China Auto Sector

Research Analysts
Jack Yeung
852 2101 6779
jack.yeung@credit-suisse.com
Contribution by
Alex Yang
China Auto Sector
INITIATION
Selectively accumulate in 2013
08 January 2013
Asia Pacific/China
Equity Research
Automobile Manufacturers
Figure 1: Valuation comparison
TP Up/down Price Mkt cap 6M ADTO P/E (x)
Company Ticker (HK$) side (%) Rating (HK$) (US$ mn) (US$ mn) 13E 14E
Brilliance 1114.HK 12.00 13.4 O 10.58 6,089 17.5 12.1 9.9
BYD 1211.HK 20.00 -12.5 N 22.85 5,730 7.8 35.5 26.0
Dongfeng 0489.HK 14.00 16.3 O 12.04 10,817 33.3 6.6 6.1
Geely 0175.HK 3.50 -14.2 U 4.08 3,381 21.5 11.0 9.1
Great Wall 2333.HK 30.00 18.3 O 25.35 10,105 16.7 10.9 9.5
GAC 2238.HK 6.50 -9.0 N 7.14 4,955 5.2 10.2 8.2
Note: O = Outperform. N = Neutral, U = Underperform.
Source: Bloomberg consensus, Credit Suisse estimates
■ Luxury segment continues to outperform. By the end of 2012, China’s
USD millionaires reached more than 1mn, and a growing middle class
particularly brand conscious that wants luxury cars that have been stretched
to offer more space. As a result, sales of luxury vehicles and SUVs are
outpacing the market with little sign of slowing down. Given the strong
demand and enhanced local production, we expect China’s luxury auto
sales to grow at 20-25% p.a. by 2015, compared with about 8-10% growth
for overall passenger vehicle (PV) sales.
■ Mid-to-high end segment’s competition intensifies. Japanese brands
had a difficult year in 2012 due to anti-Japan sentiment in China. Its sales
started to recover at the end of 2012 with massive discounts and new model
launches in 2013. These new models will have lower ASPs, which puts a lot
pressure on some mid-end brands like Hyundai. We believe 2013 will be a
recovery year for Japanese brands as they often known for better value for
money and cheaper price will make them even more attractive.
■ SUV segment: New battlefield with strong demand. More than 20 new
SUV models are going to be launched across different segments in 2013,
which will intensify competition among SUV makers. However, given the low
SUV penetration rate and strong upgrade and replacement demand, we
expect SUV sales to remain over 20% growth for the next 2-3 years.
■ Initiating on the China auto sector with OUTPERFORM. Given China’s low
penetration rate and rising household income, we believe its PV segment will
grow 8-10% for the next 3-5 years. We initiate coverage on Great Wall with
OUTPERFORM (TP HK$30.00 18.3% upside), on BYD with NEUTRAL (TP
HK$20.00, 12.5% downside) and on Geely with UNDERPERFORM (TP
HK$3.50, 14.2% downside). We upgrade Guangzhou Auto to NEUTRAL (TP
HK$6.50, 9% downside) and maintain OUTPERFORM on Brilliance (TP
HK$12.00, 13.4% upside) and Dongfeng Motors (TP HK$14.00, 16.3%
upside). Our top pick for the long term remains Brilliance and our near-term
top pick (next 12 months) is Dongfeng Motors.
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Focus charts and table
Figure 2: Growth of China auto sales by segment Figure 3: Foreign brands’ PV market share in China
60%
50%
40%
30%
20%
10%
0%
-10%
2004 2006 2008 2010 2012E 2014E 2016E 2018E 2020E
Auto sales YoY % PV sales YoY % CV sales YoY %
Source: CAAM, Credit Suisse estimates Source: CAAM
08 January 2013
0%
Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Nov-12
China Auto Sector 2
25%
20%
15%
10%
5%
Japanese German American
Korean French
Figure 4: Luxury PV sales in China Figure 5: SUV sales as % of China’s PV sales
'000 Units
2,500
2,000
1,500
1,000
500
0
181
39%
22%
252
25%
7%
314
53%
76%
1,551
1,877
2,252
33%
29%
718
1,272
42%
1,017
25%
5% 7%
22% 21% 20%
10% 10%
407
9%
2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
Luxury PV sales (LHS) Luxury PV sales YoY (RHS)
Total PV sales YoY (RHS)
Source: Roland Berger, Credit Suisse estimates Source: CAAM
100%
80%
60%
40%
20%
0%
-20%
Figure 6: Valuation comparison of major listed automakers
16%
14%
12%
10%
8%
6%
4%
2%
0%
Jan/04 Oct/05 Jul/07 Apr/09 Jan/11 Oct/12
SUV sales as % of PV sales
Upside/ Share Market Dividend
Company Ticker TP downside price cap P/E (x) P/B (x) yield (%) ROE (%)
(HK$) (%) (HK$) (US$mn) 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E
Brilliance 1114.HK 12.00 13.4 10.58 6,089 19.7 14.8 12.1 9.9 7.6 5.7 4.3 3.3 - 0.0 0.1 0.3 27.2 29.4 28.6 26.6
BYD 1211.HK 20.00 -12.5 22.85 5,730 26.3 77.6 35.5 26.0 2.1 2.0 1.9 1.8 - 0.0 0.0 0.1 7.0 1.7 4.1 5.0
Dongfeng Motors 0489.HK 14.00 16.3 12.04 10,817 8.0 9.6 6.6 6.1 2.2 1.9 1.7 1.4 1.5 1.3 1.5 1.6 25.0 17.6 18.0 17.3
Geely 0175.HK 3.50 -14.2 4.08 3,381 16.1 12.9 11.0 9.1 2.6 2.3 1.9 1.7 0.7 0.9 1.1 1.3 18.6 17.1 17.6 17.3
Great Wall Motor 2333.HK 30.00 18.3 25.35 10,105 16.3 12.7 10.9 9.5 3.8 3.0 2.5 2.1 1.4 1.9 2.1 2.4 25.6 24.9 23.3 21.6
Guangzhou Auto 2238.HK 6.50 -9.0 7.14 4,955 7.8 15.0 10.2 8.2 1.5 1.4 1.3 1.2 2.8 1.5 2.2 2.6 15.6 8.3 10.5 12.1
Mkt cap–wtd avg 16.0 22.4 13.7 11.1 3.6 2.9 2.4 2.0 0.9 1.0 1.2 1.3 22.1 19.1 19.0 18.1
Source: Bloomberg consensus

Selectively accumulate
PV growth remains solid in 2013
China’s low auto penetration rate and strong income growth will further its growth in the
passenger vehicles (PV) segment in the next 3-5 years. Low-tier cities and inland regions
have lower-than-average auto penetration rates, higher income growth rate as well as
higher GDP growth; we believe they will become major auto markets in the next 5-10
years. Although automakers are expanding capacity aggressively, their overall utilization
rate is still above 70%. Automakers also have the flexibility to adjust their capacity plans to
meet real demand growth.
SUV segment: New battlefield with strong demand
China’s sports utility vehicle (SUV) segment has maintained strong sales growth in recent
years despite slowing PV sales in 2011 and 2012. Over 20 new SUV models are planned
to be launched in 2013 across all segments. We expect competition within the SUV
segment to intensify, as most JV players are equally competitive. However, we note that
rising upgrade and replacement demand will mainly benefit the mid-to-low end SUV
segment. We expect Great Wall to maintain its leadership in this segment due to lack of
strong competitors.
Mid-to-high end segment: Intensifying competition
Due to anti-Japan protests in China in 2012, Japanese brands had a difficult year last year.
Its sales started to recover at the end of 2012 with massive discounts and new model
launches in 2013 in hoping to regain some of its lost market share. These new models will
have lower ASPs, which will put a lot pressure on some of the mid-end brands like Korean
brands. With cheaper price, we believe sales of Japanese brands will recover significantly
in 2013 as they often known for better value for money.
Luxury segment: Rising along with wealth in China
China’s luxury auto segment is still in its early growth stage, with a low penetration rate.
We believe growing wealth will drive the country’s luxury auto sales. We also expect
strong waves of replacement purchases to support luxury auto sales in the next 3-5 years.
Many luxury brands have launched their economy models with prices close to the mid-tohigh
end. We believe these models will become strong engines for luxury auto sales and
help luxury automakers to gain market share from mid- to high-end players.
Valuation and stock picks
We are initiating China Auto Sector with OUTPERFORM given China’s low penetration
rate and rising household income. We initiate on Great Wall Motor with an OUTPERFORM
(TP HK$30.00 based on 13x 2013E EPS) given its leading position in China’s SUV
segment. For BYD, we initiate with NEUTRAL, (TP HK$20.00 based on a sum-of-the-parts
valuation) as we believe its electric cars are yet to be commercialized. We initiate
coverage on Geely with an UNDERPERFORM (TP HK$3.50 based on 10x 2013E EPS)
as we believe it will face competition from JV brands moving toward low-end segment as it
tries to move upward. We upgrade Guangzhou Auto to NEUTRAL from
UNDERPERFORM (TP HK$6.50 based on 10x 2013E EPS) given recovering Japanese
auto sales. Brilliance remains OUTPERFORM (TP HK$12.00, based on 14x 2013E EPS)
as our long term top pick for the sector and Dongfeng Motors maintains OUTPERFORM,
(TP HK$14.00, based on 9x 2013E EPS) as our near term (12 month) top pick for the
sector.
08 January 2013
China’s low auto penetration
rate and strong income
growth will further its PV
growth in the next 3-5 years
We expect competition in
the SUV segment to
intensify but demand to
remain strong
Japanese brands’ new
models in 2013 would help
them to regain market share
but intensify competition in
mid-to-high end segment
We believe rising wealth in
China will continue to drive
luxury auto sales
We are positive on sector
growth and initiate coverage
on Great Wall Motor, BYD,
and Geely. Brilliance and
Dongfeng Motors remain
our top picks
China Auto Sector 3

Sector valuation comparison
Figure 7: Auto sector valuation table
Share Dividend
08 January 2013
Ticker price Mkt cap P/E (x) P/B (x) yield (%) ROE (%)
Company (local ccy) (US$ mn) 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E
H share automakers
Brilliance China Auto 1114.HK 10.58 6,089 19.7 14.8 12.1 9.9 7.6 5.7 4.3 3.3 - 0.0 0.1 0.3 27.2 29.4 28.6 26.6
BYD 1211.HK 22.85 5,730 26.3 77.6 35.5 26.0 2.1 2.0 1.9 1.8 - 0.0 0.0 0.1 7.0 1.7 4.1 5.0
Dongfeng Motors 0489.HK 12.04 10,817 8.0 9.6 6.6 6.1 2.2 1.9 1.7 1.4 1.5 1.3 1.5 1.6 25.0 17.6 18.0 17.3
Geely 0175.HK 4.08 3,381 16.1 12.9 11.0 9.1 2.6 2.3 1.9 1.7 0.7 0.9 1.1 1.3 18.6 17.1 17.6 17.3
Great Wall Motor 2333.HK 25.35 10,105 16.3 12.7 10.9 9.5 3.8 3.0 2.5 2.1 1.4 1.9 2.1 2.4 25.6 24.9 23.3 21.6
Guangzhou Auto 2238.HK 7.14 4,955 7.8 15.0 10.2 8.2 1.5 1.4 1.3 1.2 2.8 1.5 2.2 2.6 15.6 8.3 10.5 12.1
Qingling Motors 1122.HK 2.05 599 11.1 11.7 10.2 9.9 0.6 0.6 0.6 0.6 7.1 6.4 6.9 7.0 4.9 4.6 5.1 5.5
Sinotruk 3808.HK 6.2 1,632 11.1 29.4 13.9 10.1 0.8 0.8 0.8 0.8 1.6 1.1 1.4 1.6 5.4 2.8 3.8 5.0
Weichai Power Co. 2338.HK 35.8 8,295 10.1 14.8 12.3 11.0 2.6 2.0 1.8 1.6 0.3 0.6 0.6 0.7 27.0 14.0 14.6 14.3
Mkt cap–wtd avg 14.0 20.6 13.1 10.8 3.1 2.5 2.1 1.8 1.1 1.1 1.3 1.4 21.5 16.5 16.8 16.3
Global automakers
Honda Motor 7267 3270 65,635 10.4 20.4 9.4 7.9 1.3 1.3 1.3 1.2 1.7 1.8 2.3 2.6 12.2 4.8 10.1 10.7
Nissan Motor 7201 854 36,558 9.1 10.3 9.9 6.6 1.2 1.1 1.0 0.9 1.2 2.3 2.9 3.5 11.3 11.2 10.9 11.9
Toyota Motor 7203 4260 136,134 24.2 35.0 14.0 9.4 1.3 1.3 1.2 1.1 1.2 1.2 1.7 2.2 3.9 2.7 7.9 9.1
Mitsubishi Motors 7211 94 4,995 32.3 21.1 23.1 8.6 (2.6) (2.9) 1.8 1.5 - - - 0.7 6.7 9.7 13.0 20.0
Mitsubishi Corp 8058 1710 31,839 5.8 5.9 7.6 6.7 0.9 0.8 0.8 0.7 3.8 3.8 3.1 3.5 14.8 13.5 9.7 10.7
Mazda Motor 7261 185 7,488 (3.1) (2.6) 45.8 10.5 0.8 1.2 1.2 1.1 - - - 0.5 1.9 6.2
Hyundai Motor 005380.KS 206000 40,975 7.9 6.4 5.6 5.1 1.2 1.2 1.0 0.9 0.8 0.9 1.0 1.0 22.8 21.7 19.3 17.6
Kia Motors 000270.KS 53600 22,181 6.8 5.7 5.3 4.6 1.6 1.3 1.0 0.8 1.1 1.2 1.3 1.4 29.1 27.4 23.0 20.8
Ford Motor Co. F.N 13.46 52,711 7.3 8.4 8.0 6.4 3.4 2.7 2.3 1.9 0.4 1.7 1.8 2.2 85.3 33.0 28.4 27.9
General Motors Corp. GM.N 29.82 39,918 6.6 7.8 6.6 5.2 1.5 1.3 1.1 - 0.2 0.4 18.7 18.6 19.9
Fiat FIA.MI 3.946 6,112 12.9 7.6 4.9 3.4 0.6 0.5 0.5 0.4 - 1.4 2.2 3.9 3.6 5.3 8.8 12.3
BMW AG BMWG.DE 75.61 57,409 9.7 8.4 9.2 8.0 1.6 1.4 1.3 3.0 3.5 3.6 3.9 20.5 17.1 15.6 14.7
Porsche Auto PSHG_p.DE 63.19 9,911 6.2 4.5 4.0 0.6 0.6 0.5 0.4 1.2 1.9 2.6 5.6 20.2 10.8 10.4
Daimler DAIGn.DE 42.455 49,794 7.6 8.9 7.4 7.5 1.1 1.0 0.9 5.2 5.0 4.9 5.3 15.5 12.5 12.4 13.0
Mkt cap–wtd avg 12.1 15.9 9.9 7.4 1.1 1.4 1.3 1.1 1.7 2.0 2.2 2.6 18.4 13.2 13.8 14.2
Source: Bloomberg consensus
Figure 8: Comparison within our coverage—P/E vs RoE Figure 9: Comparison within our coverage—P/E vs P/B
2013E ROE (%)
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
Dongfeng
Motors
Brilliance
Great Wall
Motor
Geely
Guangzhou
Auto
BYD
- 10.0 20.0
2013E P/E (x)
30.0 40.0
Dongfeng
Motors
Source: Bloomberg consensus Source: Bloomberg consensus
Brilliance
Great Wall
Motor
China Auto Sector 4
2013E P/B (x)
5.0
4.0
3.0
2.0
1.0
-
Geely
Guangzhou
Auto
BYD
- 10.0 20.0
2013E P/E (x)
30.0 40.0

Table of contents
Selectively accumulate ........................................................................................................ 3
PV growth remains solid in 2013 ..................................................................................... 3
SUV segment: New battlefield with strong demand ........................................................ 3
Mid-to-high end segment: Intensifying competition ......................................................... 3
Luxury segment: Rising along with wealth in China ........................................................ 3
Valuation and stock picks ................................................................................................ 3
Sector valuation comparison ........................................................................................... 4
PV growth remains solid in 2013 ......................................................................................... 6
Low penetration rate suggests high growth potential ...................................................... 6
Income growth is driving auto sales ................................................................................ 8
Growing demand in low-tier cities and inland regions ..................................................... 9
Risks of oversupply ....................................................................................................... 10
SUV segment: New battlefield with strong demand........................................................... 11
Low SUV penetration rate with strong sales ................................................................. 11
Upgrade and replacement demand to boost sales ....................................................... 12
New model launches to intensify competition ............................................................... 13
Limited competition in mid-to-low end segment ............................................................ 16
Mid-to-high end segment: Intensifying competition ........................................................... 17
Slowdown of PV sales ................................................................................................... 17
Intensifying competition in PV segment ........................................................................ 18
Japanese brands to regain market share in 2013 ......................................................... 19
Low-end segment is under pressure ............................................................................. 20
Luxury segment: Rising alone with wealth in China .......................................................... 23
Low luxury auto penetration rate ................................................................................... 23
Growing wealth strengthens luxury auto demand ......................................................... 23
Replacement demand drives luxury auto sales ............................................................ 24
Proliferation of economy models ................................................................................... 25
Restrictive policies won’t hurt luxury segment .............................................................. 28
Great Wall Motor (2333.HK / 2333 HK) ............................................................................ 29
BYD Co Ltd (1211.HK / 1211 HK) .................................................................................... 44
Geely Automobile Holdings Ltd (0175.HK / 175 HK) ......................................................... 62
Guangzhou Automobile Group (2238.HK / 2238 HK) ........................................................ 80
Dongfeng Motors Group Co Ltd (0489.HK / 489 HK) ........................................................ 83
Brilliance China Automotive Holding (1114.HK / 1114 HK) ............................................... 86
08 January 2013
China Auto Sector 5

PV growth remains solid in 2013
Low penetration rate suggests high growth potential
China’s auto penetration rate (number of vehicles owned by per 1,000 people) was around
69 in 2011, much lower than mature auto markets such as Japan and Korea, Germany,
and the US (Figure 10). It is also lower than the world’s average of around 140. Given
China’s GDP per capita already exceeded US$5,000 in 2011, we believe its reasonable
auto penetration rate is around 100 (Figure 10). However, most provincial regions in China
have penetrations rate below 100 (Figure 11), suggesting high potential for auto sales
growth.
Figure 10: 2011 auto penetration rate by country
900
800
700
600
500
400
300
200
100
(No. of autos per
1,000 people)
China (69)
United states (815)
Japan (622)
Korea (381)
Germany (567)
0
GDP per capita (USD)
100 1,000 10,000 100,000
Source: United Nation Statistics, Ward Auto, CEIC, IMF, Credit Suisse estimates
Figure 11: 2011 China auto penetration rate by region
250
200
150
100
50
No. of autos / 1,000
persons
GDP per capita (RMB)
0
10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000
Source: CEIC, Credit Suisse estimates
Zhejiang
08 January 2013
China Auto Sector 6
Beijing
Tianjin
Shanghai
China’s auto penetration
rate is much lower than
mature auto markets,
suggesting high growth
potential for auto sales

