The New Normal

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The New Normal

Coronavirus Impact on China Car Industry

Alan Kang, Senior Market Analyst The Global Light Vehicle Outlook Briefing October 22, 2020

. COVID-19 Impact to Marco Economy . Passenger Car Market Overview . Market Dynamics: Sales Distribution, Brand Origins and Segments . Outlook

© 2020 LMC Automotive Limited, All Rights Reserved. China Still Under the Risk of a Second COV-19 Wave . China is ahead of the world from a recovery perspective but the risk of second wave of COV-19 is still high

. In May, a small scale of outbreak in Jilin province.

. In June, an outbreak of COVID-19 occurred in Beijing. Xinjiang th . In July 16 , cases restarted in Xinjiang province. Qingdao . In October 12th, new cases raised in Shandong province.

120 Xinjiang New cases 100 (July-August) 80 Jilin Beijing (May) (June-July) 60 40 Shandong 20 (October) 0 09/05/2020 11/05/2020 13/05/2020 15/05/2020 17/05/2020 19/05/2020 21/05/2020 23/05/2020 25/05/2020 09/06/2020 11/06/2020 13/06/2020 15/06/2020 17/06/2020 19/06/2020 21/06/2020 23/06/2020 25/06/2020 27/06/2020 29/06/2020 01/07/2020 03/07/2020 05/07/2020 07/07/2020 09/07/2020 11/07/2020 13/07/2020 15/07/2020 17/07/2020 19/07/2020 21/07/2020 23/07/2020 25/07/2020 02/08/2020 04/08/2020 06/08/2020 08/08/2020 10/08/2020 12/08/2020 14/08/2020 01/10/2020 13/10/2020 27/07/20203 29/07/20205 31/07/20207 16/08/20202

(bn RMB) GDP (bn RMB) Total retail sales of consumer goods 30,000 10% 80,000 2019 2020 YoY 10% 2019 2020 YoY 60,000 4.9% 5% 3.2% 0.70% 20,000 0.9% 0% 40,000 0% -3.1% -7.20% 20,000 -5% 10,000 -10% -6.8% 0 -10% 0 -19.0% -20% Q1 Q2 Q3 Q1-Q3 Q1 Q2 Q3 Q1-Q3

(bn USD) Export (bn RMB) National fixed asset investment (excluding farmers) 50,000 15% 2,000 2019 2020 YoY 20% 2019 2020 YoY 10% 40,000 8.8% 1,500 8.9% 10% 4.6% 5% 30,000 0.80% 0% 1,000 0.2% -0.8% 0% 20,000 -5% 500 -10% -10% -13.3% 10,000 -16.1% -15% 0 -20% 0 -20% Q1 Q2 Q3 Q1-Q3 Q1 Q2 Q3 Q1-Q3 © 2020 LMC Automotive Limited, All Rights Reserved. 4 Exports Show Surprising Surge as Global Economy Reopens

. China exports surged 9.9% in Sep despite Trump’s “tech grenade” and strong RMB appreciation. RMB VS USD . Surge is powered by demands for lockdown goods overseas (medical supplies, electronics and work-from-home equipment. Supply chain disruption in India/Asean regions also shifted overseas orders back to China.

. Strong recovery of exports sectors boosted consumer confidence in coaster regions where the local economy more open to foreign trade

China Export 9.5% 9.9% 10% 7.2% 5% 3.5% 0.5% 0% -0.8% -2.3% -5% -3.3% -4.1% -6.2% -10% -6.6% -7.7% -9.0% -13.3% -15% -17.2% YoY Ytd YoY -20% 202001-02 202003 202004 202005 202006 202007 202008 202009 © 2020 LMC Automotive Limited, All Rights Reserved. 5 Consumer Confidence Improved But Still Weak

 Income confidence was improving slightly in Q2 and Q3, but still in a low level

Income Sentiment and Income Confidence index Residents' willingness to consume, save and invest

Jan-Jun 2020 YoY (in nominal terms ) YoY (in real terms) Per capita disposable personal income(RMB) 15,666 2.4% -1.3% Per capita consumer spending (RMB) 9,718 -5.9% -9.3% Gap(RMB) 5,948 Source: NBS

. COVID-19 Impact to Marco Economy

. Passenger Car Market Overview . Market Dynamics: Sales Distribution, Brand Origins and Segments . Outlook

