NASDAQ : CAAS
CHINA AUTOMOTIVE SYSTEMS
NASDAQ : CAAS
Company At a Glance China Automotive Systems, Inc. is a leading supplier of power Steering components and systems to the Chinese automotive industry. Exchange Symbol Recent Stock Price 52-Week Price Range P/E Ratio (TTM) Average Daily Volume Market Capitalization
: : : : : :
Nasdaq:CAAS $3.25 – 18.09 (3 months) 37107 $157.54M
Milestones
September 1997 – Established Henglong company for producing Power Steering Gear which was utilized in light-duty vehicles and sedans August 1999 – Completed safety production line and began mass production March 2000 – Achieved QS9000 and VDA6.1 quality system certificate December 2000 – Approved to become OEM supplier for Dongfeng Citroen October 2001 – Signed licensing agreement with Bishop Steering Technology Co., Ltd for automotive power steering valve technology December 2002 – Awarded “High-Tech Enterprise ” certification by Hubei Province July 2002 – Established Zhejiang Henglong Wanan Pump Co. (J/V with Zhejiang Wanan Group) May 2003 – Completed reverse merger; registered as Delaware corporation December 2003 – Licensing agreement signed with Korean automotive company, NamYang for steering columns December 2003 – Annual sales of power steering systems reached 400,000 units January 2004 – Achieved TS/16949 quality system certificate June 2004 – Recognized as “One of the 100 Best” automotive suppliers by China Automotive Engineering Association August 2004 – Listed on Nasdaq Small Cap November 2004 – Selected as Exclusive Supplier for Steering Pumps for General Motors Joint Venture in China January 2005 – Signed Technology Licensing Agreement with Korea Delphi Automotive Systems
Investment Overview Leading Market Share Diverse National Footprint Broad Product Offering Customer Base Comprised of Leading Chinese Auto Manufacturers and Many Foreign Manufacturers Strategic International Partnerships Strong Technological & Research and Development Capabilities Strong Veteran Management
Investment Overview
LEADING MARKET SHARE – China Automotive is the second largest supplier of power steering components and systems to the Chinese automotive industry. The first one ZF is tied directly to SAIC-Volkswagen. – The Company has long-term business relationships with more than 50 vehicle manufacturers. – Fragmented industry - seven major competitors –three Sino-foreign joint ventures and four state-owned – Total output was 2.4 million units last year – China Automotive supplied approximately 450K units in 2004 18%
18% 2% 2% 8%
28%
5% 7% 12%
CAAS SHANGHAI ZF FKS DONGFENG FAW YUBEI J IN G M E N S H IB A O OTHERS
Investment Overview - Diverse National Footprint
Diverse National Footprint SHENGYANG JINBEI HENGLONG
– Based in Hubei Province, People’s Republic of China – The company manufactures and serves its customer base through four production facilities and employs approximately 2,000 personnel ¾ Jingzhou Henglong Automotive Parts Co. ¾ Shashi Jiulong Power Steering Co. ¾ Shenyang Jinbei Henglong Automotive Steering System Co Ltd ¾ Zhijiang Henglong & Vie PumpManu Co. Ltd
ZHEJIANG HENGLONG VIE
JINGZHOU HENGLONG
SHASHI JIULONG
Investment Overview
Investment Overview - Manufacturing Facilities JINGZHOU HENGLONG AUTOMOTIVE PARTS CO., LTD. SHASHI JIULONG POWER STEERING CO., LTD. Total Area : 425,091 m2 (105 acres) Building Area : 49,105 m2 (528,562 ft.2 ) Employees : 1,530 Products : Integral Ball& Nuts Power steering R&P Power Steering Gears Steering Column & Steering Hoses 2004 Units : 363,759
Investment Overview - Manufacturing Facilities SHENYANG JINBEI HENGLONG AUTO-STEERING SYSTEM CO., LTD. Total Area
: 35,354 m2
(8.75 acres)
Building Area
: 11,413 m2
(122,849 ft.2 )
Employees
: 218
Products:
R&P Power Steering Gears R&P Manual Steering Gears
2004 Units
: 81,834
Investment Overview - Manufacturing Facilities ZHEJIANG HENGLONG VIE PUMP CO., LTD. Total Area Building Area Employees Products 2004 Units
: 27,756 m2 (6.86 acres) : 7,262 m2 (78,168 ft.2 ) : 209 : Power Steering Pumps : 94,881
Investment Overview - Awards & Certificates
Internationally Certified Manufacturing Facilities
The Henglong and Jiulong manufacturing facilities received ISO/TS 16949 Certification in January of 2004.