We plot the GDP per capita and auto penetration rate of more than 100 countries in Figure
10. We find auto penetration rates generally grow with GDP per capita and follow an Sshaped
curve. We note that China is entering a stage of high growth on this S curve
(Figure 10). We also note that growth of China’s GDP per capita and its auto penetration
from 2000-11 has generally followed the trend for Korea over 1978-89 (Figure 12). We
expect China to continue to follow Korea’s growth trends of 1990-98 between 2012 and
2020. According to International Monetary Fund (IMF) estimates, China’s GDP per capita
is likely to exceed US$9,500 in 2017, similar to Korea’s in 1994 when Korea’s auto
penetration rate reached 167. We assume China’s auto penetration rate will reach 160 in
2017. Then we use Korea’s auto penetration rate for 1990-98 as a proxy to simulate
China’s penetration rate over 2012-20 (Figure 12). This suggests China’s total number of
autos would reach around 200 mn units in 2016 and its annual auto sales growth rate
would be maintained at around 10% by 2015 then 8-9% up to 2020 (Figure 13 and Figure
14).
Figure 12: Growth of GDP per capita and auto penetration rate
USD
25,000
20,000
15,000
10,000
5,000
-
Korea
1978-1989 1990-1998
-
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
GDP per capita (LHS) Auto penetration rate (RHS)
Source: World Bank, IMF, Credit Suisse estimates
No. of vehilces
per 1,000 people
450
400
350
300
250
200
150
100
50
08 January 2013
-
2000 2005 2010 2015E 2020E
China Auto Sector 7
USD
15,000
12,000
9,000
6,000
3,000
-
China
2000-2011 2012-2000
GDP per capita (LHS) Auto penetration rate (RHS)
Figure 13: Growth of auto sales and auto population Figure 14: Growth of auto sales by segment
('000 units)
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
-
2004 2006 2008 2010 2012E 2014E 2016E 2018E 2020E
Auto sales (RHS) Total No. of autos (LHS)
('000 units)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
60%
50%
40%
30%
20%
10%
0%
-10%
No. of vehilces
per 1,000 people
2004 2006 2008 2010 2012E 2014E 2016E 2018E 2020E
Auto sales YoY % PV sales YoY % CV sales YoY %
Source: CAAM, Credit Suisse estimates Source: CAAM, Credit Suisse estimates
We expect China’s annual
auto sales growth rate to be
around 10% by 2015 and 8-
9% up to 2020
250
200
150
100
50

Income growth is driving auto sales
We expect China’s auto sales to exceed 19 mn units in 2012, representing a 2005-12
CAGR of more than 20%. This remarkable growth was mainly driven by a fast-growing
domestic economy and rising individual incomes, with real GDP growing by around 10%
p.a. from 2005-11 and Chinese disposable incomes per capita also growing by double
digits. According to the National Bureau of Statistics, China’s disposable income per capita
for urban residents in 1H12 increased 13.3% YoY to Rmb13,679 or US$2,183, faster than
1H11’s 11.2%. During the same period, cash income per capita for rural residents
increased 16.1% to Rmb4,303 or US$687, much faster than the growth of disposable
income per capita for urban residents. With this rise in income, China’s middle class—
defined as individuals earning more than Rmb50,000 or US$7,978 annually—doubled
2006’s scale of about 12% of the country’s total population in 2010 and may account for
about 45% of the total population by 2020 (Figure 15). We believe the emergence of
China’s middle class is the power engine that will drive China’s auto sales in the next few
years.
Figure 15: Growth of middle class in China Figure 16: Income growth of Chinese households
200
180
160
140
120
100
80
60
40
20
-
million
1952 1978 1988 1991 1999 2004 2008 2020E
Number of middle class household or higher (LHS)
Share of middle class & higher (RHS)
%
45
40
35
30
25
20
15
10
5
-
income YoY
25%
Source: CEIC, Credit Suisse estimates Source: CEIC
Figure 17: Income distribution of Chinese urban households
%
16
14
12
10
8
6
4
2
0
10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
2005 2007 2009 2011
Source: National Bureau of Statistics, CEIC
RMB '000
08 January 2013
China Auto Sector 8
20%
15%
10%
%
20
18
16
14
12
10
5%
0%
-5%
8
6
4
2
0
1997 1999 2001 2003 2005 2007 2009 2011
2.1
3.0
Urban household Rural household
4.5
We believe strong income
growth and rising middle
class will be major engines
for China’s auto sales
7.5
9.5
12.2
18.1
2005 2006 2007 2008 2009 2010 2011
Share of urban households with annual income > RMB100,000

Growing demand in low-tier cities and inland regions
The number of China’s urban residents exceeded rural residents for the first time in 2011.
The Chinese government was anticipating an urbanization rate of 51.5% by 2015E, which
seems to have been easily realized in 2012. Tier 2 and 3 cities are the major engine of
China’s urbanization. Tier 2 cities accounted for around 16% of the country’s population,
but generated about 30% of total GDP and consumed over half of its foreign direct
investment (Figure 18). The GDP growth rate of Tier 2 cities is about 2% higher than the
whole economy in 2011 (Figure 19). We estimate that new car sales in Tier 2 cities will
grow more than 10% p.a. by 2015. This rate would be 5-8% higher in Tier 3 cities, but less
than 5% in Tier 1 cities, mainly due to auto restrictive policies. Moreover, China’s inland
regions have lower auto penetration rates, but higher income (indicated by GDP per capita)
growth rates than the national average (Figure 20 and Figure 21). We believe auto sales
growth in these regions will also be faster than other parts of China.
08 January 2013
Figure 18: GDP contribution of Tier 1 and 2 cities Figure 19: GDP growth rates of Tier 1 and 2 cities
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
65% 64% 63% 62%
23% 23% 24% 23%
60% 60% 60% 60% 60% 58% 58%
26% 26% 26% 27% 27% 30% 30%
12% 13% 13% 14% 14% 14% 14% 13% 13% 12% 12%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Tier-1 cties Tier-2 cities Other cities
China Auto Sector 9
30%
25%
20%
15%
10%
5%
2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,009 2,010 2,011
China total Tier-1 cties Tier-2 cities
Source: CREIS, CEIC, Credit Suisse estimates Source: CREIS, CEIC, Credit Suisse estimates
Figure 20: PV penetration rate (number of PV per 1,000
persons) by region
National average = 55.3
Figure 21: 2005-11 CAGR of GDP per capita by region
National average = 16.3%
Source: CEIC, Credit Suisse estimates Source: CEIC, Credit Suisse estimates
We believe auto sales
growth in low-tier cities and
inland regions will be faster
than the national average

Risks of oversupply
The return to strong growth in Chinese vehicle sales has prompted a wave of investment
in new capacity. It has raised concerns that the industry could be left with a supply glut
when sales growth slows following the end of government incentive schemes. The
National Development and Reform Commission (NDRC) estimated that the industry was
using 80% of its installed capacity in 2011, while we expect this to drop to about 75% in
2012 and less than 70% by 2013. Compared with JVs, domestic brands seem to be more
aggressive on capacity expansion (Figure 22 and Figure 23). They also have much lower
capacity utilization rates (Figure 24 and Figure 25). We expect domestic brands to be
more rational facing the slowdown of demand in the low-end segment. As most new
capacities are still being planned, there would be sufficient time for them to adjust their
capacity expansion to fit the industry’s demand growth.
08 January 2013
Figure 22: Capacity expansion of major JVs Figure 23: Capacity expansion of major domestic brands
DF Honda
GAC Toyota
Changan Ford Mazda
GAC Honda
DF PSA
DF Yueda Kia
FAW VW
FAW VW
SH VW
SH GM
JVs
- 500 1,000 1,500 2,000
2012E capacity 2015E capacity
FAW Xiali
Jianghuai
Great Wall Motor
- 500 1,000 1,500 2,000
China Auto Sector 10
FAW Car
Changan Auto
Brilliance Auto
Shanghai Auto
Source: Company data Source: Company data
Geely
BYD
Chery
Domestic brands
2012E capacity 2015E capacity
Figure 24: Capacity utilisation rate of JVs Figure 25: Capacity utilisation rate of domestic brands
Million units
20
18
16
14
12
10
8
6
4
2
0
90% 88%
9.8
11.2
JVs
14.9
75%
15.0
84%
2012E 2013E 2014E 2015E
PV capacity* (LHS) Capacity utilization rate (RHS)
* Including capacities for sedan, SUV and MPV
Source: Company data, Credit Suisse estimates
100%
90%
80%
70%
60%
50%
40%
30%
Million units
20
18
16
14
12
10
8
6
4
2
0
7.8
56%
Domestic brands
8.8
53%
14.7
34%
16.6
32%
2012E 2013E 2014E 2015E
PV capacity* (LHS) Capacity utilization rate (RHS)
* Including capacities for sedan, SUV, and MPV
Source: Company data, Credit Suisse estimates
Domestic brands have
higher risks of overcapacity.
100%
90%
80%
70%
60%
50%
40%
30%

SUV segment: New battlefield with
strong demand
Low SUV penetration rate with strong sales
SUVs are expected to contribute around 13% of China’s PV sales in 2012, compared with
about 5% in 2004 (Figure 26). However, this ratio is still much lower than the more than
30% in the US and Australia, and is also lower than China’s neighbor such as Russia
(Figure 27). SUV sales have grown much stronger than the PV industry in recent years
(Figure 28). This is probably due to Chinese customers’ preferences for a more spacious
driving experience, better visibility, outdoor lifestyles and better handling over tough road
conditions. Moreover, prices for SUVs seem to be more resilient compared with other PV
products, implying a lucrative playground for automakers (Figure 29). Given the low
penetration rate and strong demand, we believe China’s SUV sales will remain strong in
the next few years, which should attract more players to enter the market.
08 January 2013
Figure 26: SUV sales as a % of China’s PV sales Figure 27: 2011 SUV sales as a % of PV sales (by country)
16%
14%
12%
10%
8%
6%
4%
2%
0%
Jan/04 Oct/05 Jul/07 Apr/09 Jan/11 Oct/12
SUV sales as % of PV sales
Source: CAAM Source: CAAM, VDA, FCAJ, SMMT
Figure 28: PV sales growth by segment
Sales YoY%
120
100
80
60
40
20
0
-20
2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
Source: CAAM, Credit Suisse estimates
China Auto Sector 11
35%
30%
25%
20%
15%
10%
Total PV Sedan MPV SUV
5%
0%
11%
32%
16%
25%
30%
China US* Germany Russia Australia
SUV sales as % of taotal PV sales (RHS)
China’s SUV penetration
rate is lower than major
economies. We believe the
segment’s sales will remain
strong in next few years.

Figure 29: PV prices by segment
4
2
0
-2
-4
-6
-8
-10
Price change (%)
vs. Jan 2008 price
-12
Jan-08 Dec-08 Nov-09 Nov-10 Oct-11 Oct-12
Source: NDRC
PV Sedan SUV Mini Bus
Upgrade and replacement demand to boost sales
The SUV segment grows the fastest among all PV segments in China. One of the main
reasons for this increase is that Chinese customers tend to choose bigger vehicles to
upgrade/replace their existing car. A family car is quickly becoming a desired, and
attainable, consumer product in China. Many Chinese consumers have already purchased
a first, entry-level car and will be ready to upgrade to newer, better models. According to
Sinotrust’s latest survey done in November 2012 on Chinese car owners’ preferences on
their second vehicle, over 80% of Chinese car owners have only one car, who will become
the major engine for auto sales in the next few years. Moreover, around 40% of Chinese
car owners have indicated that they are going to buy an SUV as their second car, just
behind sedans 49% (Figure 30: ). Also, the majority of upgrade and replacement
purchases focus on models with an engine size between 1.7 and 2.0L and prices of
Rmb50,000-150,000 (Figure 31, Figure 32). These models are usually classified as the
mid-end and mid-to-low end segments. Therefore, we believe the mid-end and mid- to
low-end SUV segments will have high sales growth potential given rising upgrade and
replacement demand.
Figure 30: Preference on vehicle model for first vehicle
vs. second vehicle in China
70%
60%
50%
40%
30%
20%
10%
0%
14.7%
6.8%
Hatchback
sedan
64.4%
48.6%
39.8%
16.9%
2.5% 1.4%
1.8% 1.4%
0.5%
0.2%
0.8%
0.3%
Sedan SUV MPV Cross-over Minibus Others
1st vehicle 2nd vehicle
08 January 2013
Figure 31: Preference on engine size for first vehicle vs.
second vehicle in China
China Auto Sector 12
70%
60%
50%
40%
30%
20%
10%
0%
1.2%
0.6%
57.8%
38.1%
32.2%
26.3%
7.1%
23.9%
7.1%
1.0%
2.9% 1.2%
0.4% 0.4%
4.0L
1st vehicle 2nd vehicle
Source: Sinotrust, Credit Suisse estimates Source: Sinotrust, Credit Suisse estimates
We expect rising upgrade
and replacement demand to
mainly benefit mid-end and
mid-to-low end SUV sales.

Figure 32: Preference on price of first vehicle vs. second vehicle in China
80%
70%
60%
50%
40%
30%
20%
10%
0%
0.60% 0.30%
3.3%
0.7%
72.6%
38.5%
12.9%
19.0%
08 January 2013
China Auto Sector 13
7.5%
22.6%
3.0%
19.0%
Rmb 300k
Source: Sinotrust, Credit Suisse estimates
1st vehicle 2nd vehicle
New model launches to intensify competition
Attracted by the lucrative SUV market, many automakers launched their new models to
gain market share. Generally, JVs have launched more new models than domestic brands,
expanding their market share since 2008 (Figure 33). Four new models were launched in
4Q12 and over 20 new models are in the 2013 pipeline across different segments (Figure
34 through to Figure 38). In the high-end and luxury segments, Audi Q3 should become a
strong competitor for the BMW X1, while the Land Rover Freelander 2 and Volvo XC60
will likely compete with each other starting 4Q13 (Figure 35). In the mid-to-high end
segment, new models account for almost 40% of the total number of models (Figure 36).
JV producers are major players in this segment and we expect their average margins to
decline as competition intensifies. Although new models also account for around 40% of
total models in the mid-end segment (Figure 37), we believe that Great Wall will retain its
position as the No.1 best-selling brand. Its competitors in the mid-end segment are mainly
domestic players not specialized in SUVs and with tiny market shares (Figure 38).
Figure 33: SUV sales by automaker type
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
45% 45%
40% 38%
48%
59% 57%
62% 59% 61% 63% 66%
2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
Source: CAAM, Credit Suisse estimates
JVs Domestic brands
Over 20 new models are
due to be launched in 2013,
which will intensify
competition in the SUV
segment

Figure 34: Launch time of new models
Buick Encore
Changan CS35
Mitsubishi ASX
Beijing B40
Ford Kuga
Peugeot 3008
JAC Rein II
Geely Emgrand SX7
Zotye T600
Audi Q3
Benteng X80
Yongman T5
Mitsubishi Pajero Sport
Mazda CX-7
Geely Emgrand EX8
Ford Ecosport
Geely Emgrand EX6
Mazda CX-5
Chery T21
Great Wall H2
Geely Gleagle GX5
Haima C2
Beijing SC20
Volvo XC60
Land Rover Freelander 2
Skoda Yeti
Chevrolet Orlando
08 January 2013
- 100,000 200,000 300,000 400,000 500,000 600,000 700,000
Source: Company data, Credit Suisse estimates
New models
Figure 35: Price range of China-made SUV models in high-end and luxury segments
Toyota Prado
Nissan Murano
Volvo XC60
Benz GLK
Audi Q5
Land Rover Freelander 2
BMW X1
Toyota Highlander
Audi Q3
Mitsubishi Pajero
Mitsubishi Pajero Sport
Source: Company data
China Auto Sector 14
4Q12
1Q13
2Q13
3Q13
4Q13
200,000 300,000 400,000 500,000 600,000 700,000 800,000
Existing models New models
RMB
RMB

Figure 36: Price range of China-made SUV models in mid-to-high end segment
Mazda CX-7
VW Tiguan
Ford Kuga
Chevrolet Captiva
Nissan X-Trail
Roewe W5
Nissan Paladin
Mazda CX-5
Luxgen 7
Toyota RAV4
Honda CR-V
Skoda Yeti
Kia Sportage R
Hyundai IX35
Peugeot 3008
Changfeng Leopard CS7
Chevrolet Orlando
Hyundai Tucson
Nissan Qashqai
Kia Sportage
Trumpche GS5
Benteng X80
Hawtai Boliger
Mitsubishi ASX
Buick Encore
Jiangling Yusheng
Geely Emgrand EX8
Source: Company data
08 January 2013
100,000 150,000 200,000 250,000 300,000 350,000
Existing models New models
Figure 37: Price range of China-made SUV models in mid-end segment
75,000 100,000 125,000 150,000 175,000 200,000
Beijing B40
Changfeng Leopard CT5
Zhonghua V5
Dongfeng Oting
Great Wall H5
Landwind X Series
Haima 7
Great Wall H6
Great Wall H3
Ford Ecosport
Yongman T5
JAC Rein II
Chery T21
BYD S6
Geely Gleagle GX7
Geely Emgrand SX7
Zotye T600
JAC Rein
Huanghai V3
Chery Tiggo
Great Wall H2
Source: Company data
Existing models New models
China Auto Sector 15
RMB
RMB

08 January 2013
Figure 38: Price range of China-made SUV models in low-end segment
50,000 75,000 100,000 125,000
Hawtai Santa Fe
Haima C2
Changan CS35
Lifan X60
Geely Emgrand EX6
Zotye 5008
Beijing SC20
Source: Company data
Existing models New models
Limited competition in mid-to-low end segment
Top JVs have equal strengths in the mid-to-high end SUV segment (Figure 39). Many of
them are launching new models in 2013 and competition would become tougher. In
contrast, the mid-to-low end SUV segment is dominated by Great Wall Motor (Figure 40).
More than ten new models will be launched in 2013 in this segment. However, we believe
Great Wall will be able to keep its leadership given its traditional strength in SUV and its
good brand image. We expect the mid-to-low end segment to have less intensive
competition but higher sales growth potential, which will mainly benefit Great Wall Motor.
Figure 39: Market share in mid-to-high end SUV segment
FAW Toyota
10%
DF Yueda
Kia
12%
DF Nissan
14%
Others
11%
Jan-Nov 2012
Source: CAAM, Credit Suisse estimates
SH VW
19%
DF Honda
17%
BJ Hyundai
17%
Figure 40: Market share in mid-to-low end SUV segment
Hawtai
4%
Geely
4%
Brilliance
Auto
6%
Jiangnan
6%
BYD
11%
Jan-Nov 2012
Others
19%
Source: CAAM, Credit Suisse estimates
Chery
14%
Great Wall
36%
FAW Toyota
9%
DF Yueda
Kia
11%
DF Nissan
12%
China Auto Sector 16
Hawtai
4%
Geely
8%
Brilliance
Auto
5%
Others
20%
Jiangnan
7%
Others
21%
2013E
2013E
BYD
9%
Chery
13%
SH VW
17%
DF Honda
16%
BJ Hyundai
15%
Great Wall
33%
RMB
We believe Great Wall will
continue to lead the mid-tolow
end SUV segment due
to lack of strong competitors

Mid-to-high end segment:
Intensifying competition
Slowdown of PV sales
China’s auto sales slowed down after its high growth of 2009-10 (Figure 41). In the first 11
months of 2012, China’s auto sales grew 3.9% YoY, rebounding a little from 2.6% for 2011.
We expect its entire 2012 sales to reach around 19 mn units. The YoY growth rate of its
quarterly sales has dropped to single digits since 1Q11 when most of the government’s
stimulus policies faded (Figure 42). Mid-to-high end PV sales have closely followed the
industrial trend in recent years (Figure 43). We expect them to keep growing in single
digits by 2015 (Figure 43).
Figure 41: Auto sales of major countries
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
'000 units
2004 2005 2006 2007 2008 2009 2010 2011 2012E
China India Japan Western Europe
Russia USA (Light vehicles) Brazil
Source: CAAM, Gasgoo, Wind, Credit Suisse estimates
Figure 42: China’s passenger vehicle (PV) sales
('000 units)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
77%
26%
17%
25%
9%
3%
8%
2% -2%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12E
Source: CAAM, Credit Suisse estimates
08 January 2013
China Auto Sector 17
17%
China's PV sales (LHS) China's PV sales YoY (RHS)
7%
8%
YoY
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
Given the slowdown of
China’s PV sales, we
believe the mid-to-high end
segment will grow in the
single digits by 2015

Figure 43: PV sales comparison by segment
100%
80%
60%
40%
20%
0%
-20%
39%
22%
25%
7%
53%
29%
76%
33%
5%
42%
25%
22% 21% 20%
7% 10% 10%
2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
Mid-to-high end YoY Luxury YoY Ultra-luxury YoY Total PV YoY
Source: Roland Berger, Credit Suisse estimates
Intensifying competition in PV segment
China’s auto sector is highly competitive and original equipment manufacturers (OEM) are
flooding the market. There are more than 50 auto makers in China and the industry is
relatively fragmented. Foreign brands dominate, with their Chinese JVs accounting for
almost 70% of China’s PV sales. Among them, GM and Volkswagen had a joint market
share of around 35% in the first 11 months of 2012 (Figure 44). Their market shares have
improved quickly in recent years, as Japanese brands lost market share in the mid- to
high-end segment, especially after the Diaoyu islands dispute in mid-September 2012.
The joint market share of domestic auto brands has kept decreasing in recent years,
mainly due to weakening low-end PV sales, and is now less than one-third in 2012.
Meanwhile, auto prices have also kept falling in recent years due to intensifying
competition, while luxury auto prices are much more resilient compared with other
segments (Figure 46).
Figure 44: PV market share of major foreign auto brands in China
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
GM Volkswagen Nissan Hyundai Toyota Honda Ford Kia PSA
Source: CAAM, Credit Suisse estimates
2008 2009 2010 2011 Jan-Nov 2012
08 January 2013
China Auto Sector 18
9%
JVs are gaining market
share in China’s PV
segment, while auto prices
are declining due to
intensifying competition.

