lesson to IFP school students studying in Powertrain

1. General introduction to Chinese
Automotive market
IFP SCHOOL
28TH JUNE 2012

2. Summary
General information about China & Chinese
Market
International OEMs’ situation & challenge
Chinese OEMs’ ambition
Chinese Automotive Engine Industry

3. General information about China & Chinese market
Youtube Link : 10 minutes to know about China
http://www.youtube.com/watch?v=IvEVEIzmYBc

4. General information about China & Chinese market
Big concentration in urban areas, especially in cities on the coast
2nd and 3rd category cities in development with government politics

5. General information about China & Chinese market
Big concentration in urban areas, especially in cities on the coast
2nd and 3rd category cities in development with government politics
Vehicle ownership : far away from Japan, Europe or USA levels

6. General information about China & Chinese market
In 2011, 80% of customers are first-time purchasers

7. General information about China & Chinese market
In 2011, 80% of customers are first-time purchasers
The average age of the customers is younger in China. (26yrs for BMW
owners)

8. General information about China & Chinese market
In 2011, 80% of customers are first-time purchasers
The average age of the customers is younger in China. (26yrs for BMW
owners)
The taste of luxury and the « big brands » are generally welcomed.
(BMW, Audi, Mercedes etc…)

9. Summary
General information about China & Chinese Market
International OEMs’ situation & challenge
Chinese OEMs’ ambition
Chinese Automotive Engine Industry

10. Challenges of international OEMs
Leaders in Chinese market ~= leaders in Automotive Industry VW, GM,
Toyota.
Good performance for Korean OEM : Hyundai Group
But…
Source : VW Group China

11. Challenges of international OEMs
Chinese government ambition : to have at least one international-scale OEM
in TOP10 by 2020
Limit the foreign investment in China, typically in JV in order to increase the local OEM market shares
from 2012
Hope on « Big Four » : SAIC, BAIC, DongFeng & Chang’An

12. Challenges of international OEMs
Global long-term strategy including Chinese market with its particularity
Introduction of the newest technology & global product program

13. Challenges of international OEMs
Shift of business network to 2nd or 3rd tiers cities

14. Challenges of international OEMs
Chinese government politics.
Local OEM growth
Global long-term strategy including Chinese market with another dimension
Shift to 2nd or 3rd tier cities with low volume (business network and
infrastructure)
Satisfy the special Chinese taste : for example, A4L, A6L
Knowledge sharing : newest technology appreciated
Local talents management
Turnover at about 20% in average.
Experience generally appreciated in international big companies with a final goal to
work for Chinese local ones.
Environment pressure :
CO2 (160g/km against 120g/km in Europe => 2015 target)
E-mobility

15. Summary
General information about China & Chinese Market
International OEMs’ situation & challenge
Chinese OEMs’ ambition
Chinese Automotive Engine Industry

16. Chinese OEMs’ ambition
Chinese government politic
Local OEM in JV : Big Four
Local independent OEM: BYD (means « Bluid your dream »), Chery, Geely (& Volvo)
Chinese local OEMs (not in JV) produce « low cost » vehicles up to now
(same strategy as Japanese's Toyota or Honda, as Korean Hyundai-Kia
etc)
Marketing & brand issue
Technology issue
Investment issue
Last but not least…

17. Chinese OEMs’ ambition
Chinese government politic
Local OEM in JV : Big Four
Local OEM without JV : BYD (means « Bluid your dream »), Chery, Geely (& Volvo)
Chinese local OEMs (not in JV) produce « low cost » vehicles up to now
(same strategy as Japanese's Toyota or Honda, as Korean Hyundai-Kia
etc)
Marketing & brand issue
Technology issue
Investment issue
Last but not least : quality issue

18. Chinese OEMs’ ambition
What do they do?
Upscaling & Marketing effect : Chery creates new luxury brands
Technology :
Chinese politics demand a local new brand of JV. GM-SAIC : Baojun
M&A (Geely and Volvo) : to improve brand image of Geely
Reverse engineering
Domination in a new field : Electrical vehicles

19. Summary
General information about China & Chinese Market
International OEMs’ situation & challenge
Chinese OEMs’ ambition
Chinese Automotive Engine Industry

20. General view
Focus on engines for passenger cars
CO2 in decreasing
Natural aspirated
engine : Harbin
Dong’an Engine group

21. Naturel aspirated engine
Harbin Dong’an Engine Group
Independent supplier of engines
Example : 4G18
Technical characteristic :
In-line 4 cylinders, 4-strokes, 16 valves, SOHC
74kW @ 6000rpm and 136Nm @ 4500rpm
Compression ratio : 9.5 :1
Pollution : EuroIII
Cars application : BYD F3, Haima Family,
+:
Low-cost engine, accessible for local brands
Gasoline consumption
Since 1996
-:
Low-cost vehicles, lack of power
No newest technology

22. General view
Focus on engines for passenger cars
CO2 in decreasing
Small natural aspirated
engine : Harbin
Dong’an Engine group
masse reduction &
air-intake system
optimization:
Chery & Geely
• Low cost & low technologies

