10531 Uriel Inversiones Francisco Mr. Director fsoto@urieli Madrid Spain P de La Industrials Automobile Spain4046 Uriel Inversiones Juan Felix Mr. Presidente jfhuarte@u Madrid Spain P de La Industrials Automobile Spain3737 Valeo Ian Wang 王依润 Mr Director yirun wang Shanghai Shanghai China 上海市漕河 Industrials Automobile331 Valeo Michel Mr. Group Asia michel pagl Shanghai Shanghai China Industrials Automobile France

1633 Veritas Jose Ma Mr. Director josemjane Barcelona Spain Av Industrials Automobile Spain904 VOLKSWAGEN Bojun Song Mr Assistant bojun song Germany Volkswagen Industrials Automobile Germany903 Volkswagen Kai Mr. Manager kai.grueber Beijing Beijing China 北京市建国 Industrials Automobile Germany273 Volkswagen Klaus-Uwe Mr k Schaffrat Beijing Beijing China 北京建国门 Industrials Automobile Germany902 Volkswagen Melanie Ms PR officer melanie be Beijing Beijing China 北京市建国 Industrials Automobile Germany675 Volkswagen Zhang Mr. Executive suixin.zhan Beijing Beijing China 北京市建国 Industrials Automobile Germany271 Volkswagen Zhao Mr Senior jiayou zhao Beijing Beijing China 北京市建国 Industrials Automobile Germany

7924 Volkswagen Bahong Su 苏巴鸿 Mr. Director, bahong.su Beijing Beijing China 北京朝阳区 Industrials Automobile Germany7033 VOLVO Dzeki Mr. Vice dzeki.macki Shanghai Shangahi China No.2095, Industrials Automobile5099 VOLVO Harry Li Mr VP harry li@vol Sweden Sweden 上海市嘉定 Industrials Automobile Sweden5100 VOLVO Karin Malm Mr. Purchasing kribarit@vol Sweden China Dept Industrials Automobile Sweden7034 VOLVO KATARINA Mr. Vice katarina.fjo Shanghai Shangahi China No.1180 Industrials Automobile6914 VOLVO Lars Falk Mr Vice lfalk5@volv Goteborg Sweden Dept Industrials Automobile Sweden5102 VOLVO Luc Mr. VP STA lsemeese@ Sweden Sweden Dept. Industrials Automobile Sweden8000 VOLVO Nicolas 赵智国 Mr IT Director nicolas zha Beijing Beijing China 11F Tower Industrials Automobile7032 VOLVO Sylvain Di Director sylvain di- Shanghai Shangahi China No 2095 Industrials Automobile5103 VOLVO Thomas Mr. VP Interior thomas.gro Sweden Dept Industrials Automobile Sweden5106 VOLVO Thomas Mr Director 40 thomas vq Sweden UK 53084 Industrials Automobile Sweden4487 Webasto Christian Mr Strategic christian hai Germany Friedrichsh Industrials Automobile Germany6833 Webasto Fernando Mr. Head of fernando.v San Spain C/Mar Industrials Automobile Spain4260 Webasto Thomas Mr General thomas lue Beijing Beijing China A2103 Tow Industrials Automobile Germany4283 Webasto Wang Mr. Head of xiaoming.w Beijing Beijing China 北京市朝阳 Industrials Automobile Germany2016 Welly Automotive Mitchell Lou Mr. Chairman [email protected] Shanghai Shanghai China No. 60, Industrials Automobile China532 Zadi Bruno Mr Consultani brunopr@t 138 Via C Industrials Automobile Italy

4376 Zanini Antonio Mr. Corporate amolon@z Spain Industrials Automobile Spain3245 Zanini Conrad Mr. Strategic ctorras@m Barcelona Spain Marineta, Industrials Automobile Spain


Chinese Contacts (1/2): Maintained strong network with proactive and reactive Chinese investors and institutes

Example Chinese Investor List (Auto) Networking (Examples): Associations, Chinese OEMs, and Chinese component players)

28

No. Buyer Name Type Industry1 Ningbo Joyson Electronic Corp Strategic Auto/Trk Prts&Equip-Orig2 Zhejiang Geely Holding Group Co Ltd Strategic Auto-Cars/Light Trucks3 Wanxiang Group Corp Strategic Auto/Trk Prts&Equip-Orig4 SAIC Motor Corp Ltd Strategic Auto-Cars/Light Trucks5 Jiangsu Olive Sensors High-Tech Co Ltd Strategic Auto/Trk Prts&Equip-Orig6 Zhejiang Vie Science & Technology Co Ltd Strategic Auto/Trk Prts&Equip-Orig7 Ningbo Huaxiang Electronic Co Ltd Strategic Auto/Trk Prts&Equip-Orig8 Sailun Jinyu Group Co Ltd Strategic Rubber-Tires9 ZMFY Automobile Glass Services Ltd Strategic Auto/Trk Prts&Equip-Orig

10 Shandong Yongtai Chemical Group Co Ltd Strategic Rubber-Tires11 Zhejiang Shibao Co Ltd Strategic Auto/Trk Prts&Equip-Orig12 Ford Motor Co Strategic Auto-Cars/Light Trucks13 Dah Chong Hong Holdings Ltd Strategic Auto-Cars/Light Trucks14 Weichai Power Co Ltd Strategic Auto/Trk Prts&Equip-Repl15 Tianjin Motor Dies Co Ltd Strategic Auto/Trk Prts&Equip-Orig16 Mubea Automotive Components Taicang Co Ltd Strategic Auto/Trk Prts&Equip-Orig17 Zhejiang Youngman Passenger Car Group Co Ltd Strategic Auto-Cars/Light Trucks18 Fuyao Glass Industry Group Co Ltd Strategic Auto/Trk Prts&Equip-Orig19 Beijing Automotive Industry Holding Co Ltd Strategic Auto-Cars/Light Trucks20 Guangzhou Automobile Group Co Ltd Strategic Auto-Cars/Light Trucks21 FAW CAR Co Ltd Strategic Auto-Cars/Light Trucks22 Hyundai Motor Co Strategic Auto-Cars/Light Trucks23 Fangda Special Steel Technology Co Ltd Strategic Auto/Trk Prts&Equip-Orig24 Shanghai Fosun Pharmaceutical Group Co Ltd Strategic Medical-Drugs25 Northeast Industries Group Co Ltd Strategic Retail-Automobile26 Chongqing Skyman Industrial Group Co Ltd Strategic Auto/Trk Prts&Equip-Orig27 HNA Group Co Ltd Strategic Airlines28 Tencent Holdings Ltd Strategic Internet Applic Sftwr29 Tianjin THSG Corp Strategic Investment Companies30 PAG Financial Private Equity31 GO Scale Capital Ltd Strategic Finance-Investment Fund32 Daqing State-owned Assets Management Co Ltd Strategic Investment Companies33 Aerospace Hi-Tech Holdings Grp Ltd Strategic Auto/Trk Prts&Equip-Orig34 Transportation Technology Ventures LLC Financial Venture Capital35 Shanghai International Group Co Ltd Strategic Investment Companies36 Reliance Venture Asset Management Pvt Ltd Financial Venture Capital37 Yuan Capital Financial Venture Capital38 Shanghai Jiaerwo Investment Co Ltd Strategic Investment Companies39 Ningbo Jifeng Auto Parts Co Ltd Strategic Auto/Trk Prts&Equip-Orig40 Sichuan Bohong Industry Co Ltd Strategic Auto/Trk Prts&Equip-Orig41 Xiaoju Kuaizhi Inc Strategic Investment Companies42 China Taiping Insurance Holdings Co Ltd Strategic Multi-line Insurance43 Cayman Engley Industrial Co Ltd Strategic Auto-Cars/Light Trucks44 Chongqing Sokon Industry Group Co Ltd Strategic Auto-Cars/Light Trucks45 Anhui Zhongding Holding Group Co Ltd Strategic Auto/Trk Prts&Equip-Orig46 Xiangyang Automobile Bearing Co Ltd Strategic Auto/Trk Prts&Equip-Orig47 Ningbo Joyson Automotive Electronic Holding Co Ltd Strategic Auto/Trk Prts&Equip-Orig48 Qingdao Doublestar Co Ltd Strategic Rubber-Tires49 Baidu Inc Strategic Web Portals/ISP50 GSR Ventures Management Co Ltd Financial Venture Capital

• 80+ deals for top 50 in the past 5 years…• …with deal value totally above USD 130 bil …• …with the median deal value at USD 70 mil.• We have maintained decent relations with 1/2 of

them, plus other potential investors.


Index


21

345

29


NEVs In China: China will most likely lead the global NEV wave, but needs more balanced efforts from all stakeholders…

China’s Government• Address the challenges of oil dependency.• Address the challenges of emissions

controls.• Leapfrog China’s automotive tech globally.

Consumers In China’s Market• Expectations of NEV’s

performance.• Expectations of NEV’s safety

and reliability. • Price-sensitive.• Occasional personal

image/activism-based decision making.

OEMs & Supply Chain• Investment in technology

development.• Technology route selection. • New car models.• Supply chain development.

Infrastructure• Who will fund and who will benefit?• The power consumption of NEVs is

10% of China’s grid power at maximum.

Source: China’s NEV 12th FYP; MOST

BEV (incl. PHEV)

2012

0.5 million

2020 Planned

Ownership

2015 Planned

Ownership

5 million

* Actual BEV (incl. PHEV) ownership by 2015 isslightly below 0.5 million* HEV: <20k in 2012; without gov. goals in 2015and 2020.

Note: The existing composition of NEV might have commercial vehicles (usually with demonstration projects and corporate purchases) taking the majority of sales; however, in 2015 - 2020, passenger vehicles will take the majority. The report doesn’t include low-speed electric vehicles produced by non-qualified players.

30


Future Direction in China: …Heavily influenced by the gov. policies, for both scale and tech routes…

China’s Government

OEMs For China’s Market

Consumers In China

Infrastructure investors

NEV Vision

Subsidy/ Double-credit

System

Chinese OEM

Non-JP Foreign OEM

JP OEM

Major Stakeholders Preference for BEV, including PHEV (i.e. Attitude & Achievements) Now Future

Now 2015 – 2020• Determined government policies on NEV (especially BEV).• Will maintain the policy direction.

• Largely in favor of BEV/PHEV; very little preference for HEV. • Phase-out subsidy scheme with double-credit system taking over.

• Price-sensitiveness + Mileage Anxiety + Perceived Tech Instability > current environmental concern.

• With technology improvements and cost reductions, there will likely be more purchases.

• Concerned with IPR now; might take opportunistic approach at this time.• However, might transfer some BEV/PHEV models to China upon initiation of

the market.

• Significant focus on HEV.

• Large investment in BEV, as well as PHEV (according to industrial insiders).• Many registered models .• Technology gap with the international market might begin to close.

• Follow the market demands.• Various business models (different investor profiles; battery charging vs.

battery swapping).

Largely favorable to BEV now Less favorable to BEV now Favorable development to BEV 2015-2020

Less Favorable development to BEV 2015-2020

31


Market Volume: …are we close to the tipping point?...

EV + PHEV Sales Volume

Source: CAAM, MOST

(unit)

Targets in China’s NEV 12th FYP

0.5 million planned ownership in 2015 is narrowly missed

5 million planned ownership in 2020 possible?

(China’s NEV 12th FYP)

?

168

2015

17,799

PV - EV

9,908

2012

2,153

2013 2014

3,785

2009

330,200

PV - PHEV

74,763

2010 2011

CV - PHEV

CV - EV

Actual ownership by 2015: 0.45 million units, close to targeted volume

32


Infrastructure: …Implementation has lagged behind the plan, coastal region takes the lead…

Source: MIIT, CSR of State Grid and South Grid, China NEV Yearbook 2012, NDRC, National Energy Administration, InterChina Consulting interviews and analysis.

Notes: This applies to both private cars and vehicles of companies (e.g. taxi, bus).

Lagging behind the plan significantly; land availability, possible low utilization rates and the coordination of various gov. bodies present challenges

But policies with implementation measures are “speeding up” in China, with a positive impact on the market

Charging Stations

Charging Piles

• The number of charging stations in 2015 is 23% of the2020 target; charging piles are only 1% of the target.

• SAIC recently invested RMB 300 m in establishing a newcompany designated for building charging piles, with theaim of completing 50,000 charging piles countrywide by2020.