Figure 45: PV market share of major domestic auto brands in China
6%
5%
4%
3%
2%
1%
0%
Chery Geely Great Wall BYD Brilliance Changan Jianghuai Lifan
Source: CAAM, Credit Suisse estimates
2008 2009 2010 2011 Jan-Nov 2012
Figure 46: Change of auto prices by segments
(Jan 2008 price = 100)
105
100
95
90
85
80
Jan-08 Jun-08 Dec-08 Jun-09 Nov-09 May-10 Nov-10 May-11 Oct-11 Apr-12 Oct-12
PV Mini Small Medium Class High Class Luxury
Source: Cheshi, Credit Suisse estimates
Japanese brands to regain market share in 2013
Probably due to conservative market strategies, Japanese auto brands’ market shares
have kept declining in recent years. Moreover, they suffered strikes from the Japanese
earthquake in March 2011 and the Diaoyu island dispute in September 2012. Top
Japanese auto brands such as Nissan, Toyota, Honda, and Mazda saw their Sep-Nov
2012 sales decline sharply from the previous year (Figure 47). Japanese brands’ joint
market share in China has fallen below 20% in the first 11 months of 2012 from more than
22% in 2010 (Figure 48). The market share losses of Japanese brands are mainly the
gains of JV brands especially German brands such as Volkswagen (Figure 48). Domestic
players have not gained much, as they do not have intensive overlap with Japanese
brands, which primarily focus on the mid-to-high end segment. December 2012 shipment
of major Japanese auto brands rebounded to around 75-85% of their December 2011
levels, suggesting a recovery is on track (Figure 47). Through our channel checks, we also
learn that inventories at dealers’ have dropped to 1.3-1.6 months from their peaks at 2-3
months in October 2012. Retail of Japanese auto brands in December 2012 has also
08 January 2013
We expect Japanese
brands’ new models to help
them regain market share in
2013
China Auto Sector 19

ecovered to similar level as in December 2011. Brands, such as Nissan and Honda, plan
to launch their new generation of sedans in 2013, which we expect will help them improve
sales and regain market share. We expect these models to have lower ASPs than existing
ones, which will not only intensify competition in the mid-to-high end segment, but also
post high price pressure on the mid-end segment. However, luxury brand economy
models are priced close to Japanese brands’ high-end models. Facing this top-down price
pressure from the luxury segment, we expect Japanese brands to encounter a tough
recovery in 2013.
Figure 47: China sales of major Japanese auto brands
China sales YoY (%) Sep-12 Oct-12 Nov-12 Dec-12 2012
Nissan -35.3 -41.0 -29.8 -24.0 -5.3
Toyota -48.9 -44.1 -22.1 -15.9 -4.9
Honda -40.5 -54.0 -29.2 -19.2 -3.1
Source: Company data, Credit Suisse estimates
Figure 48: Foreign brands’ PV market shares in China
25%
20%
15%
10%
5%
0%
Jan-09 May-09 Oct-09 Feb-10 Jul-10 Dec-10 Apr-11 Sep-11 Jan-12 Jun-12 Nov-12
Source: CAAM
Japanese German American Korean French
Low-end segment is under pressure
Usually PVs with an engine size of less than 1.6L are classified as low-end vehicles in
China. They achieved impressive sales growth in 2009, outpacing the country’s PV sector
(Figure 49). However, since 2010 the sales of low-end PVs have generally
underperformed the sector (Figure 49). And we expect the share of low-end sedans
(including A00, A0 and A classes) in China’s total PV sales to drop to around 51% in 2012
from over 53% in 2006 (Figure 50). Given the slowdown in sales, we believe the peak
period of strong demand growth for low-end vehicles has already passed. Automakers
with a primary focus on low-end sedans, such as Geely and BYD, are therefore likely to be
seriously affected.
08 January 2013
Low-end PV sales is slowing
down as demand weakens.
China Auto Sector 20

Figure 49: China’s low-end PV sales growth vs. total PV sales growth
140%
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
Jan, 2009
y-y
Apr, 2009
Source: CEIC, Credit Suisse estimates
Jul, 2009
Figure 50: China PV sales by class
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
30%
Oct, 2009
Jan, 2010
Apr, 2010
Jul, 2010
Oct, 2010
Engine

Figure 51: Sedan market shares of top domestic automakers
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
4.4%
4.2%
5.7%
3.7%
3.4%
3.2%
0.8%
2.1%
0.2%
Geely Auto Chery Auto BYD Changan Auto Great Wall
Motor
Source: CAAM, Credit Suisse estimates
3.5%
2008 2009 2010 2011 Jan-Nov 2012
08 January 2013
China Auto Sector 22
2.4%
1.8% 1.8% 1.7%
Tianjin FAW
Auto
0.2%
1.2%
FAW Car Jianghuai Auto
Figure 52: Official prices of major JV self-owned brands
Self- Lowest Highest Lowest Highest
owned price price Original price price
Manufacturer brand (Rmb) (Rmb) platform (Rmb) (Rmb)
GAC Honda Linian 69,800 99,800 Honda City 96,800 159,800
SH GM Wuling Baojun 62,800 95,800 Chevrolet Spark 77,800 88,800
DF Nissan Venucia 67,800 83,800 Nissan TIIDA 105,300 158,800
DF Honda CIIMO 111,800 119,800 Honda Civic 131,800 135,800
Source: Company data, Credit Suisse estimates

Luxury segment: Rising alone with
wealth in China
Low luxury auto penetration rate
Luxury PVs contribute to about 7% of total PV sales in China. This compares with 13% in
the US and more than 20% in Europe (Figure 53). Luxury PVs account for about 9% of
total automobiles in China, lower than most mature auto markets such as the US,
Germany and the UK (Figure 54). Therefore, we believe that there is still large potential for
luxury auto sales growth in China. We expect the luxury segment to keep growing at 20-
25% p.a. by 2015 (Figure 56,Figure 57).
Figure 53: Luxury* PV sales as % of total PV sales (2011) Figure 54: Luxury* PV as % of total number of autos
35%
30%
25%
20%
15%
10%
5%
0%
7%
13%
10%
29%
9%
23%
China US** Japan Germany Russia UK
Luxury* PV sales as % of taotal PV sales
* Includes both luxury and ultra-luxury models.
** PV sales here refer to light vehicle sales.
Source: CPCA, LMC Automotive, AEB, Credit Suisse estimates
(2011)
08 January 2013
China Auto Sector 23
35%
30%
25%
20%
15%
10%
5%
0%
9%
11%
3%
29%
15%
16%
China US Japan Germany Russia UK
Luxury* vehilce as % of total number of automobiles
* Includes both luxury and ultra-luxury models
Source: SXRB, Credit Suisse estimates
Growing wealth strengthens luxury auto demand
Figure 55: Growth of number of millionaires in China
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
320
345
7% 8%
20%
413
364 343
2005 2006 2007 2008 2009 2010 2011 1H12
-12%
-6%
56%
535
562
Number of millionaires (RHS) Number of millionaires y-y (LHS)
5%
'000 persons
1,200
72%
Source: Capgemini, Merrill Lynch Global Wealth Management, RBC Wealth Management, Citi Private
Bank, Credit Suisse Research Institute
964
1,000
800
600
400
200
-
We believe luxury auto
sales have high growth
potential in China mainly
due to a low penetration rate

Figure 56: Luxury PV sales in China
'000 Units
2,500
2,000
1,500
1,000
500
0
181
39%
22%
252
25%
7%
314
53%
29%
407
76%
33%
718
42%
1,017
1,272
25%
08 January 2013
China Auto Sector 24
1,551
1,877
2,252
22% 21% 20%
5% 7% 10% 10%
2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
Luxury PV sales (LHS) Luxury PV sales YoY (RHS) Total PV sales YoY (RHS)
Source: Roland Berger, Credit Suisse estimates
Figure 57: Ultra-luxury PV sales in China
'000 Units
90
80
70
60
50
40
30
20
10
0
4
51%
22%
6
83%
7%
11
53%
10
17
-12%
79% 77%
33%
30
5%
35%
41
7%
53
30%
66
25%
9%
79
20%
10% 10% 9%
2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
Ultra-luxury PV sales (LHS) Ultra-luxury PV sales YoY (RHS) Total PV sales YoY (RHS)
Source: Roland Berger, Credit Suisse estimates
Replacement demand drives luxury auto sales
Most Chinese auto buyers are still first-time buyers and contributed more than 90% of total
auto sales in 2011 (Figure 58). As the auto stock ages in China, people who bought their
cars during 2009-10 should be looking to make a replacement purchase in the next few
years. This trend may continue and we believe that replacement demand will gradually
become the major driver of China’s auto sales in the next 5-10 years. It is difficult to
describe the Chinese customers’ affinity for luxury goods, such as luxury cars. In particular,
they love SUVs or luxury cars for their second car. Since about 2003, China's affluent
population has completely overtaken Americans with similar incomes in the purchase of
luxury vehicles (Figure 59). For the same income bracket per 1,000 households, Chinese
customers purchase nearly six times as many luxury cars as Americans do. We believe
replacement demand will boost luxury auto sales in China, stronger than it did in other
developed countries.
100%
80%
60%
40%
20%
0%
-20%
100%
80%
60%
40%
20%
0%
-20%
We believe replacement
demand will be the major
driver of luxury auto sales in
China

Figure 58: New demand vs. replacement demand
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
87%
13%
91%
9%
76%
24%
50%
50%
China (2010) China (2011) India Korea USA Japan UK German
Source: JD Power, Wardsauto, China Auto Market
25%
75%
Replacement demand 1st time demand
Figure 59: Luxury car sales per 1,000 households with annual disposable incomes over US$100,000
Unit US
100
90
80
70
60
50
40
30
20
10
0
68
69
75
80
84 84
80 79
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Euromonitor, US Census Bureau, HIS, World Bank, TNS, Credit Suisse estimates
Proliferation of economy models
67
53
58
53
08 January 2013
China Auto Sector 25
17%
83%
40
6%
94%
72
76
5%
95%
Unit China
350
Many luxury brands have launched their economy models with affordable prices. Some of
them are selling below Rmb300,000, which is the traditional price range for the mid-to-high
end segment (Figure 60 through to Figure 63). Major economy models, such as the
Mercedes-Benz C class, BMW 3 series, Audi A4L and Volvo S60, are also the best-selling
models for these luxury brands. We believe their good brand image and attractive prices
will enable them to expand their customer base and gain market share from mid-to-high
end players. This should fuel their sales growth in the next 3-5 years.
300
250
200
150
100
50
0
122
97 93
130
161
177
231
340 339
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Luxury brands’ economy
models will help them to
boost sales and gain market
share

Figure 60: Official prices of luxury brands’ economy models vs. key mid-to-high end models
BMW New 3 Series
Volvo S60
BMW 3 Series
Mercedes-Benz C Class
Audi A4L
Nissan Teana
Buick LaCrosse
Source: Company data
Honda Accord
Toyota Camry
VW Passart
08 January 2013
100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 600,000
Figure 61: Nov 12 retail prices of luxury brands’ economy models vs. key mid-to-high end models
BMW New 3 Series
Volvo S60
BMW 3 Series
Mercedes-Benz C Class
Audi A4L
Nissan Teana
Buick LaCrosse
Honda Accord
Toyota Camry
VW Passart
Source: Channel checks with dealers
100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 600,000
China Auto Sector 26
RMB
RMB

Figure 62: Comparison among cheapest economy models of major luxury brands
Model
Official price
(’000 Rmb)
Dec-12 Retail price
(’000 Rmb)
Mercedes-Benz
C Class
BMW 3 Series
BMW New 3 Series
(Long-wheelbase)
08 January 2013
Audi A4L Volvo S60
C180 CGI Classic 318i Advance 320Li Fashion 30TFS I MT Comfort 2.0T Advance
308.0 296.0 354.6 272.8 282.8
158.0 241.0 354.6 217.8 212.8
Size (m) 4.581/1.770/1.448 4.531/1.817/1.421 4.734/1.811/1.455 4.791/1.826/1.439 4.628/1.865/1.484
Wheelbase (m) 2.76 2.76 2.92 2.869 2.776
Trunk volume (litre) 475 460 480 480 380
Tank volume (litre) 66 63 60 65 67.5
Complete mass (kg) 1545 1465 1540 1550 1591
Engine size (L) 1.796 1.995 1.997 1.798 1.984
Max power (kW/rpm) 115/5000 100/5750 135/5000 118/4500-6200 132/5000
Max toque (n.m/rpm) 250/1600-4200 180/3250 270/1250-4500 250/1500-4500 300/2700-4200
Acceleration 0-100 km/h
(seconds)
8.9 10.8 7.9 8.3 8.7
Transmission 7AT 6AT 8AT 6MT 6AT
Fuel consumption
(L/100km)
7.7 8.5 6.9 6.5 8.3
Warranty 2 years 2 years 2 years 2 years 2 years or 100,000 km
Emission standard Euro IV Euro IV Euro IV National IV National IV
Source: Xcar, Channel checks with dealers
Figure 63: Major luxury models with retail prices below Rmb300,000
Official Oct-12 Price Nov-12 Price Dec-12 Price
price retail price cut retail price cut retail price cut
Brand Model (’000 Rmb) (’000 Rmb) (%) (’000 Rmb) (%) (’000 Rmb) (%)
Mercedes-Benz C180K CGI Classic 308.0 233.0 24 218.0 29 158.0 49
C200 CGI 348.0 258.0 26 248.0 29 193.0 45
C200 CGI Fashion 388.0 283.0 27 268.0 31 233.0 40
BMW 318i 2.0 AT Advance 2012 296.0 249.0 16 246.0 17 241.0 55
Audi A4L 1.8 30TFSI MT Comfort 2012 272.8 232.8 15 234.8 14 217.8 20
A4L 1.8 30TFSI CVT Comfort 2012 291.0 251.0 14 253.0 13 236.0 19
A4L 2.0 35TFSI CVT Standard
2012
309.8 269.8 13 271.8 12 254.8 18
A4L 2.0 35TFSI CVT Comfort 2012 329.9 289.9 12 291.9 12 274.9 17
Volvo S60 2.0T Advance 2013 282.8 242.8 14 222.8 21 257.8 9
S60 2.0T T5 Smart 2013 299.8 259.8 13 239.8 20 274.8 8
S60 2.0T T5 Comfort 2013 322.8 282.8 12 262.8 19 297.8 8
S60 2.0T DCTT5 Smart 2012 249.8 199.8 20 189.8 24 199.8 20
S60 2.0T DCTT5 Comfort 2012 319.9 269.9 16 259.9 19 264.9 17
S60 1.6T DCTDRIVe Smart 2012 282.8 232.8 18 222.8 21 212.8 25
S60 1.6T DCTDRIVe Comfort 2012 306.8 256.8 16 246.8 20 236.8 23
S60 1.6T DCTDRIVe Smart 2012 334.8 284.8 15 274.8 18 264.8 21
S60 2.0T DCTT5 Comfort 2012 339.8 259.8 24 264.8 22 259.8 24
S60 2.0T DCTT5 Delux 2012 369.8 289.8 22 294.8 20 289.8 22
Lexus CT200h 1.8 CVT Elite 2012 279.0 234.0 16 239.0 14 229.0 18
CT200h 1.8 CVT Advance 2012 339.0 294.0 13 289.0 15 289.0 15
Source: Channel checks with dealers
China Auto Sector 27

Restrictive policies won’t hurt luxury segment
Beijing and Guangzhou are adopting restrictive policies on auto sales to control
congestion. Beijing announced the most strict restrictive policies on auto license plates in
December 2010. The new measures set a 2011 annual quota for Beijing’s new PV
licenses of only 240,000 units, compared with its 2010 total auto sales of around 900,000
vehicles. Quotas for new car licenses are distributed by lottery draw, while
upgrading/replacement purchases are not regulated by the new measures once an owner
disposes of his/her old car. With this new license quota limit, car growth in Beijing has
slowed down since 2011 (Figure 64). Accordingly, the CAGR for total number of autos in
Beijing is expected to drop to about 3.7% in 2012-16E from over 11% for 2007-11. It is
also estimated that only one person in 20 can win the quota to buy a new car. Moreover,
people with that precious quota are less likely to buy a cheap car, which in turn stimulates
luxury auto sales. Further, luxury autos are bought by Chinese customers mainly as status
symbols rather than a mode of transportation. Although some of the potential buyers may
not have a valid Beijing license to bypass the quota application, they are still allowed to
buy cars with non-Beijing licenses with some restrictions on driving areas. Guangzhou’s
government announced its own auto purchase restriction policy on 30 June 2012. In the
coming year, the number of incremental small- and medium-sized passenger cars in
Guangzhou is capped at 120,000 units, translating into a monthly quota of 10,000 units.
However, data shows that 226,000 vehicles were registered with license plates in
Guangzhou in 2011, equivalent to around 19,000 units per month. As in Beijing, we
believe auto buyers are more likely to choose high-end models, boosting sales of luxury
autos.
Figure 64: Number of automobiles in Beijing
6
5
4
3
2
1
0
1997
million vehicles
1
1998
1999
2000
2
2.58
Source: Beijing Municipal Commission of Transport
2001
2002
2003
2004
2005
2006
3
2007
3.5
4.02
4.5m
(2010 Sep)
2008
2009
Sep-10
Dec-10
4.81m
(2010 Dec)
08 January 2013
China Auto Sector 28
5.02
2011
2012E
2013E
2014E
2015E
2016E
6
We believe restrictive
policies in Tier 1 cities will
create opportunities for
luxury auto sales given
precious quota and licences

