Car Industry

Welcome

Global Light Vehicle Outlook Briefing from Shanghai

22nd October 2020 AGENDA

Session 1: China 13:00 5min Intro and housekeeping Volker KRUEGER LMC Automotive 13:05 15min Macro Economic Outlook Louis KUIJS Oxford Economics 13:20 15min China PV Outlook Alan KANG LMC Automotive 13:35 15min China NEV Outlook Lancy ZHANG LMC Automotive 13:50 10min China CV Outlook John ZENG LMC Automotive 14:00 10min Q & A

Session 2: Regional Overview 14:10 15min Customer Satisfaction Jun SU J.D. Power 14:25 10min Asia May ARTHAPAN LMC Automotive 14:35 10min Europe Justin COX LMC Automotive 14:45 10min Americas Jeff SCHUSTER LMC Automotive 15:00 15min Q & A 15:15 10min Global wrap-up Pete KELLY LMC Automotive

15:30 END

Louis Kuijs, Head of Asia Economics

[email protected] Outline of webinar

• The post-Covid recovery • Globally • China • APAC

• Longer-term outlook for China and Asia • Headwinds to China’s external conditions • Role of US elections • China’s policy response: ‘Dual circulation’ • Outlook Global recovery to be slow; risks skewed to the downside

2 Central bank interest rates lower for longer

3 China’s has recovered but consumption still lags

4 Exports and imports bounce back sharply

5 The PBoC allows the CNY to strengthen further

6 APAC: containment is key to economic recovery Progress towards recovery varies greatly in APAC (I)

8 Progress towards recovery varies greatly in APAC (II)

9 Our baseline has a strong rebound in 2021 With global rates lower for longer, Asian bond yields will remain relatively low too

11 Longer-term outlook China’s external conditions have worsened more than expected

• US has ramped up efforts to decouple from China and counter it

• Other countries have also taken efforts to decouple, for various reasons (Australia, UK, India)

• What about a Biden Presidency? • Less aggressive, more predictable • Tough US stance will remain • Greater chance of ‘common front’

13 US-China tensions won’t go away

14 ‘Decoupling’ increasingly weighing on LT outlook

15 But dramatic decoupling remains unlikely

• Governments of most developed countries want to remain engaged with China, economically

• Even amid the escalation of the US-China trade war, many US firms remain keen to expand their China business • FDI, PF flows • Expansion / establishment US financial firms • Amcham survey

16 We don’t expect drastic decoupling

17 Decoupling?

18 Harder external conditions are shaping China’s policy

• ‘Dual circulation’: • Boosting domestic demand and domestic growth (both demand and supply), and ensuring the economy is robust against shocks • Continued commitment to reform and opening up • Hukou system and improving the quality of urbanization, the rural land system, and SOEs • Easing restrictions on FDI and PF flows, lowering tariffs

19 Decoupling hurts China’s long-term growth

20 China and APAC to remain fastest growing part of global economy

21 Conclusions

• Globally, after the initial post-lockdown bounce, the recovery will be slow and risks are to the downside • China has recovered, but consumption is lagging • APAC prospects are mixed, but we expect a rebound in 2021 • US-China tensions won’t go away and a Biden presidency won’t change the outlook much • But we don’t expect dramatic decoupling and see China and APAC growing relatively solidly in the coming 5-10 years

22 Thank you!

Oxford Economics is a leader in global forecasting and quantitative analysis, providing reports, forecasts and analytical tools on 200 countries, 150 industrial sectors and 7,000 cities and regions. For more information, please scan the QR code below to follow us on Wechat. Global headquarters Europe, Middle East Americas Asia Pacific Oxford Economics Ltd and Africa Abbey House, 121 St Aldates Oxford New York Singapore Oxford OX1 1HB, UK London Philadelphia Sydney Tel: +44 (0) 1865 268 900 Belfast Boston Melbourne Frankfurt Chicago Hong Kong London Paris Los Angeles Tokyo 4 Millbank, Westminster Milan Toronto London SW1P 3JA, UK Stockholm Mexico City Tel: +44 (0)20 3910 8000 Cape Town Dubai Frankfurt: Marienstr. 15, 60329 Frankfurt Email: am Main, Germany [email protected] Tel: +49 69 96 758 658 Website: www.oxfordeconomics.com New York Further contact details: th 5 Hanover Square (8 floor) www.oxfordeconomics.com/about-us/worldwide-offices New York NY 10004, USA Tel: +1 646 503 3050