Time Region MeasuresDec2014

Jiangsu • Provincial gov. gives RMB 800-1200/kwof subsidies for construction ofcharging facilities

• City gov. provides same amount ofsubsidies as the provincial level

Nov 2014

National • Central gov. awards subsidies to localgovernments who reach NEVapplication targets

• Budgeted subsidy amount is estimatedto be RMB 10 bn for 2015

Jun 2014

Shanghai • Municipal gov. provides up to 30% ofinvestment to charging/swap facilityconstruction/operation companies intheir projects of building qualifiedcharging/swap facilities

Jun2014

Wuhan • City gov. gives subsidy to purchasersof charging poles through publicbidding process, with the amount of20% of purchasing price, or max. RMB3 m

Apr 2014

Shenzhen • City gov. gives 30% subsidies basedon equipment investment amount of acharging/swap station, or max. RMB300,000

Oct2015

National • Central gov. awards annual subsidiesto provincial governments reachingNEV application targets during 2016-2020, max. RMB 200 million

12,000

3,60073241837115510012

2020Goal

2015201420132012201120102009

49,00028,00022,25617,932

2014 2020 Goal20132012 2015

4,800,000

33


Opportunities Along Value Chain: …new and unique, which may open up new opportunities along the value chain

34

NEV Exclusive Components

For Example:• Battery Pack• Motor System• Control system

ICE Components But Required Tech Modification

For Example:• Brake• Inverter / Converter• Air conditioner

Traditional Components In ICE

For Example:• Engine• Transmission System• Chassis

NEV will require a very different set of components…

…which may present many opportunities along the new value chain…

Battery Pack

Battery pack case

Battery modules (cells

included)BMS and

electronic parts

Battery positive terminal, Battery negative terminal, Service plug, Main fuse, Relays, Current sensors, Voltage sensor

Top cover, Gasket, Insulator, Safety vent, Separator, Water based binder, Electrolyte, Anode negative electrodes, Cathode positive electrodes, Tab, Inner pack, Battery cell carrier

CAN / Chips, PC board, MOS transistors, Isolation chips, CPU, Transformer, relays, CAN / Chips, PC board, MOS transistors, Isolation chips, CPU, Transformer, relays, BMS case, Temperature sensors, Thermal conductive materials, PTC heater, A/C chiller, Fan


Aftermarket Potential: Likely to gain much more importance in theautomotive sector in China…

Sources: CAAM, Development Research Center of the State Council, InterChina Interviews and Analysis

The Scale of The Component Industry in China (Unit: bn USD)

80

Non-AF Comp Sales

AF CompSales

2013

437

357

2009

177

154

23

43%

20%

45%

60%12%

20%

100%

Spare parts

After-services

New car sales

North American

China Overall

CAGR (2009-2013)

37%

23%

Sales of AF (Aftermarket) components in China are growing faster than total component sales due to booming new car sales…

…and the industry is shifting to a more balanced situation of OEM and aftermarket sales

The Profit Allocation Structure

35


Geo. Focus: …but the future battlefield is around T2 cities (incl. provincial capitals in T3)…

Source: InterChina analysis

68

315

327

9.8

34.2

34.8

28%

27%

22%

8,000

12,500

2,500

25

30

38

PV ownership (2013, million)

PV ownership CAGR

(2008-2013)# of 4S shops

(2013)Average disposable income per capita (2012, RMB 1,000)

Competition of distributors

Urban Population(2012, million)

T1 cities: Have already reached mature growth due to large ownership base and new purchase restriction, plus there is high density of distributor as competitors.T2+T3 provincial capitals: Have the high growth potential because of smaller ownership base and only few big cities have imposed restriction. And the competition is not so strong.The total in all other 600+ cities: Good new car growth rate but very small car ownership based due to low population and disposable income. And there is lack of qualified distributors.

T2 & T3 Provincial Capitals provide a strong growth platform, with decent size now and strong growth potential plus the moderate competition yet

T1 Cities

T2+T3 provincial capitals

Other Cities

36


Aftermarket Transformation: …and success in the aftermarket largely depends on quality and concentration of channels & distributors…

Existing automotive after market under OEM monopolized model is mainly authorized with varied quality…

…Future automotive after-market with de-regulate model will largely depend on concentrated co-existed authorized and independent channel with quality

Component maker

OEMs

Authorized Channel

4S, 3S Dealer

Large-Scale Auto Part Market

Large Volume

Wholesaler

Parts Retailer

Non Authorized Channel

Car Owners

Component maker

OEMs

Authorized Channel

4S, 3S Dealer

Distributor of Component

makers

Non Authorized Channel, including more quality chains

Car Owners

mainstream minor stream mainstream minor stream

37


Emerging Model: …1-step distribution model is likely to be the futurewinner, differing from western markets…

Emerging Model: 1-Step Distributor*Quality Distribution

Current Mainstream Model: 2-step or multi-step Distribution*

Natural Distribution

*Note: The above chart is just for illustration purpose and is simplified. The actual aftermarket distribution structure is much more complex. The 1-step distributors might also have a certain portion of the revenue from 2-step business.

Target – 1-Step Distributor

W W W W W W

Car owners

Multiple Manufactures

Tier-1 Distributor

W W W W W W

Car owners

Multiple Manufactures

Tier-2 Distributor

• Multiple productsand brands.

• Usually regional.• Majority of

business via directsales toworkshop/retailerswith decent control.

• Multiple products andbrands.

• Usually regional.• Tier-1 might have

loose control over theworkshop/retailers.

• Tier-2 might be toosmall for acquisitions.

• This naturaldistribution model isdifferent from the“designed” in-depthdistribution model inthe US.

Low

Weak

Slow

High

Strong

Fast

Market Understanding

Channel Control

Response To Market Dynamics

Model Comparison

38


Key challenges – and success factors – for foreign investors

Source: InterChina Consulting analysis.

Insufficient market understanding in China’s complex

aftermarket1

Significant differences between China and foreign aftermarket

business models2

Lack of acquirable quality distributors3

How to speed up China know-how building4

• Avoid boiling the ocean.• Dig deep in a focused way.• Avoid investing either too ahead of or too far behind the trend.

• Fit for China: Local design of the distribution model.• Tailor-made communication message to global HQ.

• Avoid waiting for the perfect target profile.• Focus on critical factors, e.g. sustainable channel access and control.• Systematic search and screening.• Warm-up and maintain relations with targets .

• Local team building with HQ trust and support.• Result management, rather than process management. • Best practice learning via benchmarking.

• China way…• …but strictly following the home-country regulations such as FCPA.

How to effectively mitigate possible risks5

39


LW Drivers: Lightweight automobiles have become a global must-do in the recent future

Lightweight automobiles will help reduce Greenhouse gas emissions, while China is one generation behind the EU and US

Lightweight automobiles will also enhance the driving performance of the vehicles

Lowering the weight of automobiles has become a global trend in world’s major auto producing countries

Lightweight automobiles will improve fuel consumption, acceleration and braking distance, which influence the overall driving performance of the vehicles.

Source: InterChina Interviews & Analysis

65

2020

100

502030

200

2010

150 140

95

2010 2030

200

50

150

100

2020

200

110

200

50

150

2025

100

20202015

117

161

Euro Regulation2009/443/EC US Regulation China: MIIT

Emissions control targets of key countries (g/km)

Note: The emission control is either taken from the policy directly or calculated based on the capped fuel consumption by the gov. (e.g. 5 litre/km in 2020).

-100 Kg Fuel Consumption -0.4 L/100km

Acceleration +8%~+10%

Brake Distance -2~-7m

Drivability

LowerWeight

Better Performance

Safety

Research from Volkswagen has shown that lightweight automobiles will reduce CO2 emission per km by 8-11 grams

40


Toyota Target2010-2015 • Reduce weight by 100kg

for 3 types of carsAfter 2016 • Reduce weight by 200kg

for larger car scope

LW In Action: Various OEMs have set different automobile weight reduction goals

Major OEM targets are clear in their roadmap schedules

Some models from major OEMs have reduced weight despite larger sizes

Mazda Target

2011-2015• Reduce weight by 100kg

via body structure optimization

After 2016 • Reduce weight by 100kg during each redesign

Volkswagen TargetMOQ Platform • Reduce weight by 100kg

on each Golf modelAudi A3 Platform • Reduce 79.8kg on new A3

series

Ford Motor TargetAfter 2020 • Reduce weight around

318kg via new materials

GM TargetAfter 2016 • Reduce weight by 100kg

via material improvement

Length

Polo GTI Mk5 (2014) Mk6 (2018) VAR

Length (mm) 3,972 4,053 +81

Width (mm) 1,682 1,751 +69

Height (mm) 1,453 1,446 -7

Wheel Base (mm) 2,470 2,564 +94

Weight (kg) 1,269 1,199 -70

Source: InterChina Interviews & Analysis , OEM Interview

Width

Height

Skoda Octavia Model 2014 Model 2018 VAR

Length (mm) 4,658 4,675 +7

Width (mm) 1,814 1,814 +0

Height (mm) 1,459 1,460 +1

Wheel Base (mm) 2,684 2,686 +1

Weight (kg) 1,215 1,200 -15Chang’an TargetAfter 2020 • Reduce weight by 40kg-

50kg for each new model

41


LW Opportunity: Plastics play a significant role

Plastics play important roles in the evolution of lightweight automobiles…

• Plastics also face the competition from other materials for the lightweight of PV.

Carbon Fiber Composite

Nature Hemp

Glass Fiber Composite

… China still lags behind in the utilization of light weight materials for cars, but has potential to grow faster…

Lightweight Technique Weighting

Definition: Penetration rate of China is only for Local OEMs

Source: InterChina Interviews & Analysis & China Plastic Association

Modified PlasticsPP,PE,PVC,ABS,PBT…

50%

～40%

100%

～10%

Metal Alloy

PlasticsComposite

DesignOptimization

• Technological innovation may expedite the penetration of lightweight materials in local OEMs, but penetration will slow down due to plastic replacement application caps.

200156139

90

20202016 20352010

Pure Chinese OEM Plastic Usage per PV (kg)

Global OEM Plastic Usage per PV (kg)

250194178

130

20222016 20352010

450364334

230

2035202220162010

The basis of forecast (kg)Realistic China OEM Plastic Usage per PV (Chinese OEMs use less plastic, and JV OEMs in China might have “lower standards” plastics consumption in China.)

42


Market Paradigm: China will catch up with int’l markets for plastic light weight (PLW) adoption … especially driven by Chinese OEMs

Source: “Technology Roadmap For Energy Saving and New Energy Vehicles” by SAE, InterChina Interviews and Analysis

China lags behind in PLW adoption compared with other int’l markets, and will be picking up quickly, driven by Gov. Vision and Chinese OEMs increasing tech know

PLW Adoption geographic markets comparison, 2017

PLW

Tec

hnol

ogy

Know

-how

High

Low

PLW Application Mindset

Low High

*Note: PLW = plastic light weight

Illustrative

365250220

15090

GermanyFrance

x3

US JapanChina

Unit: kg plastics per car in average

• China lags behind for PLW adoption for passenger carscompared with other international market.

• This is because a) the OEMs technology know-how,mindset is weak, b) overall supply chain readiness is low

Chinese OEMs will be catching up with Int’l markets quickly

Other Chinese OEMs

followers

Early Adopters

• Chinese OEMs have been closing the gap in bothPLW mindset and know-how.

• Some Chinese OEMs like Geely, Chery amongothers are more active in adopting PLW.

• They will set up role models for followers,together with improving readiness of supply chainwill boost the overall adoption of PLW.

Chinese Gov. sets up ambitious weight reduction target for PV fleets

70%80%

2020

90%

2015

100%

20302025

-30%

“Aggressively promote the application of high duty steel..., plastics and composite materials application.” ~ SAE

43

演示者

演示文稿备注

PLW penetration is widely adopted in EU, Japan than US and China, and thus future growth will linear. Because car makers have accumulated technology know-how, are more cautious about fuel consumption as well as the mature supply chain from raw material to machine makers. In contrast, China lags behind for PLW adoption for at least 5 years compared with EU and Japan, constrained by both demand and supply side. JV OEMs are not active in introducing the most advanced technology to China due to concerns on IPR. Chinese OEMs are lack of technology know-how, cost sensitive to adopt more advanced technology. The supply chain of PLW is not mature. Having said that, some Chinese OEMs like Geely, Chery among others are more active in adopting PLW. They will set up role models for followers, suggest a lot of headroom for future growth.


