BAIC Group: Aiming for production and sales of 4.5 million vehicles by 2020

Promoting electrification and globalization

2017/08/29

Summary
Overview of the BAIC Group
Mid-term plan: Targeting 4.5 million production/sales in 2020
Overseas expansion: Production and R&D facility expansion to increase sales
Maker-specific plans: Both own brand foreign joint ventures focus on new energy vehicles and strengthening production systems
Own brands: Strengthening the Senova and Wevan brands, increasing new energy vehicle production
Foreign-owned joint venture brands: Promoting localization, creating a system for producing new energy vehicles
Production capacity at major BAIC Group plants
BAIC Group sales numbers in China (factory shipments)
Production Forecast by LMC Automotive: BAIC Group is mild growth and reach 1.5 million units in 2020

Summary

BAIC Group is one of the five major automotive groups headquartered in Beijing, the capital of the People's Republic of China. The predecessor of the BAIC Group is “Beijing Automobile Works,” which was founded in 1958 and produced the Jinggangshan small sedan. While the Jinggangshan was not mass-produced, the maker later worked on the production of military off-road vehicles under the orders of the central government. This resulted in the development of the BJ210, the origin of the current Beijing Jeep series off-road models.

A foreign capital joint venture with AMC (American Motors Corporation) began in 1983. It produced Jeep Wrangler based models and vehicles like the Cherokee in China. In the 2000s, the maker signed an overall strategic corporation agreement with Hyundai Motor Company and Daimler AG. In 2014, “BAIC Motor Corporation, Ltd.,” a passenger car division under the group, was listed in Hong Kong.

The BAIC Group's automobile sales (plant shipments) have been steadily increasing, growing to approximately 2.4 million units in 2014, 2.489 million units in 2015, and 2.872 million units in 2016. Although the automaker's market share in China in 2011 was 8%, it has been maintaining a 10% share since 2014.

The sales target for 2017 has been set at 3.1 million units for the entire group. However, the sales volumes of Beijing Hyundai Motor Company, which has the highest unit sales ratio among the group's OEMs, has decreased by 37.4% year-over-year in the period January - May as a result of the deployment of the Terminal High Altitude Area Defense (THAAD) system by the U.S. in South Korea. This has caused the entire group's sales to decrease.

The BAIC Group will aim at electrification and globalization during the the13th Five-year plan (2016-2020) period, in addition to promoting projects including own brand vehicles and new energy vehicles (NEVs) in Central China area, Hunan Province. It is aiming for sales and production of 4.5 million vehicles and to rise to 12th place in the global rankings for automakers.

Overview of the BAIC Group

The BAIC Group has a wide range of businesses, from passenger and commercial cars, large and small-sized trucks, assembly for projects like specially-equipped vehicles, and automotive parts production; to aviation, finance, real estate, and education. Among the assembled vehicle makers in the group, BAIC Motor Corporation, Ltd. has been listed on the Hong Kong stock market. The automaker's foreign joint venture partners are Hyundai and Daimler. As for Daimler models, Beiqi Foton produces trucks, Fujian Benz produces vans, and Beijing Benz produces passenger cars.

Correlation diagram of BAIC Group's major group companies (% are investment ratios)

BAIC Group's major OEMs and brands

Major OEMs	Sales volume 2016 (units)	y o y (%)	Major Brand
BAIC Yinxiang	303,116	5.2	Own brands: Wevan, Huansu
BAIC Motor	344,721	37.5	Own brands：Wevan, Senova
Beijing New Energy Vehicle (BJEV)	23,349	3339.6	Own brands：EC series, EX series, EH series
Jiangxi Changhe	72,997	69.4	Own brands：Changhe, Freedom , Light trucks, Mini trucks
Chongqing Bisu Note. 1)	2,917	-	Own brands：Bisu
Beijing Automobile Works(BAW)	33,684	78.4	Own brands：BJ series, Yongshi
Beiqi Foton	501,094	2.2	Own brands：Gratour, MP-X, Sauvana
Beijing Hyundai	1,142,016	7.5	Hyundai brands： New Santa Fe, Tucson, Elantra, Yuedong, Langdon, Elantra 2016, Accent, Sonata, Mistra, MoInca, ix Series
Beijing Benz-DaimlerChrysler	317,069	26.7	Mercedes-Benz brands：C-Class, E-Class, GLA, GLC
Jiangxi Changhe Suzuki	36,999	-35.1	Suzuki brands： Coolcar
Beiqi Borgward Note. 1）	30,015	-	Own brands (Borgward brands): BX series
Note. 1) Chongqing Bisu Automobile Co., Ltd and BORGWARD China Co. Ltd launched sales in 2016.Chongqing Bisu Automobile Co., Ltd. is an affiliated company of the Chongqing Yingxiang Industrial Group. (Source: Created based on MarkLines' database)

Mid-term plan: Targeting 4.5 million production/sales in 2020

Although the BAIC Group had set target sales volume for the entire group at 3.5 million units during the 12th Five –year plan (2011-2015) period, it only sold 2.489 million vehicles. Sales in 2016, which is the first fiscal year of the 13th Five-year plan period were 2.872 million units, a y/y increase of 15.3%, to achieve the No. 160 ranking in the FORTUNE500. The target sales goal for the entire group in 2017 was set at 3.1 million units. The automaker is aiming for production and sales of 4.5 million units in 2020.

BAIC Group aims to shift from its current status as a typical production company to offering more services and producing innovations as it looks ahead to 2020. The automaker lists electrification and globalization as its strategic pillars. As for electrification, it will focus on the establishment of R&D facilities and new plant construction, and the swift introduction of new models to the market to develop its NEV business. For globalization, the group will actively invest in countries and regions related to the "Belt and Road Initiative" Note 2) promoted by the Chinese government. It will release many own brand vehicles and aim to raise awareness as an international brand.

Note 2) This is a Chinese economic and diplomatic concept that President Xi Jinping proposed in 2013. The Chinese-centered framework that consists of two main components; a land-based "Silk Road Economic Belt" that will connect western China to Europe via Central Asia and Russia; and a "21st-century Maritime Silk Road" that will connect areas around the coast of China to the Indian Ocean, areas around the coast of the Arabian Peninsula, and Eastern Africa via the South China Sea.

