Annual Report 2019

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Annual Report 2019 0610_2019©M��≠^§��~�‾��≠±ΩT�{.pdf 1 2020/6/10 下午1:18 Hotai Motor annual report is available at: Company website: http://pressroom.hotaimotor.tw/zh/ Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw Stock code: 2207 Published on May 31, 2020 HOTAI MOTOR CO., LTD. Annual Report 2019 (For the convenience of readers and for information purposes only, the annual report has been translated into English from the original Chinese-language version prepared and used in the Republic of China. In the event of any discrepancy between the English and Chinese versions, or if there are any differences in interpretation between the two versions, the original Chinese version shall prevail.) C M Y CM MY CY CMY K 8-14F, No. 121, Sung Chiang Rd., Taipei, Taiwan, R.O.C. TEL:(02)2506-2121 / FAX:(02)2504-1749 www.hotaimotor.com.tw TABLE OF CONTENTS I. Letter to Shareholders 002 1. Operating Performance in 2019 005 2. Outline of 2020 Business Plan 006 3. Future Development Strategies 008 4. Impact of External Competition, Regulatory Environment and Overall Operational 009 Environment II. Corporate Overview 011 1. Incorporation 012 2. Company Timeline 012 III. Corporate Governance 019 1. Organization Structure 020 2. Directors, President, Vice Presidents, Chief Officer and Department and Divisional 023 Executive Officers 3. Corporate Governance 048 4. Audit Fees 091 5. Disclosure of Change of Auditors 092 6. Disclosure of the Company’s chairman, president, chief financial officer or chief 092 accounting officer who has held a position at the Company’s independent certified public accounting firm or its affiliates within the last year 7. Changes in Shareholding of Directors, Executive Officers, and Major Shareholders 093 8. Relationship among Top 10 Shareholders 095 9. Share Ownership in Affiliates 096 IV. Capital Overview 097 1. Capital and Shares 098 2. Corporate Bonds 105 3. Preferred Stocks 105 4. Global Depository Receipts 105 5. Employee Stock Options 105 6. Employee Restricted Stocks 105 7. Issuance of New Shares in Connection with Mergers and Acquisitions or in 105 Exchange for the Shares of another Company 8. Financing Plans and Implementation 106 V. Operational Highlights 107 1. Business Activities 108 2. Market and Sales Overview 112 3. Key Statistics of Group Employees for the last Two Years and as of the Date of the 120 Annual Report 4. Environmental Costs 121 5. Labor Relations 121 6. Material Agreements 125 TABLE OF CONTENTS VI. Financial Information 126 1. Condensed Balance Sheet and Statement of Comprehensive Income for the Last 127 Five Years 2. Financial Analysis for the Last Five Years 132 3. The Audit Committee report regarding the most recent annual financial report 135 4. Consolidated financial statements and report of independent accountants 137 5. Parent company only financial statements and report of independent 272 accountants 6. Any cash flow difficulties with the Company and its affiliates during the most 359 recent year and as of the date of the Annual Report VII. Financial Status, Operating Results and Risk Management 360 1. Financial Condition 361 2. Financial Performance 362 3. Cash Flows 363 4. Major Capital Expenditures and Impact on Financial Condition 364 5. Investment Policy of the Latest Fiscal Year, Reasons for Gains or Losses, 366 Improvements and Investment Plan for the Coming Year 6. Risk Factors Provide Evaluations and Analysis of the Following Items over the Latest 367 Fiscal Year and as of the Date of the Annual Report 7. Other Material Disclosures 369 VIII. Specific Notes 370 1. Subsidiaries 371 2. Private placement of securities in the most recent fiscal year and as of the date 384 of the Annual Report 3. Shareholding or disposition of shares of the Company by any subsidiaries in the 384 most recent fiscal year and as of the date of the Annual Report 4. Other required disclosures 384 ⣠˚凛傈㝘⠘␱㛟 Letter to Shareholders I. Letter to Shareholders 2019 Operational Highlights In 2019, Taiwan’s investment, exports, and consumption were all better than expected, and the domestic economy benefited from the trend of homecoming Taiwanese enterprises and the rooting of the high-level semiconductor manufacturing processes in Taiwan; the domestic economy showed a “steady growth”. The annual growth rate last year was at 2.71%, up by 0.08 percentage points compared to 2.63% in 2018, and the total sales in the automotive market reached 439,834 units, an increase from the previous year, mainly attributed to factors such as the sunset of the subsidy policy by giving trade-ins in excise taxes, the successive launch of new automobile models by various brands and increased sales promotion, and the early lunar new year, all of which fueled the sales number of cars throughout the year. From a market structure perspective, the number of new model imported cars increased in 2019 compared to 2018, hitting 49.6% of the market share and continued to cause pressure on domestic vehicles. As imported vehicles market and