• Nissan, X-trail• Rear door• From 38kg to 25kg• LFT

Which Customer Base To Alliance?: Among Chinese OEMs’ early PLW adopters are Geely, Chang’an, and Chery… they will become role models for market followers

Chinese OEMs

• VW, Magotan• Front end carrier• 20% weight reduced• LFT

2007 2008

211171

2016 2017

185180

2016 2017

• VW, Sagitar• Front end carrier

3433

20172016


• Mercedez, Class E• Dashboard Frame• -3.2kg• LFT

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E

57113

2016 2017

Though lag behind JV OEMs in PLW adoption, Chinese OEMs have been picking up PLW very recently, with front end carriers as initial focus

• Chang’an, Yidong• Front end carrier• -4kg, 40%• LFT

92156

20172016

• Chang’an, CX30• Front end

carrier• -4kg, 40%• LFT

• Chery, Aizerui7• Front end carrier• LFT

Unit: K units cars soldIn China market

417

2016 2017

• Geely Boyue• Beam• -2kg, 50%

• Geely, Dihao GS• Battery Tray• Front end• -1kg

JVOEMs

44


Which Products To Invest in R&D?: PLW will be more adopted by (semi-) structural parts


Auto parts applying PLW Key drivers of PLW

0

2

4

6

8

2015 2020 2025 2030

ChinaEU

U.S.

Fuel Consumption Targets for PV

Door

Frame of Instrument Board

Front-end Carrier

Anti-collision beam

• Fuel Saving: Lightweight isone of the most efficient waysto reduce fuel consumption.To comply with Chinese Gov.regulation on CAFC(5L/100km, 4L/100km,3.2L/100Km in 2020, 20252030, OEMs need to applyvarious engine optimizationtechnology incl. PLW.

Unit: L/100 KM

• Efficiency improvement:Unlike metal parts, the moreflexible processing technologymake it possible for plasticparts to integrate dozens ofauto part into one.

• Cost Saving: Reducing theauto parts need means amore efficient process and abetter cost performance.

BackSeat2/3 Seat

1/3 SeatSpare Tire Well

Rear Door1/3 Seat

2/3 Seat

Engine CoverBattery Frame

“LFT is mainly used in semi-structure parts, while IMC can beused in structural parts with higher strength coefficient, sothe substitution target for IMC is both LFT and metal parts.”

---- Ningbo Huaxiang

Front-end Carrier

Rear Door

Not exhaustive

CAFC: Corporate average fuel consumption. 45


Automated Driving Policy: China is on parallel with leading countries in the development of automated driving technology…

World

China

1970s 1980s

China started relevant research

1990s 2005 2011

FAW conducted road test for its HQ3 automated driving vehicle

2014 2016

1992: National University of Defense Technology developed China’s first automated driving vehicle

Shanghai JiaotongUniversity developed first urban automated driving vehicle

2014-2016: many partnerships formed between OEMs and internet/tech firms, such as Baidu-BMW, Dongfeng-Huawei, BAIC-LeSee, etc.

2009

Nevada of US become world’s first region to allow automated driving cars on ordinary roads.

2004

• UK: gov. invested GBP 19 m for road testing in 4 cities

• France: Roadmap released, gov. to invest EUR 100 m in three years

• US: Federal Automated Vehicles Policy

• UN: International Road Transportation Treaty that allows automated driving under conditions

• South Korea: issued first driver license to an automated driving car; invest KRW 145.5 bn since 2017 for development of automated driving vehicles

• Japan: Road map; by 2020 allow automated vehicle driving on express ways.

Google started automated driving research

• US: DARPA had achievement

• Italy: AGRO project road test

US, UK and Germany started relevant research

Google released its first automated driving car

Source: Analysys – China Automated Driving Industry Report 2016, public literature

Automated Driving Vehicle Development Milestones

• Apr 2016: Chang’an ran 2,000 km road test for its automated driving vehicle

• Oct 2016: Technology Road Map released

Baidustarted automated driving research

46


Emerging Value China: Chinese enterprises from relevant segments have formed a ecosystem for automated driving vehicle development

Chinese Enterprises Involved in the Development of Automated Driving Vehicles

Source: Analysys – China Automated Driving Industry Report 2016

Component Suppliers Vehicle Suppliers

Technology Suppliers

Contents Suppliers

Intelligent Sensing Chips OEMs Internet/Technology Firms

Cloud Car ConnectivityAlgorithm

HMIPlatformControlling & actuating Interaction

Navigation Entertainment, communication, service

47


OEM Partnership: Chinese OEMs’ are actively developing the automated driving vehicles in partnership with various technology firms

Domestic OEM Progress and PartnershipsFAW 2011: HQ3 286 km road test Changsha-Wuhan

Targeting on 50% of all its models to be automated driving by 2025Dongfeng 2014: Partnership with Huawei

Chery 2016: Partnership with APG which targets auto driving by 2018

BAIC 2015: Partnership with LeSee

Chang’an 2014: Partnership with Huawei2016: completed 2000-km road test Chongqing-Beijing

ZTE 2016: ZTE acquired 70% share in the Guangdong Granton Bus and established ZTE Smart Auto

SAIC 2016: released Roewe RX5 with YunOS automated control system, jointly developed with Alibaba.

Geely 2017: will start construction of testing ground in H2, targeting on fully automated driving by 2024

BYD 2014: Partnership with Singapore Agency for Science, Technology and Research2016: Partnership with Baidu

Great wall Started research in 2012, targeting on rolling out automated car for expressway by 2020

Chinese OEMs Involved in Automated Driving Vehicle Development

48


Supporting Policies: The government attaches high importance to the development of automated driving technology

GovernmentBody

Action Time Highlights

National NaturalScience Foundation of China国家自然科学基金委

Organization of tech competition: Intelligent Vehicle Future Challenge 智能车未来挑战赛

Annuallysince 2009

• A nationwide competition on the automated driving technologies

• Participants: Universities, science and technology research institutions, enterprises

• Top winners: Tsinghua University, National University of Defense Technology, Beijing Institute of Technology

State Council Released Plan of Made in China 2025

2015 • Automated driving vehicles is one of the important directions for the upgrade of China’s auto industry.

Ministry of Industry and Information Technology (MIIT)

Approved National Intelligent Connectivity Vehicles (Shanghai) Pilot Demonstration Area国家智能网联汽车（上海）试点示范区

June 2016 • Function: a closed area for comprehensive testing of automated driving vehicles

• Area: 5 square km (phase 1), will be extended to 100 square km by 2020

Society of Automotive Engineers of China中国汽车工程学会

Released Intelligent ConnectivityVehicle Technology Road Map智能网联汽车技术路线图

October2016

Targeted milestones:• 2020: Driver assisted/partial self-driving vehicles

take 50% market share• 2025: Highly automated driving vehicles take 15%

market share• 2030: entirely automated driving vehicles take 10%

market share

National Technical Committee of Auto Standardization全国汽车标准化技术委员会

Formulation of the Frameworkof Standards for Intelligent Connectivity Vehicle

Drafting started in 2014, now completed and pending approval by MIIT

Framework structure:• Basis: terms and definitions， classification and

codes, identification and symbols• General specification: Grading of intelligent

connectivity, HMI, information security• Product and application: Information collection, pre-

warning, vehicle control, information interaction• Relevant standards: Communication protocol,

interface

Source: MIIT, public literature 49


China Ambition: China’s latest Development Roadmap targets fully automated driving by 2025

Targeted Technology Milestones in China for Automated Driving Vehicles

Source: Intelligent Connectivity Vehicle Technology Road Map, Society of Automotive Engineers of China (2016)

Connectivity

Intelligence

CollaborativeDecision-

Making and Control

Cooperative Sensing

Information Exchange

Driver Assistance (DA)

Partial Auto Driving(PA)

Conditional Auto Drive (CA)

Highly/Fully Auto Drive (HA/FA)

• Adaptive Cruise Control

• Automatic Emergency Braking

• Lane Keeping• Parking Aid

• In-lane Auto Driving• Lane Change Aid• Fully Automated

Parking

• Auto Driving on Expressway

• Auto Driving on Urban and Suburban Roads

• Cooperative Queue Drive • Intersection Assistance

• Vehicle Road Coordinated Control

• Auto Driving in Downtown Area

• Fully Automated Driving

50


End-game: By 2035, China is forecasted to assume 24% share in global market of automated driving vehicles

Source: IHS

0.23

2025E 2035E

CAGR 48%

9.00(76%)

2.80(24%) China

ROW

11.80

Forecasted Sales of Automated Driving Vehicles Global and in China (SAE level 4 and 5)

(million unit)

51

© InterChinaConfidentialSource: FactSet, EMIS Deal Watch

M&A: China Outbound Deals in Auto Parts Sector 2014-2016 (1/2)Ranked by transaction value

DateEffective Target Name Target

Nation Buyer Name% of

SharesAcquired

Value ofTransaction

(USD m)

Ratio ofEnterpriseValue to

Sales

Ratio ofEnterpriseValue toEBITDA

P/E

11/06/2015 Pirelli & C. SpA Italy China National Tire & Rubber Corp 73.79 6,904.02 1.117638 6.79365 23.64

08/11/2015 Pirelli & C. SpA Italy China National Tire & Rubber Corp 26.21 2,017.67 1.36807 8.315916 19.24

02/02/2016 Key Safety Systems Inc United States Ningbo Joyson Electronic Corp 100.00 920.00

10/30/2014 Hilite International GmbH Germany AVIC Mechanical & Electrical 100.00 643.36

09/09/2015 Henniges Automotive Hldg Inc United States

Investor Group (AviationIndustry Corp of China andBohai Harvest RST Shanghai)

100.00 572.00

18/01/2016 IEE SA Luxembourg Aerospace Hi-tech Holdings Group Co Ltd 100.00 217.39

23/10/2015 EcoMotors United States Anhui Zhongding Holding (Group) Co Ltd 200.00

03/24/2014 Fisker Automotive Inc United States Wanxiang Group Corp 100.00 150.0001/28/2015 Quin GmbH Germany Ningbo Joyson Electronic Corp 75.00 111.31

03/02/2015 WEGU Holding GmbH Germany Anhui Zhongding Sealing Parts Co Ltd 100.00 107.57

11/29/2014 DSI Holdings Pty Ltd Australia Proper Glory Holdings Inc 100.00 82.82 1

10/30/2015 Opcon AB-Compressor & Waste Sweden Shanghai XingXueKang Invest 100.00 48.85

28/10/2015 NYX Inc United States Shanghai Shenda Co Ltd 48.66 35.00

06/12/2015 UYT Ltd. United Kingdom

Shandong Yongtai Chemical Group Co. Ltd. 100.00 46.50

52

© InterChinaConfidentialSource: FactSet, EMIS Deal Watch

China Outbound Deals in Auto Parts Sector 2014-2016 (2/2)Ranked by transaction value

DateEffective Target Name Target

Nation Buyer Name% of

SharesAcquired

Value ofTransaction

(USD m)

Ratio ofEnterpriseValue to

Sales

Ratio ofEnterpriseValue toEBITDA

P/E

17/06/2014 IMA Automation Amberg GmbH Germany Ningbo Joyson Electronic Corp 100.00 19.39

09/03/2016 Marval Srl Italy Mandarin Capital Partners 13.22

25/03/2016 Green Motion SA Switzerland Anhui Zhongding Sealing Parts Co Ltd 42.87 12.30

02/12/2015 Elaphe Propulsion Technologies Ltd Slovenia Zhejiang Asia-Pacific Mechanical

& Electronic Co Ltd 20.00 10.59

02/03/2016 Four Link Systems Inc Japan Jiangxi Special Electric Motor Co Ltd 50.00 5.17

09/02/2015 Waldaschaff Automotive GmbH Germany Lingyun Industrial Corp. Ltd. 100.00 3.72 0.061904

22/07/2015 Seoyon Top Metal Mexico SA de CV Mexico Shanghai Yongli Belting Co Ltd 20.00 2.50

05/30/2014 Kokinetics GmbH Germany AVIC Mechanical & Electrical 100.00 n/a

08/29/2014 Key Safety Systems Inc United States FountainVest Partners Asia Ltd - n/a

01/31/2015 Lamberet Sas France AVIC Henan Xinfei Electric 100.00 n/a

05/01/2015 Waldaschaff Automotive GmbH Germany Lingyun Industrial Corp Ltd 100.00 n/a

07/02/2015 Johnson Controls-Automotive United States Yanfeng Automotive Trim Sys Co 100.00 n/a

21/07/2014 KS Aluminium-Technologie GmbH Germany Huayu Automotive Systems Co

Ltd 50.00 n/a

16/07/2014KOKI TECHNIK Transmission Systems GmbH

Germany Aviation Industry Corporation of China 100.00 n/a

21/04/2014 ABC Group Fuel Systems Inc United States State Development &

Investment Corp 100.00 n/a

26/03/2014 JAC Motors do Brasil Automoveis Ltda Brazil Anhui Jianghuai Automobile Co

Ltd 32.00 n/a

53


Partial consolidation in the commodity segments – trend towards segmentation for future suppliers

New players from the fields of IT and new materials will appear on the supplier market (e.g. SGL Carbon)

Wave of consolidations ideal for Asian investors Companies with high innovation potential will be of

interest to OEMs as well as cross-sector industries (see Google, Apple, IBM, etc.)