Group strategy

Electrification	•Advance NEV technology, quality improvement, product design; and establish core technologies in areas including batteries, motors, and electronic control in order to accelerate NEV business development. • Develop new platforms including EVs and PHVs, strengthen NEV lineup, and respond to segmented demand.
Electrification	• Become a leading corporation for ride sharing services by improving infrastructure such as charging facilities and continue development of intelligent, networked vehicles for the future.
Intelligent vehicles	• Develop technologies and products for intelligent and connected technologies, and improve the group's intelligent technology level with an aim for the "China Production 2025" guidelines. • Invest in intelligent plant construction, improve the quality level of independent brand vehicles, and increase market competitiveness.
Differentiation	• Strategically develop models in fields (military vehicles, off-road vehicles) that the group excels in.
Globalization	• Simultaneously develop products for domestic and overseas markets by making an effort to enhance own brand vehicles and promote globalization. • Develop flagship models that suit local needs.
	• Promote the Yunnan Province Ruili Project, which will be a South African project and production facility for the Asian market.
	• Invest in countries and regions related to the "Belt and Road Initiative" being promoted by the Chinese government. Specifically, increase production scale and sales of own brand vehicles and establish them as international brands in South African, Iranian, Southeast Asian, and South American markets.

Concrete goal up to 2020

Strategic goals for 2020	• Aim for production and sales of 4.5 million units and an operating income of RMB 620 billion by 2020. 500,000 units are to be NEVs, and 600,000 units sold in overseas market.
	• Aim to be one of the top automakers in the Chinese automotive industry, rank within the top 100 as a global brand, and rank within the top 12 as a global automaker.
	• Aim to rank within the top 3 in the own brand passenger car market.
	• Beijing Benz aims to be the leading automaker in the Chinese luxury car market.
	• Beijing Hyundai Motor Company will continue to maintain 4the place in the domestic passenger car market for foreign capital joint venture group corporations.
Group goals for 2017	• Target 3.1 million units in sales, a y/y increase of 8.9% and operating revenue of RMB 460 billion.
Group goals for 2017	• The BAIC Group signed a strategic agreement with the local government to invest heavily in Hunan Province during the the13th Five-year plan period. The group will partner with the government in a wide range of fields including own brand vehicles, NEVs, and logistics.

Overseas expansion: Production and R&D facility expansion to increase sales

The BAIC Group has set rapid overseas expansion as a mid-term strategy. Specifically, it will invest in Turkey, Brazil and Russia in 2016-2018 to strengthen its foundation for future local production. In addition to plant construction projects, it has established R&D centers in Europe, the U.S., and Japan.

BAIC Motor Corporation, Ltd. has been releasing own brand vehicles in China since 2012, And sales have been gradually increasing in overseas markets since 2014.

Beiqi Foton Motor Co., Ltd. has been expanding its business overseas from an early stage and currently conducts KD production in over 20 countries and regions. It accounts for more than 50% of the BAIC Group's oversea sales.

Top 5 countries for BAIC Group own brand vehicle sales

(Units)

	2011	2012	2013	2014	2015	2016
Iran	404	1,115	2,812	3,001	3,217	2,292
Chile	943	912	1,326	1,460	1,155	2,230
Colombia	66	69	160	144	189	1,250
Australia	84	111	84	711	1,210	970
Egypt	100	343	783	349	986	904

Main trends in overseas expansion

South Africa	• An assembled vehicle plant constructed with a total investment of RMB 5 billion is scheduled to start operation in the second half of 2017 The maker will target production capacity of 50,000 units in 2022 and ultimately aim for 100,000 units. It plans to export from South Africa to other countries in the future. • Some media have reported that the models to be produced include the Senova, Wevan, and Beijing Jeep.
Zimbabwe	• KD production project for pickup trucks started in January 2015. The first vehicles rolled off the production line in March 2017. The maker plans to produce 10,000 units annually within six years.
Iran	• A plan to construct a production line in Iran with an annual production capacity of 100,000 units was announced in April 2016. • A joint venture will be formed with Diar Khodro and is scheduled to produce Senova gasoline and hybrid vehicles.
Mexico	•The BAIC Group's first dealership in the country opened in May 2016. The group announced the establishment of an import company.
Mexico	• In May, 2017, the group opened a KD plant in Puente Nacional, Veracruz State. The investment amount is USD 30 million and it will produce D20 sedans, hatchbacks, and X25 SUVs for the North American market. It is scheduled to produce approximately 6,000 units in 2017 and increase annual production to 10,000 units in 2018.
Domestic production facilities for the Southeast Asian market	• The completion ceremony of a new plant in Ruili, Yunnan Province was held at the end of 2016. The total investment amount is RMB 3.6 billion. The first phase of construction will result in annual production capacity of 50,000 units. The plant will mainly produce MPVs, jeeps, and pickup trucks. It will aim for an annual production of 150,000 units after the completion of the second phase of construction. • In the future, the new plant will become a production facility for the South Asian and Southeast Asian markets, in addition to producing models for the Chinese market.
R&D centers overseas	• An EV Technical Center opened in Detroit in January 2016. It will develop motors and batteries. The center will also coordinate with a facility in Silicon Valley, which was established in August 2015 (development of control unit technology, connected cars, and intelligent functional areas), and one in Aachen, Germany (development of power train of PHVs), which was established in September 2015.
	• An R&D center for high-performance sports EVs was established in Barcelona in February 2016. Campos Racing, which participates in motor sports, is the local partner.
	• R&D centers that will design next generation EVs were established in Tokyo and Turin in June 2016.
	• An R&D center for weight reduction design and materials application technology was established in Dresden, Germany in November 2016.

