Guangzhou Automobile Group Company Limited 廣州汽車集團股份有限公司a joint stock company incorporated in the People’s Republic of China with limited liability （ ） H Share Stock Code: 2238 A Share Stock Code: 601238 ANNUAL REPORT 2020 ANNUAL REPORT ANNUAL Contents Chapter 1 Corporate Profile and Chapter 7 Report of the Directors 138 Summary of Business 3 Chapter 8 Report of the Supervisory Chapter 2 Chairman’s Statement 11 Committee 143 Chapter 3 Discussion and Analysis Chapter 9 Corporate Governance 149 On Operation 19 Chapter 10 Corporate Bonds 172 Chapter 4 Significant Events 58 Chapter 11 Financial Statements 175 Chapter 5 Changes in Ordinary Shares and Definitions 339 Information on Shareholders 101 Honours and Awards 344 Chapter 6 Profiles of Directors, Supervisors, Senior Management Corporate Information 350 and Employees 113 Important Notice 1. The Board, supervisory 5. The proposal for profit distribution committee and the directors, or conversion of capital reserve supervisors and senior into shares for the reporting management of the Company period as considered by the warrant the authenticity, Board accuracy and completeness of the information contained in the The Board proposed payment of final cash annual report and there are no dividend of RMB1.5 per 10 shares (tax inclusive). misrepresentations, misleading Together with the cash dividend of RMB0.3 per statements contained in or 10 shares (including tax) paid during the interim material omissions from the period, the ratio of total cash dividend payment annual report for which they for the year to net profit attributable to the shall assume joint and several shareholders’ equity of listed company for the responsibilities. year would be approximately 31.18%. 6. Risks relating to forward-looking 2. All directors of the Company statements have attended meeting of the Board. The forward-looking statements contained in this annual report regarding the Company’s 3. PricewaterhouseCoopers issued future plans and development strategies do an unqualified auditors’ report not constitute any substantive commitment for the Company. to investors and investors are reminded of investment risks. 4. Zeng Qinghong, the person in charge of the Company, Feng 7. No appropriation of funds of Xingya, the general manager, the Company by the controlling Wang Dan, the person in shareholder or its related parties charge of accounting function for non-operational activities. and Zheng Chao, the manager of the accounting department 8. There are no guarantees granted (Accounting Chief), represent to external parties by the that they warrant the truthfulness Company without complying and completeness of the financial with the prescribed decision- statements contained in this making procedures. annual report. 2 Corporate Profile and Summary of Business Guangzhou Automobile Group Co., Ltd. | Annual Report 2020 3 Corporate Profile and Summary of Business GAC Group is committed to becoming a mobile life value creator. It will promote the transformation of GAC into a technological enterprise through the improvement of its technological innovation capabilities. Group Profile Corporate Culture Slogan Guangzhou Automobile Group Co., Ltd. ("GAC Creativity Defines Our Future Group") was established on 28 June 2005, and its predecessor was Guangzhou Automobile Corporate Philosophy Group Company Limited, which was established Humanity, Credibility, Creativity in June 1997. Headquartered at GAC Centre which is located in Corporate Vision Zhujiang New Town, Tianhe District, Guangzhou, To become a world-class enterprise which GAC Group is a A+H share listed state-owned is trusted by customers, brings employees stockholding enterprise group (601238.SH, happiness and is anticipated by the society, 02238.HK). and continuously create value for the colourful mobile life of mankind. Brand Culture Creativity Defines Our Future Brand Slogan With GAC philosophy as the core, GAC Crafted by the Driven Group creates a corporate culture with GAC characteristics, building consensus and motivating Positioning of Brand brave advancement, which coheres with the values Mobile Life Value Creator and strengths of every GAC people to form a "business community", and is moving towards the goal of building a world-class enterprise and the Brand Claims vision of everlasting prosperity. To meticulously and dedicatedly create value with ingenuity for consumers and employees, Crafted by the Driven cooperation and investment partners, industry GAC Group adheres to the brand core of Detailing and the society. and Greatness, never forgets the mission of craftsmanship and pursuit of excellence, strives to become a mobile life value creator, and provides innovative value for users' mobile life, promoting industrial enhancement and social development. 