Product life cycles adapted to consumer behaviour, i.e. increasing pressure to innovate

Challenge of defining M&A strategies according to the supplier industry – commodity vs. innovation

Anticipated developmentObservations in the tier 2 to tier 4 segment

1

2

3

4

Investor restraint due to uncertain development (global financial crisis and EU crisis)

Limited availability of liquid assets in 2009 to finance takeovers –restrictive lending

Limited management resources – focus on stabilisation and restructuring

Market power of OEMs and their view that many segments are adequately consolidated

Further consolidation at the OEM and supplier levels is anticipated, which will be particularly crucial for the

OEMs, as they would otherwise become puppets of the large suppliers, who would more or less impose

strategies and components on them.

Great potential for future M&A transactions that will take place across industries (game changers)

System change and radical transformation in the automotive industry will result in new challenges for

the OEMs.

5

6

7

8

Consolidation trend through overcapacities in commodity product areas (supplier reduction, cost pressures, globalisation, etc.)

Tier 2 to tier 4 with certain innovation potential and new uses of technology are often unaffected by the consolidation

Many PE assets were underfinanced for the volatility of the industry, resulting in more PE insolvencies than with family-run companies

Price pressure in tier 2 to tier 4 is often not as high as for tier 1 suppliers as it is below the detection threshold

Source: IMAP analysis, Roland Berger

Consolidation in the Automotive Industry

54

演示者

演示文稿备注

Erwarte Entwicklung Warum ist das so? Die Branche ist in einem Technologieumsprung, die politische, ökonomische und gesellschaftliche Faktoren hat. (Mobilitätskonzepte, Stellenwert des Autos, etc)


M&A Environment in the Automotive Supply Industry

Suppliers from the emerging markets are strengthening their technological expertise and local presence through M&A

Overview of M&A supply transactions with purchasers from Asia

Acquisitions of highly developed production and manufacturing technologies

Access to R&D expertise

Acquisition of well-known brands with the “Made in Germany” stamp of quality

Acquisition of market shares of European competitors

Diversification of the sales channels access to European sales markets

Access to western OEMs and customer structures

Increased product quality and competitiveness in own market

Acquisition rationaleInvestor Country Target company Description Year

Anhui Zhongding Austria Druckguss Die-casting components 2016

Ningbo Joyson TechniSat Electronic components 2016

Lingyun Waldaschaff Systems and component parts 2015

Motherson Group Scherer + Trier Thermoplastic moulded parts 2015

AVIC KOKI Technik Gear components 2014

AVIC Hilite Engine and transmission components 2014

AVIC Kokinetics Metal components for seating and gear units 2014

Ningbo Huaxiang Helbako Electronic modules 2013

Ningbo Huaxiang HIB Trim Parts Wood trim for interiors 2013

Zhuzhou Boge Rubber, plastic and metal components 2013

Amtek Neumayer Tekfor Forming technology 2013

Consortium of investors IEE Sensor safety systems 2013

Wanxiang Group A123 Lithium ion batteries 2013

Bohong Wescast Industries Exhaust manifolds and turbocharger housings 2012

Hebei Lingyun Kiekert Closing systems 2012

Ningbo Huaxiang Sellner Interior trim 2011

Motherson Group Peguform Plastic parts 2011

Joyson Preh Vehicle systems, sensors and units 2011Sources: S&P Capital IQ, mergermarket, IMAP research 55


Outbound Chinese Acquires Face Key Challenges

M&ASTRATEGY &

DEAL SOURCING

DEAL SCREENING

INTERNAL DEAL

STRUCTURINGDUE

DELIGENCEBINDING &

NEGOTIATIONAPPROVAL &

CLOSING PMI

Lack of a clear M&Aroadmap

Inefficient deal sourcing or screening

Lack of capability to manage due diligence

Lack of capability to identify key risks or support decision making

Difficulty in understanding the overseas business environment

Inefficient communication with regulatory bodies

Insufficient planning

Unclear governance structure

Talent shortage

Culture issues

APPLY TO BOTH M&A NOVICES & VETERANS

APPLY MOSTLY TO M&A

NOVICES

UNCLEAR M&A STRATEGY LACK OF DUE DILIGENCE EXPERTISE INEFFECTIVE PMI

56


Index


21

345

57


Case Study: What opportunities are available for newcomers of foreign auto components makers in China’s maturing auto sector?

The Client• A PE firm 100% owned by the Swedish

Government with dozens of auto componentportfolio companies.

The Method• 15 interviews with China CEO/ Sourcing VP

of foreign companies in the passenger cars,buses, trucks and construction machinerysectors in China.

• Systematic survey.

The Problem• In response to the ‘Go East’ trend by

European carmakers, the client would like tounderstand the opportunities and challengesof entering China by component players.

Solutions by InterChina• Foreign component makers should follow

carmakers to enter China, in accordance withthe trend of increasingly aggressivelocalization.

• Focus on “incremental” demand given thehighly entrenched barrier of the incumbentmarket, with technology, costs and servicesas key.

• Practical recommendations on dealing withvarious challenges in China such as IPRissues.

What opportunities are available while simultaneouslymanaging the challenges reasonably in China?

Foreign carmakers welcomenewcomers, but no specialtreatment is given inadvance.

China automotive marketmoving towards the maturitystage in 5 – 10 years

Increasing localization ratiomeans carmakers will purchasemore in China.

The opportunity opens the doorwith manageable challenges

Confidential © InterChina

Localization rate reported and collected in InterChina’sinterviews and industrial research

6

InfinitiVolvo

60%

0%

Daimler Benz

70%50%

0%

Land Rover

40%

0%

40%

BMW

70%60%

Audi

90%85%

PSA

>80%

Honda

>60%

GAC Toyota

80%

Dongfeng Nissan

90%

VW (excluding

Audi)

>90%

SAIC GM

>90%

Company J

70%

50%

Company I

70%60%

Company G

60%

35% 2015E2012

and Bus sectors, there are few localized tion cases.

or the long established carmakers with on base in China, the localization rate now

e as high as 80% or more.

planned production plant in China, the on goal might be set as below 40% in the

p.


… aiming to get lower cost and good quality2

Decision-making: FIE carmakers welcome newcomers of foreign suppliers to be in China, but are cautious about offering special treatment

7

Yes

ned

No

78% (7)

22% (2)

0%(0)

hina Consulting interviews and analysis.

1

657

Short lead time

Global quality

standards

01

6

Other support

Small promised contract

Big promised contract

provide to newcomers?

Do newcomers need export (such as to Asia) to stay afloat?

Yes No

757% (4) 43% (3)

base in China.


The major opportunity for newcomers of component suppliers in China is to supply foreign carmakers, though doing so may be quite challenging

8

The Entry Opportunity Two Add-on Opportunities After Entry

• Leading Chinese carmakers with the presence in the medium-range segment or potential to move into the medium-range segment. Examples could be Shanghai Auto (a leading state-owned carmaker and the acquirer of Rover).

• To satisfy the needs of Chinese carmakers to get the component solution that Chinese suppliers are still not qualified yet; and in some cases, to leverage the brand power of leading foreign component players.

• Leading foreign carmakers with (existing or planned) global sourcing from China.

• To satisfy the needs of carmakers to increase the cost competitiveness globally while maintaining the global quality standards and supply chain best practices. This might not overlap with the sourcing for the local production plants in China in most cases.

Focus on “Incremental” Demand, which

has a lower impact of the entrenched supply relations

Technology, cost and service are

key

Challenges need to be carefully

handled in China

+1) Trade-up Of Chinese OEMs

2) Global Sourcing

To Supply Foreign Carmakers In China

12

34

58


Case Study: How to diversify into China’s dynamics NEV sector at the right pace?

The Client• A global top 30 auto component supplier

The Method• Comprehensive investigation of NEV Tech

trend, and product opportunities• Over 70 interviews with decision-makers in

OEMs, semi-gov. entities (policy-making), and T1.

The Problem• This tech-driven company requires a

practical China roadmap for its NEV business in China, which is quite different from the ICE business (more market-driven, and global clients)

Solutions by InterChina• Gained transparency over the practical

China’s NEV roadmap by reading between the lines

• Supported the effective communicate back to HQ in Germany to have buy-in

• Evaluated 5 potential components and recommended an express entry strategy to capture the China time of window

• Recommended best practices of serving Chinese OEMs

How to diversify into China’s dynamics NEV sector at the right pace?

For the product opportunity, only the component with the right time of window is recommended to match our client’s competitive advantages

InterChina forecasts that BEV will be the market mainstream, though the gov. goal might be missed

It is also forecasted the hypothesized tech by the client HQ won’t gain popularity in China

To realize the strategy, a clearly defined roadmap in “express scenario” is developed to facilitate the communication to HQ

59


NEV Market Forecast: Gov. NEV goal for 2020 will be difficult to materialize, goal for 2025~30 could be possible, while BEV will remain as majority of NEV

2

Gov’t goal for NEV and our forecast based on our interviews suggests the Gov. goal is somehow stretched


Unit: NEV sales volume mil. (NEV % of PV sold)

Gap 1: -12%

2030E

17.1 (35%)

Gap 2: -49%

19.5 (40%)

8.7 (18%)

2025E

4.9 (13%)

1.1 (~4%)0.56 (2%)

7.6 (20%)

1.3 (4%)

2017A 2020E

2.1 (7%)

5.7 (15%)

3.3 (9%)

InterChina Froecast(incl. 2017 Actual)

NEV target by SAEAssumed Subsidy Scenario

NEV target by MIIT

*Note: MIIT does not specify HEV sales target, and NEV target for 2030. Note: In “InterChina Forecast”, the portion of PHEV in the NEV in 2025 and 2030 are 25% And 20%.

Gap 1:• Most of senior interviews agree that the newly policy (double credit

system) is likely to achieve its goal in the long term.

• Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

• xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Definition:• Assumed Subsidy Scenario: Assuming no double credit system, sales

affected by 1) subsidy withdraw policy up to early 2020s 2) NEV cost(battery cost down with tech advance and other components cost downwith economy of scale) drops over time.

• xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Gap 2:• The interviews suggest that the double credit system is more effective

than the previous subsidy system.

• Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

• xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx


48V: 48V will play a limited role within HEV, as it is perceived as a temporary transition HEV tech route

3

Only some selected Chinese and US/EU-JV OEMs will likely toadopt 48V as alternative for HEV, but will skip 48V for PHEV


This will be leading to a moreconservative 48V outlookthrough to 2030

in HEV In China

Rationale

• Focus on NEV.• Will pay some attention to HEV, but

biased towards heavy HEV.• Will skip 48V for PHEV.

• Focus on ICE (SUV).• Prefer to add NEV vs HEV (48V) to

cope with the double credit pressure.• Will skip 48V for PHEV.

• Might only consider to adopt 48V tosmall number of mid-high end HEV carmodels due to the cost sensitivities.

• Will skip 48V in PHEV.

• Focus on heavy hybrid HEV, might domore NEV to comply with policy.

• 48V is not a cost effective choice forboth HEV and PHEV.

• Influenced by home country car modelsand platform, but also Chineseconsumers high level price sensitivities,EU and US JV OEMs are likely to haveless interests on 48V.

• They might have minority level ofadoption of 48V in China, but limited inHEV and will skip 48V in PHEV.

• For example, SAIC-GM indicates theymight have some level of 48V adoptionfor selected mid to high end HEV carmodels to test the water.

OEMs

With NEV focus like BYD, Geely

ICE focus but with huge NEV credit pressure like GreatWall

With a more diversified portfolios, e.g. SAIC.

• Despite the highly optimistic estimation of48V adoption rate in China by some 48Vmakers, different types of OEMs in Chinaseems to have a rather conservativeattitude towards 48V, and mainly drivenby cost effectiveness.

• Both 48V makers like XYZ, JohnsonControls, and various types of OEMsactive in China have confirmed that 48Vwill be mainly relevant to some HEV carmodels, and for PHEV, majority of OEMswill skip 48V due to cost effectiveness.

• Regarding the application of 48V in HEV,Chinese OEMs might add 48V as onetemporary transition HEV tech route,while EU, US JV OEMs might not widelyadopt 48V in China due to the significantextra cost (RMB ~5,000 per car) asChinese consumers are highly pricesensitive.