Company received ISO 9002, QS9000 and VDA6.1 quality system certificate in March of 2000.
Vesteon Quality System Verification in July 2004.
Investment Overview - Company Structure
Investment Overview - Broad Product Offering
The company’s product offering encompasses a full range of auto parts which are incorporated into steering systems for both automobiles and commercial vehicles. Steering Column (Safety, Tilt) Steering Pumps
Steering Hoses
R & P Power Steering Gears*
The company currently offers approximately four separate series of power steering sets and 307 models of power steering sets, steering columns, steering oil pumps and steering hoses.
Investment Overview - Key Customers
Customer Base Comprised of Leading Chinese Auto Manufacturers
The Company’s Ten largest customers represent approximately 73.1% of total sales. Customer Brilliance China Automotive Holdings Ltd.
% 19.2%
Beiqi Foton Motor Co., Ltd.
16.2%
Donfeng Auto Group Co., Ltd.
10.9%
China FAW Group, Corp.
7.2%
Chery Automobile Co., Ltd.
4.3%
Great Wall Motor Company, Ltd.
4.3%
Zhejiang Geely Holdings Co., Ltd.
3.7%
Shanxi Heavy Auto Co., Ltd.
2.8%
Southeast (Fujian) Auto Industry Co., Ltd.
2.3%
Hebei Zhongxing Auto Co., Ltd.
2.2%
Other
26.9%
Key Customers – Customer Profiles
Brilliance China Automotive Holdings Ltd. http://www.brillianceauto.com
Brilliance China is one of the leading automotive manufacturers in China through its subsidiaries, associated companies and joint ventures.
The company manufactures minibuses and automotive components, and sedans.
Its commercial vehicle brands include "JinBei" and "Granse" minibuses and its sedan brand includes "Zhonghua".
In 2003, the Group also established a joint venture with BMW to produce BMW 3-series and 5-series sedans in China.
In addition the company has established strategic partnerships or working relationships with leading global automotive companies, such as Toyota, Mitsubishi, FEV Motorentechnik Gmbh, Porsche and Italdesign S.p.A.
The company has over 8,700 employees, the Group achieved revenue of RMB10.1 billion for the year ended 31st December, 2003.
Key Customers – Customer Profiles
Beiqi Foton Motor Co., Ltd. http://english.foton.com.cn
Beiqi Futian (Foton) is a state-owned enterprise which was established in 1996 by merging 100 other companies from 13 municipalities.
The company is a leading producer of four-wheel farm vehicles and with the approval of the State MachineBuilding Bureau ventured into automobile manufacturing in1998.
The corporation possesses a total asset of 4 billion RMB and has approximately 15,000 employees.
Foton’s main products are automobile, engine, tractor, harvest machinery, economic light truck, chemical building material and equipment, and structural steel strut.
The company sold 260,235 passenger cars and 209,842 light trucks in 2003.
Key Customers – Customer Profiles
Dongfeng Auto Group Co. - www.dfmc.com.cn
Dongfeng Motor Corporation (abbr. DFM) has grown to be one of the three big automotive groups in China since it was founded in 1969.
The company’s products include full series commercial vehicles, passenger cars, and automotive components and devices.
The company is based in central China's Hubei Province.
At the end of 2003, the company had RMB 63.68 billion in total assets, RMB 27.3 billion in net assets and 112,000 employees.
The company currently has international alliances with Nissan and Mitsubishi.
Key Customers – Customer Profiles
China FAW Group, Corp. – www.faw.com.cn
FAW Group Corp., also known as First Automotive Works, was founded in 1953 and is the biggest automotive industrial conglomerate in China.
The company is located in Changchun, Jilin Province, North East China and employs more than 200,000 people.
FAW has 35 assembly plants throughout China, 11 subcompanies (controlled solely by FAW), 12 holding companies and 14 joint ventures. And there are 200 other enterprises related to FAW.
The company established a JV with Volkswagen AG in 1990.
FAW also has a JV with Toyota Motor Corp.