Rating OUTPERFORM* [V]
Price (04 Jan 13, HK$) 25.35
Target price (HK$) 30.00¹
Upside/downside (%) 18.3
Mkt cap (HK$ mn) 84,052 (US$ 10,845)
Enterprise value (Rmb mn) 58,413
Number of shares (mn) 3,042.42
Free float (%) 44.0
52-week price range 25.4 - 11.2
ADTO - 6M (US$ mn) 16.9
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock considered volatile (see Disclosure Appendix).
Share price performance
Research Analysts
Jack Yeung
852 2101 6779
jack.yeung@credit-suisse.com
40
30
20
10
0
Price (LHS) Rebased Rel (RHS)
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
The price relative chart measures performance against the
MSCI CHINA F IDX which closed at 6647.58 on 07/01/13
On 07/01/13 the spot exchange rate was HK$7.75/US$1
400
300
200
100
0
Performance over 1M 3M 12M
Absolute (%) 5.2 19.6 130.9
Relative (%) -0.1 8.0 105.2
Great Wall Motor
(2333.HK / 2333 HK)
Greatly moving ahead
08 January 2013
Asia Pacific / China
■ Initiate with OUTPERFORM. We initiate coverage on Great Wall Motor
(GWM) with an OUTPERFORM rating and a target price of HK$30.00, which
implies 18.3% potential upside. GWM is the largest SUV maker in China with
a market share around 13%. It is also China’s largest pick-up maker,
contributing 33% of the country’s total pick-up sales .
■ Strong SUV demand. China’s SUV segment is growing much faster than its
other PV segments. It contributes 13% of the country’s total PV sales vs.
32% in the US, implying high growth potential for SUV sales in China. Many
Chinese car owners are choosing SUVs as their second vehicle. Therefore,
we expect upgrade and replacement demand to become the major engine
for SUV sales in the next few years. As the largest SUV maker in China, we
believe GWM will be the major beneficiary of this strong SUV demand.
■ New plant to support sales. GWM’s H6 is facing capacity constraints, with
a waiting list of around 20 days. GWM will open its second plant in Tianjin in
2H13, adding about 100,000 units of initial capacity. C50 will be transferred
to the new plant to leave the existing plant purely for H6 production. We
believe this arrangement will lay a solid foundation for GWM’s SUV sales in
2013 and 2014. GWM also plans to launch five new models in 2H13, which
we believe will enhance its leading position in this segment. Key downside
risks include: (1) tougher-than-expected competition in the SUV segment; (2)
slower-than-expected ramp up of its new capacity.
■ Valuation. China’s SUV sales are growing at more than 20% per year,
similar to its luxury auto sales. We believe that GWM is well positioned in the
SUV sector and should trade at 13x 2013E EPS, a premium to its Chinese
peers (10x 2013E EPS) given its higher-than-peers’ sales growth rate,
margins as well as strong product mix.
Financial and valuation metrics
Year 12/11A 12/12E 12/13E 12/14E
Revenue (Rmb mn) 30,089.5 41,600.0 47,220.3 54,770.0
EBITDA (Rmb mn) 4,640.8 6,944.8 7,919.6 9,098.9
EBIT (Rmb mn) 3,966.8 6,009.7 6,672.5 7,559.8
Net profit (Rmb mn) 3,426.2 5,044.7 5,613.0 6,140.7
EPS (CS adj.) (Rmb) 1.22 1.66 1.84 2.02
Change from previous EPS (%) n.a.
Consensus EPS (Rmb) n.a. 1.66 1.88 2.07
EPS growth (%) 23.4 36.2 11.3 9.4
P/E (x) 16.7 12.3 11.0 10.1
Dividend yield (%) 0.6 0.8 0.9 1.0
EV/EBITDA (x) 13.2 8.4 7.0 5.6
P/B (x) 3.8 3.0 2.4 2.0
ROE (%) 26.2 27.0 23.9 21.4
Net debt/equity (%) Net cash Net cash Net cash Net cash
Source: Company data, Thomson Reuters, Credit Suisse estimates.
China Auto Sector 29

Greatly moving ahead
No.1 SUV producer
Hover series has been the No.1 best-selling SUV brand in China since 2009. Its first
sedan-chassis SUV H6 was launched in August 2011. Its sales hit 15,800 units in
November 2012, versus less than 6,000 in January 2012. Despite price cuts offered by its
competitors, H6’s prices have stayed resilient throughout the year and customers still need
to queue up for the vehicle. We believe H6’s strong sales is mainly due to GWM’s
traditional strength in SUV production. We believe that GWM will maintain its leadership in
the SUV segment over the next few years and be the major beneficiary of the strong SUV
demand.
Dominant pick-up market share
GWM is also China’s largest pick-up producer, contributing about a third of the country’s
total pick-up sales. In particular, its key pick-up brand, Wingle, has maintained its position
as the No.1 best-selling pick-up for 15 years. Given GWM’s dominant share in the pick-up
segment, we believe other players will not be able to challenge its leadership in the next
few years. Moreover, we believe demand for pick-up trucks in inland regions will maintain
strong growth in the next few years with GWM being the largest beneficiary.
Expanding capacity + new models
GWM’s second plant in Tianjin will start operations in 2H13, adding about 100,000 units of
capacity by end-2013. C50 will be transferred to the second plant and the existing plant
will be used to purely produce H6. We believe the capacity expansion will lay a solid
foundation for GWM’s sales growth in the next few years. The company also plans to
launch five new models in 2H13. We believe they will help to enhance its sales and
improve its ASP. In particular, H8 is GWM’s first SUV model priced above Rmb150,000,
which we expect to help improving its brand image and paving the way for its further
expansion.
Solid exports and sedan sales
GWM is the fifth-largest auto exporter in China. SUVs and sedans have become its major
export drivers in recent years. Its H6 has received the European Union’s market entry
permit in December 2012, which would boost its exports to European markets starting
from 2013. Its sedan exports grew the fastest among all segments in 2012 and we expect
it to remain solid in the next few years. GWM’s two key sedan models—the C30 and
C50—are very competitive in the low-end segment. We believe the sportive versions C30
and C50 to be launched in 2013 will enhance GWM’s sedan sales. We also expect sedans
to be a stable sales engine for the firm in the next two years.
Initiate with an OUTPERFORM
We initiate coverage on GWM with an OUTPERFORM rating given its leading position in
China’s SUV segment. We believe it is well positioned to cater to strong SUV demand
growth in China. Our target price for GWM is HK$30.00 based on 13x 2013E EPS. We
believe it deserves to trade at premium toward its domestic peers (10x 2013E EPS), given
strong sales volume in SUV, leading position in pick-up tracks as well as higher than
industry average margins. Downside risks include tougher-than-expected competition in
the SUV segment and slower-than-expected ramp-up of GWM’s new capacity.
08 January 2013
We believe GWM will be
able to maintain its
leadership in China’s SUV
market
We believe GWM will
maintain its No.1 position in
the pick-up segment and
benefit from rising demand
in inland regions
We expect GWM’s
expanding capacity and new
models to enhance its
position in the SUV segment
We expect solid export and
sedan business to be
GWM’s stable sales engine
in the next two years
Initiate with an
OUTPERFORM with TP
based on 13x2013E EPS
China Auto Sector 30

Great Wall Motor 2333.HK / 2333 HK
Price (04 Jan 13): HK$25.35, Rating:: NEUTRAL [V], Target Price: HK$30.00, Analyst: Jack Yeung
Target price scenario
Scenario TP %Up/Dwn Assumptions
Upside 32.02 26.31 2013E auto sales: 750,000 units
Central Case 30.00 18.34 2013E auto sales: 701,000 units
Downside 27.81 9.70 2013E auto sales: 650,000 units
Income statement (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Sales revenue 30,089 41,600 47,220 54,770
Cost of goods sold 22,594 30,889 35,212 41,021
SG&A 2,477 3,203 3,636 4,217
Other operating exp./(inc.) 378.3 562.5 452.9 432.7
EBITDA 4,641 6,945 7,920 9,099
Depreciation & amortisation 674 935 1,247 1,539
EBIT 3,967 6,010 6,673 7,560
Net interest expense/(inc.) (22.9) (18.4) (30.2) (42.3)
Non-operating inc./(exp.) 143.2 199.7 226.7 262.9
Associates/JV — — — —
Recurring PBT 4,133 6,228 6,929 7,865
Exceptionals/extraordinaries (2.2) — — —
Taxes 620 1,059 1,178 1,573
Profit after tax 3,511 5,169 5,751 6,292
Other after tax income — — — —
Minority interests 84.5 124.4 138.4 151.4
Preferred dividends — — — —
Reported net profit 3,426 5,045 5,613 6,141
Analyst adjustments — — — —
Net profit (Credit Suisse) 3,426 5,045 5,613 6,141
Cash flow (Rmb mn) 12/11A 12/12E 12/13E 12/14E
EBIT 3,967 6,010 6,673 7,560
Net interest — 18.4 30.2 42.3
Tax paid (620) (1,059) (1,178) (1,573)
Working capital 303 1,063 374 503
Other cash & non-cash items 799 1,135 1,474 1,802
Operating cash flow 4,449 7,167 7,373 8,334
Capex (3,759) (4,000) (3,800) (3,500)
Free cash flow to the firm 690 3,167 3,573 4,834
Disposals of fixed assets — — — —
Acquisitions (7.4) — — —
Divestments 1,802 — — —
Associate investments — — — —
Other investment/(outflows) (1,700) — — —
Investing cash flow (3,664) (4,000) (3,800) (3,500)
Equity raised 3,894 — — —
Dividends paid (663.4) (347.4) (511.5) (569.1)
Net borrowings 4.8 — — —
Other financing cash flow 220.2 — — —
Financing cash flow 3,456 (347) (511) (569)
Total cash flow 4,241 2,820 3,061 4,265
Adjustments (7.9) — — —
Net change in cash 4,233 2,820 3,061 4,265
Balance sheet (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Cash & cash equivalents 6,306 9,126 12,187 16,452
Current receivables 10,033 12,296 13,958 16,189
Inventories 2,777 3,554 4,052 4,720
Other current assets 1,259 1,257 1,257 1,257
Current assets 20,374 26,235 31,454 38,619
Property, plant & equip. 7,392 10,457 13,010 14,971
Investments 76.5 76.5 76.5 76.5
Intangibles 1,871 1,871 1,871 1,871
Other non-current assets 3,420 3,420 3,420 3,420
Total assets 33,135 42,060 49,833 58,959
Accounts payable 10,011 12,448 14,167 16,476
Short-term debt — — — —
Current provisions — — — —
Other current liabilities 4,702 6,370 7,184 8,278
Current liabilities 14,714 18,818 21,351 24,754
Long-term debt — — — —
Non-current provisions — — — —
Other non-current liab. 1,400 1,400 1,400 1,400
Total liabilities 16,113 20,218 22,751 26,154
Shareholders' equity 16,396 20,929 25,973 31,491
Minority interests 284.4 408.8 547.1 698.5
Total liabilities & equity 33,135 42,060 49,832 58,958
08 January 2013
Key earnings drivers 12/11A 12/12E 12/13E 12/14E
Auto sales volume (Unit) 463,391 620,500 701,000 801,000
— — — —
— — — —
— — — —
Per share data
—
12/11A
—
12/12E
—
12/13E
—
12/14E
Shares (wtd avg.) (mn) 2,814 3,042 3,042 3,042
EPS (Credit Suisse)
1.22 1.66 1.84 2.02
(Rmb) DPS (Rmb) 0.12 0.17 0.19 0.20
BVPS (Rmb) 5.4 6.9 8.5 10.4
Operating CFPS (Rmb) 1.58 2.36 2.42 2.74
Key ratios and valuation 12/11A 12/12E 12/13E 12/14E
Growth(%)
Sales revenue 30.9 38.3 13.5 16.0
EBIT 35.3 51.5 11.0 13.3
Net profit 26.9 47.2 11.3 9.4
EPS 23.4 36.2 11.3 9.4
Margins (%)
EBITDA 15.4 16.7 16.8 16.6
EBIT 13.2 14.4 14.1 13.8
Pre-tax profit 13.7 15.0 14.7 14.4
Net profit 11.4 12.1 11.9 11.2
Valuation metrics (x)
P/E 16.7 12.3 11.0 10.1
P/B 3.78 2.96 2.39 1.97
Dividend yield (%) 0.61 0.83 0.92 1.00
P/CF 12.9 8.6 8.4 7.4
EV/sales 2.04 1.40 1.17 0.93
EV/EBITDA 13.2 8.4 7.0 5.6
EV/EBIT 15.4 9.7 8.3 6.8
ROE analysis (%)
ROE 26.2 27.0 23.9 21.4
ROIC 35.4 42.6 40.1 38.7
Asset turnover (x) 0.91 0.99 0.95 0.93
Interest burden (x) 1.04 1.04 1.04 1.04
Tax burden (x) 0.85 0.83 0.83 0.80
Financial leverage (x) 1.95 1.93 1.84 1.80
Credit ratios
Net debt/equity (%) (37.0) (41.8) (45.0) (50.2)
Net debt/EBITDA (x) (1.36) (1.31) (1.54) (1.81)
Interest cover (x) (173) (327) (221) (179)
Source: Company data, Thomson Reuters, Credit Suisse estimates.
0
2008 2009 2010 2011 2012 2013
China Auto Sector 31
16
14
12
10
8
6
4
2
3.0
2.5
2.0
1.5
1.0
0.5
12MF P/E multiple
12MF P/B multiple
0.0
2008 2009 2010 2011 2012 2013
Source: IBES

No.1 SUV producer
GWM is China’s largest SUV producer, with a current market share around 13%, much
higher than other top players (Figure 65). Its SUV sales have maintained strong growth in
recent years, generally outperforming the industry average and major JV SUV makers
(Figure 66, Figure 67 and Figure 68). In particular, its Hover series have been ranked the
No.1 best-selling SUV in China since 2009, contributing to about half of its SUV sales and
more than 20% of its total auto sales. Its first sedan-chassis Hover SUV H6 was launched
in August 2011, mainly competing with domestic SUV models such as the BYD S6, Geely
GX7 and Chery Tiggo (Figure 70). Despite price cuts offered by these domestic models,
the H6 has the most resilient retail prices and customers still need to queue for the vehicle.
H6 sales hit 15,800 units in November 2012 versus less than 6,000 in January 2012. Its
strong sales are probably due to its outstanding quality and GWM’s good brand image in
the domestic market. Given China’s rising SUV demand and GWM’s traditional strength in
SUV production, we believe it will maintain its leadership in the SUV segment in the next
few years.
Figure 65: Top-15 SUV producers in China
Company JV/Indigenous 2011 sales Market share (%) Jan-Nov 12 sales Market share (%) Key model
Great Wall Motor Indigenous 164,379 10.3 249,397 13.9 Hover
Shanghai VW JV 129,172 8.1 168,472 9.4 Tiguan
Dongfeng Honda JV 160,003 10.0 150,059 8.4 CR-V
Beijing Hyundai JV 154,211 9.7 143,649 8.0 Tucson, IX35
08 January 2013
Dongfeng Nissan JV 140,426 8.8 120,329 6.7 Qashqai, X-Trail
FAW Toyota JV 129,374 8.1 113,560 6.3 RAV4
Chery Auto Indigenous 115,977 7.3 109,183 6.1 Tiggo
Dongfeng Yueda KIA JV 109,095 6.8 104,837
Sportage, Sportage
5.9
R
FAW VW JV 58,632 3.7 83,094 4.6 Audi Q5
BYD Indigenous 60,198 3.8 78,792 4.4 S6
GAC Toyota JV 94,635 5.9 69,065 3.9 Highlander
Jiangnan Auto Indigenous 73,349 4.6 44,009 2.5 Zotye T600
Brilliance Auto Indigenous 1,233 0.1 43,579 2.4 Zhonghua V5
Hawtai Auto Indigenous 18,486 1.2 29,864 1.7 Santa Fe
Dongfeng Yulong JV 7,058 0.4 27,627 1.5 Luxgen 7
Source: CAAM, Credit Suisse estimates
Figure 66: SUV market share of top producers Figure 67: SUV sales of top producers
16%
14%
12%
10%
8%
6%
4%
2%
0%
Great Wall
Motor
Shanghai VW Dongfeng
Honda
2010 2011 2012E
Beijing Hyundai FAW Toyota
China Auto Sector 32
300
250
200
150
100
50
-
('000 units)
Great Wall
Motor
Shanghai VW Dongfeng
Honda
2010 2011 2012E
Source: CAAM, Credit Suisse estimates Source: CAAM, Credit Suisse estimates
GWM is China’s No.1 SUV
makers. We believe it will
maintain its leadership in the
SUV segment in the next
few years.
Beijing
Hyundai
FAW Toyota

Figure 68: Great Wall’s SUV sales vs. China SUV sales Figure 69: Great Wall’s revenue by product
250%
200%
150%
100%
50%
0%
46%
203%
32%
135%
8%
88%
29%
2007 2008 2009 2010 2011 2012E 2013E 2014E
China SUV sales YoY Great Wall Motor SUV sales YoY
20%
08 January 2013
China Auto Sector 33
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
4% 4% 1% 1% 1% 1% 1%
5%
47%
44%
27%
34%
35%
28%
46%
34%
25% 24%
25% 23% 21%
40% 55% 59% 62%
19% 17% 16%
2008 2009 2010 2011 2012E 2013E 2014E
Pick-up truck SUV Sedan Others
Source: CAAM, Great Wall Motor, Credit Suisse estimates Source: Great Wall Motor, Credit Suisse estimates
Figure 70: Comparison of Great Wall H6 and its major competitors
Model
Great Wall H6 BYD S6 Geely GLEagle GX7 Chery Tiggo
1.5TMT Urban 2.0MT Delux 2.0MT Comfort 2.0MT Elite
Official price (’000 Rmb) 100.8 89.8 102.9 115.8
Dec-12 retail price (’000 Rmb) 100.8 81.8 95.9 104.8
Size (m) 4.640/1.825/1.690 4.810/1.855/1.680 4.541/1.833/1.700 4.390/1.765/1.705
Wheelbase (m) 2.68 2.72 2.661 2.51
Trunk volume (Litre) 808 465 580 520
Tank volume (Litre) 58 72 60 55
Complete mass (kg) 1690 1620 1564 1455
Engine size (L) 1.497 1.991 1.997 1.971
Max power (kW/rpm) 110/5600 103/6000 104/6000 102/5750
Max toque (n.m/rpm) 210/2200-4500 186/4000-4500 178/4000-4500 182/4600-4500
Acceleration 0-100 km/h (s) 13.1 14.2 13.7 12.9
Transmission 6MT 5MT 5MT 5MT
Fuel consumption (L/100km) 8.7 8.6 8.8 7.2
Warranty 5 years or 100,000km 4 years or 100,000km 3 years or 100,000km 2 years or 60,000km
Emission standard National IV National IV National IV National IV
Source: Xcar, Channel checks with dealers

Dominant in pick-up segment
GWM is also China’s largest pick-up producer with a market share of around 33% (Figure
72). Its Wingle series has been the No.1 best-selling pick-up for 15 years, with sales
almost equivalent to the aggregate pick-up sales of the No.2 and No.3 players JAC and
Zhengzhou Nissan (Figure 71). Given GWM’s dominant share in the pick-up segment, we
believe that other players would not be able to challenge its No.1 position in the next few
years. Pick-up has also shown stronger growth potential than other CV products in China.
Pick-up sales grew by around 7% YoY in the first ten months of 2012, the highest in the
CV segment (Figure 73). More than half of the pick-ups are priced below Rmb80,000, and
we believe domestic automakers led by GWM will continue to dominate the market (Figure
74 and Figure 75). Except for several affluent coastal regions, pick-up demand primarily
came from inland regions (Figure 76). These regions have higher GDP growth rates than
the national average and are the major engine of China’s urbanization. We believe that
demand for pick-ups in these regions will remain strong in the next few years and the
company is expected to be the largest beneficiary.
Figure 71: Pick-up market share of top producers Figure 72: Pick-up sales of top producers
35%
30%
25%
20%
15%
10%
5%
0%
Great Wall
Motor
JAC Zhengzhou
Nissan
2010 2011 2012E
Zhongxing Foton
08 January 2013
China Auto Sector 34
160
140
120
100
80
60
40
20
-
('000 units)
Great Wall
Motor
JAC Zhengzhou
Nissan
2010 2011 2012E
Source: CAAM, Credit Suisse estimates Source: CAAM, Credit Suisse estimates
Figure 73: China’s CV sales by segment Figure 74: Price distribution of pick-ups
('000 units)
300
250
200
150
100
50
0
-50
117
76
-24.4% YoY
16
4.6% YoY
13
MDT and HDT Medium and
large Buses
182
147
-5.1% YoY
39
6.7% YoY
35
275
1.1% YoY
228
Light CVs Pick-up Minibus
2011 sales Jan-Oct 2012 sales
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
Source: State Information Centre Source: Sinotrust
0.0%
6.6%
20.4%
26.3%
18.1%
17.4%
Zhongxing Foton
11.6% 13.4% 12.9%
3.9%
6.1%
2.2%
5.5%
2.7%
8.5%
25.1% 23.2% 20.5%
11.7%
24.4%
20.3% 19.2%
2009 2010 2011
Below RMB60k RMB60k-69k RMB70k-79k RMB80k-89k
RMB90k-100k RMB100k-110k Above RMB110k
GWM is also China’s No.1
pick-up maker. We believe it
will benefit from strong pickup
demand in inland
regions.

