Korea/Automobiles Industry Update Overweight 19 September 2011 Overweight Overweight Overweight 2 Sep 2011 4 Aug 2011 1 Aug 2011

Frankfurt Motor Show review – The fittest to survive the storm At the 2011 Frankfurt Motor Show, global auto/parts manufacturers showed their latest products that can fuel a Stocks for action new growth momentum despite the uncertain macro Price environment and more stringent regulations. However, (15/9/2011 Target those who already have (1) a strong line-up of new Company Ticker Rating close) price models/products with industry-leading product and price Hyundai Motor 005380 KS Buy 208,000 300,000 Kia Motors 000270 KS Buy 70,000 100,000 competitiveness, (2) cost-cutting measures in advanced Note: Prices are in KRW level, (3) a balanced global footprint in sales are expected to outperform others in short-to-mid term.

» New products to fuel new growth momentum Performance From new small hatchbacks to advanced electric vehicles with carbon 210 fiber-reinforced plastic body panels, the world’s leading manufacturers Industry performance KOSPI index 190 showcased their latest products, and we expect the latest offerings from 170

Hyundai/Kia Motors, Toyota, Volkswagen Group, and BMW to fuel 150 stronger-than-expected growth for the companies from as early as 2H11. 130 110 » Cost-cutting measures in advanced level 90 After meetings with company/IR representatives at the Frankfurt Motor 70 50 Show, we were left with a strong conviction that Hyundai/Kia Motors, Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Volkswagen and BMW will be able to withstand the possible short-to- mid-term margin squeezes better than many of the competitors, through further cost-cutting via integration of platforms using modular platforms/toolkits.

» A balanced global footprint Auto manufacturers with a balanced global footprint and a big exposure in BRICs market are expected to withstand the impact of a possible downturn in some developed regions better than others. Also, with the BRICs auto market expected to grow by 11.7% in 2011E and by a 6.2% CAGR over the next 10 years, manufacturers with a strong foothold in the region are likely to outperform others in the short-to-mid term.

» Maintain Kia Motors as Top Pick We maintain Kia Motors as our top pick(BUY; TP: KRW100,000) in Korea auto sector and expect Volkswagen(Not Rated) and BMW(Not Rated) to outperform during the uncertain macro environment and possible global auto market slow-down.

Hedge fund investors Long-only investors Gregory Byung Kwan Kim, Korea Analyst 822 3774 1592 [email protected] Recent robust stock performance and a Solid financials, introduction of key strong won may prompt short selling, volume models in overseas markets but a correction of the stock will be and greater market share globally will short-term, as long as strong sales from provide further re-rating opportunities the U.S. and BRICs continue and the for the Korea auto stocks, going yen stays strong forward

See the last page of this report for important disclosures Source for above data: Bloomberg, companies, Mirae Estimates

1 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Executive summary New products to fuel new growth momentum After spending three full days (13th~15th September) at the 2011 Frankfurt Motor Show Latest models from HKMC, VW reviewing new products and ideas, the latest products from Hyundai/Kia Motors, Toyota, Toyota, and BMW to fuel stronger -than-expected growth Volkswagen Group and BMW stood out from the rest, in our view, due to industry-leading product and price competitiveness. From new small hatchbacks to advanced electric vehicles with carbon fiber-reinforced plastic body panels, we expect the latest offerings from Hyundai/Kia Motors, Toyota, Volkswagen Group, and BMW to fuel stronger-than-expected growth for the companies from as early as 2H11.

Cost-cutting measures in advanced level Cost-cutting is the key in sustaining margins through possible market downturn, and having had HKMC, VW and BMW are best at meetings with company/IR representatives at the show, we were left with a strong conviction cost-cutting, so expect solid margins going forward that Hyundai/Kia Motors, Volkswagen and BMW will be able to withstand the possible short-to- mid term margin squeezes (due to increasing incentives and rising raw material costs) better than many of the competitors, through further significant cost-cutting via integration of platforms using modular platforms/toolkits.

A balanced global footprint Auto manufacturers with a balanced global footprint and an already significant exposure in the HKMC and VW have the most emerging markets are expected to withstand the impact of a possible market downturn in some balanced global footprint, so less impact of developed market developed regions better than others. Also, with the BRICs auto market expected to grow by downturn expected 11.7% in 2011E and by a 6.2% CAGR over the next 10 years, auto manufacturers with a strong foothold in the region are expected to outperform others in the short-to-mid term.

We believe Hyundai/Kia Motors and Volkswagen Group have the most balanced global footprint and we expect the companies to benefit the most from continued growth in the BRICs auto market going forward.

Maintain Kia Motors as Top Pick We maintain Kia Motors as our top pick(BUY; TP: KRW100,000) in Korea auto sector and Maintain Kia Motors as Top Pick expect Volkswagen(Not Rated) and BMW(Not Rated) to outperform during the uncertain macro due to expected solid earnings growth and attractive valuations environment and possible global auto market slow-down.

Kia’s FY11 and FY12 EPS(consolidated) are expected to increase by 56% and 22%, respectively, while, despite the recent share price gain, the company is trading at 6.7x 2011 P/E and 5.5x 2012 P/E; still undervalued against its global peers. The company is also one of the most undervalued stocks in terms of PBR vs. ROE, trading at 2.1x 2011 book and 1.5x 2012 book despite an ROE of 37.2% and 33.8% for respective years. Therefore, we still believe Kia Motors presents an attractive buying opportunity.

2 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

TABLE OF CONTENTS

Executive summary 2 New products to fuel new growth momentum 2 Cost-cutting measures in advanced level 2 A balanced global footprint 2 Maintain Kia Motors as Top Pick 2

New products to fuel new growth momentum 4 Hyundai Motor Group – Brand new B, C, D-segment models to conquest new sales in Europe 4 Toyota Motor Corporation – Consolidating Toyota's strengths in Europe 12 Volkswagen Group – Seeking greater penetration in small car segment 24 BMW Group – Achieving a new level of efficiency in the premium market 27

Cost-cutting measures in advanced level 30 Hyundai Motor Group – Further cost-cutting through platform integration 30 Volkswagen Group – Modular toolkits, the driver in margin expansion 30 BMW – ‘Strategy Number One’ efficiency measures above plan 31

A balanced global footprint 33 Hyundai Motor Group – Growing presence in all regions 33 Volkswagen Group – Well on track to achieve 10m unit sales by 2018 35

Analyst team profile 36

3 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

New products to fuel new growth momentum After spending three full days (13th~15th September) at the 2011 Frankfurt Motor Show reviewing new products and ideas, the latest products from Hyundai/Kia Motors, Toyota, Volkswagen Group and BMW stood out from the rest, in our view, due to industry-leading product and price competitiveness. From new small hatchbacks to advanced electric vehicles with carbon fiber-reinforced plastic body panels, we expect the latest offerings from Hyundai/Kia Motors, Toyota, Volkswagen Group, and BMW to fuel stronger-than-expected growth for the companies from as early as 2H11.

Below are highlights of the new products offered at the show by the world’s leading manufacturers and our views on them.

Hyundai Motor Group – Brand new B, C, D-segment models to conquest new sales in Europe At the 2011 Frankfurt Motor Show, Hyundai Motor(BUY, TP KRW300,000) and Kia Motors(BUY, Hyundai/Kia’s new B, C, D- TP KRW100,000) introduced brand new B, C, and D-segment models (new Kia Rio 3/5dr, segment models to conquest new sales in Europe Hyundai i30 5dr, Hyundai i40 saloon/estate, Kia Optima saloon) that could lead to further volume growth and market share gains for both companies in Europe even under the difficult market conditions.

The new Kia Rio(AKA Pride) With the all-new, fourth-generation Rio, Kia is hoping for a successful re-entry to the compact Kia’s all new Rio expected to gain car segment and accelerate the growth of sales in Europe. According to the company, the new significant sales in the European B-segment Rio has a bold and distinctive personality, bringing the latest B-segment model into line with the rest of Kia’s modern, design-led product range. In addition to appealing to consumers’ aesthetic tastes, the company is aiming to significantly grow its market share across the world by offering industry-leading environmental improvements and low running costs. CO2 emissions for the model range start at just 85 g/km. This impressive figure places the most environmentally- friendly version of Kia’s new model, the Rio EcoDynamics, ahead of all other B-segment vehicles currently on sale in Europe.

Since its launch in 2005, global sales of the third-generation Rio have totaled more than 860k units. It was the company’s third best-selling vehicle in overseas markets during 2010 with sales of more than 219k units. According to Kia’s market research, global demand for B-segment cars is expected to grow significantly over the next two years as consumers increasingly shift to more economical, more fuel-efficient cars - downsizing to offset the continuous rise in fuel prices. The company forecasts that global demand for B-segment cars will climb to 9.2 million units in 2012 and to 14 million units by 2014. With two body styles for Rio, plus the already well- established Soul and Venga B-segment models, the company is confident of capturing a larger share of the enlarging compact car market. The five-door version will be the first variant to go on sale in Europe in 3Q11, with the new three-door model joining Kia’s line-up in 1Q12. Both versions will be manufactured at Kia’s Sohari plant in Korea.