luxury brands continued to dominate and consumer preference shifted, Hotai introduced all new car models in 2019, TOYOTA HILUX, SUPRA, YARIS Crossover, and LEXUS UX250h, LM, and redesigned models, including TOYOTA PRIUS, RAV4, ALTIS, PRIUS PHV, SIENTA, C-HR and, LEXUS RC, RC F, RX with the support of Toyota Motor Corporation, the parent company. Our annual sales performance was far better than expected. By the joint effort of our passenger car and commercial vehicle dealers, the total number of registered vehicles in 2019 was 149,297 units,, which accounted for 33.9% of the market share, putting us at the top among automakers in Taiwan in 18 consecutive years. In addition, TOYOTA ALTIS and RAV4 continue to be the winners in domestic-made and imported vehicles respectively. LEXUS had 22,295 units of registered vehicles which created a new record, and HINO’s full-size commercial vehicle sales ranked top of the market for 10 consecutive years, both were a startling record in automotive sales. Since the establishment of the Company, it has accumulated extensive experience in product planning, marketing and customer service, and has continued to grow steadily and invested in diversified operations. In addition to our core business – vehicle sales and services, the Company has proactively expanded the value chain to involve other automobile-related business, and is well- positioned to drive continuous innovation and growth. For example, “Hotai Finance Co., Ltd.”, a company with growing revenues and profits that offers a broad range of financing services across the Taiwan Strait, remained the top-ranked company in the automotive installment market last year. It was successfully listed on the stock market in the fourth quarter of 2019. Since then, it has proactively expanded the two billion-markets of commercial vehicles and scooters, and the equipment financing leasing business, pursued the continuous growth of the overall business of installment and leasing across the Taiwan Strait. Hotai Leasing Co. rides along with the rise and development of sharing economy, and actively promotes “Mobility-as-a-Service” and “Resource Sharing”, and its subsidiary, Hoing Mobility Service Co., Ltd., specializes in short-term rentals with the goal to become the top brand that provides real-time integrated mobility services. CarMax Co., Ltd., a professional car accessories provider, was joined by TCD (formerly known as J-TACS) to develop businesses in mainland China, expanded offices around the world, and continued to impress with high profits while competing for a spot in the global supply chain of automakers. “Hotai Cyber Connection” tapped into e-commerce and continues to grow. “Hotai Insurance Co., Ltd.” realizes the I. Letter to Shareholders industry vertical integration, provides the one-stop premium car insurance service to the customers, and strides to the goal of becoming a billion-premium-income enterprise by adhering to the innovative spirit. Apart from the above businesses, the Company invests in the transport and logistics sector as well, integrating and optimizing Group logistics and expanding business operations. The Group began investing in Toyota China since 1997 and it has been more than 20 years now. The Company’s China operation headquarters, Hotong Motor Investment Co., Ltd., has established the operation system that integrates resources, reduced the Group’s operating costs, increased the overall competitive advantage of the Group, and continued to expand the business scope in China. Although the China automotive market in 2019 was affected by factors such as the China-US trade war, the change of vehicle emission standards, and the gradual withdrawal of new energy vehicle subsidies, and thus the total market sales decreased by 8.2% to 25.77 million units from the previous year, Hotai’s recognized revenue in mainland China has reached a record high of NT$ 878 million, benefited from the growth of the Japanese car sales. 2020 Business Outlook Due to the alleviation of the US-China trade tensions and the increase of private consumption momentum, even though influenced by the outbreak of coronavirus at the beginning of this year, the growth of the automotive market is expected to increase up to around 450,000 units than which in last year as the policy which gives new car buyers with trade-ins in excise taxes ends in this year. The Company continues to pursue the diversification of products, trendization of the brand, integritization of the organization, intelligization of the sales, and customization of the service. Through the five evolutions, the Company can provide products and services far beyond the customers’ expectations and reinforce the Group value in order to achieve new sales records in the passenger car for the 19th consecutive year and become the new top-notch in commercial vehicle segments. While pursuing sales growth, we also work towards enhancing the “Happiness at TOYOTA” experience and offers a healthy and energetic workplace for our employees.
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