Figure 75: Comparison of Great Wall Wingle and its major competitors
Model
08 January 2013
Great Wall Wingle Zhongxing Grandtiger Dongfeng Ruiqi Huanghai Dachaishen
2.4MT Biz Delux 2.4MT 4G69 2.4MT Standard 2.4MT 4WD Delux
Official price (’000 Rmb) 77.8 71.9 79.8 79.8
Dec-12 retail price ('000 Rmb) 72.8 68.9 74.8 75.8
Size (m) 5.020/1.720/1.675 5.310/1.750/1.735 4.980/1.690/1.650 5.560/1.850/1.760
Wheelbase (m) 3.05 3.1 2.95 3.5
Tank volume (Litre) 66 73 60 74
Complete mass (kg) 1545 1620 1495 1880
Engine size (L) 2.378 2.438 2.438 2.378
Max power (kW/rpm) 100/5250 100/5250 102/4600-5000 105/5250
Max toque (n.m/rpm) 200/2500-3000 200/2500-3000 217/2600-3200 200/2500-3000
Transmission 5MT 5MT 5MT 5MT
Fuel consumption (L/100km) 10.4 10.6 10 10.7
Warranty 2 years or 50,000km 2 years or 50,000km 2 years or 60,000km 2 years or 50,000km
Emission standard National IV National III National IV + OBD National IV
Source: Xcar, Channel checks with dealers
Figure 76: Distribution of pick-up sales in China
Annual sales (units)
Source: CPCA, CAAM, Credit Suisse estimates
China Auto Sector 35

Expanding capacity + new models
Capacity expansion in Tianjin
GWM’s Tianjin plant (production base of H6 and C50) is running over its designed
capacity of 200,000 units in 2012. Tianjin plant is able to provide 240,000-250,000 units of
maximum capacity by adding shifts, with priority given to H6 production. The second plant
in Tianjin will start operation in 2H13E, adding about 100,000 units of capacity by the end
of 2013 (Figure 77). C50 will be transferred to the second plant after its commissioning
and the existing plant will be used to purely produce H6. We expect GWM to keep running
at full capacity in 2013, which would help to maintain its high operational efficiency (Figure
77). We believe the solid expansion of its Tianjin plant’s capacity will lay a solid foundation
for GWM’s sales growth in next few years.
Figure 77: Production capacity versus sales volume
2011 2012E 2013 E
08 January 2013
Utilisation Utilisation Utilisation
’000 units Capacity Sales rate (%) Capacity Sales rate (%) Capacity Sales rate (%)
SUV 180 150 83 240 278 116 340 360 106
Sedan 200 190 95 220 200 91 220 220 100
Pick-up truck 120 120 100 140 137 98 140 150 107
Total 500 460 92 600 615 103 700 730 104
Source: Great Wall Motor, Credit Suisse estimates
New models to improve ASP
Figure 78: Launch time of Great Wall’s new models in 2013
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Updated Wingle 5 Mid-2013
H2 2H13
H6 sportive version 3Q13
C50 sportive version 3Q13
C30 sportive version 3Q13
Source: Great Wall Motor
Figure 79: Great Wall’s ASPs by segments
('000 RMB)
80
75
70
65
60
55
50
45
40
68.5
56.2
54.3
45.8
73.1
59.8
77.2 78.0 77.2 78.0
60.8
63.4 63.9 64.6
54.9
56.6 54.9 54.4 53.9
48.9 50.5
48.9 48.5 48.0
2009 2010 2011 2012E 2013E 2014E
Source: Great Wall Motor, Credit Suisse estimates
Pick-up SUV Sedan Overall
Tianjin plant’s capacity
expansion will laid a solid
foundation for GWM’s sales
growth in next few years.
China Auto Sector 36

GWM plans to launch five new models in 2H13 with higher prices (Figure 78 and Figure
81). This is consistent with its strategy in recent years to gradually improve its ASP by new
model launches (Figure 79). In particular, the H8 will be GWM’s first SUV priced between
Rmb200,000 and Rmb250,000 in the mid-to-high end segment, which may be launched in
early 2014. We believe that H8 is more symbolic for GWM to improve its brand image and
elevate prices for its future SUV models. We expect H8 sales to ramp up slower than
existing company models, as competition in the mid- to high-end segment is intensifying
following more than ten new models being launched by JVs since 4Q12 (Figure 36). We
do not think H8 will become a key sales driver for GWM within next few years.
Figure 80: Great Wall Motor’s vehicle models
08 January 2013
Segment Model Price (’000 Rmb) Launch time of new model 2012E sales (’000 units) 2013E sales (’000 units)
Pick-up Deer 59.8 – 75.8 23.7 24.5
Wingle 3 70.8 - 120.8
Wingle 5 71.8 - 125.8
113.3 115.5
Updated Wingle 5 75 - 130 Mid-2013
SUV H2 80 - 180 2H13 5.5
H3
H5
92.8 - 158.8
92.8 - 170.8
81.8 98
H6
H6 sportive version
100.8 - 151.8
145 - 160 3Q13
132.8 165
M1 42.9 - 59.9
M2 67.9 - 89.9
63.9 72
M4 63.9 - 71.9
Sedan Florid 59.9 - 78.9 11.4 12
Phenom 57.8 - 80.9 2.7 3
C30 64.5 - 83.5
135.6 145
C30 sportive version 75 - 88 3Q13
C20R 62.9 - 72.9 12.8 13.5
C50 78 - 91.8
37.5 41
C50 sportive version 82 - 97 3Q13
Cross-over Cowry 116.8 - 136.8 5.5 6
Total 621 701
Source: Great Wall Motor, Credit Suisse estimates
Figure 81: Official prices of Great Wall models
H8
H6 sportive version
H5
H2
Cowry
H6
H3
Updated Wingle 5
Wingle 5
Wingle 3
C50 sportive version
C50
C30 sportive version
M2
C30
Florid
Phenom
M4
C20R
M1
Source: Great Wall Motor
- 50,000 100,000 150,000 200,000 250,000 300,000
Existing model New model
GWM’s new models have
higher prices, which would
improve its ASPs in the next
few years
China Auto Sector 37
RMB

Solid exports and sedan sales
Growing exports driven by SUVs and sedans
GWM is the fifth-largest auto exporter in China, contributing about 8% of the country’s total
auto exports for Jan-Nov 2012 and around 10% in the same period of last year (Figure
82). Most of its exports comprise pick-ups, whose share has kept declining in recent years
(Figure 83). GWM’s H6 has received the EU’s market entry permit in December 2012,
which would boost exports to the EU and Eastern European countries starting from 2013.
Although its sedan sales grew the slowest in the domestic market, sedan exports grew the
fastest among all segments in 2012 (Figure 85 and Figure 86). Given the recovery in the
global economy and its improving brand image in overseas markets, we believe that its
exports will remain solid in coming years and contribute over 20% of its total sales in 2014
(Figure 84).
Figure 82: Market shares of Chinese auto exports
Brilliance Auto
1%
SH GM Wuling
3%
BYD
4%
JAC
11%
Honda (China)
5%
Great Wall
10%
Others
10%
SH GM
6%
Jan-Nov 2011
Source: CAAM, Credit Suisse estimates
Lifan
9%
Chery
33%
Geely
8%
Brilliance Auto
2%
SH GM Wuling
2%
08 January 2013
China Auto Sector 38
BYD
3%
JAC
4%
Honda (China)
5%
Great Wall
8%
SH GM
10%
Others
10%
Jan-Nov 2012
Figure 83: Great Wall’s exports by segment Figure 84: Great Wall exports as % of total sales
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
6%
9%
84%
16% 15%
34% 39%
50%
21%
37%
46% 43%
2009 2010 2011 2012E
Pick-up SUV Sedan
('000 units)
1,500
1,250
1,000
750
500
250
-
15%
210
14%
363
17%
463
32 50 79 98
16%
Lifan
13%
620
19%
140
736
182
Chery
28%
22%
2009 2010 2011 2012E 2013E 2014E
827
Geely
15%
Export Total sales Export as % of total sales
Source: Great Wall Motor, Credit Suisse estimates Source: Great Wall Motor, Credit Suisse estimates
We believe GWM’s export
will remain solid in coming
years and contribute over
20% of its sales since 2014
25%
20%
15%
10%
5%
0%

Figure 85: Export growth by product Figure 86: Domestic sales growth by product
Export y-y
500%
400%
300%
200%
100%
0%
-100%
-7%
44%
467%
82%
17% 16%
300%
67%
50%
Pick-up truck SUV Sedan
2010 2011 2012E
08 January 2013
China Auto Sector 39
140%
120%
100%
80%
60%
40%
20%
0%
-20%
Domestic sales
y-y
51%
15%
12%
118%
-3%
108%
72%
52%
Pick-up truck SUV Sedan
2010 2011 2012E
Source: Great Wall Motor, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Solid sedan sales
Sales of GWM’s two key sedan models, the C30 and C50, picked up fast after their launch
in May 2010 and December 2011. Their ramp-up speed is similar to its flagship SUV
model, the H6, which was launched in August 2011 (Figure 87). C30 and C50 are
competitive models in the low-end segment. C30 offers attractive prices and the longest
warranty among domestic brands (Figure 89). C50 offers the most powerful engine and
also the longest warranty among its domestic and JV competitors (Figure 90). We believe
the sportive version C30 and C50 to be launched in 2013 will enhance GWM’s sedan
sales. We also expect sedans to be a stable sales engine for GWM in in the next two
years, contributing about 30% of its total sales (Figure 88).
Figure 87: Sales ramp-up of C30, C50 and H6 Figure 88: Great Wall’s sales by product
Unit
18,000
100%
90%
2%
12%
3% 1% 1% 1% 1% 1%
16,000
14,000
80%
70%
41%
34%
41%
32% 30% 29%
12,000
60%
47%
10,000
8,000
50%
40%
32%
38%
32%
45% 49% 51%
6,000
4,000
2,000
-
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th
months after initial launch
C30 C50 H6
30%
20%
10%
0%
39%
24% 27% 26%
3%
22% 20% 19%
2008 2009 2010 2011 2012E 2013E 2014E
Pick-up SUV Sedan Cross-over
Source: Great Wall Motor Source: Great Wall Motor, Credit Suisse estimates
We also expect sedans to
be a stable sales engine for
GWM in in the next two
years, contributing about
30% of its total sales

Figure 89: Comparison of Great Wall C30 and its major competitors
Model
08 January 2013
Great Wall C30 BYD G3 Changan Yuexiang V5
SH GM Wuling Baojun
630
1.5MT Comfort 1.5MT Standard 1.5MT Fantasy 1.5DVVT Standard
Official price (’000 Rmb) 64.5 62.9 65.9 65.8
Dec 12 retail price ('000 Rmb) 60.5 57.9 62.9 59.8
Size (m) 4.452/1.705/1.480 4.600/1.705/1.490 4.415/1.710/1.475 4.597/1.736/1.462
Wheelbase (m) 2.61 2.61 2.515 2.64
Trunk volume (litre) 510 430 550 445
Tank volume (litre) 40 50 45 54
Complete mass (kg) 1125 1200 1120 1220
Engine size (L) 1.497 1.497 1.499 1.485
Max power (kW/rpm) 78/6000 80/5800 84/6000 82/5800
Max toque (n.m/rpm) 138/4200 145/4800 145/4000-5000 147/3600-4000
Acceleration 0-100 km/h (s) 12.7 11 11.2 12.8
Transmission 5MT 5MT 5MT 5MT
Fuel consumption (L/100km) 6.5 6.2 6.5 6.7
Warranty 4 years or 150,000km 2 years or 60,000km 3 years or 60,000km 3 years or 60,000km
Emission standard Euro IV National IV National IV National IV
Source: Xcar, Channel checks with dealers
Figure 90: Comparison of Great Wall C50 and its major competitors
Model
Great Wall C50 Geely Emgrand EC7 Nissan Sunny Hyundai Elantra
1.5T MT Delux 1.5MT Standard 1.5MT XE Comfort 1.6MT Comfort
Official price (’000 Rmb) 78.0 75.8 82.8 89.8
Dec-12 retail price (’000
Rmb)
75.0 71.8 73.8 79.8
Size (m) 4.650/1.775/1.455 4.635/1.789/1.470 4.426/1.696/1.518 4.545/1.725/1.425
Wheelbase (m) 2.7 2.65 2.6 2.61
Trunk volume (Litre) 530 680 490 368
Tank volume (Litre) 50 50 41 55
Complete mass (kg) 1255 1258 1021 1250
Engine size (L) 1.497 1.498 1.498 1.599
Max power (kW/rpm) 98/5600 80/6000 82/5600 82/6000
Max toque (n.m/rpm) 188/2000-4500 135/4800 139/4000 145/4500
Acceleration 0-100 km/h (s) 9.7 11.5 12.5 11.2
Transmission 5MT 5MT 5MT 5MT
Fuel consumption (L/100km) 6.9 6.6 6.1 7.5
Warranty 5 years or 150,000km 3 years or 100,000km 3 years or 100,000km 2 years or 60,000km
Emission standard National IV National IV Euro IV National IV
Source: Xcar, Channel checks with dealers
China Auto Sector 40

Initiate with OUTPERFORM
We initiate coverage on GWM with an OUTPERFORM rating given its leading position in
China’s SUV segment. Our target price for GWM is HK$30.00 based on 13x 2013E EPS.
Given its higher than industry average sales growth rate, margins as well as strong
product mix, we believe that it should trade at a premium towards its domestic peers,
which are trading at around 10x 2013E EPS.
Figure 91: Valuation comparison table
H Share automaker Price Market Dividend
08 January 2013
cap P/E (x) P/B (x) yield (%) ROE (%)
(l.c.) (US$ mn) 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E
Brilliance China Auto 1114.HK 10.58 6,089 19.7 14.8 12.1 9.9 7.6 5.7 4.3 3.3 - 0.0 0.1 0.3 27.2 29.4 28.6 26.6
Dongfeng Motors 0489.HK 12.04 10,817 8.0 9.6 6.6 6.1 2.2 1.9 1.7 1.4 1.5 1.3 1.5 1.6 25.0 17.6 18.0 17.3
Geely 0175.HK 4.08 3,381 16.1 12.9 11.0 9.1 2.6 2.3 1.9 1.7 0.7 0.9 1.1 1.3 18.6 17.1 17.6 17.3
Great Wall Motor 2333.HK 25.35 10,105 16.3 12.7 10.9 9.5 3.8 3.0 2.5 2.1 1.4 1.9 2.1 2.4 25.6 24.9 23.3 21.6
Guangzhou Auto 2238.HK 7.14 4,955 7.8 15.0 10.2 8.2 1.5 1.4 1.3 1.2 2.8 1.5 2.2 2.6 15.6 8.3 10.5 12.1
Qingling Motors 1122.HK 2.05 599 11.1 11.7 10.2 9.9 0.6 0.6 0.6 0.6 7.1 6.4 6.9 7.0 4.9 4.6 5.1 5.5
Sinotruk 3808.HK 6.20 1,632 11.1 29.4 13.9 10.1 0.8 0.8 0.8 0.8 1.6 1.1 1.4 1.6 5.4 2.8 3.8 5.0
Weichai Power Co. Ltd 2338.HK 35.80 8,295 10.1 14.8 12.3 11.0 2.6 2.0 1.8 1.6 0.3 0.6 0.6 0.7 27.0 14.0 14.6 14.3
Mkt cap–wtd avg 12.5 13.5 10.3 8.9 3.2 2.6 2.1 1.8 1.2 1.2 1.4 1.6 23.3 18.4 18.4 17.8
Source: Bloomberg consensus
Valuation comparison with Brilliance
Both GWM and Brilliance are positioned in segments with strong sales growth potential:
SUV and luxury PVs. Since 2010, GWM has traded at an average discount of 44% to
Brilliance in terms of 12-month forward P/E (Figure 93). Currently, it trades at a 17%
discount to Brilliance. GWM has traded at an average 12-month forward P/E of 7.4x after
its capitalization issue in January 2011, compared to Brilliance's average P/E of 13.5x
(Figure 92). It now trades at 11.1x 12-month forward P/E, versus Brilliance’s 13.4x.
Figure 92: 12-month forward P/E band—Great Wall* vs.
Brilliance
22
20
18
16
14
12
10
8
6
4
2
Jan-10 Aug-10 Mar-11 Oct-11 May-12 Jan-13
Brilliance 12m forward P/E Great Wall 12m forward P/E
*Adjusted for the effect of its capitalisation issue in January 2011
Source: Bloomberg consensus
Figure 93: Great Wall’s P/E multiple* discount to Brilliance
-80%
Jan-10 Aug-10 Mar-11 Oct-11 May-12 Jan-13
China Auto Sector 41
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
Great Wall 12m forward P/E discount average discount
* Adjusted for the effect of its capitalisation issue in January 2011
Source: Bloomberg consensus
Initiate coverage on GWM
with an OUTPERFORM and
TP based on 13x 2013E
EPS
Valuation comparison with
Brilliance