CHINA PASSENGER VEHICLE SALES (CAAM WHOLESALES) Sales Volumes Sales YoY Growth Downswing Tax Cut Stimulus Payback COVID-19 8 31% 40% 7 30% 20% 18% 14% 15% 20% 6 15% 13%12% 9% 6% 7% 8% 10% 3% 4% 4% 2% 10% 5 0% 0% 0% -2% -8% -6% 0% 4 -15%-14%-14% -10% 3 -20% In In units million Pre-buy effect: 4˜5 million extra 2 car sales estimated during the -30% 1 period -45% -40% - -50%

Source: LMC Automotive; CAAM Wholesales © 2019 LMC Automotive Limited, All Rights Reserved. 9 Retail Sales Followed the Wholesales Pace Tightly  Gap between Wholesales and Retails stood at only 124,000 units in first 9 months, suggesting that newly added inventory level remained at low level

MONTHLY RETAIL SALES V.S WHOLESALES (2015 – SEP 2020)

Registration Wholesales 3.5 50% purchase tax cut 25% purchase tax cut 0.8 million gap: 3 4% of 2015 retail 0.48million gap: 0.68 million gap: 1.4 million gap: 82,408 gap 0.4% of 2019 retail sales 2% of 2016 retail 3% of 2017 retail 7% of 2018 retail 124k gap 2.5 sales sales sales sales Ytd Sep. In Million Units 2

1.5

0.5

0 201501 201502 201503 201504 201505 201506 201507 201508 201509 201510 201511 201512 201601 201602 201603 201604 201605 201606 201607 201608 201609 201610 201611 201612 201701 201702 201703 201704 201705 201706 201707 201708 201709 201710 201711 201712 201801 201802 201803 201804 201805 201806 201807 201808 201809 201810 201811 201812 201901 201902 201903 201904 201905 201906 201907 201908 201909 201910 201911 201912 202001 202002 202003 202004 202005 202006 202007 202008 202009

Source: LMC Automotive; CAAM Wholesales (exports are removed from 2018) ; Vehicle Registrations (2016 onwards: Insurance Data) © 2019 LMC Automotive Limited, All Rights Reserved. 10 Matthew Effect Appears in China Car Market

Market Concentration ( 105 active brands in the market in 2020) 100%

90.7% 89.3% Top 30 90% 88.4% 87.2% 87.9%

80.5% 80% 78.7% Top 20 75.4% 75.3% 76.1%

70%

60.6% Top 10 60% 56.3% 53.2% 50.9% 52.1% 50% 2016 2017 2018 2019 2020 YTD May

40% (0.6%, 162.9%) Brand Share & Growth in China

20%

0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0%

-20% Average -13% (12.9%, -19.2%)

-40% YTD Growth

-60%

-80%

-100% Market Share (Ytd Sep 2020)

Segment Ytd Sep 2019 Ytd Sep 2020 YoY Growth 9 0% 8 -7% -5%

In Million Units 7 -10% 6 -15% 5 -15%

4 -20% 3 -25% 2 -30% 1 -33% 0 -35% Car MPV SUV Source: LMC Automotive; CAAM Wholesales

Sales Volumes Sales Growth 30.0 60.0% 50.0% 25.0 47.4% 40.0% 20.0 36.0% 30.0% 15.0 20.0% 19.0% 16.7% 9.8% 12.2% 12.9% 10.0% 10.0 8.3% 9.5% 8.1% 5.9% In million units million In 4.6% 4.8% 3.8%3.3% 2.4% 0.0% 5.0 -3.9% -8.9%-8.6% -10.0% - -20.0%

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China NEV market status

Lancy Zhang, Powertrain and NEV LMC Webinar 22nd October, 2020

• Key Policy Review

• NEV Market Status

• Outlook

© 2020 LMC Automotive Limited, All Rights Reserved. 17 Subsidy decreased in the following years . Subsidy will extend to 2022, but the amount will decrease slightly 0,000 RMB 6 2017 2018 2019 2020 2021F 2022F 1.4 2017 2018 2019 1.2 5 1 4 0.8 3 0.6

2 0.4

1 0.2

0 0 PHEV ≥50 100 - 150 150 - 200 200 - 250 250 - 300 300 - 400 ≥ 400 90 - 105 105 - 125 125 - 140 140 - 160 ≥ 160 BEV Range (Km) Energy Density (Wh/Kg)

Battery- Purchase Swapped Note: Tax Free - 23rd Apr to 22nd Jul 2020 is the Year 2020 2021 2022 Vehicles interim period

Decrease 300,000 - subsidy only available for 10% 20% 30% vehicle’s price below 300,000 (base of 2019) RMB RMB, except for battery- swapped vehicles © 2020 LMC Automotive Limited, All Rights Reserved. 18 Local Government support NEV market . Local governments offer some incentives on NEV since COVID-19 outbreak