Singapore: 6 Battery Road # 38-05, Singapore 049909 Tel: +65 6850 0110 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

▪ 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) Jilin Beijing 80 (May) (June-July) 60 40 Shandong 20 (October)

27/06/2020 04/08/2020 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 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 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 millionunits 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 Million In 2

1.5

0.5

201602 201704 201809 201911 201501 201502 201503 201504 201505 201506 201507 201508 201509 201510 201511 201512 201601 201603 201604 201605 201606 201607 201608 201609 201610 201611 201612 201701 201702 201703 201705 201706 201707 201708 201709 201710 201711 201712 201801 201802 201803 201804 201805 201806 201807 201808 201810 201811 201812 201901 201902 201903 201904 201905 201906 201907 201908 201909 201910 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 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 Million In 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% 12.2% 12.9% 9.8% 9.5% 10.0% 10.0 8.3% 8.1% 5.9% 4.8% In million units million In 4.6% 3.8%3.3% 2.4% 0.0% 5.0 -3.9% -8.9%-8.6% -10.0% - -20.0%

China NEV market status

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

• Key Policy Review

• NEV Market Status

• Outlook

▪ 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 Note: Swapped 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. 3 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

▪ a) New NEV quota is set for 2021-2023

▪ 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

Data source: MIIT, LMC Automotive

▪ The more NEV share, the better CAFC performance

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. 6 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. 7 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. 8 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%

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 10 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%

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

Feb-20 Sep-18 Feb-19 Sep-19

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

Data source: MIIT, LMC Automotive

China Market Rises Against the Trend

John Zeng, Forecasting Director China The Global Light Vehicle Outlook Briefing October 22, 2020

Jul-16 Jul-17 Jul-18 Jul-19 Jul-20

Jan-19 Jan-16 Jan-17 Jan-18 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%

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%

80.0%

70.0%

60.0% YTDGrowth

50.0%

40.0% Average +36%

30.0%

20.0%

10.0%

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. 5 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

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

Up to 20-25% of truck sales 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%)

• 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

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. 11 State VI Trucks Accounted For ~17% Emission Standards 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 15% 17% 17% 0%

State VI Other

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 -21% -20% 1

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

Source: Beidou © 2020 LMC Automotive Limited, All Rights Reserved. 13 A Payback Effect Expected In The Next Two Years • Pre-buy likely to push Q4 sales and first half of 2021 to new high level • A weak second half of 2021 expected due to pay back effect 1,600 80% MH Truck Retail Sales 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)

Global Light Vehicle Outlook Briefing from Shanghai

22nd October 2020 Insights into New Energy Vehicle Consumers in China

Jun Su, President, J.D. Power China

October 22, 2020 J.D. POWER is a pioneer in NEV market research and services

With industry benchmarking studies, proprietary studies and consulting services, we comprehensively facilitate the development of NEV products and the improvement of product and service experiences.

New Energy Vehicle Experience Index New Energy Vehicle Quality Club (NEVXI) Study Including NEV startups and NEV brands owned by traditional automakers Released for a 2nd consecutive year

NEV Autonomous Driving NEV Intelligent Cockpit Experience User Requirements Consultation Improvement Examines consumers' requirements for an HMI Evaluations and Improvements autonomous vehicle

2 NEV Market Accelerates

Fueled by favorable policies, China’s NEV market has recovered from COVID-19 and accelerated since the 2nd half of 2020 and will be on the fast growth lane in the next five years.

Narrowly Defined# New Energy Vehicle Sales Volume March 2020 (Million)

700 20% Fiscal and Tax Support 16.6% - extends the NEV purchase subsidy and tax exemption policy by two 15.3% 14.2% years to boost NEV consumption 600 13.0% 15% 11.5% 500 9.5% 471.9 July 2020 424 10% 6.7% 382.3 400 5.1% 4.5% 4.5% 336.1 Demand-side and Supply-side Upgrading 5% 2.3% 284 - stimulates the penetration of NEVs to the countryside 300 0.9% 1.3% 219.6 - lowers the entry threshold for NEV manufacturers 0% 200 146.7 108.9 112.5 90.2 -5% October 2020 100 58 18.4 32 Top-level Design and Overall Planning 0 -10% - emphasizes the full leverage of the decisive role of the market in 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E resource allocation Sales of NEV Market Share of NEV - requires to strengthen the subjective initiative of enterprises in technological route selections Source: LMC Automotive LLC; Narrowly Defined NEV refers to BEV and PHEV only. 3 NEV Market Competition Intensifies

NEV startups gradually gain a foothold, while some domestic NEV brands are eliminated from competition. Traditional automakers have launched high-end NEV brands to meet the challenges from international brands.