Valuation comparison with sector index
GWM’s average P/E multiple discount over the MSCI China Consumer Discretionary Index
has been 56% since 2010, compared with Brilliance’s average discount of 21% (Figure 95).
Since its capitalization issue in January 2011, GWM has traded at an average discount of
47% over the MSCI China Consumer Discretionary Index (Figure 95). This compares with
Brilliance’s average discount of 7%. GWM’s valuation has steadily improved since 2011
(Figure 94 and Figure 95). We believe that GWM’s P/E multiple discount over Brilliance
has great potential to narrow in the near term, given its leading position in China’s SUV
segment.
Figure 94: Forward P/E band for Great Wall Motor, Brilliance and MSCI China Consumer
Discretionary Index
22
20
18
16
14
12
10
8
6
4
2
Jan-10 Apr-10 Aug-10 Nov-10 Mar-11 Jul-11 Oct-11 Feb-12 May-12 Sep-12 Jan-13
Source: Bloomberg consensus, MSCI
Brilliance 12m forward P/E
Great Wall 12m forward P/E
MSCI China Consumer Discretionary Index 12m forward P/E
Figure 95: P/E multiple discount to MSCI China Consumer Discretionary Index
20%
0%
-20%
-40%
-60%
-80%
-100%
Jan-10 Apr-10 Aug-10 Nov-10 Mar-11 Jul-11 Oct-11 Feb-12 May-12 Sep-12 Jan-13
Source: Bloomberg consensus, MSCI
Great Wall 12m forward P/E discount Brilliance 12m forward P/E discount
08 January 2013
Valuation comparison with
sector index
China Auto Sector 42

Risks to our investment case
Tougher-than-expected competition in SUV segment
More than ten new mid- to high-end SUV models and 12 new mid-end and low-end SUV
models are being launched in the Chinese market from 4Q12 (Figure 37 and Figure 38).
GWM has the leading position in China’s SUV segment mainly in the price range of less
than Rmb150,000. We do not think new models launched by domestic automakers below
Rmb150,000 will significantly drag down its market share. However, the company may
face competitive pressure from the mid- to high-end segment, especially from Japanese
brands and GM. Japanese brands may offer more price cuts in 2013 to regain their market
share. The retail prices of some of their SUV models, as well as their JV partners’ selfowned
brands (such as Trumpche), are already below Rmb150,000 (Figure 96). The retail
prices of GM’s mid-to-high end brands such as Buick’s Encore and Chevrolet’s Orlander
(to be launched in early 2013) also have basic models priced below Rmb150,000. As the
competition in the mid-to-high end segment intensifies, it is likely that these models may
offer massive price cuts to boost sales. This is expected to exert top-down pressure on the
mid-end and low-end segments, and may impact GWM’s sales.
08 January 2013
Figure 96: Nissan, Mitsubishi, and Trumpche SUV models selling below Rmb150,000
Official Oct-2012 Price Nov 2012 Price Dec-2012 Price
price retail price cut retail price cut retail price cut
Brand Model (’000 Rmb) (’000 Rmb) (%) (’000 Rmb) (%) (’000Rmb) (%)
Nissan Qashiqai 1.6MT XE 2012 2WD 139.8 126.8 9 127.8 9 126.8 9
Qashiqai 2.0MT XL 2012 2WD 151.8 138.8 9 139.8 8 138.8 9
Mitsubishi ASX 1.6MT Standard 128.8 128.8 0 88.8 31
ASX 2.0MT Comfort 148.8 148.8 0 108.8 27
Trumpche GS5 2.0MT Comfort 2012 123.8 115.8 6 113.8 8 115.8 6
GS5 2.0MT Elite 2012 133.8 125.8 6 123.8 7 125.8 6
GS5 2.0MT Elite ESP 2012 138.8 130.8 6 128.8 7 130.8 6
GS5 2.0AT Elite 2012 149.8 141.8 5 139.8 7 141.8 5
Buick Encore 1.4T MT Urban Advance 2013 149.9 149.9 0 149.9 0 149.9 0
Source: Company data, Credit Suisse estimates
Slower-than-expected ramp-up of new capacities
GWM’s Tianjin plant is suffering capacity constraints due to strong demand for H6. The
new plant in Tianjin should add 100,000 units of new capacity by the end of 2013.
However, its effective capacity may be lower than 50,000 units, as it may start operations
in 2H13E. The existing Tianjin plant’s designed capacity is 200,000 units, which is
expected to be raised to 240,000-250,000 by adding shifts. Its current monthly production
volume for the H6 is around 16,000 units and around 6,000 units for the C50. This is
equivalent to 264,000 units p.a. and already exceeds the plant’s maximum capacity. The
capacity constraint may help to keep H6’s current prices as it is short of supply. However,
if the waiting list continues to grow, customers may lose their patience and turn to other
SUV models launched by GWM’s competitors. Therefore, any delay in new capacity may
not only affect its sales in 2013, but also affect market share given debuts of new models
by its competitors.
JV’s mid- to high-end
models may offer massive
price cuts and impact
GWM’s sales
Slower-than-expected rampup
of GWM’s new capacity
in Tianjin plant may affect its
shipment and sales
China Auto Sector 43

Rating NEUTRAL* [V]
Price (04 Jan 13, HK$) 22.85
Target price (HK$) 20.00¹
Upside/downside (%) -12.5
Mkt cap (HK$ mn) 56,976 (US$ 7,352)
Enterprise value (Rmb mn) 61,496
Number of shares (mn) 2,354.10
Free float (%) 60.5
52-week price range 28.4 - 12.7
ADTO - 6M (US$ mn) 7.9
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock considered volatile (see Disclosure Appendix).
Share price performance
60
40
20
Research Analysts
Jack Yeung
852 2101 6779
jack.yeung@credit-suisse.com
Price (LHS) Rebased Rel (RHS)
0
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
The price relative chart measures performance against the
MSCI CHINA F IDX which closed at 6652.07 on 04/01/13
On 04/01/13 the spot exchange rate was HK$7.75/US$1
120
Performance over 1M 3M 12M
Absolute (%) 18.8 69.8 33.9
Relative (%) 11.4 53.0 11.0
70
20
BYD Co Ltd
(1211.HK / 1211 HK)
Electric car yet to commercialize
08 January 2013
Asia Pacific / China
■ Initiate with NEUTRAL. We initiate coverage on BYD with a NEUTRAL
rating and a target price of HK$20.00, which implies 12.5% potential
downside. BYD is the third largest low-end sedan maker in China just behind
Geely and Chery. It also produces electric vehicles (EV) with trial fleets in
Shenzhen. Meanwhile, it is the world’s largest handset battery maker.
■ Intensifying competition at the low-end segment. BYD’s conventional
vehicles primarily focus on the low-end segment, where competition is
intensifying. Till Nov 2012, BYD’s monthly sedan sales were about 15%
lower than in 2011 and over 20% lower than in 2010. We expect its sedan
sales to remain weak in 2013 mainly due to intensifying competition. The
company is recalibrating its product strategy by introducing more upscale
models such as the SUV S6. We believe that it will miss its 2012 S6 sales
target facing strong competition from Great Wall’s H6 and Geely’s GX7. It
seems that BYD currently does not have other major breakthrough products
in the low-end segment to support its future sales growth.
■ Negative catalyst. BYD’s profit from handset components and assembly
services may fall more than over 90% YoY in 2012. Its major customers
Nokia and HTC continued to suffer declines in market share, which is likely
to impact its 2013 orders. We expect its solar segment to continue losses in
2013 mainly due to declining solar prices caused by oversupply in the
industry. China's solar sector might experience a wave of consolidation in
the years ahead, which could exert high pressure on small solar
manufacturers such as BYD.
■ Valuation. Our target price of HK$20.00 for BYD is based on a sum-of-theparts
(SoTP). We value its auto business at HK$10.20 by using discounted
cash flow (DCF). We use sector average P/E multiples for both its handset
components and assembly business (valued at HK$9.10 based on 18x 2013E
P/E) and battery business (valued at HK$0.70 based on 12x 2013E P/E).
Financial and valuation metrics
Year 12/11A 12/12E 12/13E 12/14E
Revenue (Rmb mn) 46,312.3 47,825.3 58,062.5 63,172.2
EBITDA (Rmb mn) 4,984.3 4,833.8 6,545.9 7,333.0
EBIT (Rmb mn) 2,468.5 1,299.2 2,434.5 2,780.9
Net profit (Rmb mn) 1,384.6 172.3 716.3 769.5
EPS (CS adj.) (Rmb) 0.60 0.07 0.30 0.33
Change from previous EPS (%) n.a.
Consensus EPS (Rmb) n.a. 0.16 0.42 0.57
EPS growth (%) -46.1 -87.8 315.8 7.4
P/E (x) 30.7 251.0 60.4 56.2
Dividend yield (%) 0 0 0 0
EV/EBITDA (x) 12.1 12.7 9.5 8.5
P/B (x) 2.0 2.0 2.0 1.9
ROE (%) 7.0 0.8 3.3 3.4
Net debt/equity (%) 61.2 64.5 64.2 63.3
Source: Company data, Thomson Reuters, Credit Suisse estimates.
China Auto Sector 44

Electric car yet to commercialize
Weak conventional vehicle sales
BYD’s conventional vehicles primarily focus on the low-end segment, where demand
growth is slowing down and competition is intensifying. Up until November 2012, BYD’s
monthly sedan sales volume was still about 15% lower than in 2011 and over 20% lower
than in 2010. We expect its sedan sales to remain weak in 2013 mainly due to a lack of
attractive models and intensifying competition. BYD is recalibrating its product strategy
and introducing more upscale models, such as the SUV S6 and mid-sized sedan G6. We
believe that BYD will miss its S6 sales target in 2012 mainly due to strong competition
from Great Wall’s H6, whose sales and market share have grown throughout the year.
BYD lost momentum in terms of conventional vehicles in recent years. Even though it has
done well with some low-end models such as the S6, it does not have other major
breakthrough products in this area.
EV business in its infancy stage
BYD has made remarkable progress in its electric vehicle (EV) segment. Its electric MPV
E6 has been under trial running in Shenzhen for two years as an electric taxi. Its E-Bus K9
has also received thousands of orders from both domestic and overseas markets.
Compared with other EV projects operated by domestic players, BYD is a leader in initial
commercialization. However, major technical efforts in the auto industry are still
concentrating on improving the current combustion engine technology. Moreover, currently
almost all charging infrastructures in China are built by state-owned enterprise (SOE) grid
companies and lag behind schedule. We expect policy support to remain the major
determining force for China’s EV industry in the next few years. We believe BYD’s EV
business will still be constrained by the infrastructure issue and is unlikely to spread over
to the national market shortly.
Uncertainties in handset and solar
BYD’s profit from handset components and assembly may fall more than 90% YoY in 2012,
as its major customers, Nokia and HTC, continue to suffer declines in market share. Given
the strong competition in the mobile phone and smart phone segments, we think it would
be unlikely for these two companies to quickly achieve a dramatic rebound in market share.
This is likely to impact BYD’s 2013 orders and margins for handset components and
rechargeable batteries. Moreover, we expect its solar segment to continue losses in 2013
mainly due to declining solar prices, which is caused by oversupply in the industry. China's
solar sector might experience a wave of mergers, restructurings and company failures in
the years ahead, which could exert high pressure on small manufacturers such as BYD.
Initiate with a NEUTRAL
We initiate coverage on BYD with a NEUTRAL rating. We believe that its EV business has
long-term potential earnings upside but its conventional vehicle segment as well as
handset and solar segments will remain weak in the near term. We value BYD’s auto
business at HK$10.20 using DCF; its handset components and assembly business at
HK$9.10 based on 18x 2013E P/E; and its battery business at HK$0.70 based on 12x
2013E P/E. Major risks to our target price include uncertainties in EV technology
breakthroughs and policies, as well as stronger-than-expected demand in low-end
segment.
08 January 2013
BYD’s conventional vehicles
sales remained weak mainly
due to intensifying
competition and lack of new
models.
China’s EV industry is still at
its infancy stage. And BYD’s
EV business will be
constrained by the
infrastructure issue
BYD should face weak
handset orders and margin
pressure in the solar
segment
Initiate NEUTRAL on BYD
with TP based on SoTP
China Auto Sector 45

BYD Co Ltd 1211.HK / 1211 HK
Price (04 Jan 13): HK$22.85, Rating:: NEUTRAL, Target Price: HK$20.00, Analyst: Jack Yeung
Target price scenario
Scenario TP %Up/Dwn Assumptions
Upside 21.71 (4.99) 2013E auto sales: 533,000 units
Central Case 20.00 (12.47) 2013E auto sales: 493,000 units
Downside 17.05 (25.38) 2013E auto sales: 453,000 units
Income statement (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Sales revenue 46,312 47,825 58,063 63,172
Cost of goods sold 39,445 41,772 49,699 53,906
SG&A 3,925 4,018 4,877 5,306
Other operating exp./(inc.) (2,043) (2,799) (3,060) (3,373)
EBITDA 4,984 4,834 6,546 7,333
Depreciation & amortisation 2,516 3,535 4,111 4,552
EBIT 2,469 1,299 2,434 2,781
Net interest expense/(inc.) 742 900 1,272 1,488
Non-operating inc./(exp.) — — — —
Associates/JV 1.2 (12.6) — —
Recurring PBT 1,727 387 1,163 1,293
Exceptionals/extraordinaries — — — —
Taxes 132.4 59.7 139.5 194.0
Profit after tax 1,595 327 1,023 1,099
Other after tax income — — — —
Minority interests 210.5 154.7 307.0 329.8
Preferred dividends — — — —
Reported net profit 1,385 172 716 770
Analyst adjustments — — — —
Net profit (Credit Suisse) 1,385 172 716 770
Cash flow (Rmb mn) 12/11A 12/12E 12/13E 12/14E
EBIT 2,469 1,299 2,434 2,781
Net interest (1,001) (843) (1,197) (1,375)
Tax paid (344.0) (59.7) (139.5) (194.0)
Working capital 1,179 (752) 335 505
Other cash & non-cash items 2,626 3,478 4,037 4,439
Operating cash flow 4,929 3,122 5,470 6,157
Capex (7,245) (5,260) (4,730) (5,313)
Free cash flow to the firm (2,316) (2,137) 740 844
Disposals of fixed assets — — — —
Acquisitions — — — —
Divestments 580.9 — — —
Associate investments 13.1 — — —
Other investment/(outflows) (2,272) 1,130 (1,320) (1,320)
Investing cash flow (8,923) (4,130) (6,050) (6,633)
Equity raised 1,368 — — —
Dividends paid (0.33) — — —
Net borrowings 4,727 1,872 3,600 3,600
Other financing cash flow (302.6) — — —
Financing cash flow 5,792 1,872 3,600 3,600
Total cash flow 1,798 865 3,020 3,124
Adjustments (39.2) — — —
Net change in cash 1,759 865 3,020 3,124
Balance sheet (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Cash & cash equivalents 3,737 4,602 7,622 10,746
Current receivables 9,782 10,053 11,237 12,393
Inventories 6,596 7,899 8,026 8,144
Other current assets 2,665 3,321 3,659 3,989
Current assets 22,780 25,875 30,544 35,272
Property, plant & equip. 30,723 32,000 32,619 33,380
Investments 587.2 — — —
Intangibles 2,481 3,809 5,129 6,449
Other non-current assets 10,310 8,887 8,887 8,887
Total assets 66,881 70,572 77,179 83,988
Accounts payable 17,236 18,167 19,427 20,773
Short-term debt 11,342 12,176 13,141 14,296
Current provisions — — — —
Other current liabilities 6,050 6,617 7,340 8,105
Current liabilities 34,628 36,959 39,909 43,174
Long-term debt 7,079 8,117 10,752 13,197
Non-current provisions — — — —
Other non-current liab. 1,194 1,175 1,175 1,175
Total liabilities 42,901 46,251 51,836 57,546
Shareholders' equity 21,125 21,310 22,026 22,796
Minority interests 2,856 3,010 3,317 3,647
Total liabilities & equity 66,881 70,572 77,179 83,988
08 January 2013
Key earnings drivers 12/11A 12/12E 12/13E 12/14E
Automobile sales (unit) 448,484 428,638 493,246 538,185
— — — —
— — — —
— — — —
Per share data
—
12/11A
—
12/12E
—
12/13E
—
12/14E
Shares (wtd avg.) (mn) 2,315 2,354 2,354 2,354
EPS (Credit Suisse)
0.60 0.07 0.30 0.33
(Rmb) DPS (Rmb) — — — —
BVPS (Rmb) 9.0 9.1 9.4 9.7
Operating CFPS (Rmb) 2.13 1.33 2.32 2.62
Key ratios and valuation 12/11A 12/12E 12/13E 12/14E
Growth(%)
Sales revenue (0.8) 3.3 21.4 8.8
EBIT (27.4) (47.4) 87.4 14.2
Net profit (45) (88) 316 7
EPS (46) (88) 316 7
Margins (%)
EBITDA 10.8 10.1 11.3 11.6
EBIT 5.33 2.72 4.19 4.40
Pre-tax profit 3.73 0.81 2.00 2.05
Net profit 2.99 0.36 1.23 1.22
Valuation metrics (x)
P/E 31 251 60 56
P/B 2.05 2.03 1.96 1.90
Dividend yield (%) — — — —
P/CF 8.6 13.8 7.9 7.0
EV/sales 1.31 1.29 1.07 0.99
EV/EBITDA 12.1 12.7 9.5 8.5
EV/EBIT 24.5 47.3 25.5 22.5
ROE analysis (%)
ROE 7.00 0.81 3.31 3.43
ROIC 6.34 2.79 5.25 5.57
Asset turnover (x) 0.69 0.68 0.75 0.75
Interest burden (x) 0.70 0.30 0.48 0.47
Tax burden (x) 0.92 0.85 0.88 0.85
Financial leverage (x) 2.79 2.90 3.05 3.18
Credit ratios
Net debt/equity (%) 61.2 64.5 64.2 63.3
Net debt/EBITDA (x) 2.95 3.25 2.49 2.28
Interest cover (x) 3.33 1.44 1.91 1.87
Source: Company data, Thomson Reuters, Credit Suisse estimates.
0
2008 2009 2010 2011 2012 2013
China Auto Sector 46
80
70
60
50
40
30
20
10
12MF P/E multiple
12MF P/B multiple
10
9
8
7
6
5
4
3
2
1
0
2008 2009 2010 2011 2012 2013
Source: IBES

Weak conventional vehicle sales
Sedan sales remain weak
BYD’s conventional vehicles (mainly sedans) primarily focus on the low-end segment
(Figure 97 and Figure 98), where demand growth is slowing and competition is
intensifying. BYD’s sedan sales slipped almost every month from August 2010 to July
2012, mainly due to network consolidation and weakening demand in the low-end
segment. BYD launched a new low-end sedan model Surui in August 2012, which has
competitive prices and better quality than the old ones. Surui achieved strong sales in
September and October 2012. BYD also extended its warranty on new vehicles to four
years/100,000 km to boost sales. However, up until October 2012, BYD’s monthly sedan
sales volume was still about 15% lower than in 2011 and more than 20% lower than its
ordinary level in 2010. We also expect its sedan sales to remain weak in 2013 due to its
lack of attractive models and intensifying competition in the low-end segment.
Figure 97: Official prices of BYD models Figure 98: BYD auto product portfolio
(RMB/unit)
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Conventional vehicle
Mid-to-high end vehicles
Mid end vehicles
E6 F3DM M6 F3 S6 L3 G6 G3 F6 Surui F0
(EV) (Hybrid)
EV and hybrid
vehicle
0.5%
Jan-Nov 2012
Low-end sedan
79%
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Figure 99: Sedan sales comparison of major domestic automakers
Sedan sales
(unit)
600,000
500,000
400,000
300,000
200,000
100,000
0
2007 2008 2009 2010 2011 2012E
BYD Geely Chery Great Wall Motor
Source: CAAM, Credit Suisse estimates
Sedan sales
200%
YoY
08 January 2013
Mid-to-high end
MPV (M6)
0.3%
Mid-to-low end
SUV (S6)
20%
China Auto Sector 47
150%
100%
50%
0%
-50%
BYD’s sedan sales would
remain weak due to
intensifying competition and
lack of attractive models
2008 2009 2010 2011 2012E
BYD (LHS) Geely (LHS)
Chery 9LHS) Great Wall Motor (RHS)
800%
700%
600%
500%
400%
300%
200%
100%
0%
-100%
-200%