Figure 1 The new Kia Rio

Source: Kia Motors, Mirae Asset Research,

4 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 2 New Kia Rio Europe technical specification Body and chassis

Five- and three-door*, five-seater B-segment hatchbacks, with all-steel unitary construction bodyshell. Choice of four transversely-mounted gasoline and diesel engines driving the front wheels via a five-speed or six-speed manual or four-speed automatic transmission - depending on model and market

Diesel engines

1.4-liter 90 ps Type / capacity U2 (4-in-line), DOHC, four-cylinder, with WGT / 1396 cc Power / torque 90 ps (66.0 kW) @ 4000 rpm / 220 Nm (22.4 kg.m) @ 1750-2750 rpm Emissions From 109 g/km / 100 with ISG

1.1-liter 75 ps Type / capacity U2 (3-in-line), DOHC, three-cylinder, with WGT / 1120 cc Power/torque 75 ps (55.0 kW) @ 4000 rpm / 170 Nm (17.3 kg.m) @ 1500-2750 rpm Emissions From 94 g/km / 85 with ISG and ECO

Gasoline engines

1.4-liter 109 ps Type / capacity Gamma (4-in-line), DOHC, four-cylinder, dual CVVT / 1396 cc Power / torque 109 ps (80.0 kW) @ 6300 rpm / 137 Nm (14.0 kg.m) @ 4200 rpm Emissions From 124 g/km / 119 with ISG

1.2-liter 85 ps Type / capacity Kappa (4-in-line), DOHC, four-cylinder, dual CVVT / 1248 cc Power/torque 85 ps (62.5 kW) @ 6000 rpm / 120.7 Nm (12.3 kg.m) @ 4000 rpm Emissions From 114 g/km / 109 with ISG

Transmissions

Petrol 1.4 1.2 1.4D 1.1D Manual 6-speed 5-speed 6-speed 6-speed Automatic 4-speed - - -

Gear ratios

1.4 MT / AT 1.2 1.4D 1.1D 1.1D Eco 1 3.769 / 2.919 3.545 3.636 3.769 3.769 2 2.045 / 1.551 1.895 1.962 2.045 2.045 3 1.370 / 1.000 1.192 1.257 1.37 1.37 4 1.036 / 0.713 0.906 0.905 0.971 0.971 5 0.893 / - 0.719 0.702 0.774 0.774 6 0.774 / - - 0.596 0.688 0.688 Rev 3.700 / 2.480 3.636 3.583 3.7 3.7 Final Drive 4.059 / 4.375 4.6 3.706 3.833 3.647

Source: Kia Motors, Mirae Asset Research, * Figures stated refer to five-door model only, unless specified

5 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 3 New KIA Rio Europe technical specification - continued Suspension and damping

Front Fully independent by subframe-mounted MacPherson struts, with coil springs and gas-filled shock absorbers. Anti-roll stabiliser bar Rear Semi independent by CTBA (coupled torsion beam axle) with separate coil springs and gas-filled shock absorbers

Steering

Type MDPS electric power-assisted rack and pinion Gearing 4.42 turns lock-to-lock (manual) 2.82 turns lock-to-lock (powered) Turning circle 10.4 (manual) 10.52 (powered)

Brakes

Power Single 9-inch Booster Front 280 x 22 mm ventilated discs (all 1.4 models) 256 x 22 mm ventilated discs (all other models) Rear 262 x 10 mm solid discs (drum brakes on EcoDynamics model) Assistance ABS anti-lock with EBD

Wheels and tyres

Standard Steel 15 in x 5.5J 185/65 R15 tyres Optional Alloy 15 in x 5.5J 185/65 R15 tyres Alloy 16 in x 6.0J 195/55 R16 tyres Alloy 17 in x 6.5J 205/45 R17 tyres Spare Tire mobility kit Optional Temporary steel wheel and tyre

Dimensions (mm)

Exterior Overall length 4,045 Overall width 1,720 (excluding door mirrors) Overall height 1,455 Wheelbase 2,570 Overhang 805 / 670 (front / rear) Track 1,521 / 1,525 (front / rear) Ground clearance 140

Interior Front Rear Headroom 1,015 960 Legroom 1,112 790 Shoulder room 1,350 1,324 Hip room 1,323 1,301

Capacities (litres)

Fuel tank 43 Luggage (VDA) 288 litres / rear seats upright 923 litres / rear seats folded

Source: Kia Motors, Mirae Asset Research, * Figures stated refer to five-door model only, unless specified

6 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 4 New KIA Rio Europe technical specification - continued Weights (kg) (five-door)

1.4 MT / AT 1.2 1.4D 1.1D Curb (minimum)** 1,066 / 1,093 1,029 1,164 1,116 Gross (maximum) 1,600 / 1,630 1,560 1,690 1,640

Performance*** (five-door)

1.4 MT / AT 1.2 1.4D 1.1D Top speed / kph 183 / 170 168 172 160 0-to-100 kph / sec 11.5 / 13.2 13.1 14.2 16.1

Economy**** (five-door)

1.4 MT / AT 1.2 1.4D 1.1D Litres / 100 km 5.3 / 6.3 5 4.1 (tbc) with ISG 5.1 / - 4.8 3.8 3.6 with ISG & ECO ---3.2***** CO2 emissions 124 / 147 114 109 (tbc) with ISG 119 / - 109 100 94 with ISG & ECO - - - 85*****

Source: Kia Motors, Mirae Asset Research, ** excluding driver, *** Figures stated are manufacturer’s estimates, **** Combined cycle, *****EcoDynamics model only

The new Hyundai i30 Hyundai Motor unveiled its second-generation i30, a model the company expects will build on Over 120k unit sales per year the success of the original model thanks to enhanced design, quality, performance and expected for the new i30, taking 5% of the European C-segment efficiency. Designed and engineered at the Hyundai Motor Europe Technical Centre in Russelsheim, Germany, the new-generation i30 represents a further evolution of the unique Hyundai design language, ‘fluidic sculpture’, and offers a choice of four engines with a total of six power options and CO2 emissions below 100 g/km thanks to an upgraded and more efficient 1.6-litre diesel engine.

The new i30 will go on sale in Europe in 1Q12 as a five-door hatchback. The model will be manufactured in Europe at the company’s plant in Nosovice, Czech Republic. Since 2007 launch, the original i30 has recorded over 360k sales in Europe, including more than 115k units during 2010 - the highest-ever sales figure for an individual Hyundai model on sale in Europe in one year, putting the i30 6th in the C-segment rankings in entire Europe. The original i30 has played an important role in expanding Hyundai’s sales and reputation in Europe’s fleet sector too. Hyundai expects the new-generation i30 to be a more tempting proposition to fleet managers and company car drivers than its predecessor and forecasts approximately 50% of sales to come from the fleet sector.

Compared to the original i30, total cost of ownership(TCO) for the new-generation model will be reduced, helped by stronger residual value, improved fuel efficiency, lower CO2 emissions and a lower insurance classification. As such, Hyundai expects the new-generation i30 to maintain this growth trend, contributing to future sales gain, growing brand awareness and improving perceptions of Hyundai among European consumers. The sales of the new i30 are expected to be helped by a recovering C-segment market too. The company forecasts the mainstream C- segment will grow by 7% over the next three years, reaching sales of 2.4 million vehicles per year by 2014. Hyundai is planning to sell on average over 120k units of the new i30 per year during the car’s lifecycle, capturing a larger market share of approximately 5%.

The new i30 will be available with a choice of three gasoline and three diesel variants, with power outputs ranging from 90 to 135 ps. Both fuel types play a significant role in the European C-segment, with diesel representing 52% and gasoline 43% of total sales. Overall, Hyundai is expecting a 50:50 split between diesel- and gasoline-powered i30 sales.

7 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 5 The new Hyundai i30

Source: Hyundai Motor, Mirae Asset Research

Figure 6 New Hyundai i30 technical specification Diesel engines

1.4-litre 90 ps Type / capacity U-II, WGT, four-cylinder, DOHC 16-valve / 1396 cc Power / torque 90 ps (66.0 kW) @ 4000 rpm / 220 Nm @1500~2750 rpm Bore x Stroke (mm) 75 x 79 Co mpre ssio n ra tio 1 7.0%

1.6-litre 110 ps Type / capacity U-II, VGT, four-cylinder, DOHC 16-valve / 1582 cc Power / torque 110 ps (81.0 kW) @ 4000 rpm / 260 Nm @ 1900~2750 rpm Bore x Stroke (mm) 77.2 x 84.5 Co mpre ssio n ra tio 1 7.3%

New 1.6-litre 128 ps Type / capacity U-II, VGT, four-cylinder, DOHC 16-valve / 1582 cc Power / torque 128 ps (94.0 kW) @ 4000 rpm / 260 Nm @ 1900~2750 rpm Bore x Stroke (mm) 77.2 x 84.5 Compression ratio 17.3%

Gasoline engines

1.4-litre 100 ps Type / capacity Gamma 1.4, four-cylinder, DOHC 16-valve / 1396 cc Power / torque 100 ps (73.2 kW) @ 5500 rpm / 137 Nm @ 4200 rpm Bore x Stroke (mm) 77 x 74.99 Compression ratio 10.5%

1.6-litre 120 ps Type / capacity Gamma 1.6 MPI, four-cylinder, DOHC 16-valve / 1591 cc Power / torque 120 ps (88 kW) @ 6300 rpm / 156Nm @ 4850 rpm Bore x Stroke (mm) 77 x 85.44 Compression ratio 10.5%

1.6-litre 135 ps Type / capacity Gamma GDI, four-cylinder, DOHC 16-valve / 1591 cc Power / torque 135 ps (99 kW) @ 6300 rpm / 164 Nm @ 4850 rpm Bore x Stroke (mm) 77x85.44 Compression ratio 11.0%

Transmissions

Diesel 1.4 / 90 1.6 / 110-128 Manual 6-speed 6-speed Automatic - 6-speed

Petrol 1.4 / 100 1.6 / 120-135 Manual 6-speed 6-speed Automatic - 6-speed

Source: Hyundai Motor, Mirae Asset Research

8 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 7 New Hyundai i30 technical specification - continued Suspension and damping

Front Fully independent subframe-mounted MacPherson struts, with coil springs and gas-filled shock absorbers. Anti-roll stabiliser bar. Rear Fully independent subframe-mounted multi-links, coil springs and gas-filled shock absorbers.