25.03.2020/Beijing: 27.05.2020/Shaanxi: 10,000RMB per vehicle 6,000RMB per vehicle Add 20,000NEV car plates

09.04.2020/Ningbo: 10,000RMB per vehicle

23.04.2020/Shanghai: 5,000RMB for charging fee

03.03.2020/Guangzhou: 10,000RMB per vehicle 09.04.2020/Shenzhen: 08.05.2020/Hainan: 10,000RMB per vehicle 10,000RMB per vehicle

. b) Standard credit per vehicle is declined

. c) New concept, LFC, is proposed previous new Year 2018 2019 2020 2021 2022 2023 required quota 8% 10% 12% 14% 16% 18%

BEV 0.012*R+0.8 0.0056*R+0.4

Standard credit per vehicle PHEV 2.0 1.6

FCEV 0.16*P 0.08*P

Low Fuel Consumption (LFC) Vehicle - 0.5 0.3 0.2

2017 2018 2019

Geely SAIC SAIC SAIC Geely GAC FAW-VW Brilliance BWM Brilliance BWM Brilliance BWM GAC-Toyota GAC-Toyota SGM FAW-VW Great Wall FAW-Toyota FAW-Toyota FAW-Toyota SVW SVW Geely GAC-Toyota Great Wall GAC-Honda Beijing-Benz Beijing-Benz DF-Honda DF-Honda DF-Honda SVW GAC-Honda GAC Beijing-Benz GAC GAC-Honda FAW-VW Great Wall SGM SGM

Positive credit: Actual value < standard value Data source: MIIT LMC Automotive © 2020 LMC Automotive Limited, All Rights Reserved. 21 NEV credit performance . NEV credit is surplus， but will decrease sharply under new regulation NEV credit per vehicle Actual NEV quota 4.20 4.10 22.8% units 3.60 20.2% 3.00 2.90 16.5%

2020 target 12% 6.8% 4.1%

2016 2017 2018 2019 2020 (Jan-Aug) 2016 2017 2018 20192020 (Jan-Aug)

units under previous policy under new policy 8

0 Tesla Model3 standard BYD Han Luxury NIO ES8 2020 415KM NIO ES6 2020 430KM Trumpchi Aion S Buick Velite6 range performance © 2020 LMC Automotive Limited, All Rights Reserved. 22 NEV market saw 29% decline in Q2 . Q2 market improved greatly from Q1, but demand was still at a low level 180 500% 160 400% 140 -24.0% 28.7% Thousands 120 -30.8% 300% 23% EREV 100 -32.4% -47.0% -45.7% 200% 80 PHEV 60 -71.9% 100% BEV 40 0% YoY 20 0 -100% Jul-18 Jul-19 Jul-20 Jan-18 Jan-19 Jan-20 Jun-18 Jun-19 Jun-20 Oct-18 Oct-19 Apr-18 Apr-19 Apr-20 Feb-18 Sep-18 Feb-19 Sep-19 Feb-20 Dec-18 Dec-19 Aug-18 Aug-19 Aug-20 Nov-18 Nov-19 Mar-18 Mar-19 Mar-20 May-18 May-19 May-20 180 160 140 120 2017 Thousands 100 2018 80 2019 60 40 2020 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Data source: CAAM, LMC Automotive © 2020 LMC Automotive Limited, All Rights Reserved. 23 NEV sales decline by major segment and OEMs

NEV sales (Thousand)

-18% -59% -26%

-48% 148%

BEV sales (Thousand) PHEV sales (Thousand)

-46% -76% -78% -27% -29% -90% +14% -62% -50% -38% -28% -29%

© 2020 LMC Automotive Limited, All Rights Reserved. 24 Intense competition among CN brands . Unqualified vehicles quit the market by 2020, significant by CN brands . JVs brands boost in 2021 2019 2021F

250 +111 CN -61 EU 200 JP KR 150 US +22 +15 +7 +10 100 -1 -0 -3 -5

0 CN EU JP KR US 2017 72 4 7 3 7 2018 112 9 10 4 8 2019 128 18 17 8 11 2020 122 25 21 7 12 2021F 235 79 44 18 22 © 2020 LMC Automotive Limited, All Rights Reserved. Data Source: LMC Automotive GHEVF 25 Global brands sales keep rising in NEV sector . Global brands starting to taking more and more share in NEV market BEV 100.0% 80.0% US

60.0% KR

40.0% JP 20.0% EU 0.0% CN 201801 201802 201803 201804 201805 201806 201807 201808 201809 201810 201811 201812 201901 201902 201903 201904 201905 201906 201907 201908 201909 201910 201911 201912 202001 202002 202003 202004 202005 202006 202007 202008

PHEV 100.0% 80.0% 60.0% 40.0% 20.0% 0.0%

. Meanwhile Tesla is struggling with disruption of supply chain due to low local content rate.