FAW Group Corporation produced more than 1 million units in 2004 and the company exports vehicles to over 30 countries.
Key Customers – Customer Profiles
Chery Automobile Co., Ltd. - www.cheryglobal.com
Chery Automobile Co.,Ltd was founded in 1997 and is based in Wuhu, Anhui Province.
The company is one of the fastest growing independent auto manufacturers in China.
The company has production capacity of 400,000 engines and 300,000 whole cars.
Chery currently ranks in the top eight in the domestic auto industry.
The company has established a Joint Venture with Visionary Vehicles and is preparing to export to the U.S. market in 2007.CAAS will be its exclusive power-steering supplier for its exporting vehicles.
The company plans to introduce several different models in including, an entry level compact, a mid-size sedan, a luxury coupe, an SUV, and a Crossover.
The exported vehicles are expected to be priced 30% below existing comparable vehicles and carry a 100,000 mile/10 year warranty.
Key Customers by Product Category Rack & Pinion Power Steering Gears
Key Customers by Product Category Integral Power Steering Gears
Key Customers by Product Category Steering Columns
Investment Overview – Strategic International Partnerships
January 2005 – Korea Delphi Automotive Systems Corporation – 10-year agreement – Manufacture and export automotive steering systems – Systems used in GM Daewoo Auto & Technology Company’s Matiz vehicle November 2004 – General Motors (SAIC GM Wuling Automobile Co.) – Manufacture steering pumps for Spark 1.0 vehicle – Expected to produce 10,000 units in 2005 – Exclusive contract August 2004 – Advanced Custom Sensors, Inc. – Letter of intent to establish joint venture – Expected to commence production by July 2005 – Sensors used in electronic control systems for vehicles – Anticipated initial output of 4.5 million sensors with net sales of approximately $40 million December 2003 – Namyang (Korean automotive company) – Namyang is a leading steering column manufacturer – Entered into technology transfer agreement for electronic power steering systems October 2001 – Bishop Steering Technology Co. – Bishop is a leader in steering gear technology – Bishop’s technology currently used by BMW and Mercedes Benz – China Automotive and Bishop entered into 10-year licensing agreement for power steering valve technology
Investment Overview -Strong Technology and R&D Capabilities
More than 100 engineers dedicated to R&D
The Company invests approximately 25-30% of net sales of new products on R&D
The company currently holds 12 Chinese patents utilized for power steering technology
Technology agreements with Bishop Steering Technologies and Advanced Custom Sensors
Company has established technology and R&D centers
Investment Overview – Strong Technology and R&D Capabilities
Hubei Provincial-Level Technical Center –
Approved by the Hubei Economic Commission
–
110 employees – 25 senior engineers, four foreign experts, 70 engineers
–
Focused on R&D, testing, production and process improvement, and new material and production methodology application
Changchun Hualong Auto Technology Co., Ltd. R&D Center –
45 employees – 10 senior engineers, 3 foreign experts, 25 engineers
–
Focused on steering system R&D, tests, and new material application
In 2003, China Automotive established a steering systems research institute with Tsinghua University. –
Develop the Electronic Power Steering (EPS) and Electronic Hydraulic Steering System (EHPS)
CHANGCHUN HUALONG AUTO DEVELOPMENT CO., LTD.
Main focus: Steering Sys. Material Testing
TSINGHUA HENGLONG AUTO PARTS RESEARCH CENTER
Main focus: EPS Research
HENGLONG TECHNOLOGY CENTER Main focus: Steering System Technology Improvement Research and Using New Material / Techniques
Market Opportunity – China’s Automobile Market – A Growing Powerhouse • China is currently the world’s third largest automotive market • Demand for cars & trucks has more than doubled since 1998 • China is positioned to become the world’s leading purchaser of cars, parts and accessories over the next five to ten years. • The Chinese auto industry is expected to grow at an annual growth rate of 10% to 15%, with the output of automobiles predicted to hit 8 million vehicles in 2010. • The annual growth of both total vehicle output and sales in China in 2003 and 2002 exceeded 30%, with passenger car output and sales jumping by more than 50%. • In 2004, output of domestic vehicles broke 5 million units for the first time, up 14.1% year-over-year. • According to the China Association of Automobile Manufactures (CAAM), the domestic auto market is expected to witness more moderate growth in 2005 versus 2004 with total vehicle output and sales expected to rise 10% to 5.6 million units. • The export market for Chinese-made automotive parts is growing rapidly
Market Drivers
Rapid Economic Growth – According to the Asian Development Bank Key Indicators 2004, China’s GDP growth averaged 9% per year from 1983 to 2003. – Per Capita GDP increased from $585 in 1995 to $1,093 in 2003. – Currently China ranks as the world’s 6th largest economy.