Steering

Type Motor-driven power steering, with Flex Steer™ Steering wheel turn 2,85 Turning circle

Brakes

Front 15 / 16 inch ventilated discs Rear 14 inch solid discs

Wheels and tyres

Standard 15 inch steel / 15 inch alloy 195 / 65 R15 tyres 16 inch alloy 205 / 55 R16 tyres 17 inch alloy 225 / 45 R17 tyres

Dimensions (mm)

Exterior Overall length 4,300 Overall width 1,780 (excluding door mirrors) Overall height 1,470 Wheelbase 2,650 Front overhang 880 Rear overhang 770

Interior Front Rear Leg room 1,067 880 Head room 1,018 963 Shoulder room 1,420 1,395

Capacities (litres)

Fuel tank 53 litre Luggage 378 with rear seats upright

Source: Hyundai Motor, Mirae Asset Research

The new Hyundai i40 With the new i40 wagon and saloon, Hyundai is hoping to provide consumers with high-end All new i40 wagon and saloon, features and vehicle quality at affordable prices. With its generous exterior and interior with class-leading TCO expected to generate 60k unit sales per dimensions, high-tech features and improved quality, it is expected to generate a positive shift year in Europe in private and company car fleet customer perceptions of the brand. Designed and engineered at the company’s European R&D headquarters in Russelsheim, Germany, the 4.7-meter long i40 will first be available in wagon form, and will be joined by a four-door sedan later in 4Q12.

Hyundai is expecting the European D-segment sector to grow by 12.6% over the next 5 years, with total sales volumes of 890k units across the continent by 2016. With a sales target of 60k units for the i40’s first full year of sales in 2012, Hyundai is looking to challenge for a top-five place in the overall D-segment sales chart. The i40 will play a key role in expanding Hyundai’s presence in Europe’s company car fleet sector. Hyundai expects approximately 50% of European sales to come from the fleet sector, and this is due to Hyundai ensuring the i40 is class-leading in terms total cost of ownership (TCO). A key factor in strong TCO performance for i40 is its residual value. Germany’s intelligence agency, DAT, predicts that the i40, after three years and 90,000 km, will retain 44.5% of its original retail price, outperforming

9 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

established rivals such as Ford Mondeo (43.3%) and the Opel Insignia (43.5%), while presenting a strong challenge to the new Volkswagen Passat (45%).

To ensure i40's success in the company car fleet sector, Hyundai has also developed an infrastructure that delivers the standards to match this goal. According to the company, an extensive network of fleet business centers has already been created around Europe, and is continuing to grow. The business centers are located throughout the continent in many of the dealerships that carry Hyundai’s new showroom identity, offering a more upmarket feel and giving a more positive brand experience for customers.

Figure 8 New Hyundai i40 wagon and saloon

Source: Hyundai Motor, Mirae Asset Research

Figure 9 New Hyundai i40 technical specification Diesel engines

1.7-liter 115 ps Type / capacity ‘U-II’, DOHC, four-cylinder, 16-valve / 1685 cc Power / torque 115 ps (85 kW) @ 4000 rpm / 260 Nm (26.5kgm) @ 1250-2750 rpm Emissions 122 g/km (113 g/km when fitted with ISG)

1.7-liter 136 ps Type / capacity ‘U-II’, DOHC, four-cylinder, 16-valve / 1685 cc Power / torque 136 ps (100 kW) @ 4000 rpm / 325 Nm (33.7kgm) @ 2000-2500 rpm Emissions 124 g/km (119 g/km when fitted with ISG)

Gasoline engines

1.6-liter 135 ps Type / capacity ‘Gamma’ GDI, four-cylinder, with dual CVVT / 1591 cc Power / torque 135 ps (99 kW) @ 6300 rpm / 164 Nm (16.8kgm) @ 4850 rpm Emissions 149 g/km (140 g/km when fitted with ISG)

2.0-liter 177 ps Type / capacity ‘Nu’ GDI, four-cylinder, with dual CVVT / 1999 cc Power / torque 177 ps (130 kW) @ 6500 rpm / 213 Nm (21.7kgm) @ 4700 rpm Emissions 159 g/km

Transmissions

Diesel 1.7 / 115 1.7 / 136 Manual 6-speed 6-speed Automatic - 6-speed

Petrol 1.6 / 135 2.0 / 177 Manual 6-speed 6-speed Automatic - 6-speed

Source: Hyundai Motor, Mirae Asset Research

10 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 10 New Hyundai i40 technical specification - continued Suspension and damping

Front Fully independent subframe-mounted MacPherson struts, with coil springs and gas-filled shock absorbers. Anti-roll stabiliser bar. Rear Fully independent subframe-mounted multi-links, coil springs and gas-filled ASD shock absorbers.

Steering

Type MDPS (Motor Driven Power Steering) Gearing 14,1:1 overall ratio Turns lock-to-lock 2,88 Turning circle 10,94 meters

Brakes

Front / Rear 300 mm ventilated discs / 284 mm solid discs Front / Rear 320 mm ventilated discs / 300 mm solid discs (optional) Master Cylinder 23.81 mm diameter Booster size 11,0-inch Parking brake Electric

Wheels and tyres

Standard 7,0Jx16 205/60 R16 tyres 7,5Jx17 215/50 R17 tyres 8,0Jx18 225/45 R18 tyres

Dimensions (mm)

Exterior Overall length 4,770 Overall width 1,815 (excluding door mirrors) Overall height 1,470 Wheelbase 2,770 Overhang 920 / 1,080 (front / rear) Track 1,591 / 1,597 (front / rear) Ground clearance 140

Interior Front Rear Head room 1,025 990 Leg room 1,170 850 Shoulder room 1,455 1,420 Hip room 1,390 1,380

Cargo bay Length Width Height Rear seats 1115 1010 720

Capacities (litres)

Fuel tank 70 Luggage 553 (rear seats upright, to top of seatbacks) 1,719 (rear seats folded, to roof)

Source: Hyundai Motor, Mirae Asset Research

11 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 11 New Hyundai i40 technical specification - continued Weights* (kg) (manual transmission)

1,7 / 115 1,7 / 136 1,6 / 135 2,0 / 177 Minimum curb 1,485 1,495 1,395 1,420 Maximum loaded 2,120 2,120 2,030 2,050

Performance* (manual transmission)

1,7 / 115 1,7 / 136 1,6 / 135 2,0 / 177 Top speed (kph) 190 198 195 210 0-to-100 kph (sec) 12,9 10,6 11,6 9,7 Braking 100-to-0 kph 38 meters

Economy** (manual transmission)

1,7 / 115 1,7 / 136 1,6 / 135 2,0 / 177 Liters / 100 km 4,3 4,5 6,0 6,8 CO2 (g/km) 122 124 149 159 CO2 (g/km) with ISG 113 119 140 TBC

Source: Hyundai Motor, Mirae Asset Research, * Figures stated are manufacturer’s estimates, ** Combined cycle (except 2,0)

Toyota Motor Corporation – Consolidating Toyota's strengths in Europe With the brand new B-segment model Yaris, revised D-segment model Avensis (European Toyota concentrating on the B, D version of Camry), and reinforced hybrid model line-up, Toyota Motor Coporation (Not Rated) is and hybrid markets to regain market share in Europe hoping to consolidate its core strength of its model line-up in order to regain its market share in Europe and elsewhere.

The new Toyota Yaris(AKA Vitz) With the launch of the third generation Yaris, Toyota is hoping to regain its market share in the Toyota, with the new Yaris, aims growing B-segment market in Europe. Over the last decade, the Yaris has consistently been a to beat the previous generation model’s 270k unit sales per year strong contributor to Toyota's sales throughout Europe, becoming a key factor of the company’s European manufacturing operations. Annual sales of the previous generation Yaris peaked at 270k units in 2004~2005, but have gradually declined since, due to stronger competition and ageing product.

The new Yaris will compete in the B-segment which -with a 26% share of the total market, equating to approximately 4 million sales per year- remains one of the most important sales sectors of the European automotive market. This segment is currently dominated by petrol- engined vehicles, which represent more than two thirds of the mix. Quality will remain a key Yaris attribute. Further increasing the built-in quality recently praised in the German 2011 TuV report, Toyota Motor Manufacturing France’s close involvement with suppliers from the very earliest stages of production is expected to lead to improvement in the overall quality of the new model.

The new model will be available with a choice of three engines; 1.0 and 1.33 liter VVT-i petrol engines and a 1.4 litre D-4D turbodiesel. All three engines benefit from the application of Toyota Optimal Drive, a range of engineering measures designed to maximize performance and driving enjoyment while minimizing fuel consumption and CO2 emissions. Toyota Optimal Drive focuses on several key aspects of powertrain development such as lightweight, compact design, enhanced combustion efficiency, low friction components and environmentally friendly technologies. This, combined with weight saving measures and aerodynamic improvements, helps lower fuel consumption and CO2 emissions without compromising power and torque levels.