Changes of BEV market share High-end NEV brands launched by domestic auto groups 5% 8% 24%

2019 Jan. – Jun. 2020 13% 63% 87%

NEVs by international brands FAW Hongqi R Brand VOYAH ARCFOX NEVs by domestic startups NEVs by traditional automakers Changes of PHEV market share

27% 45% 62% Jan. – Jun. 2019 FAW Group SAIC Motor Dongfeng 2020 BAIC Group 55% 11% Motor

Sources: CAAM, news reports 4 Portraits of NEV Owners in China

Younger, more experienced, more distinctive attitudes toward life!

Younger More experienced More distinctive attitudes toward life

Ages of NEV owners Vehicle ownership of NEV owners Differences in life attitudes (NEV owners vs. ICE owners)

Like trying Born before 1980 13% 21% 66% Follow the new 2019 24% 35% 22% 19% trend +6.3% Born in 1980 to 1984 6% 17% 77% +6.2% 2020 37% 31% 18% 13% Love life Express Born in 1985 to 1989 5% 17% 79% +7.6% personality Born in 1990s +7.8% Born in 1985 to 1989 Born in 1990s 2%14% 84% Like sharing Like hi-tech Born in 1980 to 1984 +4.8% +7.4% It replaces another vehicle

It is an additional vehicle to my household

It is the first ever vehicle for my household

5 Why do NEV Owners Purchase?

Majority of NEV owners purchase vehicles to make life better or because of liking driving, instead of free license plates.

59% 29% 26% 11% 8% Love vehicles/ Vehicle registration Love driving Promotion/Discounts For kids occupancy For socialization/ Make life better For business/job For elders For marriage/ People around me all family have vehicles 47% 27% 13% 10%

Source：J.D. Power 2020 China New Vehicle Intender Study (NVIS)

6 Factors Considered by NEV Buyers

Quality, design, and performance are the primary factors, while importance of hi-tech features, personalization, and safety increases.

TOP3 TOP3 Factors considered by NEV buyers in 2020 Factors with biggest increases in importance

1 1 2 3 2 3 8% 7% 12.5% 12.4% 6% +2.8% +2.4% +2.4% 5% 9.0% 4% 3% 2% 1% 0% Good appearance/ Excellent product Outstanding Configured with high-tech It was the model I Safety devices wanted attractive design and quality performance shape 2020 2019

Source：J.D. Power 2020 China New Energy Vehicle Experience Index (NEVXI) Study

7 Overall Quality Performance of NEVs

PHEVs are of higher quality than BEVs. The higher the levels of BEV models, the fewer the quality problems; middle and high-end BEV models have obvious advantages in quality control.

PP100 of BEVs and PHEVs PP100 of different BEV models

143 138 Large BEV* 116

121 Midsize BEV 124 NEV Overall 138 Compact BEV 141 Small BEV 164 NEV Overall BEV PHEV

Source: J.D. Power 2020 China New Energy Vehicle Experience Index (NEVXI) Study, PP100 means problems per 100 vehicles