Maker-specific plans: Both own brand foreign joint ventures focus on new energy vehicles and strengthening production systems

The BAIC Group's foreign capital ventures are Daimler AG and Hyundai Motor Company. In 2016, the share in sales of foreign-owned brands in sales continued to be over 50%, while the sales volume ratio of independent brands accounted for 46.9%, recording the highest ratio in the past five years. The rate of change in 2016 increased y/y 15.4% points (9.1% points for own brands, 6.3% points for foreign joint venture brands), showing that the own brands contributed in the increase.
In recent years, the BAIC Group has been intensively introducing own brand SUVs and MPVs.

The vehicles include the BAIC Motor Corporation, Ltd. Senova high-end car, Wevan small car, and BAIC Yinxiang Automobile Co., Ltd's^{Note 1} Huansu. In addition, in 2016, Bisu, Chongqing Bisu Automobile Co., Ltd's released a new SUV and MPV brand that targets the young generation in 2016.

The group will focus more than ever on NEVs for its 2020 goal. In 2014 the automaker established BAIC BJEV, a subsidiary specializing in NEVs in an earlier stage than other government group corporations. It will be establish R&D centers in the U.S., Europe, and Japan, and is speedily constructing new plants at different regions of China.

As for foreign joint venture brands, Beijing Hyundai Motor plans to introduce nine NEVs including PHVs and FCVs by 2020. The group expanded its production capacity by launching operation of a fourth plant in 2016 and fifth plant in 2017. However, the sales target of 1.25 million units is unlikely to be achieved, as sales in January-May decreased significantly by 37.4% y/y, as a result of the U.S. deploying the THAAD system in South Korea in March 2017.

Beijing Benz has steadily expanded sales by responding to the needs of the Chinese market and releasing Chinese exclusive vehicles and SUV models. In June 2017, the BAIC Group and Daimler agreed to strengthen partnerships for NEVs. EV production is scheduled to start by 2020.

Note 1: Chongqing Bisu Automobile Co., Ltd. is an affiliated company of the Chongqing Yingxiang Industrial Group.

Own brands: Strengthening the Senova and Wevan brands, increasing new energy vehicle production

BAIC Motor: Aiming to become one of the top three sellers of own brand passenger cars in 2020

BAIC Motor will focus on the Senova and Wevan own brands. The automaker will aim these top three brands in the own brand passenger car rankings in China by 2020. Sales of the Senova brand in 2016 hit 345,000 units, a y/y 37.5% increase, thanks in part to the popularity of SUV models in China. However, the number of units sold in January-May, 2017 significantly decreased by 47.6% y/y to 660,000 units. The OEM is aiming to regain sales with the release of the D50 Senova compact sedan and X55 urban type SUV X55 that are scheduled to be released in the second half of 2017.

Enhancing the Senova and Wevan own brands	• The group will enhance the Senova and Wevan brands with an aim to make them top three selling brands among the Chinese own brands for passenger cars.
	• The product line of the Senova includes a sedan, an urban SUV, and a jeep. These are sold own brand high end vehicles. • The OEM plans to release products based on a Benz platform to the market in the period 2017-2018. • It will aggregate assembled platforms from 3 to 4, and modularized platforms from 1 to 2 from 2019-2020. The automaker's market release cycle will be accelerated by standardizing the platform. It will also enhance product development capabilities and improve profits.
	• The Wevan brand's production lineup includes a mini MPV and an economy SUV, which will be introduced as own brand economy vehicles.
Smart car strategy with Baidu	• The group concluded a strategic alliance with Baidu at the Consumer Electronics Show in 2017. The companies will partner in technological development, market operation, and information utilization; in areas including smart cars, internet for vehicles, automated driving, high-precision maps and in-vehicle maps.
Smart car strategy with Baidu	• The company will advance R&D to realize its plans to release vehicle capable of level 2 autonomous driving in the period 2018- 2019, level 3 and level 4 during 2020-2025, and level 5 after 2025.
Expansion of a second plant in Zhuzhou	• The expansion construction of a second plant in Zhuzhou City, Hunan Province has been completed, and mass-production is scheduled to start in August 2017.


Wevan M50F	Senova X35

BAIC Yinxiang: Expanding the Huansu brand vehicle lineup and new energy vehicle production plans

BAIC Yinxiang Automobile Co., Ltd, which was established by the BAIC Group and Chongqing Yinxiang Industrial Group Co., Ltd. in August 2010, mainly produces small-sized SUV and MPV models for the Huansu brand. Sales in 2016 were 303,000 units, a y/y increase of 5.2%. The OEM is planning to also produce NEVs due to the expansion of its production capacity.

Expansion of production capacity	• The Hechuan District Chongqing City plant that has an annual production capacity for 300,000 units will be expanded so it can produce 550,000 units per year. The expansion is scheduled to start mass production at the end of 2017. • In addition to BAIC Yinxiang Automobile Co., Ltd's models, the Hechuan District Chongqing City plant will also mass-produce models for Chongqing Bisu Automobile Co., Ltd., which is affiliated with its source of capital, Baic Yinxiang--Chongqing Yinxiang Industrial Group Co., Ltd.
Expansion of production capacity	• In 2016, the construction started for a plant with an annual production capacity of 100,000 units that will produce lithium batteries, driving motors, and electronic control systems. It is scheduled to be completed in July, 2017.
Model Plan	• Four new models from the Huansu brand will be on the market in 2017.
Model Plan	• Chongqing Bisu Automobile Co., Ltd, which produces BAIC Yinxiang Automobile Co., Ltd's own brands, released a seven-seater SUV in May 2017. Moving forward, it plans to release an SUV, MPV, Sedan, and NEVs. The price range of Bisu models mostly over RMB 70,000. These vehicles are positioned above Huansu brand models.

MPV Magic H3F

BAIC BJEV: Expanding production capacity with a target for 500,000 units in 2020

BAIC BJEV produces and sells NEVs and was established in March 2014. It plays an important role in promoting the "electrification strategy" of the BAIC Group. Considering financing, in 2016, it received a 6.5% stake from BAIC Motor Corporation, Ltd., under which it is listed as an affiliate on the Hong Kong H shares market.

BAIC BJEV announced that it will release 18 new energy vehicles in anticipation of the 2020 target. It is promoting the development of new models by establishing R&D centers abroad and utilizing global talent and the latest technology. In addition, it is currently constructing a new plant at a rapid pace to achieve targets for production of 800,000 units and sales of 500,000 units by 2020.