NIO Xpeng Weltmeister Model 3 (domestic) NIO share Xpeng share Weltmeister share Model 3 (domestic) share

16 2019 VS 2020 Top 5 Models 25.0% 14 27702 17484 QQ (EQ) ES6 21.0% 12 28184 23396 Thousands E5 Hongguang Mini 17.0% 10 31900 25967 Baojun E100 Aion S 13.0% 8 Yuan 51931 30212 Qin 9.0% 6 EU Series 70960 67406 Model 3 5.0% 4 2 1.0% 0 -3.0% Jul-18 Jul-19 Jul-20 Jan-19 Jan-20 Jun-18 Jun-19 Jun-20 Oct-18 Oct-19 Apr-19 Apr-20 Sep-18 Feb-19 Sep-19 Feb-20 Dec-18 Dec-19 Aug-18 Aug-19 Aug-20 Nov-18 Nov-19 Mar-19 Mar-20 May-19 May-20

BEV PHEV EREV 4,000

3,500 922 3,000 Thousands 2,500

2,000

1,500 2,984

230 1,000 296 212

114 500 792 882 795 94 61 466 0 124 227 2015 2016 2017 2018 2019 2020F 2025F

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• Market Overview

• Market Dynamics: Segments, Regions, and Drive Types

• Outlook

© 2020 LMC Automotive Limited, All Rights Reserved. 31 2020: Retail and Wholesale Back To Same Pace 250 Retail vs. Wholesale Wholesale Retail 200 150 100 50 0 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Nov-16 Nov-17 Nov-18 Nov-19 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 May-16 May-17 May-18 May-19 May-20

Retail YoY +36%

Wholesale YoY +36%

80.0%

70.0%

60.0%

50.0%

40.0% Average +36%

30.0% YTD Growth YTD 20.0%

10.0%

OEM 2019 Wholesale Completion rate 2019 2020(1-9) Actual 2020 Target Completion rate YTD2020

FAW 284436 106.1% 341591 350000 97.6% Dongfeng CV 186039 89.4% 165400 220000 75.2%

CNHTC 196000 98.0% 199199 200000 99.6% Shaanxi Auto 177500 98.6% 171180 180000 95.1% Foton 120271 88.4% 148987 125000 119.2% Dongfeng Liuqi 58270 89.6% 66100 84000 78.7% Hongyan 58077 83.0% 58637 72000 81.4% JAC 48100 96.2% 51540 45000 114.5% SANY 25677 - - unknown #VALUE!

CAMC 20184 72.1% 17451 30000 58.2% XCMG 20555 85.6% 20095 30000 67.0%

Highway Freight Throughput Highway Freight Ton-kilometers 20%

10%

0% Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 -10%

-20%

-30%

-40%

-50%

Source: NBS © 2020 LMC Automotive Limited, All Rights Reserved. 35 New Scrapping Rules Boost the Truck Sector 什么是以奖代补？Substitute subsidies with rewards for scrapping CN3 truck 以奖代补可理解成“地方任务完成了，中央财政就会到位，如不完成任务就扣钱”。财政部还将制定细则，对任务考核的结果，如优秀的或不合格的，给出打分系数，并以此予以拨款。

Local government will receive financial grant from the MOF or pay fines according to scrapping progress Subsidies

Rewards /Fines

% of Truck Parc: > 9%

4 - 9% 3 - 4%

2 - 3% < 2%

Old Rules New Rules

• Charge by weight-per-load • Charge by vehicle type (axle numbers)

• Different for full load and empty load • Same for full load and empty load

Driving sales of new vehicle types and reshape business models – more favorable on vehicle fleets

• Market Overview

• Market Dynamics: Segments, Regions, and Drive Types

• Outlook

• Accelerated elimination of the China III- • Stable investment in infrastructure complied trucks construction • Changes to the highway toll rules – from • Resumption of production and 600 weight-per-load to number-of-axles construction 60%

500 50%

400 40%

300 30%

200 20%

100 10%

- 0% Tractor Truck Dump Vocational

2019(1-9) 2020(1-9) YTD YoY Units (‘000)

150%

100%

50%

-50%

-100% Jul Jan Jun Apr Feb Sep Aug Mar May

Drive Type by Segment in YTD 2020 Drive Type by Segment in YTD 2019 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%