Highway Development – In 2004, China invested approximately RMB 500 billion on highway development, up 21.2% from 2003 – China State Council has approved the “National Expressway Network Plan”
Growing Export Market – Low manufacturing costs – Improving technology
China Automotive’s Roadmap Mission – To be recognized as the industry leader and supplier of choice for innovative automotive components and systems Five Key Growth Strategies – Expand business in domestic market and accelerate international expansion – Focus on continuous improvement in production efficiency and quality – Develop innovative world-class products through technology and R&D efforts – Increase production capacity and introduce new products through acquisition both in China and abroad. – Achieve total customer satisfaction
Market Opportunities China has the world’s third largest automotive market Demand for cars & trucks has more than doubled since 1998 Rapid growth of export market for Chinese-made automotive parts China is positioned to become the world’s leading purchaser of cars, parts and accessories over the next five to ten years
Financial Overview - Net Sales Approximately 400% growth in net sales over last five years. in USD mil.
60 50 SALES
40 30 20 10 0
99’
00’
01’
02’
03'
04'
Financial Overview Historical Unit Sales Growth In Units 250000 200000 150000 100000 50000 0
01'
02'
03'
04'
Integral
40633
95000
157487
230811
R& P
41878
115000
231034
178811
Manual
8298
10000
11500
37104
Column
35439
80000
120000
91747
0
1000
16813
94881
Pump
Financial Overview – Balance Sheet All numbers in USD thousands PERIOD ENDING Assets Current Assets Cash And Cash Equivalents Net Receivables Inventory Total Current Assets Long Term Investments Property Plant and Equipment Intangible Assets Total Assets Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Liabilities Minority Interest Total Liabilities Stockholders' Equity Common Stock Retained Earnings Capital Surplus Other Stockholder Equity Total Stockholder Equity Net Tangible Assets
31-Dec-04
31-Dec-03
13,007 41,519 12,508 67,034 2,116 35,944 393 105,487
12,003 48,660 10,229 70,893 2,385 22,350 219 95,847
41,738 13,614 227 55,580 196 17,572 73,348
39,198 9,639 2,112 50,949 197 18,687 69,832
2 14,130 18,003 3 32,138 $31,746
2 7,237 18,780 (4) 26,015 $25,796
Key Executives
Hanlin Chen - chairman, president and chief executive officer, Mr. Chen has served as a chairman and chief executive since March 2003. He is a standing board member of the Political Consulting Committee of Jingzhou City and vice president of the Foreign Investors Association of Hubei Province. He served as the general manager of Jiulong from 1993 to 1997. Since 1997, he has served as chairman of the board of Henglong. Mr. Chen earned a Masters of Business Administration degree from Barrington University.
Qizhou Wu - chief operating officer& director, Mr. Wu served as managing vice general manager of Jiulong from 1993 to 1999 and general manager of Henglong from 1999 to 2002. He earned a Masters degree in automobile engineering from Tsinghua University in Beijing.
Daming Hu – chief financial officer, Mr. Hu has been responsible for corporate accounting, reporting and tax planning since March 2003. He was the finance manager of Jiulong since 1996 to 1999 and finance manager of Henglong from 1999 to 2002.
Andy Yiu Wong Tse has served as Sr. VP and director of the Company since March 2003. He has also served as the general manager of the Henglong and Jiulong joint ventures and the chairman of the board of Shenyang since 2003. He was the vice GM of Jiulong from 1993 to 1997 and the vice GM of Henglong. Mr. Tse has over 10 years of experience in automotive parts sales and strategic development. Mr. Tse has an MBA from the China People University.