8 Problems Most 2019 2020 Reported by NEV Quality Problems with NEVs Quality Problems with NEVs TOP20 TOP20 NEV Users are more Owners sensitive to charging and Unpleasant Interior Smell/Odor Unpleasant interior smell/odor mileage problems Excessive Road Noise Excessive road noise Excessive Noises from Fans/Blowers Air conditioner doesn't achieve/maintain desired temperature Radio Has Poor/No Reception Excessive Noises from Fans/Blowers NEV users are more Navigation System - Inaccurate Excessive wind noise with windows/sunroof closed sensitive to the problems of Excessive Wind Noise Built-in navigation system - Inaccurate Engine Loses Power Charging speed is too slow charging and mileage, and Brakes Don't Have Enough Stopping Power Radio has poor/no reception they have higher Seats Squeak/Rattle, Abnormal Noises Power plug/USB port - Charges too slowly requirements for comfort, Abnormal Suspension Noises Headlights - Not bright enough Front Windshield Wipers/Washers - Broken/NW Seat - Excessively uncomfortable manipulability, and Charging Speed Is Slow Seat belt uncomfortable convenience. AC Doesn't Achieve/Maintain Desired Temperature Electric Range Is Lower than Expected NEV Users have Electric Range Is Lower than Expected Brakes - Excessively sensitive higher requirements Exterior Light - Condensation Steering system/wheel - Excessively difficult to turn for comfort, Abnormal Powertrain Noises Range gauge is inaccurate manipulability, and Bluetooth Devices Have Frequent Pairing/Connectivity Issues Abnormal suspension noises convenience Navigation System - DTU/Poor Location Front wipers don't clear windshield effectively Problems no longer among TOP20 in 2020 Brakes Are Noisy Tires have poor traction Trunk/Hatch - Squeak/Abnormal Noise Seat - Squeaks/rattles/loose/abnormal noises Problems remaining among TOP20 in 2020

Problems newly included in TOP20 in 2020 Source: J.D. Power 2020 China New Energy Vehicle Experience Index (NEVXI) Study

Problems unique to NEVs 9 Concerns about NEV Mileage

Mileage concerns are deepened jointly by inaccurate mileage, mileage reduction and the gap between actual endurance mileage and the expected endurance mileage.

Mileage inaccuracy Mileage reduction Gap between actual battery endurance and expectation

48% 64% 188KM of the NEV owners said, since the of the NEV owners said, the endurance delivery of their NEVs, mileages of fully charged batteries were 554KM the batteries had never reached the dropping with the increases in times of 366KM endurance mileages told by the charging and mileages manufacturers

Actual Expected endurance endurance

Source: J.D. Power 2020 China New Energy Vehicle Experience Index (NEVXI) Study

10 Concerns about Charging

Factors such as slow charging and charging uncertainty further reduce users' confidence in products.

Slow charging Charging uncertainty Anxiety about charging

Slow charging speed is the problem that users Being able to find charging piles and charging More than 85% of users start charging when the complain most about. piles found being usable are the first two remaining power is 10%-30%, and less than 2% start thresholds for using the public charging network. charging when the remaining power is less than 10%.

TOP5 problems with batteries/charging/motor Reasons for using third-party charging APP What is the SOC (state of charge) when of NEVs in 2020 (PP100) (%) you usually start charging? 61% Charging speed is too slow 3.3 54% 88% 85% Fast charging BEV driving ranges are lower than 2.2 39% expectations Slow charging 26% 25% Inaccurate estimation of endurable mileage 2.0 22%

Engine/motor - insufficient power 1.5 10% 14% 2% 1% Easy to find The There are Price list is Easy to pay Low service Engine/motor - abnormal sounds 1.4 10%< 10-30% >30% information many clear charge is accurate charging piles

Source: J.D. Power 2020 China New Energy Vehicle Experience Index (NEVXI) Study, PP100 means problems per 100 vehicles

11 Learn from the Leading NEV Makers

Tesla NIO Driving Pleasure User-Centric

2015 Emotional Connections

Autopilot • Branding Activities (NIO Day) 2018 • Social/Network Space (NIO House) Sentry Mode, Dog Mode, • Intelligent Partner (Nomi) Easter Eggs/Arcade Games • Member Rewards (SURPRISE Store) • Users Life (Community/Gathering) 2019 Party Mode, Camper Mode Service Experiences 2020 • Non-transparent price → Direct selling Tesla Theater, Smart Summon, • Long charging time → Battery change service Faster Charging Speed • Low retention rate → BaaS (Battery as a Service) • Insufficient driving endurance → Battery update service • Slow service → Dedicated fellow

12 How to Win Users with a New Model?

New Lifestyle

New New Product Experiences Service Experiences

Insufficient endurance mileage, immature Purchase and sale relationship, non- Concerns of Users technology, unsafety transparent services, inconvenient charging

Friends-like relationship, fully transparent Space, performance, environmental Surprise points for and intelligent process, friendliness, upgradeability, and strong users various charging solutions, and one-stop interaction + √ after-sales services √

13 THANK YOU!

14 Chaos

Asia on Rebound

May Arthapan, Director Asia Pacific Global Light Vehicle Outlook Briefing, (Shanghai) October 22, 2020