Bottleneck in SUV sales
BYD is recalibrating its product strategy and introducing more upscale models, such as the
SUV S6 and mid-sized sedan G6. More and more Chinese consumers are now replacing
their first cars, who have tended and are tending to buy cars from JVs. This is a trend that
has depressed the sales of domestic brands, such as BYD, Chery and Geely, which are
traditional makers of low-end compact models. By introducing more upscale vehicles, such
as the S6 and the G6, BYD is trying to retain those consumers. The S6 was BYD’s first
SUV model, ranked the No.6 best-selling SUV in China in 10M12 and is mainly competing
with Great Wall’s H6 and Geely’s GX7 (Figure 100, Figure 101 and Figure 102). BYD is
targeting to sell 100,000 S6 units in 2012. However, we expect it to miss the target by
about 15,000 units given weak sales in 2H12. Monthly sales of the H6 exceeded 10,000
units in the 4th month after its launch and steadily picked up above that level from the
tenth month (Figure 103). However, monthly sales of the S6 exceeded 10,000 units in the
eighth month after its launch and fell below that from the 13th month (Figure 103). We
believe that the S6’s monthly sales volume has been capped in 2012 mainly due to strong
competition from the H6, whose sales and market share kept growing throughout the year
(Figure 98).
Figure 100: BYD S6
Source: Company data
Figure 101: Great Wall Motor H6
Source: Company data
Figure 102: Geely GX7
Source: Company data
Price Rmb89,900 – 136,900
Size 4.81m x 1.855m x 1.68m
Wheelbase 2.72m
Engine and
transmission
2.0L – 103kW /6000rpm,
186N*m/4000-4500rpm
5-speed manual
2.4L – 118kW /5000-6000rpm,
215N*m/3500-4500rpm
4-speed automatic
Price Rmb95,800 – 141,800
Size 4.64m x 1.825m x 1.69m
Wheelbase 2.68m
Engine and
transmission
08 January 2013
2.0L – 98kW /5500rpm,
186N*m/4000rpm
4-speed automatic / 5-speed manual
2.0T Diesel – 110kW/4000rpm,
310N*m/1800-2800rpm
6-speed automatic / manual
Price Rmb92,900 – 129,900
Size 4.541m x 1.833m x 1.7m
Wheelbase 2.661m
Engine and
transmission
We believe BYD’s S6 will
have limited growth potential
due to strong competition
from H6
1.8L – 102kW /6200rpm, 172N*m/4200rpm
5-speed manual
2.0L – 104kW/6000rpm, 178N*m/4000-
4500rpm
6-speed automatic / manual
China Auto Sector 48

Figure 103: Sales ramp-up of S6, H6, and GX7
Sales (unit)
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
month after initial launch
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th
BYD S6 Great Wall Hover H6 Geely GX7
Source: Company data, Credit Suisse estimates
Sales (unit)
18,000
08 January 2013
-
Apr-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12
China Auto Sector 49
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
BYD S6 Great Wall Hover H6 Geely GX7
Figure 104: BYD’s vehicle models
Segment Model Price (’000 Rmb) Launch time of new model 2012E sales (’000 units) 2013E sales (’000 units)
Sedan F3 52.8 - 169.8 122.4 93
Surui 65.9 - 99.9 35.7 111
F6 89.8 - 109.8 0.8 0.8
F0 36.9 - 46.9 41 44.3
G3 62.9 - 109.9 28 31.2
L3 59.8 - 118.8 70 73
G6 79.8 - 115.8 40.5 42.6
SUV S6 89.9 - 136.9 86.5
Updated S6 2.0T 130 - 136.9 1H13
MPV M6 150.8 - 239.8 1 1.1
EV E6 369 - 369.8 1.4 3
F3DM 149.8 - 169.8 1.2 2
Qin 200 1Q13 1
E-Bus K9 2,000 1 1.5
Total 429 494
Source: BYD, Credit Suisse estimates
Figure 105: Launch time of BYD’s new models in 2013
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Updated S6 2.0T 1H13
Qin 1Q13
Source: BYD
90

Figure 106: Official prices of BYD models
F3
Surui
F6
F0
G3
L3
G6
S6
Updated S6 2.0T
Source: BYD
M6
E6
F3DM
Qin
08 January 2013
- 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000
Existing model New model
Figure 107: Comparison of BYD Surui and its major competitors
Model
BYD Surui Geely GLEagle GC7 Great Wall C30 Venucia D50
1.5MT Comfort 1.5MT Comfort 1.5MT Comfort 1.6MT Comfort
Official price (’000 Rmb) 65.9 62.9 64.5 67.8
Dec-12 retail price ('000 Rmb) 62.9 53.9 60.5 63.8
Size (m) 4.680/1.765/1.490 4.547/1.734/1.470 4.452/1.705/1.480 4.480/1.695/1.535
Wheelbase (m) 2.66 2.6 2.61 2.6
Trunk volume (Litre) 450 480 510 467
Tank volume (Litre) 50 50 40 52
Complete mass (kg) 1330 1270 1125 1115
Engine size (L) 1.497 1.498 1.497 1.598
Max power (kW/rpm) 80/5800 80/6000 78/6000 86/6000
Max toque (n.m/rpm) 145/4800 140/4200-4600 138/4200 153/4400
Acceleration 0-100 km/h (s) 9.5 12 12.7 11.2
Transmission 5MT 5MT 5MT 5MT
Fuel consumption (L/100km) 6.5 7.5 6.5 6.4
Warranty 4 years or 100,000km 4 years or 150,000km 4 years or 150,000km 3 years or 100,000km
Emission standard National IV National IV Euro IV National IV
Source: Xcar, Channel checks with dealers
China Auto Sector 50
RMB

Figure 108: Comparison of BYD G6 and its major competitors
Model
08 January 2013
BYD G6 Nissan Sylphy VW Bora Chevrolet Cruze
1.5T MT Delux 1.6MT Comfort 1.6MT Fashion 1.6 SL MT 2013
Official price (’000 Rmb) 93.8 99.8 107.8 108.9
Dec-12 retail price (’000 Rmb) 88.8 94.8 91.8 90.9
Size (m) 4.860/1.825/1.463 4.665/1.700/1.505 4.540/1.775/1.467 4.598/1.797/1.477
Wheelbase (m) 2.745 2.7 2.61 2.685
Trunk volume (Litre) 465 504 450 400
Tank volume (Litre) 65 52 55 60
Complete mass (kg) 1450 1180 1265 1360
Engine size (L) 1.5 1.598 1.598 1.598
Max power (kW/rpm) 113/5200 86/6000 77/5600 86/6000
Max toque (n.m/rpm) 240/1750-3500 153/4400 155/3800 150/3800
Acceleration 0-100 km/h (s) 9.7 11.8 11.8 12.6
Transmission 6MT 5MT 5MT 5MT
Fuel consumption (L/100km) 7 6.5 6.9 6.9
Warranty 4 years or 100,000km 3 years or 100,000km 2 years or 60,000km 2 years or 60,000km
Emission standard National IV Euro IV National IV National IV
Source: Xcar, Channel checks with dealers
Figure 109: Comparison of BYD E6 and its major competitors
Model
BYD E6 Nissan Leaf Ford Focus EV Honda Fit EV
Official price (’000 Rmb) 369.8 224-256 250-280 233-250
Size (m) 4.560/1.882/1.630 4.445/1.770/1.550 4.359/2.060/1.466 3.900/1.695/1.525
Wheelbase (m) 2.83 2.69 2.649 2.5
Trunk volume (Litre) 385 370 385 380
Complete mass (kg) 2295 1521 1674 1070
Battery (kWh) 48 (LiFePO4) 24 (Lith-ion) 23 (Lith-ion) 20 (Lith-ion)
Max power (kW) 90 80 107 92
Max toque (n.m) 450 280 250 256
Acceleration 0-100 km/h (s)

EV business in its infancy stage
EV: The future for the auto industry
Economies become more dependent on transportation fuel as they mature. In economies
such as the US, road transportation fuel makes up the largest part of oil consumption, and
if replaced with electric vehicles (EV), could significantly cut oil demand and pollution.
Countries such as China, require less of an infrastructure overhaul to switch fuel types,
and want to seize the opportunity to stem a growing dependence on oil. Electricity has the
highest distribution efficiency of any fuel, which is more than 80%. Recent advancements
by BYD in electricity storage suggest that car batteries of the somewhat far-off future could
be substantially more efficient compared to current ones. Despite sluggish global auto
growth, along with the gloomy outlook in China, there is new hope within the industry and
that is EV. Even though EV is still at the initial stages of development, we believe that it
will be the ‘King of Auto Market’ not only in China, but also in the world.
EV, in our view, will be the answer to the future of the auto industry. It generates zero
greenhouse gas emissions compared with conventional vehicles and has lower fuel costs,
even when oil is cheap. That is because electric engines are more efficient than internalcombustion
engines, and because generating energy on a large scale (in coal or nuclear
plants) is less wasteful than doing it on a small scale (by burning gasoline in an internalcombustion
engine). Besides the energy saving concept, there are material benefits from
using electric/hybrid cars. The concept is similar to the light bulb, with an energy-saving
light bulb charging five times more than usual light bulbs, but also saving on energy with
the initial investment cost being fully earned back by electricity saved from such a light
bulb. Moreover, EVs are very reliable and have almost free maintenance. There is no
need for oil and filter changes, and tuning. In addition, EVs have less than one tenth as
many parts as a conventional vehicle. For instance, they have no engine, transmission,
spark plugs, valves, fuel tank, tailpipe, distributor, starter, clutch, muffler or catalytic
converter.
One of the critical cost issues for an EV is the efficiency of the battery. BYD is using a
lithium iron phosphate (LiFePO 4) battery. The strength of this is the short charge time, high
power density while it does not explode under extreme conditions normally. In a serious
accident on 25 May 2012 in Shenzhen, a BYD E6 Taxi caught fire and burned out after it
was hit by a sports car travelling at high speed. Three people were killed at the scene.
However, a panel of experts organized to study the accident later concluded that the
batteries on the taxi did not explode and the design passes all required safety standards.
Some 75% of the vehicle’s battery survived the fire and the other 25% had no structural
damage. Also, the cost of an Li-iron battery is low, non-toxic and has readily available iron
elements. Meanwhile, most consumer electronics are extensively using lithium cobalt
oxide (LiCoO2), lithium manganese oxide (LiMn 2O 4) and lithium-nickel oxide (LiNiO 2). An
Li-iron battery has relatively higher stability than the above material despite it having a
lower capacity/size ratio. Thus, it should be more suitable for EV, as car space is sufficient
than consumer electronics (especially portable devices).
Is EV cost effective? Consider a driver in Shenzhen (BYD’s cars sell mostly in Shenzhen)
who drives every day and must decide whether to buy an EV or conventional vehicle. If we
don’t consider the environmental protection concept, let’s examine two cases: (1) buy a
gasoline sedan; and (2) buy an E6 electric car. For family users, the E6 breaks even
compared with BYD’s gasoline model F6 in terms of total cost at the end of their nine
years of lifetime (Figure 110). We believe this breakeven point could decrease with
technological improvements. In terms of per-km fuel costs, cheap electricity and minimal
maintenance for re-charging batteries should bring down the fuel cost per km of the E6 to
around 25% that of the F6 (Figure 111). The more often and longer the EV drives, the
more it can save, making it more appealing to fleet operators than private users. Therefore,
08 January 2013
EV business has bright
future but is still at the initial
stages of development
We believe EV will be a key
growth area of the auto
industry in the future
BYD has advanced battery
technology, which is critical
to EV
EV is cost effective
compared with conventional
vehicles
China Auto Sector 52

fleet operators, such as taxi companies, are likely to reach breakeven within a short period
and most likely to become BYD’s major customers.
Figure 110: Cost comparison between E6 and F6 (for family usage)
E6 (pure electric car) F6 (gasoline car)
Average mileage per day 60km (30km x 2) 60km (30km x 2)
Energy price Rmb7.56 (Rmb0.13 per km) per day
-- assuming Rmb0.70 for 1kWh
-- assuming 18kWh for 100km
Total energy cost used in nine years Rmb24,000
-- assume zero time value of money
Car list price Rmb180,000
-- after government subsidies of Rmb120,000
-- assume no residual value
Rmb33.60 (Rmb0.56 per km) per day
-- assuming gasoline price at Rmb8.00/litre
-- assuming 7 litres/100km
Rmb110,000
-- assume zero time value of money
Rmb109,800
-- assume no residual value
08 January 2013
Lifetime mileage Assume 200,000km (9 years and 60Km every day). Assume 200,000km (nine years and 60km every
Battery to charge 4,000 times before retirement
300km per charge. Maximum mileage: 3,000 times x
300km = 900,000km.
day).
Maintenance cost Unknown, but may get government subsidy Assume no cost
Total cost Rmb204,000 Rmb219,800
Source: BYD, Credit Suisse estimates
Figure 111: Cost comparison between E6 taxi and gasoline taxi (for fleet operator)
E6 Taxi (pure electric car) Gasoline taxi
Average mileage per day 450km 450km
Energy price Rmb81.90 (Rmb0.18 per km) per day
-- assuming Rmb0.70 for 1kWh
-- assuming 26kWh for 100km
Total energy cost used in 5 years Rmb149,500
-- assume zero time value of money
Car list price Rmb180,000
-- after government subsidies of Rmb120,000
-- assume no residual value
Rmb324.00 (Rmb0.72 per km) per day
-- assuming gasoline price at Rmb8.00 / litre
-- assuming 9 litre / 100km
Rmb591,300
-- assume zero time value of money
Rmb100,000
-- assume no residual value
Lifetime mileage Assume 730,000km (5 years and everyday 400km). Assume 730,000km (5 years and everyday 400km).
Battery to charge 4000 times before retirement
300km per charge. Maximum mileage: 3,000 times x
300km = 900,000km
Maintenance cost Unknown, but may get government subsidy Assume no cost
Total cost Rmb329,500 Rmb691,300
Source: BYD, Credit Suisse estimates
Figure 112: Cost comparison between E6 and F6
RMB
250,000
200,000
150,000
100,000
50,000
0
Family user
number of years after purchase
1st 2nd 3rd 4th 5th 6th 7th 8th 9th
E6 F6
Source: Company data, Credit Suisse estimates
China Auto Sector 53
RMB
1,500,000
1,200,000
900,000
600,000
300,000
0
Fleet operator
number of years after purchase
1st 2nd 3rd 4th 5th 6th 7th 8th 9th
E6 F6

BYD is the closest proxy to EV in Asia
BYD is the only auto manufacturer in Asia (ex-Japan) to provide a one-stop solution in the
EV market with commercial trials of electric taxis for more than two years in Shenzhen. If
its EV dream comes true, the EV market would be kicked off globally, and BYD would be a
good choice and may enjoy a scarcity premium. The reason that no other major players
exist may be due to the high risk of this technology. Also, these traditional car makers
usually are not equipped with battery knowledge, the learning curve is long and investment
is huge for developing battery technology from scratch. Sanyo and Samsung SDI are the
global leaders in lithium batteries, while Toyota and General Motors are the leaders in
hybrid cars. Huge investment has been poured into hybrid car R&D, but we have yet to
see any returns. However, we do not think these companies are really so investable
because they are conglomerates and EV earnings would have little impact on their bottom
line. Meanwhile, in Asia Pacific, BYD would be the closest proxy to the success of an
electric vehicle. Although many large companies in the world are developing electric autos,
BYD is the only one focusing on this area in China.
Eyeing such great potential, automakers are racing to grab a share. Shanghai-based SAIC
Motor Corp last week launched its first mass-produced all-electric car, the Roewe E50.
BYD's joint venture with Daimler AG has launched the EV brand Denza, which is jointly
designed by 80 German engineers from Daimler and 200 BYD engineers. A prototype
vehicle of Denza is under road testing and the final version will be launched in the market
around end-2013. BYD is planning to deliver 2,000 EVs in 2012 and 7,000 in 2013.
According to foreign media reports, US electric vehicle company Tesla is also preparing to
enter the Chinese market, first with a showroom planned in Beijing. However, among
them, only BYD has the capability of mass-production. Currently, its Li-iron battery
capacity is 1.6 GWh, which is able to support 500 K9s and over tens of thousands of E6s.
It does not plan to expand its battery capacity yet. Average production costs for Li-iron
battery are about Rmb2-2.5/Wh, which may be reduced to Rmb1.5-2/Wh in 2013.
EV is still far from full commercialization
Major technical efforts in the auto industry are still concentrating on improving the current
combustion engine technology, powertrain systems, connected drives, safety systems and
the development of new material solutions for vehicle weight reduction. One of the
greatest challenges to commercializing EV is likely to be the development and
industrialization of light, long-lasting and affordable battery systems. A market
breakthrough of EVs would depend greatly on innovations in this field. We expect the
corresponding development phase to last 5-10 years.
The battery functions are crucial in an EV just as the combustion engine is in a
conventional vehicle. The total value added of an EV is significantly higher than for
conventional vehicles and is clearly dominated by the battery system. As the battery
system is currently very cost intensive, the EV industry needs unified standards for its
technology, components, as well as electrical interfaces, to avoid high switching costs.
However, China’s EV battery industry is still highly fragmented. Sufficient and
standardized electric charging infrastructure is another key challenge to commercializing
EVs. Infrastructure is the foundation of a unified EV market, especially in a large country,
such as China. A well-established charging network not only provides a convenient
charging solution, but also helps avoid a multiplicity of standards, which would hamper the
development of the EV industry. Other than dedicated high-power charging stations on
public roads, charging poles have lower construction and maintenance costs, providing
more convenient refueling solutions than patrol stations. Battery swap stations and power
storage stations are also good complements to shorten charging times. These charging
facilities are already in place in China, but with limited locations and capabilities. At the
end of 2011, there were 314 charging stations built in China with 16,184 charging poles,
shared by around 10,000 EVs across the country (Figure 113). This compares with over
08 January 2013
BYD is the automaker in
Asia (ex-Japan) with the
closest proxy to EV
BYD is the only Chinese
automaker with mass
production of EVs
We expect major market
breakthrough of EVs in 5-10
years
Due to constraints in battery
technology and
infrastructure support, EV is
far from commercialising in
China
China Auto Sector 54