Investment Summary Rapidly expanding Chinese economy Strong consumer demand for automobiles Leadership position as supplier of power steering systems with highly respected core products Ability to leverage existing infrastructure to expand production capacity Opportunities for product line expansion and complementary acquisitions Export product potential Aggressive research and development programs and strong relationships with leading universities in China Solid financial position
NASDAQ : CAAS
Company At a Glance China Automotive Systems, Inc. is a leading supplier of power Steering components and systems to the Chinese automotive industry. Exchange Symbol Recent Stock Price 52-Week Price Range P/E Ratio (TTM) Average Daily Volume Market Capitalization
: : : : : :
Nasdaq:CAAS $3.25 – 18.09 (3 months) 37107 $157.54M
Milestones
September 1997 – Established Henglong company for producing Power Steering Gear which was utilized in light-duty vehicles and sedans August 1999 – Completed safety production line and began mass production March 2000 – Achieved QS9000 and VDA6.1 quality system certificate December 2000 – Approved to become OEM supplier for Dongfeng Citroen October 2001 – Signed licensing agreement with Bishop Steering Technology Co., Ltd for automotive power steering valve technology December 2002 – Awarded “High-Tech Enterprise ” certification by Hubei Province July 2002 – Established Zhejiang Henglong Wanan Pump Co. (J/V with Zhejiang Wanan Group) May 2003 – Completed reverse merger; registered as Delaware corporation December 2003 – Licensing agreement signed with Korean automotive company, NamYang for steering columns December 2003 – Annual sales of power steering systems reached 400,000 units January 2004 – Achieved TS/16949 quality system certificate June 2004 – Recognized as “One of the 100 Best” automotive suppliers by China Automotive Engineering Association August 2004 – Listed on Nasdaq Small Cap November 2004 – Selected as Exclusive Supplier for Steering Pumps for General Motors Joint Venture in China January 2005 – Signed Technology Licensing Agreement with Korea Delphi Automotive Systems
Investment Overview Leading Market Share Diverse National Footprint Broad Product Offering Customer Base Comprised of Leading Chinese Auto Manufacturers and Many Foreign Manufacturers Strategic International Partnerships Strong Technological & Research and Development Capabilities Strong Veteran Management
Investment Overview
LEADING MARKET SHARE – China Automotive is the second largest supplier of power steering components and systems to the Chinese automotive industry. The first one ZF is tied directly to SAIC-Volkswagen. – The Company has long-term business relationships with more than 50 vehicle manufacturers. – Fragmented industry - seven major competitors –three Sino-foreign joint ventures and four state-owned – Total output was 2.4 million units last year – China Automotive supplied approximately 450K units in 2004 18%
18% 2% 2% 8%
28%
5% 7% 12%
CAAS SHANGHAI ZF FKS DONGFENG FAW YUBEI J IN G M E N S H IB A O OTHERS
Investment Overview - Diverse National Footprint
Diverse National Footprint SHENGYANG JINBEI HENGLONG
– Based in Hubei Province, People’s Republic of China – The company manufactures and serves its customer base through four production facilities and employs approximately 2,000 personnel ¾ Jingzhou Henglong Automotive Parts Co. ¾ Shashi Jiulong Power Steering Co. ¾ Shenyang Jinbei Henglong Automotive Steering System Co Ltd ¾ Zhijiang Henglong & Vie PumpManu Co. Ltd
ZHEJIANG HENGLONG VIE
JINGZHOU HENGLONG
SHASHI JIULONG
Investment Overview
Investment Overview - Manufacturing Facilities JINGZHOU HENGLONG AUTOMOTIVE PARTS CO., LTD. SHASHI JIULONG POWER STEERING CO., LTD. Total Area : 425,091 m2 (105 acres) Building Area : 49,105 m2 (528,562 ft.2 ) Employees : 1,530 Products : Integral Ball& Nuts Power steering R&P Power Steering Gears Steering Column & Steering Hoses 2004 Units : 363,759
Investment Overview - Manufacturing Facilities SHENYANG JINBEI HENGLONG AUTO-STEERING SYSTEM CO., LTD. Total Area
: 35,354 m2
(8.75 acres)
Building Area
: 11,413 m2
(122,849 ft.2 )
Employees
: 218
Products:
R&P Power Steering Gears R&P Manual Steering Gears
2004 Units
: 81,834
Investment Overview - Manufacturing Facilities ZHEJIANG HENGLONG VIE PUMP CO., LTD. Total Area Building Area Employees Products 2004 Units
: 27,756 m2 (6.86 acres) : 7,262 m2 (78,168 ft.2 ) : 209 : Power Steering Pumps : 94,881
Investment Overview - Awards & Certificates
Internationally Certified Manufacturing Facilities
The Henglong and Jiulong manufacturing facilities received ISO/TS 16949 Certification in January of 2004.