12 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 12 The new Toyota Yaris

Source: Company data, Mirae Asset Research

Figure 13 The new Yaris specifications

Engine 1.0 litre VVT-i 1.33 litre Dual VVT-i 1.4 litre D-4D

Type 3 in-line cylinders 4 in-line cylinders 4 in-line cylinders Valve mechanism 12-valve DOHC, 16-valve DOHC, 8-valve, SOHC chain drive chain drive with VVT-i chain drive with Dual VVT-i Displace me nt (cm3) 998 1.329 1.364 Bore x stroke (mm) 71.0 x 84.0 72.5 x 80.5 73.0 x 81.5 Compression ratio (:1) 11.0 11.5 16.5 Max. power ((kW) DIN hp/rpm) (51) 69@6,000 (73) 99@6,000 (66) 90@3,800 Max. torque (Nm/rpm) 93@3,600 125@4,000 205@1,800-2,800 Emissions level EURO V EURO V EURO V

Transmission 5 M/T 6 M/T 7-speed Multidrive S 6 M/T 6-speed Multimode

Gearbox type 5 M/T 6 M/T 7-speed Multidrive S 6 M/T 6-speed Multimode Gear ratios 1st 3,5453,538 2.386 to 0.431 3,538 3,538 2nd 1,9131,913 2.386 to 0.431 1,913 1,913 3rd 1,3101,392 2.386 to 0.431 1,310 1,310 4th 1,0271,029 2.386 to 0.431 0.971 0.971 5th 0.8500.818 2.386 to 0.431 0.714 0.714 6th N/A0.700 2.386 to 0.431 0.619 0.619 Reverse 3,2143,333 2,505 3,333 3,333 Differential gear ratio 4,2944,294 5,079 3,550 3,550

Weights

Kerb weight (kg) 970-1,025 1,015-1,075 1,060-1,120 Gross vehicle weight (kg) 1,430 1,480 1.525

Performance

Max. speed (km/h) 155175 175 175 175 0-100 km/h (sec.) 15.311.7 12.3 10.8 13.2 0-400 m (sec.) 19.818.0 18.9 17.6 18.8

Fuel consumption (with 14'' wheels)

Stop & Start w/o w/ w/o1 w/1 w/o1 w/o w/o1 Combined (l/100km) 4.8 5.2 5.4 5.0 5.1 3.9 4.0 Urban (l/100km) 5.7 6.4 6.8 5.7 6.2 4.8 4.8 Extra urban (l/100km) 4.2 4.5 4.5 4.5 4.5 3.4 3.5 Fuel tank capacity (l) 42

CO2 emissions (with 14'' wheels)

Stop & Start w/o w/ w/o w/1 w/o1 w/o C ombine d (g/km) 110 119 123 114 118 103 105 Urban (g/km) 131 146 155 132 144 125 125 Extra urban (g/km) 97 103 105 104 103 90 93 Source: Company data, Mirae Asset Research

13 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 14 The new Yaris specifications - continued Suspension

Front MacPherson strut type independent suspension Rear Torsion-beam type suspension Brakes Front 278 x 9 mm, Ventilated discs Rear 203 mm, drums Additional features ABS with EBD and BA (Brake Assist)

Steering

Type Rack and pinion Ratio (:1) 12.81 Turns (lock to lock) 3 Min. turning radius - tyre (m) 4.7

Exterior dimensions (mm)

Overall length 3.885 Overall width 1.695 Overall height 1,510 Wheelbase 2,510 Front tread 1,460-1,485 Rear tread 1,445-1,470 Front overhang 790 Rear overhang 585

Interior dimensions (mm)

Interior length 1.915 Interior width 1,420 Interior height 1,250 Shoulder room 1.334 1.315 Rear Knee room 120 Couple distance 865

Luggage compartment

VDA luggage capacity, rear seat up (litres) 286 Length (mm) 710 Widt h (mm) 1.365 Source: Company data, Mirae Asset Research

The revised Toyota Avensis The revised Avensis builds on the spaciousness, practicality and fuel efficiency of the current, The revised Avensis features third generation model. It features a bolder and more refined exterior design, and interior much improved powertrains to appeal to the fleet market improvements to finish quality, comfort and Noise, Vibration and Harshness (NVH).

The best-selling variant of the Avensis’ six engine line-up, the 2.0 D-4D turbodiesel, has been revised to deliver significant improvements in fuel consumption and CO2 emissions. With a tax threshold set at 120 g/km in almost a third of European countries, the 2.0 D-4D’s 119 g/km brings tax benefits to both private and fleet buyers.

With a choice of two body styles, three diesel and three petrol engines, three transmissions and four model grades, the new Avensis has been specifically tailored to the European market. The D-segment demonstrates a 70% focus on diesel powertrains, a 64% bias in favour of fleet sales and a preference for the wagon body style with over 50% of customers. Designed and built in Europe, the Avensis was first launched at the end of 1997 and has since firmly established itself in the European D-segment. It sold 71k units in Europe in 2010, representing a 5.8% segment share.

14 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 15 The revised Toyota Avensis

Source: Company data, Mirae Asset Research

Figure 16 The revised Avensis technical specifications (subject to final homologation) 2.0 D-4D 2.2 D-4D 150 2.2 D-CAT 150 2.2 D-CAT 177 6M/T 6M/T 6A/T 6M/T Engines

Engine code 1AD-FTV 2AD-FTV 2AD-FHV 2AD-FHV Type 4 cylinders in line Valve mechanism DOHC 16 valve, direct injection Displacement (cm3) 1.998 2.231 2.231 2.231 Bore x stroke (mm) 86 x 86 86 x 96 86 x 96 86 x 96 Compression ratio (:1) 15.8 15.7 15.7 15.7 Max. power (DIN) KW /rpm (124) 91/3,600 (150) 110/3,600 (150) 110/ 3,600 (177) 130/ 3,600 Max. torque (Nm/rpm) 310/1,600-2,400 340/2,000-2,800 340/2,000-2,800 400/2,000-2,800 Emissions level EURO5 EURO5 EURO5 EURO5

Transmission

Type Single dry plate for manual transmission / Torque converter with Lock-up Clutch for automatic and Multidrive S transmission Gear ratios 1st 3,818 3,538 3,300 3,538 2nd 1,913 1,913 1,900 1,913 3rd 1,218 1,218 1,420 1,218 4th 0.860 0.880 1,000 0.88 5th 0.791 0.809 0.713 0.809 6th 0.674 0.673 0.608 0.638 Forward ---- Reverse 4,139 3,831 4,148 3,831

Suspensions

Front MacPherson Strut Rear Double whishbone

STEERING

Type Rack and pinion Ratio (:1) 13.3 Turns (lock to lock) 2.7 Min. turning radius – tyre (m) 5.4 Additional feature Electric Power Steering (EPS)

BRAKES

2.0 Diesel 2.2 Diesel engine Front Ventilated disc (ø295x26mm) Ventilated disc (ø320x26mm) Rear Solid disc (ø290x11mm) Solid disc (ø290x11mm) Additional features ABS ABS EBD EBD BA BA VSC+ VSC+ TRC TRC Source: Company data, Mirae Asset Research

15 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 17 The revised Avensis technical specifications (subject to final homologation) - continued 2.0 D-4D 2.2 D-4D 150 2.2 D-CAT 150 2.2 D-CAT 177 6M/T 6M/T 6A/T 6M/T Fuel consumption

Urban SD 5.6 7.0 8.2 7.4 (l/100km) WG 5.6 7.1 8.4 7.5 Extra-urban SD 3.9 4.7 5.3 5.0 (l/100km) WG 3.9 4.8 5.5 5.1 Combined SD 4.5 5.5 6.4 5.9 (l/100km) WG 4.5 5.6 6.6 6.0 Fuel tank capacity (l) 60

Performance

Max. Speed SD 200 210 205 220 (km/h) WG 200 210 205 220 0-100 km/h SD 9.8 8.9 9.5 8.5 WG 10.1 9.2 9.8 8.8

CO2 emissions

Urban SD 146 185 216 197 (g/km) WG 146 189 223 200 Extra-urban SD 104 124 141 134 (g/km) WG 104 128 145 136 Combined SD 119 147 169 157 (g/km) WG 119 150 174 159 Source: Company data, Mirae Asset Research

16 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 18 The revised Avensis technical specifications (subject to final homologation) - continued 1.6 Valvematic 1.8 Valvematic 2.0 Valvematic 6M/T 6M/T Multidrive S 6M/T Multidrive S Engines

Engine code 1ZR-FE 2ZR-FAE 3ZR-FAE Type 4 cylinders in line Valve mechanism 4 Valve Roller Rocker Displacement (cm3) 1.598 1.798 1.987 Bore x stroke (mm) 80.5 x 78.5 80.5 x 88.3 80.5 x 97.6 Compression ratio (:1) 10.7 10.5 10 Max. power (DIN) KW /rpm (132) 97/6,400 (147) 108/6,400 (152) 112/6,200 Max. torque (Nm/rpm) 160/4,400 180/4,000 196/4,000 Emissions level EURO5 EURO5 EURO5 EURO5 EURO5

Transmission

Type Single dry plate for manual transmission / Torque converter with Lock-up Clutch for automatic and Multidrive S transmission Gear ratios 1st 3,538 3,538 - 3,538 - 2nd 1,913 1,913 - 2,047 - 3rd 1,310 1,310 - 1,375 - 4th 0.971 0.971 - 1025.000 - 5th 0.818 0.818 - 0.875 - 6th 0.700 0.700 - 0.733 - Forward - - 2.386 - 0.411 - 2.396 - 0.428 Reverse 3,333 3,333 2,505 3,545 1,668

Suspensions

Front MacPherson Strut Rear Double whishbone

STEERING

Type Rack and pinion Ratio (:1) 13.3 Turns (lock to lock) 2.7 Min. turning radius – tyre (m) 5.4 Additional feature Electric Power Steering (EPS)

BRAKES

Front Ventilated disc (ø295x26mm) Rear Solid disc (ø290x11mm) Additional features ABS EBD BA VSC+ TRC Source: Company data, Mirae Asset Research