Hummingbird Plan	• At the Beijing Motor Show in 2016, the company announced that it will release 18 NEVs based on its A platform and B platform in the run up to 2020. • The Hummingbird Plan is based on the four concepts of e-Motion Design, e-Motion Drive (Super electric drive), Light Tech (super lightweight technology), and i-Link (super intelligent network technology).
Technological innovations	• In October 2016, the company made announcements mainly about smart grid technical areas at its R&D center in Silicon Valley, U.S.
Technological innovations	Specifically: • R&D and application of the advanced Battery Management System, and R&D projects for advanced batteries and management systems including development of battery cells for solid state lithium ion batteries. • Application of automated driving technology to products, highly efficient regenerative braking systems, and development projects for unmanned driving intelligent platforms. • Projects including analysis and in-depth study of big data for EVs, battery life research, and big data analysis of parts quality.
Global R&D center	• In addition to its Global Development Headquarters located in Beijing, BAIC BJEV established Global R&D Centers in Silicon Valley and Detroit in the U.S., Aachen and Dresden in Germany, and Barcelona in Spain.
Global R&D center	• Construction in Italy and Tokyo is scheduled to begin in 2017 on R&D facilities that will likely be for mold design.
Expansion of production capacity	• The company started production of the EC180 at its Laixi Plant in Qingdao Province in November 2015. The investment amount in the first phase of construction was RMB 1 billion, and yielded an annual production capacity is 50,000 units. The investment amount in the second phase is RMB 4 billion, and the annual production capacity is 150,000 units. The company will aim for an annual production of 300,000 units by 2020.
	• Construction of a new production facility for NEVs in Fuling District, Chongqing City was completed in February 2017. Beiqi Jiaqing (Chongqing) New Energy Automotive Technology Co. invested RMB 3 billion. The site area is 732,000 square meters and the annual production capacity is 300,000 units. It is scheduled to start mass production within two years.
	• In April 2017, the new EU260 EV started production at BAIC's Guangzhou Plant in Zengcheng Ward Guangzhou City. The plant will produce 100,000 new energy vehicles over the next three years.
	• The company agreed to a new energy vehicle project in Dezhou City, Shandong Province in December 2016. The total investment amount will be RMB 6 billion, and the annual production capacity 400,000 units. The OEM aims to produce low-cost EV passenger cars.
	• The company agreed to a new energy vehicle project in Kunming City, Yunnan Province in May 2017. • The plant construction will be divided into two phases. The investment amount for the first phase is RMB 5.06 billion. The automaker plans to produce NEV sedans with an annual production capacity of 50,000 units. After construction of the second stage, the annual production will be 150,000 units. The OEM plans to produce NEV sedans, SUVs, and MPVs.
Targeting 500,000 units in sales and production of 800,000 units in 2020	• According to the "Guard Blue Actions 3.0" plan announced in January 2016, the target sales of BAIC BJEV in 2020 are 500,000 units, of which 300,000 will be adopting new platforms. The annual production capacity will exceed 800,000 units.
	• The automaker will aim to become a listed company by 2020 with business revenue of RMB 60 billion and market capitalization of RMB 100 billion.


EC 180 small EV SUV	EV EH 300 released in April, 2017

Jiangxi Changhe/Jiangxi Changhe Suzuki: Developing new models utilizing the BAIC Group’s technology

After becoming part of the BAIC Group, Jiangxi Changhe Automobile Co., Ltd. attempted to revise its out of date models by launching the Changhe Q 25 and Changhe Q 35 SUVs. As a result, sales reversed a downward trend and hit 73,000 units in 2016. Jiangxi Changhe Suzuki Automobile Co., Ltd.'s sales in 2016 were 37,000 units, a 35.1% decrease y/y.

Jiangxi Changhe Automobile is currently developing projects related to projects like NEVs and intelligent vehicles at its headquarters in Jiangxi Province. Production capacity will be expanded with the construction of a new plant. Group resources such as platforms developed by Beijing Automobile Works and BAIC Motor will be utilized for the new model deployment.

New energy vehicles	• An EV model that adopts a new platform will be announced in 2017. The platform was constructed by the BAIC Group's R&D facilities. New sedan BEVs will be developed using this platform.
New energy vehicles	• New energy vehicles including SUVs/MPVs/micro trucks based on the existing platform will also be released.
Production capacity expansion	• A project that will involve constructing a new plant for intelligent vehicles, automation, and weight reduction is being carried out in Hongyuan, Jingdezhen City, Jiangxi Province. The total investment is RMB 14 billion and the total area of the site 74,000 square meters. After completion in 2018, the facility will have production capacity for 450,000 assembled vehicles and 300,000 engines. The new plant is being built based on the layout of Beijing Hyundai Motor Company's plants.
Production capacity expansion	• "The Changhe / Jiujiang new energy base project" was launched at Jiangxi Jiujiang Industrial Park in April, 2017. • The total area of the site is 1,607,000 square meters. The site for phase one of construction is 244,000 square meters. • In the second phase of construction new workplaces for pressing, welding, painting, and assembly, in addition to an engine facility will be set up. The plant will annually produce a total of 100,000 units of NEV and gasoline vehicles. • In the third phase, the automaker will establish a new plant for gasoline vehicle stamping, welding, and parts; and add painting and assembly process facilities. After completion in March 2018, the annual production capacity will be a maximum of 300,000 units.
Global R&D center construction	• In May, 2016, a groundbreaking ceremony was held at the R&D center of Jiangxi Changhe Automobile Co., Ltd. in Jingdezhen City, Jiangxi Province. The total investment amount is RMB 990 million. The site area is approximately 101,000 square meters and consists of 3 offices, an administrative building, a testing center, and housing.
Model Plan	• The OEM plans to introduce 10 new models during the four year period 2017-2020. • Specifically, it will cover a wide range of vehicle types, including small cars, SUVs, MPVs, and NEVs.
Model Plan	• In 2017, the company plans to introduce three new models, three facelifted models, and two NEVs. • One of the new models is a compact SUV equipped with a 1.5L turbo engine that is a sibling of Beijing Automobile Works' BJ series. In addition, it has been reported that a compact sedan using a platform it shares with the Coolcar and BAIC Motor's Senova D40.