Company received ISO 9002, QS9000 and VDA6.1 quality system certificate in March of 2000.
Vesteon Quality System Verification in July 2004.
Investment Overview - Company Structure
Investment Overview - Broad Product Offering
The company’s product offering encompasses a full range of auto parts which are incorporated into steering systems for both automobiles and commercial vehicles. Steering Column (Safety, Tilt) Steering Pumps
Steering Hoses
R & P Power Steering Gears*
The company currently offers approximately four separate series of power steering sets and 307 models of power steering sets, steering columns, steering oil pumps and steering hoses.
Investment Overview - Key Customers
Customer Base Comprised of Leading Chinese Auto Manufacturers
The Company’s Ten largest customers represent approximately 73.1% of total sales. Customer Brilliance China Automotive Holdings Ltd.
% 19.2%
Beiqi Foton Motor Co., Ltd.
16.2%
Donfeng Auto Group Co., Ltd.
10.9%
China FAW Group, Corp.
7.2%
Chery Automobile Co., Ltd.
4.3%
Great Wall Motor Company, Ltd.
4.3%
Zhejiang Geely Holdings Co., Ltd.
3.7%
Shanxi Heavy Auto Co., Ltd.
2.8%
Southeast (Fujian) Auto Industry Co., Ltd.
2.3%
Hebei Zhongxing Auto Co., Ltd.
2.2%
Other
26.9%
Key Customers – Customer Profiles
Brilliance China Automotive Holdings Ltd. http://www.brillianceauto.com
Brilliance China is one of the leading automotive manufacturers in China through its subsidiaries, associated companies and joint ventures.
The company manufactures minibuses and automotive components, and sedans.
Its commercial vehicle brands include "JinBei" and "Granse" minibuses and its sedan brand includes "Zhonghua".
In 2003, the Group also established a joint venture with BMW to produce BMW 3-series and 5-series sedans in China.
In addition the company has established strategic partnerships or working relationships with leading global automotive companies, such as Toyota, Mitsubishi, FEV Motorentechnik Gmbh, Porsche and Italdesign S.p.A.
The company has over 8,700 employees, the Group achieved revenue of RMB10.1 billion for the year ended 31st December, 2003.
Key Customers – Customer Profiles
Beiqi Foton Motor Co., Ltd. http://english.foton.com.cn
Beiqi Futian (Foton) is a state-owned enterprise which was established in 1996 by merging 100 other companies from 13 municipalities.
The company is a leading producer of four-wheel farm vehicles and with the approval of the State MachineBuilding Bureau ventured into automobile manufacturing in1998.
The corporation possesses a total asset of 4 billion RMB and has approximately 15,000 employees.
Foton’s main products are automobile, engine, tractor, harvest machinery, economic light truck, chemical building material and equipment, and structural steel strut.
The company sold 260,235 passenger cars and 209,842 light trucks in 2003.
Key Customers – Customer Profiles
Dongfeng Auto Group Co. - www.dfmc.com.cn
Dongfeng Motor Corporation (abbr. DFM) has grown to be one of the three big automotive groups in China since it was founded in 1969.
The company’s products include full series commercial vehicles, passenger cars, and automotive components and devices.
The company is based in central China's Hubei Province.
At the end of 2003, the company had RMB 63.68 billion in total assets, RMB 27.3 billion in net assets and 112,000 employees.
The company currently has international alliances with Nissan and Mitsubishi.
Key Customers – Customer Profiles
China FAW Group, Corp. – www.faw.com.cn
FAW Group Corp., also known as First Automotive Works, was founded in 1953 and is the biggest automotive industrial conglomerate in China.
The company is located in Changchun, Jilin Province, North East China and employs more than 200,000 people.
FAW has 35 assembly plants throughout China, 11 subcompanies (controlled solely by FAW), 12 holding companies and 14 joint ventures. And there are 200 other enterprises related to FAW.
The company established a JV with Volkswagen AG in 1990.
FAW also has a JV with Toyota Motor Corp.
FAW Group Corporation produced more than 1 million units in 2004 and the company exports vehicles to over 30 countries.
