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1、 FOR IMPORTANT INFORMATION ABOUT GOLDMAN SACHS RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL, GO TO http:/ OR CONTACT YOUR INVESTMENT REPRESENTATIVE. Long-term industry view “ “ February 21, 2003 Autos coverage views: Europe: Attractive US: Cautious Japan: Attractive Global
2、Automobiles The Chinese Auto Industry Too many bulls in a China shop? Automakers are rushing to expand capacity, lured by bold growth projections. But we fear the market could prove volatile, pricing could fall faster than costs, and cash flows from JVs could disappoint. The high returns currently e
3、njoyed in China, particularly by VW, seem unlikely to last. Keith Hayes London: 44-20-7774-1142 Max Warburton London: 44-20-7774-5905 Gary Lapidus New York: 1-212-902-2359 Kunihiko Shiohara Tokyo: 81-3-3589-8869 Young Chang Seoul: 82-2-3788-1175 Shane McKenna London: 44-20-7552-2919 Goldman Sa
4、chs Global Equity Research Chinese auto sales growing rapidly; unit profitability high China is the worlds fastest growing auto market, with car sales up 62% in 2002. The 1.2 mn units sold in 02 compare to 0.5 mn in 1996. Unusually for a developing market, profitability is high too: VW and Honda mak
5、e their highest unit margins in China, but this is due to high tariffs and protected pricing. Production costs are higher than in Japan, Europe or the US. 1.3 bn potential customers the auto industry just cant resist the pull Facing stagnant demand in other markets, the auto industry can barely cont
6、ain its excitement about China. Car ownership levels are low, income levels appear to be rising and China represents the largest potential market of all. Automakers are rushing to add new capacity. Continued market growth is not assured, investment risks are high Many industries have rushed to inves
7、t in China, only to find that returns disappoint. Auto industry investments could prove over-optimistic given the risks of market volatility. Real GDP and income growth rates remain unclear, the banking system faces challenges and government borrowing is still rising. This means that the path of gro
8、wth is likely to be rocky. Overcapacity a real threat, pricing set to fall fast, cash difficult to extract We believe there is a high probability that capacity could exceed demand. WTO entry, falling tariffs and competition will likely erode pricing. High costs (due to high overheads, investment cos
9、ts and poor steel and parts quality) may not fall fast enough. Designs may be copied by local producers, particularly for spare parts. Continued government influence in industrial policy and capital controls may make it difficult for shareholders to access cash flows. Investors should not count on C
10、hina to support sector returns for long The sheer scale of planned auto industry investment in China is striking (over EUR6 bn of investment and over 2 mn units of new capacity announced). Managements optimism is clear. Anticipated Chinese profits are now key to many companies profit goals (and Chin
11、a already generates almost 20% of VWs pre-tax profit). But we recommend that investors adopt a very cautious view of these targets. We believe there is a high risk that returns from the Chinese market will quite quickly fall back towards normal auto industry levels. Auto industry investment in Latin
12、 America during the 1990s may provide a precedent, in our view. Automobiles Global Goldman Sachs Global Equity Research - February 21, 2003 Table of contents 1 Overview: Too many bulls in a China shop? 3 Auto producers are rushing into China 7 The Chinese car market may not be as attractive as claim
13、ed 9 Macroeconomic development may not be as rapid as hoped 19 Overcapacity a real threat in China 23 Competition and lower tariffs should result in rapid price falls 26 Continued government influence on auto industry likely 29 Chinese profitability is due to high pricing, not low costs 33 Could Chi
14、na be a repeat of the Brazilian auto story? 36 A quick guide to Chinas car producers Global Automobiles Goldman Sachs Global Equity Research - February 21, 2003 1 Overview: Too many bulls in a China shop? Excitement about the Chinese car market is reaching fever pitch. The Chinese auto market is gro
15、wing rapidly, incumbent producers are making very high profits and the growth projections appear unprecedented. The rest of the industry wants a piece of the action, with massive increases in capacity planned. But we fear that the industrys lofty assumptions could easily prove wrong. The purpose of
16、this report is to provide a detailed contrarian view in response to the almost euphoric statements being made elsewhere about China. Billions of new capital to be committed; 1.3 bn customers are a powerful attraction No auto industry presentation to investors in 2003 is complete without bold statements about Chinese growth ambitions.