Tractor 5.3% Tractor 2.7%

Truck 10.3% Truck 2.4%

Dump 0.7% Dump0.5%

Vocational 4.5% Vocational 5.0%

4×2 6×2 6×4 8×4 4×2 6×2 6×4 8×4

MH Truck Sales by 8 Economic Zones in Jan-Aug 2020 HDT & MDT YoY

Northeast 58 43%

Market Share Northern Coast 273 43% Northeast

5% Mid-Yellow River 181 23%

Mid-Yellow Northwest River18% Northern Mid-Yangtze River 127 25% 5% Coast 27%

Eastern Eastern Coast 143 68% Mid-Yangtze Coast 14% River12% Southwest 11% Southern Coast 101 18% Southern Coast 9% Southwest 111 33%

Northwest 43 2% Units (‘000) Source: Insurance data & LMC © 2020 LMC Automotive Limited, All Rights Reserved. 42 Tractor Segment: High Regional Concentration YTD 2020 Sales by 8 Economic Zones in Each Segment Tractor YTD Growth Truck YTD Growth Northeast 8 Northeast 30 63% 86% Northern Coast 41 Northern Coast 167 50% 46% Mid-Yellow River 107 30% Mid-Yellow River 24 68% Mid-Yangtze River 50 48% Mid-Yangtze River 18 39% Eastern Coast 48 111% Eastern Coast 31 55% Southern Coast 37 62% Southern Coast 17 39% Southwest 41 70% Southwest 15 23% Northwest 17 1% Northwest 4 69%

Dump YTD Growth Vocational YTD Growth Northeast Northeast 6 55% 14 -1% Northern Coast 16 8% Northern Coast 50 34% Mid-Yellow River 21 17% Mid-Yellow River 30 -11% Mid-Yangtze River 19 4% Mid-Yangtze River 39 8% Eastern Coast 25 53% Eastern Coast 39 51% Southern Coast 17 -17% Southern Coast 29 1% Southwest 29 29% Southwest 27 6% Northwest 6 -32% 14% Units (‘000) Northwest 16 Source: Insurance data & LMC © 2020 LMC Automotive Limited, All Rights Reserved. 43 Tractor and Truck Segments More Centralized Market Share of the Top 5 Groups Tractor retail by OEM Truck retail by OEM retail sales Accumulated Share retail sales Accumulated Share 150 150% 150 150%

100 82.9% 100% 100 80.0% 88.4% 100%

50 50% 50 50%

0 0% 0 0%

Dump retail by OEM Vocational retail by OEM retail sales Accumulated Share retail sales Accumulated Share 150 150% 150 150% 100 100% 100 85.5% 100% 66.4% 82.0% 67.8% 50 50% 50 50% - 0% - 0%

Units (‘000) Source: Insurance data & LMC © 2020 LMC Automotive Limited, All Rights Reserved. 44 State VI Trucks Accounted For ~17% of Retail Sales Emission Standards 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 15% 17% 17% 0%

State VI Other

State IV Nationally State V Nationally State VIᵃ Nationally State VIᵇ Nationally

2016.4 2019.7 2020.7

2015.1 2017.7 2021.7 2023.7

State V Partly ① State VIᵃ Partly ② State VIᵃ Partly ③

Note: ① - In 11 eastern provinces – Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Hainan – but only for buses, sanitation vehicles and postal vehicles ② - NG vehicles ( ~10% of MH Truck in 2019) ③ - City vehicles, i.e. buses, sanitation vehicles and postal vehicles etc. (~15%)

• Market Overview

• Market Dynamics: Segments, Regions, and Drive Types

• Outlook

© 2020 LMC Automotive Limited, All Rights Reserved. 47 Tractor: Benefit From Demand for Efficient Transportation Transportation Capacity Structure 100% 90% 80% 70% 60% 50% …… 70- 40% 75 30% 59% 63% % 50% 54% 20% 10% 0% 2016 2017 2018 2019 2025E Tractor Others

20%

15%

10%

0% 2016 2017 2018 2019

Highway Freight Ton-kilometers HDT Parc Tractor Parc

MH Truck Parc Structure

Average Age GR 7 0%

6 -5% 5

4 -10% -10%

3 5.91 -14% -15% 5.07 4.56 2 3.62 -20% 1 -21%

0 -25% 2016 2017 2018 2019 Units (‘000)

1,400 60%

1,200 40% 1,000 20% 800 0% 600 -20% 400

200 -40%

0 -60% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E Units (‘000)

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