Key Customers – Customer Profiles
Chery Automobile Co., Ltd. - www.cheryglobal.com
Chery Automobile Co.,Ltd was founded in 1997 and is based in Wuhu, Anhui Province.
The company is one of the fastest growing independent auto manufacturers in China.
The company has production capacity of 400,000 engines and 300,000 whole cars.
Chery currently ranks in the top eight in the domestic auto industry.
The company has established a Joint Venture with Visionary Vehicles and is preparing to export to the U.S. market in 2007.CAAS will be its exclusive power-steering supplier for its exporting vehicles.
The company plans to introduce several different models in including, an entry level compact, a mid-size sedan, a luxury coupe, an SUV, and a Crossover.
The exported vehicles are expected to be priced 30% below existing comparable vehicles and carry a 100,000 mile/10 year warranty.
Key Customers by Product Category Rack & Pinion Power Steering Gears
Key Customers by Product Category Integral Power Steering Gears
Key Customers by Product Category Steering Columns
Investment Overview – Strategic International Partnerships
January 2005 – Korea Delphi Automotive Systems Corporation – 10-year agreement – Manufacture and export automotive steering systems – Systems used in GM Daewoo Auto & Technology Company’s Matiz vehicle November 2004 – General Motors (SAIC GM Wuling Automobile Co.) – Manufacture steering pumps for Spark 1.0 vehicle – Expected to produce 10,000 units in 2005 – Exclusive contract August 2004 – Advanced Custom Sensors, Inc. – Letter of intent to establish joint venture – Expected to commence production by July 2005 – Sensors used in electronic control systems for vehicles – Anticipated initial output of 4.5 million sensors with net sales of approximately $40 million December 2003 – Namyang (Korean automotive company) – Namyang is a leading steering column manufacturer – Entered into technology transfer agreement for electronic power steering systems October 2001 – Bishop Steering Technology Co. – Bishop is a leader in steering gear technology – Bishop’s technology currently used by BMW and Mercedes Benz – China Automotive and Bishop entered into 10-year licensing agreement for power steering valve technology
Investment Overview -Strong Technology and R&D Capabilities
More than 100 engineers dedicated to R&D
The Company invests approximately 25-30% of net sales of new products on R&D
The company currently holds 12 Chinese patents utilized for power steering technology
Technology agreements with Bishop Steering Technologies and Advanced Custom Sensors
Company has established technology and R&D centers
Investment Overview – Strong Technology and R&D Capabilities
Hubei Provincial-Level Technical Center –
Approved by the Hubei Economic Commission
–
110 employees – 25 senior engineers, four foreign experts, 70 engineers
–
Focused on R&D, testing, production and process improvement, and new material and production methodology application
Changchun Hualong Auto Technology Co., Ltd. R&D Center –
45 employees – 10 senior engineers, 3 foreign experts, 25 engineers
–
Focused on steering system R&D, tests, and new material application
In 2003, China Automotive established a steering systems research institute with Tsinghua University. –
Develop the Electronic Power Steering (EPS) and Electronic Hydraulic Steering System (EHPS)
CHANGCHUN HUALONG AUTO DEVELOPMENT CO., LTD.
Main focus: Steering Sys. Material Testing
TSINGHUA HENGLONG AUTO PARTS RESEARCH CENTER
Main focus: EPS Research
HENGLONG TECHNOLOGY CENTER Main focus: Steering System Technology Improvement Research and Using New Material / Techniques
Market Opportunity – China’s Automobile Market – A Growing Powerhouse • China is currently the world’s third largest automotive market • Demand for cars & trucks has more than doubled since 1998 • China is positioned to become the world’s leading purchaser of cars, parts and accessories over the next five to ten years. • The Chinese auto industry is expected to grow at an annual growth rate of 10% to 15%, with the output of automobiles predicted to hit 8 million vehicles in 2010. • The annual growth of both total vehicle output and sales in China in 2003 and 2002 exceeded 30%, with passenger car output and sales jumping by more than 50%. • In 2004, output of domestic vehicles broke 5 million units for the first time, up 14.1% year-over-year. • According to the China Association of Automobile Manufactures (CAAM), the domestic auto market is expected to witness more moderate growth in 2005 versus 2004 with total vehicle output and sales expected to rise 10% to 5.6 million units. • The export market for Chinese-made automotive parts is growing rapidly
Market Drivers
Rapid Economic Growth – According to the Asian Development Bank Key Indicators 2004, China’s GDP growth averaged 9% per year from 1983 to 2003. – Per Capita GDP increased from $585 in 1995 to $1,093 in 2003. – Currently China ranks as the world’s 6th largest economy.