▪ Emerging markets (India and ASEAN) most distressed

% GDP (YoY Change) 12 1998 2020 2021 9 6 3 0 -3 -6 -9 -12 Asia China India ASEAN Japan Korea

▪ Monthly volume likely returning to pre-pandemic level in September but real recovery has yet to materialize

2019 2020 2021 2022 2.4 Sales: 15.6m (-5%) Sales: 13.0m (-17%) Sales: 14.7m (+13%) Sales: 15.5m (+5%) 2.1 Build: 21.8m (-4%) Build: 17.5m (-20%) Build: 20.8m (+19%) Build: 22.0m (+5%)

1.8

Millions 1.5

1.2

0.9 LV Production Sales 0.6

0.3

Jul Jul Jul Jul

Jan Jan Jan Jan

Mar Mar Mar Mar

Nov Nov Nov Nov

Sep Sep Sep Sep

May May May May

30 2020 30 2021 25 25 -4.6 -1.9 20 20

Millions -2.2 -1.0 15 15 -21% 10 -2.1 10 -0.7 -8% -6% 5 -15% -23% 5 -7% 0 0 Sales Export Production Sales Export Production

Pre- Post-COVID Pre- Post-COVID

© 2020 LMC Automotive Limited, All Rights Reserved. Sales = Total LV sales including imports 4 Indian production hit hard but with provisional uptick ▪ Pent-up demand, stock building for autumn peak-season demand, robust rural demand (with risk)

500 2019: 4.2m (-11%) 2020: 3.1m (-26%) 2021: 4.0m (+30%) 400 2022-2023 (2-3 yrs set back)

Thousands 300

200

100

Jul Jul Jul

Apr Oct Oct Apr Apr Oct

Jan Jan Jun Jun Jan Jun

Mar Mar Mar

Feb Feb Feb

Aug Sep Nov Dec Aug Sep Nov Dec Aug Sep Nov Dec

May May May

LV production for domestic sales For export

© 2020 LMC Automotive Limited, All Rights Reserved. 5 ASEAN build unlikely to return to 2019 level until 2022 ▪ Tax cut supporting demand in Malaysia and Vietnam. Thailand may follow suit. ▪ Negatives: Second lockdown in Indonesia, Thailand’s recessed tourism sector and political risk

500 2019: 4.1m (-4%) 2020: 2.8m (-31%) 2021: 3.7m (+32%)

400 Monthly volume recovery

Thousands 300

200

100

Jul Jul Jul

Apr Oct Oct Apr Apr Oct

Jan Jan Jun Jun Jan Jun

Mar Mar Mar

Feb Feb Feb

Nov Dec Nov Dec Nov Dec

Aug Sep Aug Sep Aug Sep

May May May

Production for domestic sales For export

1,200 2019: 9.2m (-1%) 2020: 7.7m (-17%) 2021: 8.5m (+11%) 1,000 GDP: +0.7% GDP: -5.7% GDP: +2.5% (Stimulus @20% of GDP)

800 Thousands 600

400

200

Jul Jul Jul

Apr Oct Oct Apr Apr Oct

Jan Jan Jun Jun Jan Jun

Mar Mar Mar

Feb Feb Feb

Nov Dec Nov Dec Nov Dec

Aug Sep Aug Sep Aug Sep

May May May

For domestic sales For export

▪ 89 all-new and redesigned models in 2020-2021, 30 of which are SUVs

500 450 2019: 3.9m (-2%) 2020: 3.7m (-4%) 2021: 4.2m (+12%) 400 GDP: +2.0% GDP: -1.0% GDP: +2.9% 350 Thousands 300 250 200 150 100 50

Jul Jul Jul

Apr Oct Oct Apr Apr Oct

Jan Jan Jun Jun Jan Jun

Mar Mar Mar

Feb Feb Feb

Nov Dec Nov Dec Nov Dec

Aug Sep Aug Sep Aug Sep

May May May

Production for domestic sales For export

▪ Asian economy is in the worst crisis in recent history, considerably worse than during the 1998 financial crisis. ▪ Situation is most disconcerting in emerging markets (India and ASEAN) which are less equipped to cope with economic and market shocks. ▪ India has been hard hit, with a two-month national lockdown and with the economy and market already struggling before the pandemic. Recovery will be slow going. Structural problems in the economy and banking sector add to the challenge. ▪ ASEAN has also suffered a severe volume loss. Risk of further movement restrictions is imminent. Depressed export and tourism are detrimental to the regional economy. ▪ The Japanese market is on gradual rebound though risk of a rapid rise in new infection cases is imminent. Export recovery will be slow given the state of the European and US market. ▪ Quick response to the pandemic and vehicle tax cuts paid off in Korea. Export recovery will be slower and with risk.