17 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 19 The revised Avensis technical specifications (subject to final homologation) - continued 1.6 Valvematic 1.8 Valvematic 2.0 Valvematic 6M/T 6M/T Multidrive S 6M/T Multidrive S Fuel consumption

Urban SD 8.3 8.5 8.6 9.1 9.2 (l/100km) WG 8.4 8.6 8.6 9.2 9.2 Extra-urban SD 5.4 5.4 5.6 5.6 5.7 (l/100km) WG 5.4 5.5 5.6 5.6 5.8 Combined SD 6.5 6.5 6.7 6.9 7.0 (l/100km) WG 6.5 6.6 6.7 6.9 7.0 Fuel tank capacity (l) 60

Performance

Max. Speed SD 200 200 205 (km/h) WG 195 200 200 0-100 km/h SD 10.4 9.4 10.4 9.0 10.0 WG 10.6 9.7 10.7 9.3 10.3

CO2 emissions

Urban SD 196 199 201 215 215 (g/km) WG 198 202 202 216 216 Extra-urban SD 127 127 131 133 134 (g/km) WG 127 128 133 134 136 Combined SD 152 154 157 163 164 (g/km) WG 153 155 158 164 165 Source: Company data, Mirae Asset Research The new Toyota Prius Plug-in Hybrid The Prius Plug-in Hybrid, Toyota’s first plug-in hybrid electric vehicle (PHEV) to go on sale to The new Prius Plug-in Hybrid the mass market, made its production vehicle world debut. The Prius Plug-in Hybrid is the achieves market-leading fuel efficiency and low CO2 emissions latest development of the company’s modular Hybrid Synergy Drive(HSD) platform. Offering a considerable expansion of the Hybrid Synergy Drive system’s capabilities, the Prius Plug-in Hybrid incorporates a lithium-ion battery to offer an electric vehicle(EV) driving range of approximately 23 km. Beyond the electric driving range, it can be used as a conventional full hybrid, and fully recharged from a domestic source in 1.5 hours.

With a total HSD system power output of 100 kW, the Prius Plug-in Hybrid can accelerate from 0-100 km/h in 10.7 seconds and has a top speed of 180 km/h. Its EV cruising range of approximately 23 km enables it to achieve fuel efficiency of 47.6 km/l, and to lower CO2 emissions to 49 g/km. At approximately 1,420 kg, the Prius Plug-in Hybrid is 50 kg heavier than the regular Prius, and comparable to other diesel or petrol engined models in the segment.

Addressing the specific needs of drivers commuting to urban areas, the Prius Plug-in Hybrid will appeal to customers to those who were early adopters of the first generation Prius; ecologically- aware individuals attracted to the new vehicle’s concept, environmentally-friendly credentials and advanced technology. Sales will start in early 2012, mainly in Japan, US and Europe, with anticipated sales of approximately 50k units annually.

Figure 20 The new Prius Plug-in Hybrid

Source: Company data, Mirae Asset Research

18 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 21 The new Prius Plug-in Hybrid technical specifications (subject to final homologation) Engine

Engine 1.8-liter gasoline engine 2ZR-FXE: high expansion ratio Engine displacement (cc) 1.797 Maximum output (kW/PS) 73/99 Ma x imum t orque (Nm) 142

Performance

Transmission E-CVT (electric continuously variable transmission) Max. speed (km/h) 180 Acceleration (0-100 km/h) (sec.) 10.7 Electric mode cruising range (km/h) Approx. 23 (target) Idling stop ✔ Regenerative braking system ✔ System voltage max. 650 V

Motor

Motor Generator Motor type Permanent magnet: 3JM Ma x imum out put (kW/PS) 60/82 Ma x imum t orque (Nm) 207 Syst e m ma x imum out put (kW/PS) 100/136

Battery

Drive battery Lithium-ion Charging time AC100V approx. 180 min AC200V approx. 90 min Total battery capacity (kWh) 4.4 Max. battery output (Hp/kW) 36/27 Battery weight (kg) 80

Interior Dimensions

Length (mm) 1.905 Width (mm) 1.47 Height (mm) 1.225 Luggage capacity (L) 443 Seating capacity (persons) 5

Exterior Dimensions

Length (mm) 4.480 Width (mm) 1.745 Height (mm) 1.490 Wheelbase (mm) 2.700 Vehicle weight (kg) 1.420 Minimum turning radius (m) 5.2 Tire size (inches) 15”

Fuel consumption (NED)

Combined (l/100 km) 2.1 (target)

CO2 emissions

Combined (g/km) 49 (target) Source: Company data, Mirae Asset Research

19 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

The new Toyota Prius+ Prius+, a seven-seat MPV based on the Prius, made its production car European debut at the More versatile Prius+, with 7 2011 Frankfurt Motor Show, going on sale throughout Europe in 1H12. The Prius+ is the first seats, is aimed at big families car to offer European customers the versatility of seven seats combined with a full hybrid powertrain.

The Prius+ is 155 mm longer than a standard Prius, 30 mm wider, and 85 mm higher, with a wheelbase extended by 80 mm, making it possible to accommodate adults in 3 rows. Even with seven passengers on board, the Prius+ provides 200 liters of cargo space. With the third seating row stowed, this figure rises to 505 litrers. The adoption of third row seating has been made possible by the installation of a highly compact, space-saving lithium-ion battery pack within the vehicle centre console between the front seats, offering little compromise to the seven-seat passenger accommodation or loadspace of the MPV-style interior.

The Prius+ showcases the latest generation of Toyota’s Hybrid Synergy Drive powertrain, which employs a 1.8 liter 73 kW Atkinson cycle petrol engine and a 60 kW electric motor. Total system power is 136 DIN hp, and the Prius+ will accelerate from 0-100 km/h in 11.8 seconds and has a top speed of 170 km/h. Its environmental performance enhanced by the Prius+’s class-leading aerodynamic performance(Cd 0.28 drag coefficient) and low weight, the full hybrid drive system returns both class-leading fuel economy and CO2 emissions, 23.3 km/l and 99 g/km respectively.

The Prius+ goes on sale in 1H12, with expected sales targets of 18k units per year.

Figure 22 The new Prius+

Source: Company data, Mirae Asset Research

20 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 23 The new Prius Plus technical specifications (subject to final homologation) Engine

Engine 1.8-liter gasoline engine 2ZR-FXE: high expansion ratio Engine displacement (cc) 1.797 Maximum output (kW/PS) 73/99 Ma x imum t orque (Nm) 142

Performance

Transmission E-CVT (electric continuously variable transmission) Max. speed (km/h) 170 Acceleration (0-100 km/h) (sec.) 11.8 Electric mode cruising range (km/h) Approx. 2 Idling stop ✔ Regenerative braking system ✔ System voltage max. 650 V

Motor

Motor Generator Motor type Permanent magnet: 3JM Ma x imum out put (kW/PS) 60/82 Ma x imum t orque (Nm) 207 Syst e m ma x imum out put (kW/PS) 100/136

Battery

Drive battery Lithium-ion Total battery capacity (kWh) 1.0 Max. battery output (Hp/kW) 36/27 Battery weight (kg) 32

Interior Dimensions

Luggage capacity (L) 505L / 200L Seating capacity (persons) 7

Exterior Dimensions

Length (mm) 4.615 Width (mm) 1.775 Height (mm) 1.575 Wheelbase (mm) 2.780 Vehicle weight (kg) 1.470 Tire size (inches) 16” and 17”

Fuel consumption (NED)

Combined (l/100 km) 4.3

CO2 emissions

Combined (g/km) 99 Source: Company data, Mirae Asset Research

21 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

The revised Toyota Prius The world’s first mass-produced full hybrid vehicle, the Prius was launched in Japan in 1997, Toyota’s best-selling hybrid car is and in Europe in 2000. With global sales passing 2.3 million units and the revised model going revised to be even more efficient on sale, Toyota hopes the Prius maintains its leading position in terms of hybrid electric vehicle(HEV) sales.

The Prius has been ahead of its time in addressing not only CO2 emissions, but also air quality. Even operating in normal drive mode, it generates significantly lower NOX emissions that any comparable diesel or petrol vehicle. In EV mode, with a range of up to two kilometres, it generates zero CO2, NOX and PM emissions. The latest Prius returns 25.6 km/l in the combined cycle, and generates CO2 emissions of 89 g/km.

The third generation Prius showcased a head-up display, Touch Tracer switchgear and a Pre- Crash Safety system. It was also equipped with the world-first combination of a solar ventilation system and remote controlled air conditioning. The solar powered ventilation prevents the interior air temperature from rising whilst the Prius is parked. In conjunction, the air conditioning can be activated remotely, using the large capacity hybrid battery to cool the interior for up to three minutes before vehicle occupancy.

The new Prius benefits from the addition of a new range of advanced multimedia equipment choices being introduced to every vehicle in the new Prius family; Toyota Touch, Toyota Touch & Go Plus, the new Toyota Touch Pro, and a new JBL Matrix Premium Sound System with GreenEdge energy-saving technology.