JV in China

in PHEV In China

Perception towards 48V

12

34


Summary Of Product Opportunities: ECC stands out from the investment certainty and likely profitability perspectives

4

Emerging Growth Pre-maturity Maturity

The Product Life Cycle Perspective For Next Few Years Vs Investment Time Of Window• Overall: In the next few years, these products are likely to stay in the suggested life-cycle stage, rather than to step-change to the next life-cycle stage,

even with the fast growth of NEV.• ECC: The investment time of window for ECC might be just for a few years, until OEMs finish the expansion and stabilization of their supplier pool, in

parallel to OEM’s progress to accumulate the tech know-how building related to this aspect. Note: the list of features in this slide are applied to the studied products ONLY, rather than a generalized rule for other auto components.


EBB (?)48V Booster

ECC

ECPBTMS

• High tech barrier.• Decent share taken by

foreign players, and likely tomaintain in future.

• Thereby possibly decentprofitability.

Tech Barrier

Competition Rivalry

Likely Profitability

• High tech barrier.• Dominated by a few giant

players with high market sharewith overwhelming first-moveradvantage (e.g. XYZ).

• The profitability might be high infuture if reaching economy ofscale and still with tech barrier,but might be too early to say.

• Medium tech barrier.• Thereby decent share taken by

Chinese players.• Thereby possible

dissatisfactory profitability(Note: BTMS is mainly suppliedby battery makers itself, and lesstransparent on the profitability ofBTMS only).

• Good growth with NEV market.• No evidence of the likely

substitution technology toreplace ECC soon.

• OEMs are still in the processto build their qualifiedsupplier pool, which mightlast for another few yearsonly (refer to Slide 21).

Demand Perspective

• The demand is small, eitherdue to the small HEV (e.g. 48Vbooster) or the low penetrationrate (e.g. VP vs EBB).

• For EBB, XYZ is taking a game-changer initiative to re-definedemand landscape, however,the interviewees we talked toare not so optimistic.

• Good growth with NEV market(e.g. BTMS) or with extra driver(e.g. ICE with turbo with liquidcooling for ECP).

• Right time of window for investment in the next few years by a player like ABC

• To take actions quickly

• Decent investment uncertainty comes from both demand and dominant competition sides

• To wait and monitor for 1-2 years.

• Too mature (esp. relatively weak profitability of ECP) to invest

• To skip


ABC Likely Sales Forecast (ECC, 2017 – 2025)

Key Forecast (with the quali recommendation on the next slide)

ABC’s Opportunity In ECC: Subject to when ABC invest in a China plant, ABC is likely to win XXX% market share in 2025, or RMB XXX mil to RMB ~XXX mil Revenue…

Likely Revenue Forecast Of ABC ECC In China (for mainland sales only)

5

Base ScenarioExpress Scenario

2016 2019 2022 2025

Key Forecast Items Base Scenario (ABC ECC Plant will kick off only after ABC EU SOP in 2020, resulting into a relatively slow entry and thereby miss part of time of window of the opportunity)

Express Scenario ( ABC ECC Plant in EU and China will both kick off in 2018, resulting into a relatively fast entry and thereby gain the most of time of window of the opportunity)

When to have the revenue by ABC China

~2022 (1-2 years after China plant kick-off)

~2020 (1-2 years after China plant kick-off)

2025E ABC Volume ForecastIn China XX units XXk units

2025E ABC Revenue Forecast RMB XX mil RMB XX mil

ABC Market ShareMeasure-ments

ABC in All China Sales (incl. in-house supply)

XX% XX%

ABC in all China 3rd-party Sales (excl. in-house supply)

XX% XX%

ABC in MNC (incl. MNC local supply only, i.e. 35% of the total market)

XX% (as an average player) XX% (as a leading player after the first mover)


Note: Given the strengths of ABC in JV OEMs, it is assumed that ABC’s market share in JV OEMs for NEV is also higher than in Chinese OEMs.

Note:• The starting revenue point and the revenue

forecast based on ABC’s likely market positioningare forecasted per the table to the right side.

• However, the revenue in-between might havemany varieties, thereby no specific figures aregiven, but assumed that the in-between years willhave 1 or a few contracts (car models) won byABC.


Case Study: China market expansion strategy on how client can capitalize on its opportunity for Dealer Management System

The Client• One of the leading solution providers in the

automotive sector globally

The Method• Tailor-made forecast methodology (quali and

quanti) in this fragmented market• Over 30 interviews with OEMs, top 10

leading dealer groups, and 4S individual dealer shops in China

The Problem• After initial success in China with sales to

OEMs via global contract, the Client would like to tap into the booming automotive dealer sector for its Dealer Management Systems (DMS) in China

Solutions by InterChina• A phased growth strategy with different

emphasis on “push” or “pull” strategic options in the short-, medium- and long-term

• For different market segments, tailor-made models are recommended

• Strategic target acquisition is recommended as the practical investment model, with shortlisted targets

How can the client quickly grow its existing business in China?

For the high-end market, the payment model relevant for China in the prioritized segment is recommended

InterChina forecasts that the Chinese Auto market will continue rapid growth until 2010

A tailor-made forecast of the opportunity value

To realize the strategy, two POE software and information companies are selected as acquisition targets

CONFIDENTIAL © InterChina Consulting 12

3,000

4,500

6,000

7,500

9,000

2006e 2007e 2008e 2009e 2010e

Scenario of 10% CAGR


Scenario fo 20% CAGR

Unit: thousand

Forecast sales of cars (per year) in China (2006 – 2010)

13,000

23,000

33,000

43,000

2006e 2007e 2008e 2009e 2010e



Scenario fo 20% CAGR

Unit: thousand

Forecast car ownership in China (2006 – 2010 accumulated)


E

C

DMS Offering Options: Opportunity ValueThe client’s total opportunity value roughly estimated at RMB 450 to 500 million

Short term

Medium term

Longterm

Focus on Sales Revenues, with No (Poor) DMS

A B

D

F

DMS

Module

Application

DMS Need

Number of Carmakers

The Client Success

RateFee Per

CarmakerOpportunity

Value

AGeely, Chery

50% RMB 10 million RMB 10 million~2

BSAIC, Dongfeng, Chang’An…


DChang’An Ford, Chang’An Suzuki, FAW, Brilliance… 33% RMB30 million RMB 250 million

~25

F

Dongfeng Citroen, Guangzhou Honda, SVW, SGM 50% RMB30 million RMB 60 million

~4

GAudi, Lexus, Infiniti


Partial DMS

Focus on Profit Margin, with Full DMS

Carmaker Needs By DMS Starting Point Over Time

Carmaker Market Segments

Estimation of the Client Opportunity Valuefor each Carmaker Need

Opportunity = Number Of Carmakers x the Client Success Rate x

Fee Per Carmaker (Initiation)

Equivalents to Client and Mercedes

G

• A: simple DMS (push)• B: advanced DMS (Pull)• C: ‘Trojan Horse’ Offering (Push)• D: replace existing DMS with advanced DMS (Pull)• E: ‘Trojan Horse’ Offering (Push)• F: replace existing DMS with very advanced DMS (Pull)

1)

2)

3)

4)

Total Opportunity ValueRMB

450 – 500 Million


The Client China Strategy: DMS Payment StructureTwo models for different market segments

Purchase &

Implementation

• Hybrid ‘Western & Chinese Model’.• Aiming to increase total investment by

sharing costs between carmakers and dealers.

• Carmakers benefit from perceived lower purchase & implementation price.

• Dealers benefit from perceived lower license fee.

• The Client benefits from network expansion.

• ------• Purchase & implementation fee: Carmaker

pays one time payment.• License & maintenance fee: Dealer pays

license fee and maintenance fee annually.

• Same as BMW and Mercedes.• ‘Western Model’• ------• Implementation fee: Carmaker pays

one time payment.• License & maintenance fee: Carmaker

pays license fee annually, dealer pays maintenance annually.

China DMS Payment Structure Comments1) The Client Payment StructureFor High-End Market

2) The Client Payment Structure For Low-End and Medium-End Markets

RecurringInitiation Recurring

China’s DMS payment structure is focused on the lump sum payment during the initiation stage. This is preferred due the following reasons:

• One time budgeting is a more simple process for carmakers to handle than having to consider future budgets.

• Easier for the responsible manager to take credit for the success of the DMS implementation project.

• ‘Growth’ mentality means that lump sum purchases appears better value for money with network expansion.

• Suppliers prefer to have payment at the time of purchase in China, rather than risking the uncertainty of future payments.

Implementation Maintenance

Initiation Recurring

License

Implementation Maintenance

Initiation

LicensePurchase &

Maintenance

Paid By CarmakerPaid By Dealers


• Main Software Products:• DMS (for carmakers).• 4S management software (for multi-franchise groups /

independent 4S shops).• Quick repair management software (for chain groups /

independent shops).• Automotive accessory management software (for chain groups

/ independent shops).• Automobile service management software (for chain groups /

independent shops).• Vehicle sales management software (for multi-franchise groups

/ independent 4S shops).

• Payment Structure:• DMS Fee: RMB 300,000 to RMB 800,000 (paid by carmaker).• Payment Structure: Development fee (~80%, one time

payment) plus implementation fee (~20%, per shop).

Strategy Realization: Acquisition Target I

Location

Key Carmaker Customers

Headquarter (China)Address: GuandongTel: xxxFax: xxx

Source: Company Website, InterChina Analysis

Offering

General Profile

Establishment Year 1992 (DMS was launched in 2002)

Ownership POE, owned by Mr. Zhong

Revenue USD XXX million

No. of Employees 100 persons in total

12

34

60


Case Study: What investment model would enable a successful entry strategy for the car trim sector?

The Client• A top 3 European car trim supplier

The Method• 40 primary interviews with OEMs and

industry players• Practical approach to test partnership

feasibility

The Problem• Our Client is positioned as a specialist in

Europe in their product sector, but the China market is still at the generalist stage

• The Client would like to understand what practical strategy to enter China would be best

Solutions by InterChina• A global alliance model that allows our client

to enter China by adopting a JV with one Chinese leader to gain access and localized production capability…

• … while jointly developing the export potential to the agreed markets

How to start a successful business in China In an already consolidated and entrenched market?

We helped Client to understand that its original idea, a WFOE investment model, would require catch up time and would not likely reach sales objectives by 2015

OEMs expect a complete range of capabilities in China, including products, in which our client has limited expertise

Highly entrenched relationships between car trim suppliers and OEMs would lock access to customers for a new player

While we could identify two potential JV partners that would enable the Client to reach expected turnover

CONFIDENTIAL © InterChina Consulting

Leading competitors all provide OEMs with all types of wheel trims (and other trims and/or auto parts)…

2

An extensive Offer… … expected by OEMs

Typical national WT supplier

WT Other external trims

Other internal trims

Other auto parts

Other non-auto parts

Estimated WT capacity (million units)

WC CC/BC

Competitor 1 Y Y Y Y Y - 25-30

Competitor 2 Y Y Y - - - 20-25

Competitor 3 Y Y Y Y Y - ~10

Competitor 4 Y Y Y Y Y - ~10

Competitor 5 Y - Y Y - - ~5

Competitor 6 Y - Y - - Y ~5

“We keep expanding from our logo/letter trims into other trims, including WTs, and other auto parts to secure our growth target.” ——Swell“Although we originated from WTs, we are now expanding into other external trims, and further into other auto parts in the future.” —— Competitor 1

“We will have large capacity to meet multiple OEMs’ needs, whereas we will keep building our new additional capacity during 2012.” –——Competitor 1

OEMs require suppliers to provide them with an extended car components range for two main reasons:

Wheel trims are considered as non strategic parts, managed by junior team. In order to limit supplier management costs, OEMs tend to keep a low number of suppliers and thus require these suppliers to extend their range of components.

OEMs also seek to obtain price reductions through economies of scale. Consequently for small components such as wheel trims, OEMs expect supplier to sell an extended range.

Source: InterChina interviews and analysis.

CONFIDENTIAL © InterChina Consulting

But relationships between top OEMs in China and their car trim suppliers are likely to remain very entrenched in the next 5 years

3

• Due to the commodity nature of WT, OEMs prefer to achieve supplier management synergy and to limit number of wheel trim suppliers.

• Consequently OEMs have a limited number of wheel trim suppliers, providing them with the full range of WT, other trims and even other non-trim components.

Status-quo of Consolidated Supplier Network:

Main wheel trim suppliers for top 10 OEMs.