Changhe Q30 small SUV	Coolcar E EV

Beiqi Foton：Accelerating overseas expansion, developing passenger car models

Beiqi Foton Motor Co., Ltd.'s sales volume in 2016 was 501,000 units, accounting for 17.4% of the BAIC Group as a whole. It is the largest commercial vehicle maker in China, and it offers a rich lineup of own brand vehicles, including light to large trucks, commercial vans and pickup trucks. For medium- and heavy-duty trucks, it produces Auman brand cars with "Beijing Foton Daimler Automotive Co., Ltd.," a joint venture company with Daimler. In 2016, it announced a passenger car project and started production of Borgward brand SUVs and MPVs (a maker that once produced automobiles in Germany) that utilized existing plants.

Beiqi Foton Motor constructed a new energy base in Shandong Province as part of its work on NEVs. The base will serve as a global production facility and R&D center. In addition, the automaker is engaged in construction projects for an NEV plant in Zaoyang City, Hubei Province and a large-scale "EV truck industrial park" in Changsha City, Hunan Province.

The OEM aims to achieve global sales of 3 million units in 2020 and is building plants in a number of areas including South America, Southeast Asia, India, and Africa. Specifically, it is expanding investments in Thailand, where the company already operates, engaging in a strategic investment project to Africa, and launching operations at an automative driving industry park in Maharashtra State, India, in 2018.

Passenger car production using the Borgward brand	• A project to establish a passenger car maker planned by Beiqi Foton Motor Co., Ltd. ratified in March, 2016. Vehicle production of the German, Borgward brand launched, utilizing the resources of Beiqi Foton Motor Co., Ltd.'s MPV model production plant (Beijing city Minyun ward. The first phase of construction will be for a facility with a production capacity of 180,000 units. The second phase will expand production by a further 180,000 units to 360,000 (153,000 gasoline vehicles/200,000 NEVs).
	• A construction project for a second Borgward plant was announced in November 2016. The construction site is in Jiaxing City, Zhejiang Province and will be divided into three phases.
	• In the first phase, Beiqi Foton will invest RMB 5.5 billion to create an annual production capacity for 600,000 transmissions. The second phase will be an NEV-related project for producing components like batteries and electronic control systems. The total investment amount is RMB 5 billion, and the facility is scheduled to start operation in 2018. The third phase of construction will be for a facility that produces SUVs, MPVs, and sedans based on platforms for mid- and small-sized vehicles. The total investment amount will be RMB 10 billion. The production capacity will be 500,000 units and the expansion is scheduled to be completed by 2020.
	• When the OEM unveiled the BX5 SUV in March 2017, it was also announced that it will release at least two new models every year until 2022. It has been reported that four SUV models will be introduced in 2017.
	• Beiqi Foton reached agreement with the government of Bremen to establish a SKD/CKD plant in the city. • The site area is 140,000 square meters and the annual production capacity will be 50,000 units. Construction of a new production line will start at the plant in the early 2018 and it will start operation in 2019. In addition to production facilities; test tracks, distribution centers, and brand studios will also be built. The new plant will be Borgward's global competence center for electrified mobility. Initially, it will produce EVs and PHVs, which will be sold in Europe and other markets. • In July 2017 BX7 SUV received Whole Vehicle Type Approval in Europe.


Sauvana	Tunland

Foreign-owned joint venture brands: Promoting localization, creating a system for producing new energy vehicles

Beijing Hyundai: Promoting the operation and localization of the new plants

Beijing Hyundai announced its plan to release nine new energy vehicles in 2020 in keeping with its "Blue Melody Strategy" that will promote customer service improvement, big data utilization, and IT service expansion in 2016; and a "Turbo Engine Strategy" that will advance turbo engine installations in new models.

The maker's sales in 2013 exceeded one million units. Although sales decreased by 5.2% in 2015, it sold 1.14 million units in 2016. As of 2015, the production capacity of the three facilities in China was approximately 1.06 million units, helping the construction of the new plant in Hebei Province and Chongqing City proceed at a rapid pace.

The sales target in 2017, when there will be more production facilities, was set at 1.25 million units. The maker will release models that suit Chinese market needs. However, sales in January-May, 2017 recorded a significant decrease of 37.4% y/y to 266,000 units as a result of the U.S. deploying THAAD in South Korea in March 2017. The company recorded a y/y 65% decrease 35,000 units in May alone. It has been reported that target sales will be revised for the second half of the fiscal year.

