Automobile Industry China

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Market Analysis Report: China’s Automotive Industry
Presented to: Israel Export & International Cooperation Institute November 2010

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China’s Automotive Sector - Prepared for IEICI Updated November 2010 (Original April 2009)

Table of Contents EXECUTIVE S UMMARY ---------------------------------------------------------------------------------- 3 1. 1.1 1.2 1.3

MARKET OVERVIEW ------------------------------------------------------------------------------ 4 General Overview Market Structure Emerging Industry Trends 4 8 10

2. REGULATORY OVERVIEW ------------------------------------------------------------------------ 14 2.1 2.2 2.3 Foreign Access to the Chinese Automotive Market Automobile Emissions Standards Automotive Industry Policies 15 16 17

3.
3.1 3.2

MARKET OPPORTUNITIES ------------------------------------------------------------------ 18 Current Opportunities Key Industry Events 19 23

APPENDIX I: LOCATION OF MAJOR AUTOMOTIVE INDUSTRY CLUSTERS IN CHINA -- 25 APPENDIX II: MAP OF CHINA ------------------------------------------------------------------------ 26 APPENDIX III: ACRONYMS --------------------------------------------------------------------------- 27

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China’s Automotive Sector - Prepared for IEICI Updated November 2010 (Original April 2009)

EXECUTIVE SUMMARY
 China became the world’s largest automobile producer and market in 2009 with annual sales of nearly 14 million vehicles. The market continues to expand in 2010. In the first nine months of 2010, automobile production reached 13.08 million units, a 36.1 percent increase from a year ago. The China Association of Automobile Manufacturers (CAAM) raised its forecast for annual sales to reach a record 17 million this year, matching the highest annual total ever reached in the United States. Industry growth has been primarily driven by rising domestic demand stemming from rising incomes, a growing middle class, and by supportive industry policies from the Chinese government. The Chinese automotive industry remains very fragmented. In addition, Chinese central government officials fear that unchecked expansion of China's auto industry encouraged by local authorities could harm the wider economy, and that excess capacity must be stopped. Hence, the central government continues to push for mergers and acquisitions (M&A) in the automotive industry which will support the emergence of a few leading national companies. China’s weak R&D, domestic innovation and design capabilities are key challenges to its international competitiveness. With the government’s encouragement, domestic firms have opted for strategic partnerships with foreign players, aiming to facilitate technology transfer and improve domestic design and engineering capabilities. The Chinese government has implemented a number of tax adjustments and subsidies for automobile purchases to encourage hybrid electric vehicles, pure electric vehicles and traditional vehicles of small engine displacement. Beijing has gradually introduced higher automobile emission standards for new vehicles. Plans to develop hybrid electric and pure electric vehicle production capabilities are part of a broader, environmentally friendly strategy to develop the auto industry. Market opportunities exist especially in the following areas: o Developing domestic innovation capabilities (e.g. vehicle design and engineering, hybrid electric and pure electric engines, electric motors and electric controls) o Productivity and quality upgrade (e.g. engines, transmissions, electronic control systems and safety systems) o Mergers and acquisitions (both in China and in Israel) o Clean transportation technologies 3 China’s Automotive Sector - Prepared for IEICI Updated November 2010 (Original April 2009)













o Advanced manufacturing technologies o Supply of essential automotive components/systems to OEMs (e.g. electronic control systems and safety systems)  The following...
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