Real Competitor 1

Swell Minth Chengdu Aviation

SVW

FAW VW

Dongfeng Nissan

Chery

SAIC GM

FAW Toyota…

Geely

Chang’AnFord Mazda

“Competitor 1 has been our supplier for over 5 years, and despite minor quality issues, we are quite satisfied with their level of service and have no plan to switch suppliers”

——Chery Technical Manager

“We have been working with Real for many years already and have progressively expanded from wheel trims to other trims.”

——SAIC VW Purchasing Manager

“We are currently developing a few new suppliers for small quantities of button caps/center caps, but main supplier remains Real.”

——Purchasing Manager of SVW

• OEMs in our interviews didn’t demonstrate the trade-up needs aggressively, which shows they have a low degree of motivation to switch to new suppliers.

• The cost saving by getting a lower-price supplier will be limited for this considered low-value component and the added complexity in supplier management might not justify this limited cost saving.

Forecasted Stable Supplier Network in future:



Roll out for WFOE business model might begin by as late as 2015 for local sales, meaning that a X to Y million EUR turnover might be reached by 2015 , far from client’s expectation


20162015201420132012XXX China

Win OEM 2*Start achieving sales at exportWin JV-OEM 1* (Greenfield sales)

Win JV-OEM 3*Win JV-OEM 2*Start achieving sales at exportWin JV-OEM 1* (Greenfield sales)

Product development process [1-2 years]Homologation process [6 months – 1 year]

Win OEM 3*

Reach access to key JV customers [1 year]

Hiring top management& sales team [1 - 2 years]

Build Chinese factory [1 year]Obtain license [6 months to 1 year]

Electroplating/aluminum partnership setup [6 months to 1 year]

Reach access to GSCs [6 months]

Development of Chinese structure

Sales preparation process

Sales winsBase scenario

Sales winsOptimistic scenario

Base scenario: X million EUR turnover by 2015:• Developing factory and other capabilities would require up to 12

months.• Given high level of entrenchment of JV-OEMs, one additional year

sales approach would be necessary to gain access.• Finally, OEM homologation and product development would take

one year, and first wins in China would happen by 2015.• Consequently, sales would still be driven mainly by

exports and Greenfield until 2015.

Optimistic scenario: Y million EUR turnover by 2015:• Reaching access could be accelerated by XXX brand reputation

and track-record with GSCs. This could be the case with more ‘open’ OEM SGM.

• Players like Ford or Volvo might also not require complete homologation in China, which would reduce time for XXX to qualify to projects.

• Consequently, first domestic wins would happen starting in 2014.


JV with Partner 1: the JV could generate a total wheel trim sales of EUR XXX million, ~25% would be for export

12

2015

37-46

10-13

27-33

2011

~19

7ExportDomestic

InterChina interviews and analysis.

27-33

~90%

~10%

~20%10-13

~80%

• Competitor 1: projection of GM GSC’s volume plus possible further GM GSC penetration.

• XXX: Identified OEM GSCs (e.g., GM GSC, VW GSC) would be interested in sourcing from XXX if there’s a China operation.

• Product offering: BC only (mainly electroplating and aluminum foil).

• Pricing: JV partnership would probably stabilize the pricing at 2011 level.

to customers that XXX tangible assets:

12

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61


Case Study: What out-of-box strategy would take the advantage of aftermarket deregulation?

The Client• A global leading player in auto after-market

The Method• 90 primary interviews with key aftermarket

players, distributors, retailer etc.• Practically test partnership feasibility• Strategy workshop to align the key

stakeholders

The Problem• Our Client has 15-year experience in China’s

after-market• Given the maturing needs and the

deregulation of independent after-market, the Client would like to seek how to accelerate the growth in China

Solutions by InterChina• An innovative “platform” strategy by buying

into aftermarket distribution chain, which create unique advantages in the post-deregulation market in China…

• …with the partnership identification and evaluation

How to leverage the market deregulation opportunity for top-line growth?

We helped Client to identify the best-fit partners for the “platform” strategy

The de-regulation will shake up China’s after-market, and brings unique opportunities to our client

The in-depth insights along the value chain are also critical

For the shortlisted partners, the level of insights are at the pre-DD level

12

34

62


IAM Distribution Development: The shift is towards more complicated sales and wider geo. coverage, but faces challenges.

“Relations Play” Future Winners

“Future Stars Candidates”

The degree of proactive & value-added sales requiredTh

e co

vera

ge o

f typ

ical d

istrib

utor

s

1

“Reactive Model”

“Non-Exist” (?)

3

4

A

B

C

Limite

dMo

dera

te

Wide

r

Low Moderate High

The Development Of China’s IAM Distribution Market (In the past and future 10 years)

Future Challenges & Possible Solutions

Challenge B: Cross-Province Expansion • Lack of local relations and know-how.• Low-hanging fruits are gone with similar

offerings (service level, pricing, sales approach etc.).

• HR issues (trust vs HR cost).• Operation efficiency (DC, logistics etc.)

Challenge C: Proactive & Value-added Sales• How to add new workshops efficiently.• How to strength cross-selling.• How to increase the retention of the

existing workshops.• How to optimize the sales / operation (incl.

logistics, IT etc.) to meet the fragmented demand.

Possible Path 3• Cross-province expansion via M&A.• Strategic alliance and/or franchises (?). • Operation improvements.

Possible Path 4• Build value-added sales by organic

approaches and learning from other sectors.

• Sales innovations e.g. e-commerce. • Operation improvements.

Historical Movements – Slow shift to proactive model• Key Challenge A: To shift from reactive to proactive sales model, a

totally different system (sales team, sales approach, sales policy, financial management such as cash flow, operational management such as inventory management etc.) is required. Most distributors either didn’t have the right mentality or didn’t have the capability to deal with this challenge.

• Path 1: Most T1 distributors (mainly Makes Channel) added more T2 distributors to push the sales increase.

• Path 2: Some (e.g. Fenglian, Kanzhong) heavily invested in one-step channel with initial success.

1

A

2

C

B

34

3


Screening Result: 2 recommended & 4 backup companies

5

The Comparison Matrix Highlights

B

G

Company Capability

M

I

H

F

N

O L

D

C

Coop

erat

ion

Feas

ibilit

y E

A

J

K

Recommended companies

Backup companies

Discarded companies

The bubble size refers to the relative indication of thedistributor’s revenue in 2013 (The smallest bubble is ofXYZ at RMB 10+ million, and the largest bubble is ofxyz at RMB 250 million).

• No Super Star: In the underdeveloped IAMdistribution market, there are no strong-capability-strong-intention candidates.

• Diverse Geo. Locations: The 6 stand-out companiesare located in Shandong (2 companies), Henan, Hebei,Hangzhou and Liaoning. Some have a multi-provincepresence.

• Large-Scale Distributor’s Intention: 3 of the 6stand-out companies are large-scale (> RMB 100 mil)distributors and only interested in offering a minoritystake. If negotiations begin with a large-scale player,it might be worthwhile to probe the possibility of anearn-out scheme.

• Large-Scale vs Medium-Scale: The sales andoperation systems of the large-scale distributors arerelatively stronger than the medium-scale’s, partiallybecause the growth experience provided trial-and-error development opportunities.


Retail Structure is under shaping in China

Notes: Small players include grade III or non-grade workshops mainly.

150,000

70,000

20,000~30,0003,000~5,000

20,000~25,000

Type of retail stores

Typical maintenance service cost

Quick profiles Example

4S Store Mainly in T1and T2 cities.

• “4S” include both sales and repair function.• 4S stores have to apply for a license as any other maintenance and repair

shop would.• Due to their nature, they are normally “Grade I” or “Grade II” according to

the government classification system, which requires a high level ofinvestment.

International chainstore

Mainly in T1and T2 cities.

• Usually set up by component makers .• Components in store are usually from the player, the brand deputy of the

player is one of the largest attractiveness points for customers.• The store usually targets high-end customers who think highly of the service

quality.• It could provide quick maintenance service, usually in 1 hour.

Domesticchainstore

Mainly in T1T2, and T3cities.

• There are dozens of chain brands in the market at present. Large chain brandmight own 500~1,000 stores nationwide.

• Some stores are owned by chain brand, while some are franchised andowned by private store investors.

• The store could provide different kinds of services, such as quickmaintenance, decoration, or simple wash and clean.

Grade I /IIworkshop


• Part of them are authorized to perform maintenance and repair by theautomakers, but serve multiple car brands (not exclusive like the 4S stores);Most are independent and unauthorized by automakers.

• They are with good industry experience and certain brand image in theirregional aftermarket.

• Components sold in maintenance company are more reliable for customers.

Smallplayer*


• Usually they are not authorized by the automakers, but still have businessdue to their cost competitiveness, helped by their use of unofficial andcounterfeit parts.

• As they are small in scale, they are usually “Grade III” according to thegovernment classification system (only a small amount of investmentrequired), and not all are licensed.

• The charge is the lowest among all the types of stores, but componentsquality cannot be guaranteed.

6Source: InterChina Analysis


Short List – Recommended: Comparison Overview

7

Evaluation Parameters The Description For High Scoring Recommended

AA BB

Company Capability

Track Record and Business Model

• Revenue over RMB 100 million, with strongbrand portfolio;

• Majority of sales from proactive one-step model;• Stable growth rate >30%.

Sales Capability • Structured sales team with scalable size;• Well-developed sales management system, plus

KPI system;• Systematic planning of sales activities with strong

execution.Operation Capability

• Clearly defined operation department structurewith dedicated manager, scalable operationassets, and IT system; strong stock turnover rate.

Cooperation Feasibility

Management Team & Growth Plan

• Stable management team with enoughentrepreneurial spirit, and professionalmanagement system;

• Ambitious and well-designed business planwithout obvious red-flag issues.

Cooperation Intention and Synergy

• Serious consideration of M&A and realisticexpectations of ABC or other investors;

• Open to acquisition models, e.g. minority,majority, or full acquisition;

• Straightforward shareholding structure.

0 score Scoring Per Evaluation Framework (Slide 7 & 8) 5 score


Case Study: How to expand quickly in emerging road-side assistance segment in China

The Client• One of top 3 leading assistance providers in

the world

The Method• Structured and focused research, analysis, and

iterative approach with Client• >30 primary competitor, sales channel, service

provider IVs, including 15 Client joint visits• Systematic channel survey by 50 phone IVs

The Problem• Given the success in other assistance

business lines, the Client would like to accelerate the growth of its road-side assistance business in China

Solutions by InterChina• 7 recommended channels with prioritization

to focus with a B2B2C model allows the Client to reach a decent market share in five years

• Tailor-made service offering design in China

How could the Client deeply develop its China business?

7 sales channels should be prioritized with a robust forecasting model

A structured strategy development process with heavy involvement of the Client

Under this industry structure shift, the sales opportunities for automotive assistance are emerging with potential challenges

Tailor-made service offerings have been developed based on unmet needs and the Client’s competitive advantages


The Key Conclusions Deliverable is centered around channels and value propositions

Training in Europe

Development of Initial Value Propositions

Shortlist of Potential Sales Channels to

Interview

Joint Interview With The Client

•Demand collection•Testing value propositions•Sales opportunity

Action Plan for Specific Sales

Channels

Value Propositions to Various Sales

Channels

Segment of Sales Channels (Potential VS Less Potential)

Do Sales Channels Have Potential to

The Client in China?


China market overviewOpportunities emerging for AA players, but AA remains a challenging business

• Opportunities are emerging for AA players.

• But AA remains a challenging business.

Business Model*

• International players taking market share, but mainly fee-per-benefits model.• Creative models evident e.g. “setup fee + fee-per-benefits”, reflecting immature

market status.• Appears to be shifting away from B2C and towards B2B.• Business models and operation details (even contract terms) are likely

shared/copied among competitors.

1

Customer Base

• Car sales up 30% to 4 million in 2006 (imported car sales up 40% to 0.11 million).

• But still immature auto culture, with a low awareness of AA.

• High-end car owners are less price sensitive to value-added services such as AA.

2

Sales Channels

• AA becoming a standard element in a) after-sales service portfolio of high-end car OEMs/importers b) VIP services of banks (especially Platinum Cards).

• However, AA players have weak bargaining power over B2B sales channels.

• Winning sales channel contracts still requires time and effort, with no revenues before the first contract is won.

• Winning car importers, and some JV OEMS, requires the strong support of the headquarter/overseas operation. 3

Service Providers

• 4S shops are the best service provider network, and will continue to be strictly controlled by OEMs.

• Will be difficult to maintain service level standards with most other types of service providers.

• Difficult towing culture, especially in tier-2 and tier-3 cities.

• Some franchise repair shop (e.g. Bosch) could be a network option.4

* Fee-per-customer for Chang’an Ford, Subaru, VW (imported) & fee-per-benefits for BMW (imported and Chinese), and Benz (imported and Chinese) have been confirmed in interviews conducted by InterChina.