Automotive Path Forward - Americas

2020 – Widespread but short recession 2021 – Solid recovery expected but with high uncertainty

2020 GDP GROWTH 2020 2020 2020 2020 2020 -3.5% -5.3% -8.9% -4.6% -10.7%

USA Canada Mexico Brazil Argentina

2021 GDP GROWTH 2021 2021 2021 2021 2021 +3.7% +5.9% +5.3% +3.9% +6.3%

Light Vehicle sales (millions)

-19%

-16% -19% -27% -26% -31% -23%

• Gradual improvement in Monthly US LV Sales performance expected 1.8 0% with YTD off 19%. 1.5 -11% -19% +4% -4% -39% -30% -26% -20% 1.2 -46% 0.9 Millions • Incentive drop below $4k 0.6 0.3 for first time since June of 0.0 2019 – down 7% from Sep-19.

2019 2020 • CFTP at all time high again! Up 7% above year-

$4,214 ago. $35,961 $3,926 $33,754 • Leasing is off a bit but remains high at 28%. Long Incentives Transaction Prices loans are up (>72-month is Sep-19 Sep-20 Sep-19 Sep-20 41% of transactions). © 2020 LMC Automotive Limited, All Rights Reserved. Source: LMC Automotive, J.D. Power Impact of plant shutdown was costly

Shutdown loss US Light Vehicle days’ supply -2.8mn vehicles 150 4 2,000 1.5 119 1,500 94 3 100 87 Millions 1.0 Millions 76 78 76 69 69 67 67 59 60 66 61 66 2 1,000 55 51 50

WorkingDays 0.5 50 500 1

- 0.0 0 0 Mar Apr May Jun Jan Feb Mar Apr May Jun Jul Aug Sep

Working Days Lost Volume Lost 2019 Days' Supply 2020 Days' Supply ▪ Cumulative impact of industry-wide shutdowns totalled 3.7k working days and 2.8mn vehicles lost. ▪ Plants were down on average 45 days. ▪ US days’ supply is holding in 50-60-day range while inventory remains at historic lows. May not see normal inventory levels until mid-2021.

Launches Action ▪ Nearly 80% of planned NA 38 Planned 2020 NA launches launches impacted. 5 Launched by ramp-up delayed 12 SOP delayed within 2020 ▪ Average delay in region 12 SOP delayed into 2021 or beyond 9 SOP not yet delayed increased to 5.5 months, affecting 25 assembly lines.

Delay Activity by Year ▪ OEMs are prioritizing new 30 programs based on importance. 25 20 ▪ Facelift activity further down the 15 priority list. 10 5 ▪ 5 redesigns/launches were 0 2020 2021 2022 cancelled and 3 were pushed outside of our forecast horizon. Redesigns Facelifts

US LV Sales Volume Risk 18 16.9 17 16.3 16.6

16 15.4 Millions 15 14.3 14 13 17.4 17.5 17.2 17.2 17.0 16.4 16.1 12 15.6 15.3 15.5 11 14.5 14.1 14.7 13.2 12.8 10 11.6 9 10.4 8 20082009201020112012201320142015201620172018201920202021202220232024 ▪ Recovery hinges on economy bounce back and continued improvement employment. Second stimulus is key to keep on track heading into 2021 but looks like post-election. ▪ US trade policy, specifically the US-China trade progress is a potential headwind. ▪ Election is a wildcard to recovery pace and level. © 2020 LMC Automotive Limited, All Rights Reserved. Source: LMC Automotive 7 US Segment Shift to SUVs continue – 2020-2024 CAGR

7% SUV reign 6% continues Voyager addition + throughout forecast new EV MPVs help, but…

Car segment under -2% 4% Premium pressure but EVs EVs/Corvette drive slow share decline Sporty growth

5% New entries in 7% Total Premium Midsize and Large gains more ground driving slight truck after SUV and EV growth expansion

3 2 -3% 6% -8% 2 -20% 11% 9% 13% Millions Millions 1 -27% 1 1.9 1.3 1.6 1.7 1.8 1.0 1.0 1.2 0 0 2019 2020 2021 2022 2019 2020 2021 2022