Blue Melody strategy	• The Blue Melody strategy was announced in October 2016, and aims to provide convenient and fast services for users by supporting products and brands through networks and interactively connecting e-commerce with people, cars, and intelligence.
Blue Melody strategy	• Specifically, 1. "Blue Members": Upgrade customer service; 2. Develop "Blue eCommerce" that utilizes big data; 3. Expand IT service with "Blue Link" intelligent network; 4. "Blue Outlet: Expand sales network, run 1,000 dealerships and 1,000 satellite shops, 5. "Blue Youth": Develop brand appeal for young people, 6. "Blue Drive": Reduce emissions and improve fuel economy.
Turbo Engine strategy	• A "Turbo Engine strategy" that will boost turbo engine models was announced in 2016. • The 9th generation Sonata and Santa Fe models will be equipped with turbo engines in 2016. • Turbo engines will be offered for many vehicles, including a 1.4L turbo engine in the Lingdong, 1.6L turbo engine in the Mistra, and 1.6L turbo engine in the ix25.
Production plant expansion	• A fourth plant in Cangzhou, Hebei Province launched operation in October 2016. The total investment amount was RMB 12 billion. The production capacity for assembled cars established in the first phase of construction is 200,000 units, and it will reach 300,000 units in 2018. The plant will also produce 200,000 engines. Yuena sedans and SUVs will also be produced. In the future, it will also produce EV model SUVs.
Production plant expansion	• The groundbreaking ceremony for a fifth plant built in Yufu Industrial Park, Chongqing Liangjiang New Area, Chongqing City was held in June 2015. The plant will be the first production facility in the southwest area. The site area is 1.87 million square meters and the total investment amount is RMB 7.75 billion. It has an annual production capacity for 300,000 assembled vehicles and 300,000 engines. The first phase of production will result in a production capacity for 100,000 units. • Mass-production will start in August 2017. The first mass-production model from the plant is the new Reina compact sedan, which made its world premiere at the Chongqing Motor Show in June. Mass-production for new small SUVs is scheduled.
Model planning and localization promotion	• In June 2016, Beijing Hyundai announced the "NEW" strategy that aims to launch nine NEV models by 2020. (N stands for "Nine" for releasing nine models; E implies technologies including EVs, PHVs, HEVs, and FCVs will all be adopted; and W signifies the fact that it will propose new methods for environmental protection and mobility. •The automaker has set a target to make 10% of its sales NEVs by the end of 2020.
	• Beijing Hyundai announced its NEV policies at the Shenzhen-Hong Kong-Macao International Auto Show 2017. • A C2 segment class EV will be released in the second half of 2017. The company plans to release PHVs in 2018 and a number of PHVs and EVs that include SUV models.
	• Former VW China design director Simon Loasby, who has over 10 years of design experience in China, became China Design Director for Hyundai Motor in June 2017. The maker will promote modeling design for the Chinese market.
Plan for 2017	• The management policy for 2017 reviewed the company's sluggish sales model. Beijing Hyundai improved its profit margin ratio to respond to the changes in the Chinese market.
	• Three all-new models will be introduced to the market in 2017. The new Yuedong compact sedan was released in March 2017. The automaker is next scheduled to release a new compact sedan and new mid-class SUV. In addition, there have been reports that the OEM will release two NEVs. • The ratio for SUV models and turbo engines was set to over 30%. • The sales target for NEVs is 3,000 units.
	• The target sales volume was increased 5% y/y to 1.25 million units. However, the number of units sold in January-May, 2017 significantly decreased by 37.4% y/y to 266,000 units. 35,000 units were sold in May 2017.


ix35	Mistra

Beijing Benz：Launching EV production by 2020

Beijing Benz is a company established by Daimler and BAIC in 2005, and is renowned in China as a luxury vehicle producer. Sales are boosted by the introduction of C and E-Class vehicles locally produced in China and China-exclusive long wheelbase models. The introduction of the GLK in 2012, followed by the launch of popular car-type SUVs in China helped achieve sales of 250,000 units in 2015, a 72% increase y/y, and 317,000 units in 2016, a 26.7% increase y/y.

In June 2017 BAIC and Daimler signed a MOU to strengthen their partnership for NEVs. In the future, the Beijing Benz's production lines will be refurbished to produce NEVs including EVs and investments will be made in BAIC BJEV. In addition, it was announced in July that EV production will start by 2020.

Partnerships for strengthening new energy vehicle business	• On June 1st, 2017 in Berlin, the BAIC Group and Daimler signed an agreement to strengthen their partnership for NEVs. Two investments will be made to strengthen Daimler's new energy vehicle business in the Chinese market. • Daimler will make the first investment as a minority shareholder in BAIC BJEV, a subsidiary of the BAIC Group. The second investment will help refurbish the existing production lines of Beijing Benz in order to enable NEV production.
Partnerships for strengthening new energy vehicle business	• In July, 2017, it was announced that the company will start production of EVs by 2020 and develop infrastructure and R&D necessary for to produce batteries using Chinese cells. The investment amount is RMB 5 billion.
Engine plant expansion	• In December 2016, expansion work for the company's second engine plant in the Beijing Economic and Technological Development Zone started. It is scheduled to start production in 2018. The total investment amount is RMB 4 billion and the annual production capacity is 250,000 units. As of the end of 2016, the total annual production capacity of the two engine plants is 500,000 units.
Sales in 2016 and management policies for 2017	• The company launched all new models for each class starting from the C-Class in 2014, and concluding with the E-Class in August, 2016. • Sales in 2016 were 317,000 units, a 26.7% increase y/y. The OEM achieved total sales of 1 million units in November 2016. • The company's management policy in 2017 is to formulate a mid- and long-term development plan that maintains product popularity and links production and sales. However, a concrete target for sales has not been announced.

Production capacity at major BAIC Group plants

(Thousand units)/year

Plant			2017	Plan
BAIC Motor	Zhouzhou plant	First plant	200	200
	Zhouzhou plant	Second plant	300(Scheduled to launch operation in August, 2017)	300
	Shunyi plant		300	300
	Guangzhou plant		100	100
	Total		900	900
Bejing New Energy Vehicle	Caiyu plant		20	200
	Lanxi plant		70	150(2018y→ 300(2020y)
	Fuling plant		-	300(2019y)
	Kunming plant		-	50→150
	Dezhou plant		-	400
	Total		90	1150(2020y)
BAIC Group’s Huanghua Branch			*300	*600
BAIC Yinxinag Automobile			550(End of 2017y)	550
Beijing Automotive Group Off-road vehicle Branch			100	200
Beijing Automotive Group Off-road vehicle Xinjiang Shihezi plant			-	100
BAIC Zhenjiang Automotive			150	300
BAIC Ruili Automotive			*50	*150(phase two)
BAIC Changzhou Automotive			*200	*300
Changhe Automobile	Changhe Suzuki	Jingdezhe plant	170	170
	Changhe Suzuki	Jiujiang plant	*100	*100
	Jingdezhen new plant		350	450(2018y)
	Jiujiang new plant		50	100→400
	Total		670	1120
Beijing Hyundai	First plant(Beijing)		300	300
	Second plant(Beijing)		310	310
	Third plant(Beijing)		450	450
	Fourth plant(Hebei)		200	300
	Fifth plant(Chongqing)		100(Scheduled to start operations in August 2017)	300
	Total		1360	1660
Beijing Benz	MRA plant		100	500
	NGCC plant		250	500
	Total		350	500
Fujian Benz			40	40
Beiqi Foton	Borgward	Beijing plant	180	360
	Borgward	Zhejiang plant	-	500(2020y）
	Beijing Foton Daimler	First plant	*60	*60
	Beijing Foton Daimler	Second plant	*60	*60
	Changsha plant	First plant	*50	*100(2019y)
	Changsha plant	Second plant	*50	*100(2019y)
	Auv Bus Division	Beijing plant	*4	4
	Auv Bus Division	Guangdong plant	*10	*10
	Foshan Sanshui plant		*240	*240
	Shandong MPV plant		*100	*100
	Shandong Olin plant		*250	*1000
	Shandong Zhucheng Automobile plant		*100	*1000
	Foton LOXAXuanhua plant		*8	*8
	AuvEnvironment Equipment Division		*1	*1
	Hubei Zaoyang plant		*2	*2
	Hunan Changsha plant		-	*8
	Hebei Zhangjiakou plant		-	*27
	Total		*1092	2579