Figure 24 The revised Prius

Source: Company data, Mirae Asset Research

22 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 25 The new Prius technical specifications (subject to final homologation) Engine

Engine 1.8-liter gasoline engine 2ZR-FXE: high expansion ratio Engine displacement (cc) 1.797 Maximum output (kW/PS) 73/99 Ma x imum t orque (Nm) 142

Performance

Transmission E-CVT (electric continuously variable transmission) Max. speed (km/h) 180 Electric mode cruising range (km/h) Approx. 2 Idling stop ✔ Regenerative braking system ✔ System voltage max. 650 V

Motor

Motor Generator Motor type Permanent magnet: 3JM Ma x imum out put (kW/PS) 60/82 Ma x imum t orque (Nm) 207 Syst e m ma x imum out put (kW/PS) 100/136

Battery

Drive battery Nickel Metal Hydride Total battery capacity (kWh) 1.3 Max. battery output (Hp/kW) 36/27 Battery weight (kg) 42

Interior Dimensions

Length (mm) 1.905 Width (mm) 1.470 Height (mm) 1.225 Luggage capacity (L) 446 Seating capacity (persons) 5

Exterior Dimensions

Length (mm) 4.480 Width (mm) 1.745 Height (mm) 1.490 Wheelbase (mm) 2.700 Vehicle weight (kg) 1.370 Minimum turning radius (m) 5.2 Tire size (inches) 15” and 17”

Fuel consumption (NED)

Combined (l/100 km) 3.9

CO2 emissions

Combined (g/km) 89

Source: Company data, Mirae Asset Research

23 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Volkswagen Group – Seeking greater penetration in small car segment With the downsizing trend expected going forward due to economic uncertainties in Europe and Volkswagen Group aims for rising oil prices, Volkswagen Group (including Skoda, Audi, Seat and etc.) introduced a range of greater penetration in the growing small car segment new small models, aiming to seek a greater penetration in the small car segment in Europe and in emerging markets.

The new Volkswagen up! Volkswagen AG(Not Rated) showcased a new small car family, the up!, aiming to gain greater The new up! is expected to penetration in the small car segment across Europe and emerging markets. On a small footprint generate significant sales across Europe and emerging markets of 3.54 meters, the up! offers space for four persons as well as highly efficient drive technologies (two petrol engines with 44 kW / 60 PS and 55 kW / 75 PS with two new 5-speed gearboxes). Fuel consumption of the 60 PS version with BlueMotion Technology (including Start/Stop system) is as efficient as 24.8 km/l. Also, the new up! is the world’s first car in its class to have an optional automatic city emergency braking function.

The up! will first be launched in Europe, in December 2011, with advance sales in Germany beginning in September. There are three equipment versions for different budgets; take up! is the entry-level version, move up! the convenience-oriented model, and high up! is the top version. Later in the model cycle, more environmentally-friendly versions; eco up! with an engine run on compressed natural gas(CNG) and e-up! with a zero-emission electric motor, will be launched. The eco up! with BlueMotion Technology is expected to have an average fuel consumption of 40 km/l and CO2 emissions as low as 79 g/km. The e-up!, with an electric motor with a peak power of 60kW, has a battery capacity of 18 kilowatt-hours and can travel up to 130km on a single charge.

Figure 26 The new up!

Source: Company data, Mirae Asset Research

24 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 27 up! 44 kW (60 PS) specification Engine, electrics

Type of engine 3-cyl. petrol engine Engine position Front transverse installation Effective displacement (cm³) 999 Mixture formation Indirect electronic multi-point injection Emissions control system 3-way catalytic converter with Lambda probe Power output (kw (PS) at rpm) 44 (60) 5,000 - 6,000 Max. torque (Nm at rpm) 95/3,000 - 4,300

Performance (at curb weight + 200 kg)

Acceleration 0 - 80/100 km/h (sec.) 9.1/14.4 Top speed (km/h) 160

Fuel consumption (99/100/EC)

Fuel type Premium 95 RON Combined cycle (l/100km) 4.5 Emissions (CO2) (g/km) 105 Energy efficiency label (C) C Exhaust emissions classification Euro 5

Power transmission

Gearbox Five-speed manual gearbox

Exterior dimensions

Number of doors 2 Length/width/height (mm) 3,540/1,641/1,478 Wheelbase (mm) 2,420 Track, front/rear (mm) 1,428/1,424

Luggage compartment

Length, rear seat raised/folded down (mm) 632/1,252 Volume by VDA measurement: rear seat (l) 251-951 raised/folded down

Weights* (DIN)

Unladen weight (kg) 854

Capacities

Fuel tank (l) 35

Source: Company data, Mirae Asset Research

25 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 28 up! 55 kW (75 PS) specification Engine, electrics

Type of engine 3-cyl. petrol engine Engine position Front transverse installation Effective displacement (cm³) 999 Mixture formation Indirect electronic multi-point injection Emissions control system 3-way catalytic converter with Lambda probe Power output (kw (PS) at rpm) 55 (75) 6,200 Max. torque (Nm at rpm) 95/3,000 - 4,300

Performance (at curb weight + 200 kg)

Acceleration 0 - 80/100 km/h (sec.) 8.3/13.2 Top speed (km/h) 171

Fuel consumption (99/100/EC)

Fuel type Premium 95 RON Combined cycle (l/100km) 4.7 Emissions (CO2) (g/km) 108 Energy efficiency label (C) C Exhaust emissions classification Euro 5

Power transmission

Gearbox Five-speed manual gearbox

Exterior dimensions

Number of doors 2 Length/width/height (mm) 3,540/1,641/1,478 Wheelbase (mm) 2,420 Track, front/rear (mm) 1,428/1,424

Luggage compartment

Length, rear seat raised/folded down (mm) 632/1,252 Volume by VDA measurement: rear seat (l) 251-951 raised/folded down

Weights* (DIN)

Unladen weight (kg) 854

Capacities

Fuel tank (l) 35

Source: Company data, Mirae Asset Research

The Skoda MissionL Skoda launched a close-to-production concept car called MissionL, which will be the sixth The Skoda MissionL is the key in model in the line-up that will be launched in Europe, Russia and China in 2012. Positioned increasing Skoda’s global sales to 1.5m units by 2018 between the B-segment Fabia and C-segment Octavia and equipped with Volkswagen Group’s latest generation of low-displacement and fuel efficient petrol and diesel engines, the company is hoping the model to be an attractive choice for customers looking for a high degree of practicality and an attractive price/value ratio.

The brand looks to increase its global annual sales to 1.5 million vehicles by 2018, and this year's results show that Skoda is growing substantially in all relevant areas. The brand's August YTD sales grew by 18.3% y-y to 584k units and the company expects to sell more than 800k units in 2011. The 1H11 revenue grew by 25.7% to EUR 5.4bn, and operating profit by 81.5 % to EUR 412m. The company's net liquidity grew to EUR 2.0bn versus EUR 1.6bn as at December 2010.

26 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 29 The Skoda MissionL

Source: Company data, Mirae Asset Research

BMW Group – Achieving a new level of efficiency in the premium market BMW AG (Not Rated), with its new 1 series and new 5 series variants enhanced by the latest BMW aims to bring a new level of EfficientDynamics technology package, is bringing a new level of efficiency to its range of efficiency to the premium market in order to generate new sales premium products in order to generate additional sales in both retail and fleet markets around the globe. With the new i3 and i8, the company’s new EV/PHEV models due to be launched in 2013, the company also expects incremental sales through the expanding EV market.

The new BMW 1 series The second-generation BMW 1 series with more efficient engines, more comfort features and The new 1 series is much more more generous standard equipment compared with the first-generation model was introduced at efficient and 7-9% cheaper to produce vs. outgoing model the show. The engine portfolio consists of two members of the new petrol engine generation and three highly efficient diesel engines with a performance spectrum ranging from 136 hp to 184 hp.

The fuel efficiency has greatly improved too, with the new 116d EfficientDynamics Edition achieving an average fuel consumption of 26.3 km/l and a CO2 emission level of 99 g/km. The BMW EfficientDynamics technology package supplied as standard comprises, in addition to brake energy regeneration and electric power steering, a gearshift point indicator, a detachable climate compressor and roll resistance reduced tires. The equipment range also includes the Auto Start Stop(AKA Idle Stop and Go, ISG) function in conjunction with both the manual and the automatic transmission. Moreover, the driver can activate the ECO PRO mode via the Driving Experience Control switch, which supports a particularly economical driving style. All engine variants can be combined with the eight-speed automatic transmission as an option, a feature unique in the compact segment.

The new 1 Series is built at the BMW Regensburg plant and is produced parallel to the BMW 3 Series sedan, coupe and convertible models as well as the BMW M3 and BMW Z4, sharing a common platform and saving 7-9% of cost compared with the previous generation model.

Figure 30 The new 1 series

Source: Company data, Mirae Asset Research

27 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

The new BMW i3 Concept and i8 Concept BMW also presented the i sub-brand with two special concept vehicles at the Frankfurt Motor BMW’s new i3 and i8 are the Show; the BMW i3 Concept and the BMW i8 Concept. While the BMW i3 Concept is purely company’s first FEV and PHEV models electrically powered, the plug-in hybrid model BMW i8 Concept combines an electric motor and a 1.5 liter petrol engine, delivering a high level of performance and efficiency.

The electric drive of the BMW i3 Concept, due to be launched in 2013, is designed for use primarily in urban environments. The electric motor delivers 125 kW/170 hp and generates a maximum torque of 250 Newton meters, taking the i30 to 60 km/h in under four seconds, the 100 km/h in less than eight seconds. Furthermore, the impressive level of torque is available over a very wide range of motor speeds and ensures smooth delivery of power. The single-gear transmission ensures optimum power delivery to the rear wheels and propels the BMW i3 Concept with a continuous, uninterrupted energy stream up to 150 km/h. The i3 can travel up to 160km on normal driving conditions on a single charge that can take up to 6 hours on a domestic charge.

The BMW i8 Concept, aimed for late 2013 launch. is designed as a plug-in hybrid and combines an electric motor and a turbo-charged 1.5 liter 3-cylinder petrol engine with 223hp, taking the i8 to 100km/h under five seconds with a combined fuel consumption of up to 33.3 km/l. The i8 can also travel up to 35km on pure electric mode. All four wheels of the BMW i8 Concept can be driven simultaneously by the two drives, so the concept combines the tremendous advantages of a front-wheel drive, a rear-wheel drive and a four-wheel drive vehicle rolled into one.