4 Corporate Profile and Summary of Business I. DESCRIPTION OF THE MAIN BUSINESS AND BUSINESS MODEL OF THE COMPANY AND INDUSTRY SITUATION DURING THE REPORTING PERIOD (I) SUMMARY OF BUSINESS The principal businesses of the Group consist of five major segments, namely R&D, manufacture of vehicles and motorcycles, parts and components, commercial services and financial services, which form a complete closed-loop industry chain. R&D SEGMENT The Group’s R&D is based on GAEI, a directly funded and managed body, which is also a subsidiary of the Company and a relatively independent strategic business department operating within the authorised scope. It is mainly responsible for the Group’s general development plan of new products and new technology, as well as implementation of significant R&D projects. MANUFACTURE SEGMENT (1) The manufacture of passenger vehicles is mainly conducted through subsidiaries, including GAMC and joint ventures, including GAC Honda, GAC Toyota, GAC FCA and GAC Mitsubishi. Guangzhou Automobile Group Co., Ltd. | Annual Report 2020 5 Corporate Profile and Summary of Business Products: The Group’s passenger vehicles include 12 series of sedans, 30 series of SUV and 3 series of MPV. Fuel-engined vehicle products of the Group mainly include: • GAC Trumpchi (GA4, GA6, GA8, GS3, GS4, GS4 COUPE, GS5, GS8, GS8S, M6, M8, etc.); • GAC Honda Accord, Crider, Vezel, Odyssey, Fit, Avancier, Breeze, Acura CDX, Acura TLX-L, Acura RDX, etc.; • GAC Toyota Camry, Highlander, Wildlander, Yaris L (致炫、致享), Levin, C-HR, etc.; • GAC FCA JEEP Cherokee, JEEP Renegade, JEEP Compass, JEEP Grand Commander, etc.; • GAC Mitsubishi ASX, Outlander, Eclipse Cross, etc.; Energy conservation and new energy products of the Group include: • GAC Trumpchi GS4 • PHEV, GE3, AION S, AION LX, AION V; • GAC Honda Accord Sport Hybrid, Odyssey Sport Hybrid, Breeze Sport Hybrid, Crider Sport Hybrid, Acura CDX Hybrid, Shirui, VE-1; • GAC Toyota Camry HEV, Wildlander HEV, Levin HEV, Levin HEV E+, iA5, C-HR EV; • GAC FCA JEEP Grand Commander • PHEV; • GAC Mitsubishi Qizhi • PHEV, Qizhi • EV; • GAC Nio HYCAN (Hechuang) 007; The commercial vehicles are mainly manufactured by GAC Hino, a joint venture, and GAC BYD, an associated company. Main products include light and heavy trucks, construction vehicles and large to medium-sized passenger vehicles, etc. 6 Corporate Profile and Summary of Business (2) Motorcycles The Group manufactures motorcycles mainly through its joint venture Wuyang-Honda. Main products include standard motorcycles, sport bikes and scooters, etc. As at the end of the reporting period, the total production capacity of motorcycles of the Group was 1.25 million units/year. Production capacity: During the reporting period, GAC Honda’s Zengcheng factory production capacity expansion project (phase II) with production capacity of 120,000 units/year has commenced operation in February 2020. As at the end of the reporting period, the total vehicle production capacity amounted to 2,733,000 units/year. Sales channel: The Group conducts automobile sales through sales outlets and online channels. As at the end of the reporting period, the Company, together with its joint ventures and associated companies, had 2,525 passenger vehicle 4S sales outlets covering 31 provinces, counties, autonomous regions and municipalities in the PRC. PARTS AND COMPONENTS SEGMENT The Group’s production of parts and components was mainly carried out through the controlling, jointly- controlled, investee companies of its subsidiary, GAC Component, and GAC Toyota Engine and Shanghai Hino, the Group’s associated companies. The parts and components include engines, gearboxes, car seats, micro motors, shifter, electric controller, interior and exterior decorations. About 76% of the products were whole vehicle accessories of the Group. Guangzhou Automobile Group Co., Ltd. | Annual Report 2020 7 Corporate Profile and Summary of Business COMMERCIAL SERVICES SEGMENT Mainly through its subsidiary, GAC Business, its controlling and investee companies, Da Sheng Technology, and its associated company “ON TIME” ( 如祺出行) etc. in the upstream and downstream of the automobile industrial chain, the Group carried on businesses in vehicle sales, logistics, international trading, second-hand vehicles, end-of- life vehicles disassembling, resources recycling, supporting services, digitalisation and mobility services, etc. FINANCIAL SEGMENT The Group carried on financial investment, insurance, insurance brokerage, financial lease, automobile credit, and other related businesses mainly through its subsidiaries, namely GAC Finance, China Lounge Investments, GAC Capital, Urtrust Insurance, and its joint venture, GAC-SOFINCO, etc. 8 Corporate Profile and Summary of Business