(Source) The data are based on the figures released on the company's official website or media coverage.
(Note) "*" is for commercial vehicles or includes production capacity for commercial vehicles.

BAIC Group sales numbers in China (factory shipments)

OEM's	Type	Model	2014	2015	2016	Jan.-May 2016	Jan.-May 2017
Beijing Hyundai	SUV	Creta (ix25)	24,721	102,755	113,468	45,427	19,042
		Santa Fe/New Santa Fe	71,424	33,355	22,438	11,376	4,887
		Tucson/ix35	171,411	159,464	248,636	89,864	46,311
	Sedan/Hatchback	i30	1	0	0	0	0
		Elantra/Yuedong/Langdong/Elantra 2016	284,574	280,289	389,855	133,003	79,082
		Elantra Yuedong	132,363	42,721	21,092	11,186	23,373
		Accent (Verna)	236,024	213,678	156,902	59,943	39,704
		Sonata	54,946	69,154	35,998	21,960	4,940
		Shouwang BHCD-1	0	100	50	0	0
		Mistra	134,997	154,597	148,254	51,047	47,648
		MoInca	9,587	6,713	5,323	1,755	1,241
	Total		1,120,048	1,062,826	1,142,016	425,561	266,228
Beijing Benz-Daimler Chrysler	SUV	Benz GLA-Class	0	42,661	66,917	27,610	30,330
		Benz GLC-Class	0	5,519	87,275	30,332	48,599
		Benz GLK-Class	56,456	56,826	37	8	0
	Sedan/Hatchback	Benz C-Class	35,468	85,080	105,401	41,129	53,473
	Sedan/Hatchback	Benz E-Class	53,544	60,102	57,439	17,832	45,822
	Total		145,468	250,188	317,069	116,911	178,224
Jiangxi Changhe Suzuki	MPV	Changhe M50	0	0	0	0	9,112
		Changhe M70	0	0	0	0	5,706
		Unclassified	0	0	726	0	0
	Sedan/Hatchback	Splash	453	0	0	0	0
		Coolcar	64,673	38,398	27,312	12,626	7,864
		Liana	31,816	18,600	8,961	5,103	0
	Total		96,942	56,998	36,999	17,729	22,682
Beiqi Borgward	SUV	BX7	0	0	30,015	0	15,797
	SUV	BX5	0	0	0	0	2,725
	Total		0	0	30,015	0	18,522
BAIC Yinxiang	MPV	Wevan M20	87,401	62,793	32,996	19,091	2,552
		Huansu H2	0	18,818	14,055	7,134	7,388
		Huansu H3	0	17,537	106,634	41,626	40,021
		Huansu H6	0	0	196	11	630
	SUV	Huansu	84,696	181,089	0	15,892	0
		Huansu S2/S3	0	0	102,501	32,596	41,176
		Huansu S5	0	0	0	0	4,620
		Huansu S6	0	5,883	45,345	17,726	11,879
	Mini trucks		2,532	112	678	280	120
	Mini Van	Wevan 205	23,229	308	1	0	1
	Mini Van	Wevan 206	1,197	1,538	710	314	87
	Total		199,055	288,078	303,116	134,670	108,474
BAIC Motor	MPV	Wevan M20	3,039	84,606	0	0	0
		Wevan M20/M30	0	0	87,916	38,003	0
		Wevan M30	0	0	0	0	8,059
		Wevan M50	0	0	13,157	0	14,305
	SUV	Senova	0	7,255	186,839	61,792	35,635
	SUV	BJ40	6,748	934	221	153	116
	Sedan/Hatchback	E150	5,233	0	0	0	0
	Sedan/Hatchback	Senova	124,391	111,130	29,103	14,341	2,578
	Mini Van	Wevan 306	71,478	46,827	27,485	12,138	5,520
	Total		210,889	250,752	344,721	126,427	66,213
Beijing New Energy Vehicle (BJEV)	Sedan/Hatchback	EC180	0	0	4,128	0	15,375
	Sedan/Hatchback	Senova	0	578	19,221	1,910	4,358
	Total		0	578	23,349	1,910	19,733
Jiangxi Changhe	MPV	Freedom	7,637	20,579	30,979	13,007	0
	SUV	Changhe Q25	0	0	13,425	3,885	2,169
	SUV	Changhe Q35	0	0	17,460	0	4,012
	Sedan/Hatchback	Ideal	304	0	0	0	0
	Light trucks		13,285	10,936	9,110	3,496	5,295
	Mini trucks		0	0	0	0	511
	Mini Van	Freedom	21,878	11,003	2,023	1,024	51
	Mini Van	Landy	1,022	564	0	0	0
	Total		44,126	43,082	72,997	21,412	12,038
Chongqing Bisu	MPV	Bisu M3	0	0	2,597	0	5,795
	SUV	Bisu T3	0	0	320	0	5,649
	SUV	Bisu T5	0	0	0	0	63
	Total		0	0	2,917	0	11,507
Beijing Automotive Group Off-road vehicle Branch	SUV	B80	0	1,007	4,602	92	1,156
	SUV	BJ40	927	2,776	9,056	1,217	7,189
	Total		927	3,783	13,658	1,309	8,345
Beijing Automobile Works	SUV	BJ2020 JC Series	1,049	440	406	118	0
		BJ2032 Series	89	34	35	23	0
		BJ6466 Series	281	1,141	444	170	0
		Yusheng 007	0	0	0	0	23
		Yongshi	0	0	0	0	110
	Light trucks		13,860	7,452	22,658	10,471	3,114
	Small Buses		3,141	3,310	2,209	414	164
	Mini Van		9,891	6,508	7,932	2,981	3,911
	Total		28,311	18,885	33,684	14,177	7,322
Beijing (Zhengjiang) Automobile	SUV	BJ20	0	0	18,007	0	6,391
BAIC (Guangzhou) Motor	SUV	Wevan S50	0	0	23,423	6,249	4,908
	SUV	Senova	0	22,388	8,372	3,544	60
	Sedan/Hatchback	Senova	0	1,342	554	413	4
	Total		0	23,730	32,349	10,206	4,972
Beiqi Foton	MPV	Gratour ix	0	0	12,840	1,875	7,040
		Midi	738	120	268	234	0
		MP-X	6,460	5,429	5,573	2,649	3,040
		Gratour im	0	0	0	0	445
	SUV	Sauvana	7	1,184	2,147	750	820
	Semi Trailer (25t-40t)		52,710	43,450	48,565	19,660	27,976
	Light trucks		298,478	266,776	269,531	118,547	124,252
	Small Buses		32,349	29,532	30,635	12,407	13,821
	Heavy Trucks		35,361	17,091	16,765	7,226	10,922
	Heavy Trucks (Chassis)		21,202	14,371	13,145	5,259	7,346
	Large Buses		4,614	5,593	7,102	2,289	2,082
	Large Buses (Chassis)		35	16	11	6	0
	Medium Trucks		10,383	6,028	5,473	2,580	5,126
	Medium Trucks (Chassis)		370	110	80	78	2
	Medium Buses		1,161	1,946	2,014	855	304
	Light trucks		91,210	88,102	81,782	32,223	32,738
	Mini Van	Gratour (JiaTu)	0	0	0	801	0
		Gratour V	0	0	5,163	2,013	2,990
		JiaTu	57	10,322	0	0	0
	Total		555,135	490,070	501,094	209,452	238,904
Grand Total			2,400,901	2,488,970	2,871,991	1,079,764	969,555
(Source: Created based on MarkLines' database)