Both the i3 and i8 are built using BMW’s lightweight architecture concept called the LifeDrive. Similar to vehicles based on a frame construction, the LifeDrive concept consists of two horizontally separated, independent modules. The Drive Module, the chassis, forms a foundation and integrates the battery, the motor as well as structural and crash functionality in a single unit. Its counterpart, the Life Module, consists mainly of a high-strength, ultra-lightweight passenger cell made of carbon fibre reinforced plastic (CFRP).

Figure 31 The new i3 concept

Source: Company data, Mirae Asset Research

Figure 32 The new i8 concept

Source: Company data, Mirae Asset Research

28 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 33 BMW’s LifeDrive lightweight architecture concept

Source: Company data, Mirae Asset Research

Figure 34 BMW i3 concept specifications Length / Height / Width (mm) 3,845 / 1,537 / 2,011 Wheelbase 2,570

No . o f s e a t s 4

Kerb weight (kg) 1,250 Output 125 kW / 250 Nm Top speed 150 km/h / 93 mph

Acceleration 0-60 km/h / 37 mph 3.9 s 0-100 km/h / 62 mph 7.9 s 80-120 km/h / 50-75 mph 6.0 s

Electric range Everyday range: 130-160 km / 80-100 miles FTP72 cycle: 225 km / 140 miles

Battery charge time Standard: 6h for 100% charge Optional: 1h for 80% charge

Luggage compartment Approx. 200 litres

Source: Company data, Mirae Asset Research

Figure 35 BMW i8 concept specifications Length / Height / Width (mm) 4,632 / 1,200 / 1,955 Wheelbase 2,800

No . o f s e a t s 2 + (2)

Output 260 kW / 550 Nm system output of which petrol engine: 164 kW / 300 Nm of which electric motor: 96 kW / 250 Nm

Top speed 250 km/h / 155 mph governed

Acceleration 0-100 km/h / 62 mph 4.6 s 80-120 km/h / 50-75 mph 4.0 s

Fuel consumption (EU cycle) 2.7 l/100 km / 104 mpg imp (66g CO2)

Electric range Aprox. 25 km / 20 miles

Battery charge time Standard: 1h45 for 100% charge

Luggage compartment Approx. 150 litres

Source: Company data, Mirae Asset Research

29 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Cost-cutting measures in advanced level After meetings with company/IR representatives at the Frankfurt Motor Show, we were left with a strong conviction that Hyundai/Kia Motors, Volkswagen and BMW will be able to withstand the possible short-to-mid term margin squeezes (due to increasing incentives and rising raw material costs) better than many of the competitors, through further cost-cutting via integration of platforms using modular platforms/toolkits.

Hyundai Motor Group – Further cost-cutting through platform integration Both Hyundai and Kia Motors displayed record operating margins in 2Q11(10.6% and 8.9% Cost-cutting in good progress respectively), thanks partially to reduced COGS through further platform integration. Hyundai thanks to advanced level of platform integration Motor’s 2Q11 COGS% came down to 75.6% from 77.2% in 1Q11, whilst Kia Motors’ improved to 78.0% from 78.2% in the same period, despite the rise in raw material costs.

We expect the similar trend to continue well into 2012E, due to the ratio of cars manufactured under the new modular platforms increasing to approximately 85% in 2012E from 67% in 2011E for Hyundai Motor and to approximately 70% from 50% for Kia Motors.

As the platform integration has less-progressed for Kia Motors versus Hyundai Motor so far, we see bigger cost cutting possibilities for Kia Motors going forward. When the integration of platforms down to 6 finalizes in 2013, both companies are planning to reduce the number of platforms to 4, starting from 2014.

Figure 36-1 Hyundai’s COGS trend and forecast Figure 362 Kia’s COGS trend and forecast

(KRW tn) (%) (KRW tn) (%) 100 78 45 79 90 40 78 80 35 79 70 77 30 60 78 25 50 77 20 40 78 76 15 30 20 10 77 76 10 5 0 75 0 77 2009 2010 2011E 2012E 2009 2010 2011E 2012E

COGS(LHS) COGS TO SALES(RHS) COGS(LHS) COGS TO SALES(RHS)

Source: Bloomberg, Mirae Asset Research, 09-10 GAAP consolidated, 11-12 IFRS consolidated Source: Bloomberg, Mirae Asset Research, 09-10 GAAP consolidated, 11-12 IFRS consolidated

Volkswagen Group – Modular toolkits, the driver in margin expansion Volkswagen Group, who is the pioneer of manufacturing cars using modular platforms, is also MQB and MLB toolkits the key in accelerating the usage of front-wheel-drive MQB toolkit on compact models, starting with the cutting costs by up to 20% and engineered hours up to 30% new Audi A3 due to be launched in 2012, in order to cut costs further for possible margin squeezes going forward. The next-generation compact front-wheel-drive models such as Volkswagen Golf, Skoda Octavia, and Seat Leon will all be built on the MQB toolkit, and when the integration is finalized (possibly in 2014), the company expects to build approximately 4.5m MQB-based-vehicles per year.

The number of large models based on the MLB toolkit is also expected increase further, protecting/increasing the margins on the high-end models such as Audi A6 and A8 (the OPM for Audi division reached a record 12.9% in 2Q11).

30 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

By building the group’s forthcoming new models on the MQB and MLB toolkits, the company hopes to reduce unit costs and one-off expenditure by up to 20% and engineered hours per vehicle by up to 30% compared with the previous generation models.

Figure 37 Modular toolkits, the key in margin expansion

Source: Company data, Mirae Asset Research

Figure 38 Volkswagen’s COGS trend and forecast

(EUR bn) (%) 56 92

54 88 52 84 50 48 80

46 76 44 72 42 40 68 2009 2010 2011E 2012E

COGS(LHS) COGS TO SALES(RHS)

Source: Bloomberg, Mirae Asset Research

31 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

BMW – ‘Strategy Number One’ efficiency measures above plan BMW, having achieved a record Auto EBIT margin of 13.9% in 2Q11, is also aiming for BMW’s efficiency improvements improvement in margin with the new 1 series and 3 series, due to be launched in late 2011 and in materials/purchasing and expenses/fixed costs/R&D well early 2012 respectively, through sharing of modular platforms. Despite the uncertain macro in progress environment, less-favorable exchange rate, and phasing out cost of the previous generation 1 series and 3 series, the company expects the margin pressure to be short-lived as significant cost savings can be achieved with the two new models, which are expected to enjoy a 7-9% net cost advantage over the previous generation models (the number of common parts between the two models is expected to increase from 60% to 80%). The new 5 series, launched in 2010, also benefits from approximately 5% net cost advantage over the previous generation model, despite the rising raw material costs. By 2012, the company also expects to renew 60% of its product portfolio to new models based on the new modular platforms, cutting costs even further.

BMW’s ‘Strategy Number One’ efficiency measures are also above plan, according to the company. BMW is targeting EUR 6bn of efficiency improvements from materials/purchasing (€4bn) and expenses/fixed costs/R&D (€2bn). The program also includes: (1) automobiles EBIT margins of 8%-10% as of 2012; (2) increase of natural hedging in USD by expanding production capacity in the US, UK, and China; (3) auto retail sales of more than 1.8mn units by 2012 and more than 2mn units by 2020; (4) motorcycles retail sales of 150k by 2012; and (5) automobiles ROCE of 26% as of 2012.

Figure 39-1 BMW aims for EUR 6bn efficiency improvements Figure 39-2 Cost savings through modular platforms

Source: Company data, Mirae Asset Research Source: Company data, Mirae Asset Research

Figure 40 BMW’s COGS trend and forecast

(EUR bn) (%) 140 88

120 86 100 84 80 82 60 80 40

20 78

0 76 2009 2010 2011E 2012E

COGS(LHS) COGS TO SALES(RHS)

Source: Company data, Mirae Asset Research

32 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

A balanced global footprint Auto manufacturers with a balanced global footprint and an already significant exposure in the emerging markets are expected to withstand the impact of a possible market downturn in some developed regions better than others. With the BRICs auto market expected to grow by 11.7% in 2011E and by a 6.2% CAGR over the next 10 years, auto manufacturers with a strong foothold in the region are expected to outperform others in the short-to-mid term.

Hyundai Motor Group – Growing presence in all regions In 2011E, both Hyundai and Kia Motors are expected to show solid retail sales growth in all key Hyundai and Kia with the most regions with the most balanced global footprint amongst major competitors. balanced global footprint amongst major competitors Of the total 4.05m unit sales (+12.6% y-y) expected in 2011 for Hyundai Motor, we expect 17.8% of sales to occur in Korea (720k units, +9.1% y-y), 15.9% in the US (645k units, +15.9% y-y), 18.3% in China (740k units, +5.3% y-y), 9.1% in India (369k units, +3.4% y-y), 10.3% in Europe (418k units, +16.8% y-y), 4.3% in Russia (175k units, +101.1% y-y), 3.3% in Brazil (133k units, +25.5% y-y) and 21.1% in the rest of world (854k units).

Of the total 2.49m unit sales (+19.3% y-y) expected in 2011 for Kia Motors, we expect 20.5% of sales to occur in Korea (510k units, +5.6% y-y), 19.9% in the US (495k units, +38.9% y-y), 17.3% in China (430k units, +17.3% y-y), 11.8% in Europe (295k units, +12.2% y-y), 6.8% in Russia (170k units, +63.5% y-y), 3.6% in Brazil (89k units, +61.3% y-y) and 20.1% in the rest of world (510k units).