Quantified AA PerformanceThe annual revenue in 2010 is estimated at EUR XX million

The Forecasted ADDRESSABLE Market Scenario and Performance in 20XXI.1 Medium/ high-end OEM

• Market share in addressable market is 35%, while the forecasted revenue in 20XX is EUR XX million.

• Low AA penetration.• Not lagging behind the competitors too much.

I.2 Auto insurers’ branch

• 25% - EUR XX million.• Addressable market size is limited by low AA

penetration rate.• The large number of branches implies a less

competitive market.I.3Specialized auto insurer

• 40% - EUR XXmillion.• Limited number of companies as channels. It may

lead to the fluctuation in business performance.• Not lagging behind the competitors too much.

I.4Specialized bank card

• 30% - EUR XX million.• Limited number of companies as channels. It may

lead to the fluctuation in business performance.• Not lagging behind the competitors too much.

I.5Imported car brand

• 10% - EUR XX million.• Most penetrated channel.• Strong presence of competitors.

I.6Branded used car

• 30% - EUR XX million.• High risk sector in terms of high AA frequency.

I.7High-end bank card

• 10% - EUR XX million.• Limited market size with demanding sales channels.• Strong presence of ISOS.

Total • EUR XXXmillion of turnover in 20XX.• No prefect sales channel!

• The size of bubble indicates the Client’s market share in each sales channel (I.1 – I.7) in 2010.

The unit price in fee-per-customer model per channel (EUR per car per year)

The ADDRESSABLE market size of sales channel (unit:

cars)

0 5 10 15 20

I.2

I.1

I.3

I.6

I.5

I.4

I.7


Service Design (1/3)Economic package is almost a mini-version of premium package

PRECONDITIONS:• Scope of service.• AA period.• Who is qualified for AA.• Geographic coverage.• When AA is available.• Arrival time.• Information requested upon AA.• The guideline for payment.

EXCLUSIVITY CLAUSES:

• Conditions that AA is not necessary.

• Conditions that AA is not qualified.

BASIC SERVICES (I):

• On-spot repair.• Jump start.• Send fuel/empty fuel box.• Replace tyre.• Key service.

BASIC SERVICES (II):

• Towing service.• Winching.• Reimbursement of AA

expenditure if can’t provide AA in certain regions or certain periods.

OTHER SERVICES:

• Urgent message delivery service.• Information service (including

travel & medical care).• Alert service.

PREMIUM SERVICES:• Taxi.• TA.• Train/Flight (continuity of journey

to the planned destination or home address).

• Hotel.• Vehicle repatriation or pick-up

cost reimbursement.

Exactly the same.

Exactly the same.

Limited towing. No winching.Less amount of reimbursement.

Exactly the same.

Exactly the same.

Only taxi service with a shorter travel distance compared with premium package.

Premium package. The more the blocks, the more and higher level of service included.

Economic package. The more the blocks, the more and higher level of service included.

LEGEND

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Case Study: How to develop an effective sourcing system in China

The Client• An Italian T1 powertrain system and

driveline component maker (CV mainly)

The Method• Structured and focused research, and analysis• Systematically screen-down suppliers from 500

to 30• Received ~110 quotes from 20 suppliers and

most components have 3-9 quotes

The Problem• One of the global OEM client invited our

Client to have a new China plant for suspension systems, requiring the investment of EUR 20 mil, thereby a feasibility study on sourcing of suspension system components is required

Solutions by InterChina• Structured recommendation on what

suppliers to cooperate with• 15 recommended suppliers for 9 component

categories• Practical cost modelling is provided for final

decision-making

How to develop an effective sourcing solution in China?

Systematic analysis and verification of the collected quotes

Holistic overview of suspension supply chain models in China

Structured approach for component categories as the basis of systematic supplier screening process

Related investment issues are well analyzed and modelled, to complete the investment recommendation

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Component quotes from potential suppliers (4/4)

Part Name Part No. Processes Supplier Quotation in RMB per part 1

Machining Cost in RMB

Shipping & pka, RMB

Molding & tooling Cost

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Support 93803866 Forged + Machined

Shaoxing Jinjiang 88.03 50 2.8Yuhuan Zhenfen 40.17 Shanghai Yunliang 136.93 90 1.92 50k & 30k Cutting tool cost: 10k Zhejiang Qicheng 86.32 Ningbo Huasheng 75.88 30k molding Price based on 26k units Shandong Detai 82.65 Vol/price: 5k/87, 10k/84 Zhejiang Longhu 54.00 material: 40Cr

Support 93803866G Forged

Yuhuan Zhenfen 25.64

N/A

Shanghai Yunliang 60.01 1.92 50k Molding fee Zhejiang Qicheng 64.96 Shandong Detai 63.85 Vol/price: 5k/67, 10k/65 Nanjing Liju 44.36 1.2 30000 If vol.=20k, Mat: 25CrMo4

Lower tie rod 93822444 Forged

Shaoxing Jinjiang 29.06 1.2Yuhuan Zhenfen 19.66 Zhejiang Huabang 23.93^ 0.95 Use 40Cr, mold available Shanghai Yunliang 24.05 0.8 20k & 10k Cutting tool cost: 5k Zhejiang Qicheng 17.95 Nanjing Liju 15.57 0.5 12000 Price if vol.=26k Ningbo Huasheng 21.37 30k molding Price based on 26k units Shandong Detai 20.99 Vol/price: 5k/22, 10k/21 Hubei Hongbo 20.50 0.65 22380 If tooling initial cost: 14K

Upper tie rod 93809441 Forged

Shaoxing Jinjiang 46.15 1.5Yuhuan Zhenfen 19.66 Zhejiang Huabang 30.94^ 2.0 Use 40Cr, mold available Shanghai Yunliang 15.63 0.52 20k & 10k Cutting tool cost: 5k Zhejiang Qicheng 28.21 Nanjing Liju 33.42 0.70 15000 Price if vol.=26k Ningbo Huasheng 35.32 30k molding Price based on 26k units Shandong Detai 28.50 Vol/price: 5k/30, 10k/29 Hubei Hongbo 40.70 1.00 22380 If tooling initial cost: 14K

1Quotes include shipping & packaging, but exclude VAT unless otherwise specified*Quote with different process; **Very rough estimate; ^Quote with different material used; ^^Quote provided by supplier who couldn’t manufacture such component and purchase on behalf of client;! Replacement quote, OE price quote is very roughly 30% higher.

Source: InterChina Interview and Analysis


The expected plant investment may vary significantly,depending on choice of location and development zone

Development Zones Jiangning Liuhe Lishui

Distance to NAVECO Daily Prod. Plant 20 km 30-40 km 40-50 km

Cost of LandLand Cost per sqm (RMB)*

~950 –1,260 ~345 ~240

Total Land Cost (RMB, 10,000 sqm)

9,459,000 –12,600,000 3,450,000 2,400,000

Land Cost Rent (Unit Cost,RMB/sqm/month) 20 15 11-12

Total Land Cost Rent(Total Cost, RMB/month) 200,000 150,000 110,000 -

120,000Cost of Plant Construction

Cost of Plant Construction (Unit cost, RMB/sqm)

3,000 –4,000

1,500 -2,000

900 -1,200

Cost of Plant Construction (Total, RMB)**

30,000,000 –40,000,000

15,000,000 –20,000,000

9,000,000 –12,000,000

Total Cost of Plant InvestmentTotal Cost (RMB, Purchase)

39,000,000 –53,000,000

18,000,000 –23,000,000

11,000,000 –14,000,000

Total Cost (RMB, Rent for 10 years)** 24,000,000 18,000,000 13,200,000 –

14,400,000

NAVECO Production Plant

for Daily

Lishui

Jiangning

Liuhe

NAVECO Production Plant for Other Models

* Land costs are subject to local gov’t standards, which updated in 2012 and 2014. Each dev’t zone has different price levels and supporting policies that vary significantly.**Plant construction cost varies based on material used (steel or bricks), etc. ** The rent cost is based on estimation provided by dev’t zones, the lease period and price term is subject to each landlord. Typical lease contract period is 1-5 years.

Note: According to Jiangning Dev. Zone, it is possible that NAVECO’s Daily Plant could be relocated to its production base in Jiangning, where the company already has land reserved. However, we are not sure when they will move to new location at this point.



A rough sum-up of (as of now) collected quotes, simulating the cost for one suspension unit

The cost of suspension components based on request from ABC


• In general, a reduction of 3-5% on price could be achieved if further negotiate with the suppliers. But it is very much depend on the effort made by the procurement team, i.e. the more focus on a particular supplier, the more potential the price can be negotiated, as opposite, if less attention is paid to a particular supplier, the less possible the price will be lowered.

Component Type Units required

for 1 suspens.

Cost per components (RMB, Exclude VAT)

QuadTor QuadLeaf*

Lower control arm

Forged

2 75-100 n/a

Upper control arm 2 60-80 n/a

Stub axle 2 120-220 n/a

Support 2 50-80 n/a

Lower tie rod 2 20-30 n/a

Upper tie rod 2 30-40 n/a

Bearing hub

Casting

2 40-60 n/a

Wheel hub 2 100-150 n/a

Knuckle 2 n/a 120-200

Cross beamSheet Metal

1 500-700 n/a

Lower control arm 2 n/a 60-80

Upper control arm 2 n/a 50-70

Direct Buy Items n/a n/a n/a

Sum cost of required components 1,500-2,200


Suspensions are usually assembled in-house at the OEMs in China (i.e. Ford), or manufactured by suppliers that are OEM’s affiliates

Suspension Component Suppliers

OEM

OEM Specialized Suspension Suppliers

Suspension Component Suppliers

Major OEMs produce purchase components from tier 2 suppliers and assemble suspensions internally. Some components are also manufactured internally.

Whereas, some OEMs choose to use specialized suspension manufacturers, who purchase components, assemble and sell to OEMs

* Though OEMs may choose specialized suspension suppliers, they are usually affiliates of the OEM, e.g. Yuejin is subsidiary of SIAC and Hefei AAM is subsidiary of JAC.

Source: InterChina Expert Interviews

OEM’s in-house assembly line

Yuejin* Hefei AAM*DF Dana*


Index


21

345

65


Transaction Credentials: Automotive Sector

66


… plus InterChina/ CWI Transactions on the Auto side globally

67

Leading distributor of auto body parts to the independent aftermarket for car parts

Clearwater International advised the shareholders on the sale to Danish PE fund Capidea

KLOKKERHOLM KAROSSERIDELE

Largest Spanish manufacturer of vehicle interior components

Clearwater International advised the group on the acquisition of shares in Gong Zhu Lin Automotive Components

ANTOLIN GROUP AUTOMOTIVE

Leading producer of metal parts and components for the automotive sector

Clearwater International advised on the corporate restructuring of the company

INFUN GROUP

Specialists in design, engineering, testing and homologation services

Clearwater International advised the business on the acquisition of Shanghai EDI Automotive Technology

APPLUS IDIADA

Provider of testing and development equipment for the automotive industry

Clearwater International advised the sale of Mi Technology to CSA

Mi TECHNOLOGY

Development partner and original equipment supplier

Clearwater International advised on the company on the acquisition of Bengby Haoye Filter

MANN+HUMMEL GROUP

One of the biggest auto parts manufacturers in China

Clearwater International advised on the sale to Webasto

HEBEI NANFENG

Manufacturer of parts for the automotive industry

Clearwater International advised on the sale of Dongfeng Motor Parts and Components Group to Brose International

DONGFENG MOTOR PARTS AND COMPONENTS GROUP

Large integrated automotive component manufacturers

Clearwater International advised Amtek Auto Limited on the acquisition of ZelterGmbH

AMTEK AUTO LIMITED


Clearwater International advised Amtek on the Cross-border disposal of an automotive manufacturing business for the Triplex Components Group

AMTEK


Clearwater International advised management on the management buy out of Amtek from Triplex Components Group

AMTEK

Leading global automotive supplier

Clearwater International advised Ningbo JoysonElectronic Corporation on its acquisition of Key Safety Systems, a leading global supplier of advanced engineered safety products

JOYSON

Aluminium manufacturer for automotive and construction industries

Clearwater International advised F.W. BrökelmannAluminiumwerk on the sale to KNAUF INTERFER

BRÖKELMANN ALUMINIUMWERK

Provider of flow technology solutions for the automotive industry

Clearwater International advised Tristone Flowtech on the structuring of a credit facility for the Group entities and Holding

