Xingbin LIChief Representative

AMT-Beijing Representative Office

China Market Update

Market Update Breakfast China September 8, 2006

CONTENTSCONTENTS

The China automotive industryThe China automotive industryProduction & growth rateProduction & growth rateOpportunityOpportunity

Production capacity Production capacity (current production, production capacity (current production, production capacity and expansion plan)and expansion plan)Key automakers Key automakers

The China components industryThe China components industryProduction & growth rateProduction & growth rateOpportunityOpportunity

Demands Demands (purchasing plans of major global automakers)(purchasing plans of major global automakers)New measures and tariff New measures and tariff (technical barrier)(technical barrier)Key suppliers Key suppliers (global suppliers and domestic suppliers)(global suppliers and domestic suppliers)

FactsFacts44thth Largest economy in the world in 2005Largest economy in the world in 2005

GDP: USD 2.263825 trillion GDP: USD 2.263825 trillion GDP growth rate: 9.9% GDP growth rate: 9.9%

22ndnd Largest auto market in the world in 2005Largest auto market in the world in 2005Production: 5.75 million units of vehicleProduction: 5.75 million units of vehicleGrowth rate: 13.4%Growth rate: 13.4%

The largest machine tool market in the world The largest machine tool market in the world USD10.9 billionUSD10.9 billionGrowth rate: 15%Growth rate: 15%

The China Automotive IndustryThe China Automotive IndustryProduction & growth rateProduction & growth rate

China's Vehicle and Car Production From 1998 to 2005

1.63 1.832.07

2.34

3.25

5.07

5.75

0.50 0.57 0.60 0.701.09

2.06 2.26

2.95

4.44

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1998 1999 2000 2001 2002 2003 2004 2005

Year

Milli

ons

of U

nits

The China Automotive Industry The China Automotive Industry Production & growth rateProduction & growth rate

117 Registered Automakers, Of which 90 companys capacitiesAre less than 10,000 units a year.

Vehicles(Million of Units)(Million of Units)

2002 2003 2004 2005 2006(1 6)

Production 3.25 4.44 5.07 5.75 3.63Changes, % 38.8 36.6 14.2 13.4 28.9

Source: China Auto Industry Year Book

The China Automotive IndustryThe China Automotive IndustryProduction & growth rateProduction & growth rate

China Car ProductionsChina Car Productions(Million of Units)(Million of Units)

2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006e (12006e (1--6)6)ProductionProduction 0.7 0.7 1.09 1.09 2.06 2.06 2.262.26 2.952.95 1.801.80Change %Change % 15.1 15.1 55.7 55.7 89.0 89.0 9.79.7 30.530.5 46.946.9

Production of Top 8 Chinese automakersfrom January-June, 2006 (in units)

1. Shanghai Automotive Industry Corp 621,400 54.85%2. First Automotive Works Corp 562,900 23.28%3. Dongfeng Motor Corp 454,200 26.1%4. Chang'an Motor Corp 369,100 8.39%5. Beijing Automotive Industry Corp 337,100 11.94%6. Chery Automobile 144,200 72.15%7. Geely Automobile 105,900 55.62%8. Guangzhou Automobile 105,700

(Source: China Association of Automobile Manufacturers)

The China Automotive IndustryThe China Automotive IndustryOpportunity Opportunity Production capacityProduction capacity

Production in 2005: 5.75 million units Production in 2005: 5.75 million units Production capacity in 2005: 8 million unitsProduction capacity in 2005: 8 million unitsProduction capacity expansion plan: 16 million units by Production capacity expansion plan: 16 million units by 20102010

PRODUCTION CAPACITY OF MAJOR AUTOMAKERS IN CHINA

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

FAW SAIC DONGFENG CHANGAN BAIC GAIG CHERY GEELY

AUTOMAKERS

UN

ITS

OF

VEH

ICLE

S

Production in 2005 Current production capacity Planned production capacity in 2010

The China Automotive IndustryThe China Automotive IndustryOpportunity Opportunity -- Key automakersKey automakers

The China Components IndustryThe China Components IndustrySales & growth rateSales & growth rate

A Fragmented Industry1,540 Registered Enterprises3,500-8,500 Non-Registered

Components Statistics($ billion)

2002 2003 2004 2005

Total Sales 34.2 47.9 62.7 71.9

Domestic 32.3 42.1 52.1 56.1

Imports 3.4 9.3 11.3 10.4

Exports 1.9 5.8 10.6 15.8

Average Annual Sales Per Supplier:

$5.0 to $10.0 million

Source: China Auto Industry Year Book

The China Components IndustryThe China Components IndustryOpportunityOpportunity -- DemandsDemands

DaimlerDaimler--Chrysler Chrysler (for China operation)(for China operation)To spend $840 million in buying parts in 2008 To spend $840 million in buying parts in 2008 ($100 million in 2005)($100 million in 2005)

BMW BMW (for China operation)(for China operation)To spend $300 million in buying parts in 2007To spend $300 million in buying parts in 2007

Volkswagen Volkswagen (for overseas operations)(for overseas operations)To spend $1.0 billion in buying parts in 2006 To spend $1.0 billion in buying parts in 2006 ($300 million in 2005)($300 million in 2005)

Volkswagen Volkswagen (for China operations)(for China operations)To spend $2.5 billion in buying parts in 2006To spend $2.5 billion in buying parts in 2006

Multinational firms totally Multinational firms totally (for overseas operations)(for overseas operations)To spend $35 billion in buying parts by the end of 2007To spend $35 billion in buying parts by the end of 2007

The China Components IndustryThe China Components IndustryOpportunityOpportunity New tariffNew tariff

CarsCars

DisplacementDisplacement 20012001 20022002 20032003 20042004 20052005 200620063.0 L 8080 50.750.7 4343 37.637.6 30.330.3 28.2528.25

Parts & ComponentsParts & Components

20012001 20022002 20032003 20042004 20052005 200620061010

The China Components IndustryThe China Components IndustryOpportunityOpportunity New measuresNew measures

Measures for the Administration of Import of Automobile Measures for the Administration of Import of Automobile Components and Parts Featuring Complete VehiclesComponents and Parts Featuring Complete Vehicles

Promulgated by the Customs of China, MOC, MOF and NDRC Promulgated by the Customs of China, MOC, MOF and NDRC on April 1, 2005on April 1, 2005Go into effect on July 1, 2006Go into effect on July 1, 2006

The China Components IndustryThe China Components IndustryOpportunityOpportunity New measures New measures Key PointsKey Points

Article 21 Article 21 -- Under any of the following circumstances, the imported Under any of the following circumstances, the imported automobile components and parts shall be considered bearing the automobile components and parts shall be considered bearing the features features of a complete vehicle:of a complete vehicle:

Importing CKD or SKD to assemble automobiles.Importing CKD or SKD to assemble automobiles.The total price of the imported components and parts is not lessThe total price of the imported components and parts is not less than 60% of than 60% of the total price of the complete vehicle type.the total price of the complete vehicle type.If, within the scope as prescribed in Article 4 of the present MIf, within the scope as prescribed in Article 4 of the present Measures:easures:

Importing both the vehicle body (including the cab) assembly andImporting both the vehicle body (including the cab) assembly and engine engine assembly to assemble vehicles;assembly to assemble vehicles;Importing either the vehicle body (including the cab) assembly oImporting either the vehicle body (including the cab) assembly or engine assembly r engine assembly and 3 or more other assemblies (systems) to assemble vehicles;and 3 or more other assemblies (systems) to assemble vehicles;Importing 5 or more assemblies (systems) other than the vehicle Importing 5 or more assemblies (systems) other than the vehicle body (including body (including the cab) assembly and the engine assembly to assemble vehicles.the cab) assembly and the engine assembly to assemble vehicles.

The China Components IndustryThe China Components IndustryOpportunityOpportunity New measuresNew measures--Key pointsKey points

Article 22 Article 22 -- under any of the following circumstances, the imported under any of the following circumstances, the imported automobile components and parts shall be considered bearing the automobile components and parts shall be considered bearing the features of an automobile assembly (system)features of an automobile assembly (system)

Importing whole sets of KD components and parts to assemble an Importing whole sets of KD components and parts to assemble an assembly (system)assembly (system)Importing key components and parts or subImporting key components and parts or sub--assemblies to assemblies to assemble an assembly (system), and the import of key components assemble an assembly (system), and the import of key components and parts or suband parts or sub--assemblies reaches or exceeds the specified assemblies reaches or exceeds the specified quantity.quantity.The total price of the imported components and parts is not lessThe total price of the imported components and parts is not lessthan 60% of the total price of the assembly (system)than 60% of the total price of the assembly (system)