Figure 41-1 Hyundai’s 2011E global retail sales by region Figure 41-2 Kia’s 2011E global retail sales by region

(Units, k) (Units, k) 4,054, 4,500 12.6% 3,000 2,490, 4,000 19.3% Hyundai 2011E Kia 2011E 3,500 2,500 3,000 2,000 2,500

2,000 1,500 1,500 720, 740, 645, 1,000 1,000 9.1% 19.9% 5.3% 369, 418, 510, 495, 175, 430, 3.4% 16.8% 133, 5.6% 38.9% 295, 500 101.1% 29.1% 170 , 25.5% 500 12.2% 89, 0 63.5% 61.3%

S. a ia zil 0 rea . pe a o U ro ss Total K China Indi u Br E Ru Total Korea U.S. China Europe Russia Brazil

Source: Company data, Mirae Asset Research Source: Company data, Mirae Asset Research

As we can see below, Hyundai and Kia Motors have a far more balanced global footprint than the GM Group, the world’s top auto manufacturer by volume, and this is expected to be the key in a stable earnings growth for the two companies going forward.

33 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Figure 42 GM, Hyundai and Kia’s 2011 sales by region

GM 2011E Sales by Region Hyundai 2011E Sales by Region Kia 2011E Sales by Region

Others, 11.2% Korea, 17.8% Others, 21.1% Others, 20.1% Korea, 20.5%

North America, 33.2%

Brazil, 3.6% China, 24.4% Brazil, 3.3% U.S., 15.9% Russia, 4.3% Russia, 6.8%

U.S., 19.9%

Europe, 10.3% India, 0.9% Europe, 11.8% Russia, 1.9%

Brazil, 8.0% Europe, 20.4% India, 9.1% China, 18.3% China, 17.3%

Source: Company data, Mirae Asset Research

Not only that, Hyundai and Kia Motors are rapidly increasing their exposure in BRICs market, by launching new products specifically developed for the individual market and expanding local plant capacity. We expect this year’s BRICs market to expand by 11.7% y-y to 29.6m units, and within the market, Hyundai and Kia’s sales are forecast to grow by 20.5% y-y to 2.1m units. Due to the significant outperformance against the market, we expect their combined market share to surge to 7.1% in 2011 from 6.6% in 2010.

Also, boosted by the capacity expansion in 2012 in Brazil (+150k units), Russia (+150k units), and China (+400k units), Hyundai and Kia’s 2012 sales are expected to grow by 21.5% y-y to 2.6m units, achieving a new record market share of 7.9%. With the new factories running at full capacity in 2013, we expect their combined market share to surge to well over 8%.

Figure 43 Hyundai and Kia’s sales & m/s forecast in BRICs (m units) 2010A HMC m/s KMC m/s HKMC Total m/s Brazil 3.5 0.106 3.0% 0.055 1.6% 0.161 4.6% Russia 1.9 0.087 4.6% 0.104 5.5% 0.191 10.1% India 3.0 0.357 11.9% 0.000 0.0% 0.357 11.9% China 18.1 0.703 3.9% 0.333 1.8% 1.036 5.7% BRICs 26.5 1.253 4.7% 0.492 1.9% 1.745 6.6%

2011E HMC m/s KMC m/s HKMC Total m/s Brazil 3.8 0.133 3.5% 0.089 2.3% 0.222 5.8% Russia 2.3 0.175 7.6% 0.171 7.4% 0.346 15.0% India 3.5 0.369 10.5% 0.000 0.0% 0.369 10.5% China 20.0 0.745 3.7% 0.430 2.2% 1.175 5.9% BRICs 29.6 1.422 4.8% 0.690 2.3% 2.112 7.1%

2012E HMC m/s KMC m/s HKMC Total m/s Brazil 4.0 0.178 4.5% 0.121 3.0% 0.299 7.5% Russia 2.9 0.228 7.9% 0.229 7.9% 0.457 15.8% India 3.6 0.381 10.6% 0.000 0.0% 0.381 10.6% China 22.1 0.950 4.3% 0.480 2.2% 1.430 6.5% BRICs 32.6 1.737 5.3% 0.830 2.5% 2.567 7.9%

Source: Company data, Mirae Asset Research

34 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Volkswagen Group – Well on track to achieve 10m unit sales by 2018 Volkswagen Group is also benefiting from its balanced global footprint and its big exposure in Balanced global footprint and big the emerging markets, as it achieved a significant sales growth in all global regions so far in exposure in the emerging markets to drive VW’s growth 2011. August 2011 YTD sales for the group surged by 14.1% y-y to 5.4m units, with sales in Europe, North America, South America and Asia Pacific increasing by 11.0%, 20.9%, 10.3%, and 17.7% y-y respectively.

By 2018, the company expects the global auto market to expand by 45% versus 2010 to 104.9m units, with the China market up by 68% to 28.7m units, North America market up by 40% to 19.6m units, South America market up by 70% to 8.5m units, India market up by 137% to 6.4m units and the market in the rest of world up by 34% to 14.6m units. With the strong growth of the emerging markets and Volkswagen Group’s aggressive capacity expansion plans especially in China and America, the company’s target of achieving a global market share of 9.5% by 2018 looks to be well on track.

Figure 44 Volkswagen Group - Deliveries to Customers by Market*

(000 units)

14.1% 6,000 5,399

5,000 4,730

4,000 8.4% 3,000 17.7% 1,939 2,102 10.2% 1,679 2,000 29.5% 20.8% 1,426 24.7% 1,000 629 347 430 571 268 356 170 212 0 Vokswagen Western Central & North South Asia Pacific Rest of Group Europe Eastern America America World Europe

Jan to Aug 2010 Jan to Aug 2011

Source: Company data, Mirae Asset Research Note: *preliminary; incl. Scania (Q1+Q2)

Figure 45 Global market forecast, 2010-2018

Source: Company data, Mirae Asset Research

35 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Analyst team profile

Gregory Byung Kwan Kim

LEAD ANALYST, Korea Auto

Gregory joined Mirae Asset Korea Research Center in 2010 to cover automotive sector. After graduating from Coventry University in the U.K. with a Bachelor’s degree in automotive design, he joined Autocar magazine in the U.K. to work in the editorial team. Then, he joined Hyundai Motor UK, and worked as a product manager in the Product Marketing Team, overseeing the launch of new models in Europe and the U.K. in the past 5 years. Other reports:

» Kia Motors – Strong 3Q11 earnings expected Company Report » Korea Autos – Buy on further correction Overweight » Kia Motors – 2H11 sales to surge in Europe Company Report

36 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Recommendations

By stock (12 months) By industry Buy: A target price + 10% or more above the current price, Overweight: over +10% of the current industry index Hold: Target price within - 10% to +10% of the current price Neutral: -10% to +10% of the current industry index Reduce: A target price of –10% or less below the current price Underweight: -10% or less than the current industry index

Earnings quality score

Earnings Quality Score = 0.70*(Historical Earnings Stability) + 0.15*(Consensus Forecast Certainty) + 0.15*(Consensus Forecast Accuracy) 1. Historical Earnings Stability - The variability of the net profit growth rate (YOY) over the last 20 quarters was translated into percentage terms. - Earnings growth variability was calculated based on MAD (Median Absolute Deviation), rather than SD (Standard Deviation) in order to minimize distortion from outliers. - The lower the earnings growth variability, the higher this indicator. 2. Consensus Forecast Certainty - The gap between analysts' views on 12-month forward EPS was translated into percentage terms. - The gap is calculated by dividing the SD of 12-month forward EPS with the average value. - The narrower the gap, the higher this indicator. 3. Consensus Forecast Accuracy - The median value of absolute EPS surprise over the last 3-year was translated into percentage terms. - EPS surprise was calculated based on 'the actual figure at the end of the year / the consensus estimate at the beginning of the year - 1'. - The lower the absolute EPS surprise, the higher this indicator. * Reference 1) Consensus Forecast Certainty and Consensus Forecast Accuracy were applied only to companies with more than 5 years of EPS estimates. 2) We gave the average score of 50 to cases in which the aforementioned indicators could not be produced. REMARK: Korean analyst is only responsible for Korean securities and relevant sectors only. Compliance notice

This report is distributed to our clients only, and none of the report material may be copied or distributed to any other party. While Mirae Asset Securities have taken all reasonable care to ensure its reliability, we do not guarantee that it is accurate or complete. Therefore, Mirae Asset Securities shall not be liable for any result from the use of this report. As of 19 September 2011, Mirae Asset Securities is Hyundai Motor Company and Kia Motors Corp’s ELW issuer and LP. This report has never been provided to any institutional investor or third party. This report has been prepared without any undue external influence or interference, and accurately reflects the personal views of the analyst on the company herein. [Analyst: Gregory Byung Kwan Kim, Yoon Ki Kim]

37 Gregory Byung Kwan Kim, Analyst, 822 3774 1592 [email protected] Korea/Automobiles 19 September 2011

Recommendations By stock (12 months) By industry Buy: A target price + 10% or more above the current price, Overweight: over +10% of the current industry index Hold: Target price within - 10% to +10% of the current price Neutral: -10% to +10% of the current industry index Reduce: A target price of –10% or less below the current price Underweight: -10% or less than the current industry index Hong Kong Compliance Disclosure The views expressed in this report accurately reflect the personal views of the analysts about the subject securities, issuer(s) or new listing applicant(s). Each Hong Kong analyst declares that neither he/she nor his/her associate serves as an officer or has any financial interests in relation to the issuer(s) or new listing applicant(s) reviewed by the analyst. 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