Highway Development – In 2004, China invested approximately RMB 500 billion on highway development, up 21.2% from 2003 – China State Council has approved the “National Expressway Network Plan”
Growing Export Market – Low manufacturing costs – Improving technology
China Automotive’s Roadmap Mission – To be recognized as the industry leader and supplier of choice for innovative automotive components and systems Five Key Growth Strategies – Expand business in domestic market and accelerate international expansion – Focus on continuous improvement in production efficiency and quality – Develop innovative world-class products through technology and R&D efforts – Increase production capacity and introduce new products through acquisition both in China and abroad. – Achieve total customer satisfaction
Market Opportunities China has the world’s third largest automotive market Demand for cars & trucks has more than doubled since 1998 Rapid growth of export market for Chinese-made automotive parts China is positioned to become the world’s leading purchaser of cars, parts and accessories over the next five to ten years
Financial Overview - Net Sales Approximately 400% growth in net sales over last five years. in USD mil.
60 50 SALES
40 30 20 10 0
99’
00’
01’
02’
03'
04'
Financial Overview Historical Unit Sales Growth In Units 250000 200000 150000 100000 50000 0
01'
02'
03'
04'
Integral
40633
95000
157487
230811
R& P
41878
115000
231034
178811
Manual
8298
10000
11500
37104
Column
35439
80000
120000
91747
0
1000
16813
94881
Pump
Financial Overview – Balance Sheet All numbers in USD thousands PERIOD ENDING Assets Current Assets Cash And Cash Equivalents Net Receivables Inventory Total Current Assets Long Term Investments Property Plant and Equipment Intangible Assets Total Assets Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Liabilities Minority Interest Total Liabilities Stockholders' Equity Common Stock Retained Earnings Capital Surplus Other Stockholder Equity Total Stockholder Equity Net Tangible Assets
31-Dec-04
31-Dec-03
13,007 41,519 12,508 67,034 2,116 35,944 393 105,487
12,003 48,660 10,229 70,893 2,385 22,350 219 95,847
41,738 13,614 227 55,580 196 17,572 73,348
39,198 9,639 2,112 50,949 197 18,687 69,832
2 14,130 18,003 3 32,138 $31,746
2 7,237 18,780 (4) 26,015 $25,796
Key Executives
Hanlin Chen - chairman, president and chief executive officer, Mr. Chen has served as a chairman and chief executive since March 2003. He is a standing board member of the Political Consulting Committee of Jingzhou City and vice president of the Foreign Investors Association of Hubei Province. He served as the general manager of Jiulong from 1993 to 1997. Since 1997, he has served as chairman of the board of Henglong. Mr. Chen earned a Masters of Business Administration degree from Barrington University.
Qizhou Wu - chief operating officer& director, Mr. Wu served as managing vice general manager of Jiulong from 1993 to 1999 and general manager of Henglong from 1999 to 2002. He earned a Masters degree in automobile engineering from Tsinghua University in Beijing.
Daming Hu – chief financial officer, Mr. Hu has been responsible for corporate accounting, reporting and tax planning since March 2003. He was the finance manager of Jiulong since 1996 to 1999 and finance manager of Henglong from 1999 to 2002.
Andy Yiu Wong Tse has served as Sr. VP and director of the Company since March 2003. He has also served as the general manager of the Henglong and Jiulong joint ventures and the chairman of the board of Shenyang since 2003. He was the vice GM of Jiulong from 1993 to 1997 and the vice GM of Henglong. Mr. Tse has over 10 years of experience in automotive parts sales and strategic development. Mr. Tse has an MBA from the China People University.
Investment Summary Rapidly expanding Chinese economy Strong consumer demand for automobiles Leadership position as supplier of power steering systems with highly respected core products Ability to leverage existing infrastructure to expand production capacity Opportunities for product line expansion and complementary acquisitions Export product potential Aggressive research and development programs and strong relationships with leading universities in China Solid financial position