TRISTONE FLOWTECH

Car sharing service

Clearwater International advised Mainova and ABG FRANKFURT HOLDING on the acquisition of shares in book-n-drive

MAINOVA / ABG FRANKFURT

German provider of car rental services

Clearwater International advised Terstappen Car Rental Group on the sale of its car rental activities to Buchbinder

TERSTAPPEN CAR RENTAL

Financial holdings company

Clearwater International advised Vermögensverwaltung Erben Dr. Karl Goldschmidt on the acquisition of PMG from PLANSEE

DR. KARL GOLDSCHMIDT

Engineer of Joining Technology solutions

Clearwater International advised NORMA Group (Rasmussen GmbH and its subsidiaries) on the sale to 3i

NORMA GROUP

Automotive supplier and parts specialist for gear boxes

Clearwater International advised the shareholders of DK Automotive on the sale to Schmolz + Bickenbach

DK AUTOMOTIVE

Private equity firm

Clearwater International advised JH Automotive, a subsidiary of NORD Holding, on the sale of Heyform Bramsche and JH Automotive CZ to DUBAG

NORD HOLDING

German car rental company

Clearwater International advised Buchbinder on the assignment of the international Dollar and Thrifty Master License for Germany to Hertz

BUCHBINDER

Private equity firm

Clearwater International advised Deutsche Mittelstand Beteiligungen (DMB) on the sale of WEGU Leichtbausysteme to Anhui Zhongding Sealing Parts

DMB

Manufacturer of automotive parts

Clearwater International advised Prettl Group on the acquisition of GERDES Kunststoff-Technik

PRETTL GROUP

Manufacturer of automotive parts

Clearwater International advised the shareholders of PWG Profilrollen-Werkzeugbau on the sale to Neumann Group

PWG

Manufacturer of tools and parts for the automotive sector

Clearwater International advised the shareholders of MT Misslbeck Technologies on the sale to capiton

MT MISSLBECK TECHNOLOGIES

Provider of flow technology solutions for the automotive industry

Clearwater International advised Tristone Flowtech on the structuring of credit facilities for the branches based in Turkey, Poland and Czech Republic

TRISTONE FLOWTECH

Global automotive components and parts supplier

Clearwater International advised BorgWarner on the sale of Beru Electronics to Huf Electronics

BORGWARNER

Manufacturer of sintered parts for the automotive industry

Clearwater International advised PMG Group on the structuring of two term loans and a revolving credit facility with a tenor of 5 years

PMG GROUP

Engineer of Joining Technology solutions

Clearwater International advised NORMA Group on the acquisition of Breeze Industrial Products Corporation from Wind Point Partners

NORMA GROUP

Multi-award-winning, mobile navigation systems

Clearwater International advised the shareholder on the sale of United Navigation to DASQ Capital Partners

UNITED NAVIGATION

Insolvency administrator

Clearwater International advised Kroll, the administrators of automotive supplier T&N, on the sale of loan notes to Federal Mogul

KROLL

European leader in the light quadricycle market

Clearwater International advised Ardian and Norbert Dentressangle on the sale of Aixam Mega group to Polaris Industries

AIXAM

Trailers & Transport equipment solutions for specialist applications

Clearwater International advised the shareholders of King Vehicle Engineering Ltd on its sale to HW Martin Holdings Ltd

KING VEHICLE ENGINEERING LTD

Leading provider of automated payment processes for several mobility related services

Clearwater International advised the shareholders of Mobile City on the sale of the company to EasyPark

MOBILE CITY

One of Europe’s leading wholesalers and distributors of industrial tyres and wheels

Clearwater International advised the owners of STARCO in the divestment of major parts of their aftermarket business to German Bohnenkamp

STARCO

German machining specialist for automotive lightweight components

Clearwater International advised the shareholder of FINOBA Group on the sale of the company to AE Industry, a subsidiary of SINOMACH Group

FINOBA

Automotive components manufacturer

Clearwater International has advised the management team of Grupo Sunviauto on the MBO backed by the private equity firm Oxy Capital.

GRUPO SUNVIAUTO


Founded in 1997, Faurecia has grown to become a major player in the global automotive industry. A leader in its three areas of business, the Group is backed by a R&D and production network with sites in 35 countries. It is the preferred partner of the world's largest automakers, which value its operational excellence and technological expertise.

Jiangxi Coagent Electronics is a private Chinese company specialized in infotainment and interior electronic solutions, including the integration of digital displays and HMI technologies. The company employs 1,300 people including more than 300 engineers. Jiangxi CoagentElectronics is based in Foshan for its Research and Development activities and in Jiangxi Province for its industrial production. The company is a supplier to leading Chinese automotive manufacturers and is seeing a strong growth in sales, which reached 148 million euros in 2016 and will rise to 270 million euros by 2019.

InterChina served as one of Faurecia’s Investment Banking advisors in this transaction. Our Role in this transaction was focused on identification of the target and shareholder negotiations.

Some of our Automotive Transactions: Faurecia takes majority share in Chinese infotainment leader Jiangxi Coagent Electronics

Transaction

Transaction: Control AcquisitionDeal value: RMB1.45 billionDate: July， 2017

Faurecia announced on 19th July, 2017 that it had taken a majority share in the Chinese company Jiangxi CoagentElectronics for a total investment of 1.45 billion RMB (193 million euros).

68


Ningbo Joyson Electronic Corporation (SSE:600699) is a leading global automotive supplier headquartered in Ningbo, China with group company facilities in China, Germany, Mexico, Poland, Portugal, Romania, and the United States. The company develops and supplies high quality products and systems in the climate control, driver control, electronic control, industrial automated assembly, sensor, and specialty sectors

Key Safety Systems (KSS) is a global leader in the system integration and performance of safety-critical components to the automotive and non-automotive markets serving the active safety, passive safety and specialty product sectors. Through highly specialized design, development, and manufacturing, KSS’ technology is featured in more than 300 vehicle models produced by over 60 well-diversified customers worldwide. KSS is headquartered in Sterling Heights, Michigan, with a global network of 32 sales, engineering, and manufacturing facilities

Joyson Acquired 100% Of Key Safety Systems

InterChina Involvement

InterChina served as Joyson’s advisor and provided comprehensive transaction advice

Advisory included initial valuation, deal structure, negotiation support, definitive agreements, and transaction process management

Transaction

Transaction: 100% acquisitionDeal value: USD 1.5 billionDate: February, 2016

Joyson entered into a definitive agreement to acquire the outstanding shares of KSS in a transaction valued at approx. USD 1.5 bn on an enterprise value basis. The combination will create a global leader in the automotive supplier business with pro forma combined worldwide sales of approx. USD 3 bn and 20,000 employees

69


Founded in 1901, Webasto AG is the global leader of automotive roof and thermo systems. Its thermo business has covered worldwide markets, taking leading positions. Webasto entered China in 2001, and is currently focusing on the high-end passenger vehicle segment

Hebei Nanfeng Automotive System Group is the market leader of automotive thermal system in China. And it has also successfully expanded to North Asia market via export. It has dominant position in the bus segment in China and is also developing well the truck segment

Webasto Purchased Majority Stake Of Hebei Nanfeng

Transaction

Transaction: AcquisitionDeal value: USD 30 millionDate: March, 2015

Webasto and the shareholders of Nanfeng have agreed on a transfer of a majority stake of Nanfeng to Webasto. Parties all acknowledge that the transaction will not only give Webasto an immediate lead in the China market but also enhance its leading position in the global market, mainly including Russia and Korea


InterChina served as Webasto’s advisor and provided comprehensive transaction advice

Advisory included company valuation, key terms and definitive agreements, and transaction process management

70


Maier S. Corp is a member of Mondragon, an industrial conglomerate group based in Basque Country, Spain. Maier is one of the global leaders in plating and painting process of automotive plastic trim products, and has extensive business relationship with major automotive OEMs worldwide

Ningbo Huakai and Hubei Huakai are two companies (collectively “Huakai”) from Ningbo Huade Holding Group, a private industrial group controlled by a group of family entrepreneurs from the Ningbo region. Huakai focuses on plastic based automotive components such as trims, door handlers, etc.

Maier & Huakai Formed 2 Joint Ventures In China

Transaction

Transaction: Joint VentureDeal value: USD 30 millionDate: March, 2016

Maier and the owners of Huakai have agreed to establish two brown-field joint venture companies in Cixi and Wuhan for the production and sale of automotive plastic trim products. Parties believe that the combination of Huakai’s local commercial capabilities and Maier’s production and technical expertise will make the joint ventures the leading force of automotive plastic trim market in China and potentially in Asia as well


InterChina served as Maier’s advisor and provided comprehensive transaction advice

Advisory included key terms (MOU) and definitive agreements, and transaction process management

71


Brose International is the 5th largest family-owned automotive component producer, and is a global leader of automotive door systems. It previously acquired the automotive motor business from Siemens and became a major player in this sector. Brose has an extensive business in China, owning several WOFEs and JVs for automotive motor, door as well as seat products

Dongfeng Motor Parts and Components Group (DFPC) is a member of Dongfeng Group. It is one of the largest automotive component producers jointly owned by Dongfeng and Nissan in China. Before the transaction, DFPC and Brose used to have a 40%-60% joint venture, Shanghai Brose Motor, which is the leader of automotive electronic motors in domestic market

Brose Restructured Its JV With Dongfeng

Transaction

Transaction: Joint ventureDeal value: USD 300 millionDate: April, 2015

Brose and DFPC have agreed to form a new joint venture focusing on automotive door and seat systems to replace their previous joint venture, which produces on electronic motors, and which Brose has converted into a WOFE. Both companies believed this restructuring will optimize the strategic value of each joint venture partner and give the new joint venture a strong position in central China market


InterChina served as Brose’s advisor and provided comprehensive transaction advice

Advisory included company valuation, transaction structure and tax planning, terms and definitive agreements, and transaction process management

72


MANN+HUMMEL has more than 50 locations worldwide, employing around 14,400 people and recording about EUR 2.5 billion sales in 2011. MANN+HUMMEL offered leading filtration technology to both automotive and industrial OE and aftermarket customers in China since 1996. In the independent aftermarket, the filtration specialist meets the customer’s requirements through the premium MANN-FILTER brand products with clearly defined OE specification

For more than 16 years, Bengbu Haoye Filter Company has specialized in supplying various types of filters primarily to the automotive aftermarket. In 2011 the company generated a turnover of around EUR 13 million and employs more than 500 people

MANN+HUMMEL Acquired 100% Of Bengbu Haoye Filter

Transaction

Transaction: 100% acquisitionDeal value: UndisclosedDate: August, 2012

MANN+HUMMEL signed an agreement with Bengbu Haoye Filter Co., Ltd to take over 100% of the filter manufacturer based in the “China Filter City” – Bengbu, Anhui Province. The acquisition of Bengbu Haoye is a logical step in the MANN+HUMMEL expansion strategy in China. A local well-known brand with focus on domestic applications together with an extended product range and well developed distribution network offers a good strategic fit to the established MANN-FILTER footprint in China


InterChina served as MANN+HUMMEL’s advisor and provided comprehensive transaction advice

Advisory included initial target evaluation, deal structure, valuation, negotiation of non-binding terms and definitive agreements, and transaction process management

73

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Applus+ provides solutions for clients in all types of sectors to ensure that their assets and products meet environmental, quality, health and safety standards and regulations. The company employs 17,000 with annual turnover of EUR 1.2 billion in 2011. Applus+ has been part of the portfolio of companies in The Carlyle Group since 2007. Applus+ Idiada specializes in providing design, engineering, testing and homologation services to the automotive industry worldwide. They have an international team of more than 1,500 engineers and technical experts. Also an international network of subsidiaries and branch offices in 20 countries

Since 2004, Shanghai EDI Automotive Technology, Co., Ltd. has provided their clients with solutions in automotive engineering and design. Their service includes: Project plan book, program organization, timing/plan management, budget/cost management, risk evaluation & management, program review & open issues management, change control, supplier integration

Idiada Acquired 100% Of Shanghai EDI Automotive

Transaction

Transaction: 100% acquisitionDeal value: UndisclosedDate: December, 2012

Idiada has successfully closed a transaction to purchase 100% of Shanghai EDI Automotive Technology in December, 2012. Through the acquisition, IDIADA can greatly enhance its automotive design and engineering capacity globally and offer its clients one-stop service through the whole automotive development process from the concept design, styling to the testing and homologations. The acquisition also offers IDIADA good access to China’s local automotive manufacturers


InterChina served as Applus+ Idiada’s advisor and provided comprehensive transaction advice

Advisory included initial target evaluation, deal structure, valuation, negotiation of non-binding terms and definitive agreements, and transaction process management

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