600 3 8% 26% 8% -43% -26% 400 13% 11% 2

-31% Millions 2.7 2.5 2.7

Thousands 200 438 1 2.0 302 341 378 0 0 2019 2020 2021 2022 2019 2020 2021 2022 Source: LMC Automotive © 2020 LMC Automotive Limited, All Rights Reserved. 9 Production outlook improves but remains a risk

North America South America

24 100% 100% -3.5 5.0 21 80% 80%

-1.2 Millions Millions 18 4.0 15 60% 60% 3.0 12 40% 40% 9 17.1 17.3 2.0 16.2 15.3 16.5 3.3 3.2 3.5 3.6 6 13.1 3.0 20% 1.0 2.2 20% 3 0 0% 0.0 0% 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 Post-COVID Pre-COVID Utilization Post-COVID Pre-COVID Utilization

Global Light Vehicle Outlook Briefing from Shanghai

22nd October 2020 Overview

Global Automotive Summary

100

90 Sep-20 89.9 mn 80

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

© 2020 LMC Automotive Limited, All Rights Reserved. Source: LMC Automotive 2 LV demand in all regions see major contraction World – 76.3mn, down 16% from 2019 Europe China N. America 25.5 -7% 23.8 20.7 -20% 16.5

-17% 20.2 16.8

2019 2020 2019 2020 2019 2020 Rest of Asia Units: millions 15.7 -19% S. America 12.6 4.1 -29% 2.9

2019 2020 2019 2020

Global Sales % Change YTD August 2020 from YTD August 2019

Industry

Pickup/Truck

MPV

Van

SUV

Sporty

Car

-40% -35% -30% -25% -20% -15% -10% -5% 0%

Cumulative Projected Volume Loss Forecast Development (relative to pre-pandemic forecast) 100 2020 2021 2022 0 95.1 95 94.4 -10

Millions 90.3 89.7 Millions -20 -14 90 -22 +10% +6% -30 -28 84.3 85 -40 76.3 -50 80 -60 75 -16% Forecast Scenario Range 100 70 90 80 65 70 2014 2015 2016 2017 2018 2019 2020 2021 2022 60 Oct-20 May-20 Dec-19 50 2020 2021 2022 High (V) Low (L) Base Forecast © 2020 LMC Automotive Limited, All Rights Reserved. Source: LMC Automotive Key markets medium-term recovery path

CAGR Global Sales ‘20-’23 ▪ Global CAGR at nearly 8% Brazil 13.4% 2020-2023, with most emerging Eastern Europe 10.7% markets outperforming mature. ROW 10.2% India 8.7% ▪ China and South Korea are in a much stronger position in 2020 Western Europe 8.8% so recovery is less than other Global LV Sales 7.8% markets. China 5.8% US 5.1% ▪ Growth into the longer term is Japan 3.6% still dependent on stability in mature markets and further S. Korea 0.1% growth in newer markets.

150 Tesla Model Y Hyundai Tucson

214 100

Audi A3 122 Upcoming… 50

68 69 62 52 55 58

0 Ford Mustang Mach E Ford F-150 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2020 2020 2020 2020 2021 2021 2021 2021

20% • Marked improvement in 10% performance with YTD 0% August off -26%. -10% -20% • Sep-Dec now expected -30% up 2% from same period -40% in 2019, as inventory -50% rebuild ramps up. -60% -70% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • 2020 expected down - 17% from Pre-Covid-19, improvement of 3.1mn 89.4 74.0 92.5 -17% -8% units from May. 84.7 • 2021 expected down -8% 2020 2021 from Pre-Covid-19

Pre-Covid-19 Current Pre-Covid-19 Current forecast, up 2.5mn.

China 61% Global Utilisation 45% 51% 90% 2017 2020 2023 80% Asia-China 73% 69% 70% 55% 64% 60% 2017 2020 2023

50% Europe 73% 71% 51% 55% 40%

2017 2020 2023

2011 2023 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2024 85% North Am 73% 62%

2017 2020 2023

Oxford +44 1865 791737 [email protected] Detroit +1 248 817-2100 Bangkok +662 264 2050 lmc-auto.com Shanghai +86 21 5283 3526 Thank you

COVID-19 Automotive Impact Update Webinar #7

19th November 2020