23. Geely
Geely 4G (improvement from Dong’an 4G series) -> GeTec
Technical characteristics of 4G15D:
1.5l, in-line 4 cylinders, 4-strokes, 16 valves, DOHC
78kW @ 6200rpm，135Nm @ 4800rpm
Compression ratio : 12:1
New technologies : CVVT, Engine body in Alu
EuroV

24. Chery
Chery ACTECO séries (Gasoline & Diesel)
Co-developed by AVL
3 types :
Small Gasoline: 0.8L (3 cylinders) to 1.3L (4 cylinders)
Medium & big Gasoline : 1.6L (4 cylinders) to 4L (V8)
Diesel : 1.3L (3 cylinders) to 2.9L (V6)
Machining lines & assembly lines : German technologies
R&D investment : 30M RMB (~35M€)

25. General view
Focus on engines for passenger cars
CO2 in decreasing
Small natural aspirated
engine : Harbin Turbo & injection
Dong’an Engine group directe :
GW & BYD
masse reduction &
air-intake system
optimization:
Chery & Geely
• Low cost & low technologies
• Big investment in buying advanced process lines & outsourcing R&D

26. BYD (Build Your Dream)
• BYD relied on Mitsubishi engine
• Reverse engineering of VW 1.4L TSI engine

27. Great Wall
The best technologies to ensure & attract Chinese customers (engine
power etc.)
VVT, Oil spray nozzle (new technology?)
Piston coating
Etc…

28. Great Wall
The best technologies to ensure & attract Chinese customers
Working with international suppliers to ensure the quality
R&D development : 27 months

29. General view
Focus on engines for passenger cars
CO2 in decreasing
Small natural aspirated
engine : Harbin Turbo & injection
Dong’an Engine group directe :
GW & BYD
masse reduction & Electrical & Hybride :
air-intake system BYD
optimization:
Chery & Geely
• Low cost & low technologies
• Big investment in buying advanced process lines & outsourcing R&D
• Reverse engineering & dependency on international suppliers

30. Electrical & Hybrid
BYD hybrid engine : Dual mode & Dual mode II (Beijing 2012 Auto Show)
Battery : LiFePo4 (lithium iron phosphate) battery (recharging cycles limited = 4000)
Dual mode I : 16kwh for 97km
Dual mode II : 10kwh for 50km
Powertrain :
Dual mode I : 1L engine + 75kW (50 + 25) electrical motors
Dual mode II : 1.5L engine + 110kW electrical motors
Poor sales performance :
High cost even after governmental incentives
Lack of infrastructure
Unreliable batteries…
The “high price” is one big obstacle to Chinese consumers, which includes
essentially the battery.
Electrical vehicles?

31. Electrical & Hybrid
Electrical cars promoted by Chinese government :
Hope of dominating with own technology and global brands
$15 billion investment in order to be one of the leading producer in next 10 years
$8.000~9.000 / car (for $20.000 sell price in average)
Producers :
BYD (battery producer originally) : E6
Weihai EV R&D Co. supported by Chinese government => Lujo BB passed EEC regulations
in 2010
JV with foreign carmakers : DongFeng / Nissan, BYD / Daimler
Difficulties :
Consumers’ economic interests VS government’s interest (BYD ambition reviewed)
Modest R&D research budget (JV politics : Chinese company in major parts, one of three
core technologies)
High prices and insufficient infrastructure (battery)

32. Electrical & Hybrid
Batteries technology comparison

33. Electrical & Hybrid
Batteries technology comparison

34. Resume
• Traditional heat engine :
• Natural aspirated engine : Low cost & modest technologies
• Turbo direct injection :
• High dependency on international R&D partners & suppliers
• Reverse engineering or buy technologies with patents
• Diesel engine : few application in passenger cars
• Electrical vehicles
• Big ambition and high investment
• Poor market results with high selling prices (especially battery)
• Co-development with international OEMs
• Some battery technology, but not the most advanced
• Alternative solutions
Natural gas : 8.3% by 2015 according to 5-years plan
others

35. But, successful story…
Case study : Chery
Equipment supplier
Keys of success
Independency & autonomy from state-owned companies
Talent force :
Local talent’s training via jointed development
Oversea returners from foreign companies
Reverse engineering
At the beginning, bought an engine assembly from British Ford at $25M
Outsourcing & jointed development
AVL for heat engines & Ricardo for Hybrid engines
Pininfarina & Bertone for design

36. China : always a high potential market?
Positive points:
Lower vehicle ownership
Chinese customers’ demand & taste : Social position, berline etc.
Chinese infrastructure investment
International pressure on CO2 emission and pollution in China
Chinese middle class growth
Pay attention to :
Chinese manufacturing industry slowing down in 2012
Chinese government politics :
Number of new vehicles sells limited in Beijing (soon in other cities?)
Foreign investment in JV limited from beginning of 2012
International OEM need a global strategy
HQ of GM in Shanghai, new Toyota R&D center etc.
Local OEM growth (JVs and independent ones)
Anticipation to tomorrow’s solution of mobility : technology & innovation in China?