Production Forecast by LMC Automotive: BAIC Group is mild growth and reach 1.5 million units in 2020

（LMC Automotive, May 2017）

According to LMC Automotive's forecast released in May 2017, the BAIC Group's own brand light vehicle production is expected to be 1.25 million units in 2017, up 1.7% year-over-year (y/y). Beijing brand light vehicle production will decrease 4.2% year-over-year (y/y) in 2017, but Changhe brand light vehicle production be up 41.7% y/y. After 2017, the BAIC Group will continue to have mild growth and reach 1.5 million production units in 2020.

Looking ahead, China's LV market is projected to rise in 2017 and over the next few years, driven by higher demand from the country's lower‐tier cities, where the level of first‐time vehicle buyers is still high. However, it would be unwise to ignore the impact on the market of the payback effect from the gradual phasing out of the purchase tax cut policy, so the risk of a decline in 2017 is growing.

Beijing Hyundai's fifth assembly plant is due to begin production in Chongqing in August. The new factory will produce up to 300k vehicles a year and will initially build the redesigned Verna Compact sedan, as well as a new Small crossover. With this new plant coming on stream, Beijing Hyundai aims to boost annual sales in China by 10% to 1.25 mn units this year.

Mercedes‐Benz plans to build a battery plant and make EQ EVs in China, as regulators crack down on pollution. In September, Mercedes unveiled a €10 billion (CNY74 billion) plan to develop ten electric models, including a crossover, for its new EQ brand, which is set to enter showrooms before the end of the decade. Daimler has earmarked €1 billion to boost battery production and, so far, has invested €500 million to double capacity at its plant in Kamenz, Germany.

BAIC Group light vehicle production forecast by make (LMC Automotive, May 2017)

(Units)

COUNTRY	GLOBAL MAKE	2014	2015	2016	2017	2018	2019	2020
BAIC Group	Beijing	467,015	611,571	744,384	713,360	812,976	837,485	868,651
	Foton	423,635	401,674	411,455	430,952	466,357	498,986	507,656
	Changhe	34,654	38,222	76,877	108,915	118,660	117,378	121,395
BAIC Group Total		925,304	1,051,467	1,232,716	1,253,227	1,397,993	1,453,849	1,497,702
China	Beijing	467,015	611,517	744,384	713,198	775,995	789,382	818,099
	Foton	423,071	401,538	411,423	430,143	464,170	496,232	504,459
	Changhe	34,654	38,222	76,877	108,915	118,660	117,378	121,395
China sub-total		924,740	1,051,277	1,232,684	1,252,256	1,358,825	1,402,992	1,443,953
South Africa	Beijing	0	0	0	0	36,768	47,855	50,286
Russia	Foton	0	0	0	559	1,937	2,505	2,942
Malaysia	Foton	360	16	30	250	250	249	255
Malaysia	Beijing	0	0	0	162	213	248	266
Malaysia sub-total		360	16	30	412	463	497	521
Indonesia	Foton	195	120	2	0	0	0	0
Iran	Beijing	0	54	0	0	0	0	0
Pakistan	Foton	9	0	0	0	0	0	0
Source: LMC Automotive "Global Automotive Production Forecast (May. 2017)" (Note) 1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons. 2. All rights reserved. Reproduction of any data will require permission of LMC Automotive. For more detailed information or inquiries about forecast data, please contact LMC Automotive.

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Keywords

BAIC, Own brand, New energy vehicle, EV, Beijing Benz, Beijing Hyundai

BAIC Group: Aiming for production and sales of 4.5 million vehicles by 2020

Promoting electrification and globalization

2017/08/29

Summary