3,400 charging stations and over 20,000 charging poles in the US at the end of 2011,
which were shared by fewer than 25,000 EVs.
Figure 113: Expansion of EV charging facilities in China
2500
2000
1500
1000
500
0
550
907
08 January 2013
China Auto Sector 55
1,405
2,108
196,538
314
89,336
160
38,842
16184
2010
6432
2011 2012E 2013E 2014E 2015E
Number of charging station (LHS) Number of charging pole (RHS)
Source: State Grid Corporation, China Southern Power Grid, Credit Suisse estimates
Policy supports for EV in China
450,000
412,731
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
For electric vehicles to make serious headway, they need much faster reductions in
technology costs or continuing government subsidies. The latter looks unlikely to be
sustainable in the long term, but is critical for the industry’s development at its infancy
stage. China has 25 pilot cities for new energy vehicles, with five (Shenzhen, Shanghai,
Hangzhou, Hefei and Changchun) offering purchase subsidies for new energy vehicle
buyers (Figure 114 and Figure 115) .
Figure 114: Pilot cities for new energy vehicles
Launch
Batch Time City
1 st 13 cities Jan-09 Beijing, Shanghai, Chongqing, Changchun, Dalian, Hangzhou, Jinnan, Wuhan, Shenzhen, Hefei, Changsha,
Kunming, Nanchang
2 nd 7 cities Apr-10 Tianjin, Haikou, Zhengzhou, Xiamen, Suzhou, Tangshan, Guangzhou
3 rd 5 cities Jul-10 Shenyang, Hohhot, Chengdu, Nantong, Xiangyang
Source: MST, NDR, MIIT, and MOF
Figure 115: Purchase subsidies granted to new energy vehicle buyers
Energy type PV and light CV City buses longer than 10m
Hybrid Not more than Rmb50,000 Rmb50,000-420,000
Pure-electric Rmb60,000 Rmb500,000
Fuel cell Rmb250,000 Rmb600,000
Source: Company data
Figure 116: Purchase subsidy for new energy vehicles in five pilot cities
Rmb Unit Target
3,000 one-time/ per unit Vehicles with engine sizes below 1.6L and fuel consumption 20% lower than the current industrial standard
3,000 per kWh Hybrid electric passenger cars with total subsidy per car capped at Rmb50,000
3,000 per kWh Pure electric passenger cars with total subsidy per car capped at Rmb60,000
Source: Company data
Other than subsidies, the Chinese government has issued several industry plans to call for
more new energy vehicles. The ‘Twelfth Five-year Planning for Electric Vehicle
Technology Development’ was issued by the Ministry of Science and Technology in March
0
Major policies supporting
EVs in China
Industry plans for new
energy vehicles in China

2012. It targets 2,000 EV charging stations (including battery swap stations) and 400,000
electric charging poles in over 20 pilot cities by 2015E, which are expected to be sufficient
to foster initial commercialization of EVs. Another industry plan, the ‘Energy Saving and
New Energy Vehicle Development Plan’, was released in July 2012 by the State Council. It
set a 2020E target for total production and sales of 5 mn pure-electric vehicles and plug-in
hybrids, with annual production capacity reaching 2 mn units.
Banks are also giving financial support to BYD to encourage its EV sales. China
Development Bank (non-listed), China Everbright Bank (non-listed) and other Chinese
financial institutors launched a financial program with BYD in early November. This will
provide loans with zero down payment for companies that buy BYD’s K9 E-buses and E6
taxis. Currently, the E6 is selling at above Rmb300,000, while K9 sells at about Rmb2 mn.
Even with subsidies from both central and local governments, the prices are still much
higher than for conventional vehicles. Only fleet operators, such as taxi companies and
bus companies, are willing to purchase EVs given their high daily mileage and therefore
high savings benefits from low operating expenses of EVs. There are now 300 E6 taxis
and 200 K9 E-buses running on the roads in Shenzhen. More than 500 E6s will be added
to the fleet by the end of 2012, according to an agreement between BYD and a local taxi
company.
BYD also agreed with partners to produce its EVs in Tianjin and Yunnan province, and
supply them for local public transport use. This is expected to help BYD gain local
government support and penetrate local EV markets. The company is taking the same
approach overseas, tapping public transport markets first. It has already provided electric
buses to Denmark, the Netherlands, Spain and Hungry for trial use. It will attend two
government-oriented auctions in Brussels (around hundreds of vehicles) and Italy (100
vehicles) in 2013. Most recently, it agreed with a London cab company to supply 50 E6
cars to its fleet in 2013. We expect BYD’s EV sales to heavily rely on government orders
focusing on the public transportation sector in next few years and government subsidies
would continue to account for a large portion of its EV revenue.
08 January 2013
Banks’ supports for BYD’s
EV sales
BYD is relying heavily on
government purchases
China Auto Sector 56

Uncertainties in handset and solar
Weak orders from Nokia and HTC
BYD’s profit from handset components and assembly may fall over 90% YoY in 2012 as
its major customers Nokia and HTC have continued to suffer declines in market share
(Figure 117 and Figure 118). BYD’s revenue from handset components and assembly fell
11.6% YoY in 1H12, while rechargeable battery sales dropped 5.5% YoY during the same
period. Its largest customer, Nokia, continued its restructuring plans and its total mobile
phone shipments fell 17.8% from 303.5 mn units in 9M11 to 249.3 mn units in 9M12.
HTC’s smartphone shipments dropped 30.9% YoY from 33.3 mn units in 9M11 to 23 mn in
9M12. Given the strong competition in the mobile phone and smart phone segments, it
would be unlikely for these two companies to quickly achieve a dramatic rebound in
market share. This is likely to impact BYD’s orders for handset components and
rechargeable batteries in 2H12 and in 2013.
Figure 117: Market share of top mobile phone makers
%
50
45
40
35
30
25
20
15
10
5
0
Source: IDC
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Samsung Nokia Apple ZTE LG Others
Figure 118: Market share of top smart phone makers
%
45
40
35
30
25
20
15
10
5
0
Source: IDC
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Samsung Apple Nokia RIM HTC
08 January 2013
BYD’s handset segment
would have weak orders as
major customers face
declining market share
China Auto Sector 57

Solar: Oversupply remains a key challenge
BYD’s solar segment recorded about Rmb600 mn of losses in 1H12, higher than the
segment’s total loss of Rmb560 mn in 2011. This is mainly due to declining solar prices
caused by oversupply in the industry. BYD is expecting another Rmb200 mn of losses in
2H12. According to solarbuzz, global solar capacity is approximately twice that of its
expected 2012 demand of 30GW. Although many foreign manufacturers have exited from
solar manufacturing, Chinese capacity has continued to expand in recent years. These
new facilities were added during 2011 and 2012, fuelling solar capacity increases and
prolonging the oversupply and competitive pricing issues.
The ASPs of solar panels are still falling. Gross margins for solar panels have fallen to less
than 10% from above 30% in 2010, and Chinese companies will need to shift to a highvolume,
low-margin business if they want to survive. Despite efforts by some companies to
reorganize and cut costs, China's solar sector might experience a wave of mergers,
restructurings and company failures in the years ahead. Trina Solar Chief Executive Gao
Jifan said the global solar industry may experience a stabilization phase in the next few
years, which would be characterized by increasing consolidation and the liquidation of
lower-tier manufacturers. Although attention has previously focused on the shakeout of
European and US-based solar manufacturers, the next set of exits from the industry are
likely to come from underperforming Chinese Tier 2 and 3 manufacturers, such as BYD.
Figure 119: Chinese solar module suppliers’ revenue,
gross margin and net margin
3.5
2.5
1.5
USD billion
3
2
1
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Revenue (LHS) Gross margin (RHS) Net margin (RHS)
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-80.0%
Figure 120: Global solar supply and demand
08 January 2013
China Auto Sector 58
GW
12
Source: IMS Research Source: NPD Solarbuzz
10
8
6
4
2
0
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
Production Shipments Demand
Overcapacity in the solar
industry will continue to put
high pressure on BYD’s
margins
Solar industry may
experience a wave of
consolidation, which will
seriously impact small
players such BYD

Initiate with a NEUTRAL
We initiate coverage on BYD with a NEUTRAL rating. We derive BYD’s target price of
HK$20.00 based on SoTP. We value its auto business at HK$10.20 by using DCF; its
handset components and assembly business at HK$9.10 based on 18x 2013E P/E; and its
battery business at HK$0.70 based on 12x 2013E P/E.
08 January 2013
Figure 121: DCF—base case assumptions
Base case 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Vehicle sales (’000 units)
- Conventional 425 485 525 560 600 640 680 700 720
- Hybrid 1.2 2 4 7 10 15 20 25 30
- Electric car 1.3 3 6 10 15 20 25 30 35
- Electric Bus 1.0 1.5 2.5 5 7 10 15 20 25
Total vehicle sales 429 492 538 582 632 685 740 775 810
Total vehicle salesYoY (%) -4% 15% 9% 8% 9% 8% 8% 5% 5%
ASP (‘000 Rmb)
- Conventional 54 55 59 58 57 56 55 54 53
- Hybrid 135 135 130 130 120 110 100 90 80
- Electric car 330 300 280 260 240 220 200 180 160
- Electric Bus 1,530 1,530 1,530 1,400 1,400 1,300 1,200 1,100 1,000
Total revenue (Rmb mn) 25,071 30,140 37,000 42,990 48,800 54,890 62,400 67,450 71,160
EBITDA margin (%) 10.1% 11.3% 11.5% 11.3% 11.1% 10.9% 10.7% 10.5% 10.3%
EBITDA (Rmb m) 2,534 3,398 4,269 4,858 5,417 5,983 6,677 7,082 7,329
Working capital (Rmb mn) 6,518 7,836 9,620 11,177 12,688 14,271 16,224 17,537 18,502
Working capital movement (Rmb mn) (522) (1,318) (1,784) (1,557) (1,511) (1,583) (1,953) (1,313) (965)
Taxation (Rmb m) (391) (408) (640) (826) (1,083) (1,316) (1,669) (1,771) (1,832)
Effective tax rate (%) 15% 12% 15% 17% 20% 22% 25% 25% 25%
EV utilisation rate 29% 43% 60% 80% 80% 80% 80% 80% 80%
EV capacity (‘000 units) 12 15 21 28 40 56 75 94 113
Capex per EV (‘000 Rmb) 40 40 40 35 35 35 30 30 30
Conventional vehicle utilisation rate 49% 56% 60% 63% 67% 70% 72% 73% 73%
Conventional vehicle capacity (‘000 units) 860 870 880 890 900 920 940 960 980
Capex per conventional vehicle (‘000 Rmb) 25 25 25 25 25 25 30 30 30
Total capex (Rmb mn) (330) (370) (483) (483) (688) (1,069) (1,163) (1,163) (1,163)
Free cash flow (Rmb mn) 1,291 1,302 1,362 1,991 2,135 2,015 1,893 2,836 3,370
Discount factor 1.00 1.00 1.08 1.17 1.27 1.37 1.49 1.61 1.74 1.89
Present value (Rmb mn) 1,291 1,204 1,164 1,573 1,559 1,360 1,181 1,636 31,485
Terminal value (Rmb mn) 55,667
Rmb mn
Enterprise value (end-2012) 42,453
- Net debt 15,500
- Minority interests 155
= Equity value 26,798
Source: Credit Suisse estimates
Initiate with NEUTRAL and
TP based on SoTP
China Auto Sector 59

Figure 122: WACC assumption and pricing
Base case
WACC assumptions
Beta 1.00
Risk free rate (Rf) 3.00%
Risk premium (Rp) 6.50%
Required market return (Rm=Rf+Rp) 9.50%
Cost of equity=Rf+Beta*(Rm-Rf) 9.5%
Cost of debt (2012) 6.5%
Tax rate 25.0%
No of shares (mn) 2,354
Optimal leverage 20.0%
WACC=CoE*(1-L)+CoD*(1-T)*L= 8.6%
Perpetual growth 2.0%
Pricing
TP for Auto Project 10.2
Exchange rate (HKD=RMB) 0.806
Source: Company data, Credit Suisse estimates
The base case of our valuation is mainly supported by the following assumptions:
■ BYD could ship 2.3k EVs in 2012 to 70k EVs in 2020 (CAGR 53%).
■ ASP for electric car to decline to Rmb160k in 2020 from Rmb330k in 2012.
■ ASP for E-Bus to decline to Rmb1 mn in 2020 from Rmb1.5 mn in 2012.
■ Favourite tax policy would terminate in 2018.
■ EV’s capacity utilisation rate could rise to 80% in 2015.
■ Conventional vehicles’ capacity utilisation rate could exceed 70% in 2017.
■ Capex per EV would gradually decline due to technology advances. We expect capex
per EV to drop to about Rmb30k in 2018, similar to capex for conventional vehicles.
■ Risk premium 6.5%, cost of equity 9.5%, cost of debt 6.5%, tax rate 25%, perpetual
growth 2%.
Valuation comparison: Handset and battery makers
08 January 2013
Figure 123: Valuation comparison of major handset makers
Share Market Dividend
Price Cap P/E (x) P/B (x) yield (%) ROE (%)
Company Ticker (local ccy) (USD m) 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E
Alcatel-Lucent ALUA.PA 1.20 3,626 2.5 (8.2) (24.4) 24.4 0.8 0.8 0.8 0.9 0.0 0.0 0.0 0.0 32.5 (9.4) (3.4) 3.7
ZTE Corp 0763.HK 13.72 5,499 22.5 108.0 24.1 18.1 1.9 1.9 1.8 1.7 1.5 0.5 1.1 1.4 8.6 1.8 7.5 9.2
Research in Motion RIMM.OQ 11.47 6,012 5.2 (9.7) (23.9) (26.6) 0.6 0.7 0.7 0.6 0.0 0.0 0.0 0.0 12.5 (6.8) (2.8) (2.4)
Plantronics Inc PLT.N 37.32 1,593 15.0 13.9 12.9 11.5 2.8 2.6 2.3 n.a. 0.5 1.1 1.3 na 18.5 18.5 18.1 na
HTC Corp 2498.TW 287.00 8,428 3.9 14.0 16.9 16.4 3.0 2.8 2.7 2.5 13.9 7.9 3.2 3.0 77.0 19.7 15.7 15.2
Vtech Holdings Ltd 0303.HK 86.75 2,802 112.7 107.4 99.1 93.3 43.1 38.4 37.3 36.1 0.9 0.9 0.9 1.0 38.3 35.7 37.6 38.7
Mkt cap–wtd avg 19.2 33.9 12.2 15.9 6.0 5.4 5.3 5.0 4.6 2.6 1.3 1.3 36.7 8.2 10.0 10.2
Source: Bloomberg consensus
Figure 124: Valuation comparison of major battery makers
Share price Market cap P/E (x) P/B (x) Dividend yield (%) ROE (%)
Company Ticker (local ccy) (US$ mn) 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E
Camel Croup Co Ltd 601311.SS 8.50 1,146 20.5 15.5 13.0 11.0 2.6 1.1 1.0 0.8 2.4 12.8 7.3 7.4 7.5
Shenzhen Desay Battery 000049.SZ 30.20 663 34.6 28.0 21.3 15.4 13.5 9.2 6.7 4.9 0.8 39.0 33.0 31.5 31.9
Eve Energy Co Ltd 300014.SZ 11.29 359 26.3 22.7 16.8 12.3 3.2 3.1 2.7 2.3 0.9 12.3 13.6 15.8 18.4
Sunwoda Electronic 300207.SZ 12.20 478 33.0 31.5 20.9 14.8 2.6 2.4 2.2 2.0 0.6 7.7 7.7 10.6 13.3
Zhejiang Narada 300068.SZ 13.14 627 54.8 25.5 19.8 14.9 1.5 1.4 1.4 1.3 0.8 2.7 5.6 6.8 8.4
Mkt cap–wtd avg 32.4 23.1 17.5 13.3 4.7 3.2 2.6 2.1 1.3 15.4 12.9 13.6 14.6
Source: Bloomberg consensus
China Auto Sector 60

Risks to our investment case
Technology challenges and policy risks for EVs
A big problem for EVs is that they are expensive to make, and the single largest cost is the
battery. Manufacturing a safe, reliable, long-lasting, and fast-charging battery for a car is a
complex and costly undertaking. BYD claims to have achieved a breakthrough with its
lithium iron ferrous phosphate technology, but no one can be sure whether it will work as
promised. The recent accident of BYD’s E6 taxi in Shenzhen raised the public’s concerns
on the safety of the EV and BYD’s batteries. Moreover, its ability to produce EVs at scale
and at a low cost remains unproven. It would take the company a long time to persuade
people that it is selling a reliable, durable, and quality automobile. Moreover, government
purchases and fleet purchases subsidised by the government are still the two major sales
drivers for BYD’s E6 and K9. We believe the EV industry is still at infancy stage, and
changes in government policies would have a significant effect on EV makers such as
BYD. If the government cuts its planned EV purchases or reduces subsidies to EV
purchases, BYD’s EV sales will be seriously hurt.
Stronger-than-expected demand in low-end segment
Almost three-fourths of BYD’s conventional vehicle sales are from models priced below
Rmb100,000 (Figure 125). Its current low-cost brand image seems not to be strong
enough to support a mid-end model priced above Rmb150,000. For example, BYD’s only
MPV model M6 is its first conventional model priced above Rmb150,000. M6 started
delivery in January 2012 and is offering 5-7% of price cuts (Figure 127). However, its
monthly sales never exceed 140 units (Figure 126). If low-end demand grows stronger
than expectation, it is likely that BYD’s revenue and profits from the conventional auto
business would also improve.
Figure 125: Sales contribution of BYD’s conventional
vehicles by prices
RMB100,000-
150,000
25%
2012E
RMB150,000
0.3%
Figure 126: Sales of BYD’s M6
Source: BYD, Credit Suisse estimates Source: BYD, CAAM
08 January 2013
China Auto Sector 61
140
120
100
80
60
40
20
-
Unit
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Figure 127: Retail prices of BYD M6
Official price Oct 2012 retail Price Nov 2012 retail Price Dec 2012 retail Price
Model (’000 Rmb) price (’000 Rmb) cut (%) price (’000 Rmb) cut (%) price (’000 Rmb) cut (%)
M6 2.0L MT Delux 2011 150.8 145.8 3 140.8 7 135.8 10
M6 2.0L MT Glory 2011 170.8 165.8 3 160.8 6 155.8 9
M6 2.4L AT Delux 2011 178.8 173.8 3 168.8 6 163.8 8
M6 2.4L AT Glory 2011 198.8 193.8 3 188.8 5 183.8 8
M6 2.4L AT Flagship 2011 239.8 234.8 2 224.8 6 224.8 6
Source: Channel checks with dealers
Technology challenges and
policy risks are major factors
affecting EVs’ development
Strong-than-expected lowend
demand may benefit
BYD given its intensive
exposure to this segment

Rating UNDERPERFORM* [V]
Price (04 Jan 13, HK$) 4.08
Target price (HK$) 3.50¹
Upside/downside (%) -14.2
Mkt cap (HK$ mn) 33,700 (US$ 4,348)
Enterprise value (Rmb mn) 28,247
Number of shares (mn) 8,259.85
Free float (%) 48.9
52-week price range 4.08 - 1.79
ADTO - 6M (US$ mn) 21.8
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock considered volatile (see Disclosure Appendix).
Share price performance
6
4
2
Research Analysts
Jack Yeung
852 2101 6779
jack.yeung@credit-suisse.com
Price (LHS) Rebased Rel (RHS)
0
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
The price relative chart measures performance against the
MSCI CHINA F IDX which closed at 6652.07 on 04/01/13
On 04/01/13 the spot exchange rate was HK$7.75/US$1
140
Performance over 1M 3M 12M
Absolute (%) 10.6 32.9 134.5
Relative (%) 3.2 16.1 111.6
90
40
08 January 2013
Asia Pacific / China
Geely Automobile Holdings Ltd
(0175.HK / 175 HK)
Struggling to climb up
■ Initiate with an UNDERPERFORM. We initiate coverage on Geely with an
UNDERPERFORM rating and a target price of HK$3.50, which implies
14.2% potential downside. Geely is China’s largest domestic sedan maker. It
is also China’s second-largest auto exporter just after Chery.
■ Rebranding remains difficult. Geely is trying to move its coverage upwards
to the mid-end segment from low-end under its new brands Emgrand and
GLEagle. However, a proliferation of brands could confuse consumers and is
likely to require significant additional marketing spending. We expect this
multi-brand strategy to hardly change consumers’ perceptions of Geely. We
believe Geely will continue to face direct competition from JVs’ self-owned
brands, which are selling at similar prices as its Emgrand and GLEagle
brands. Moreover, many JVs’ low- to mid-end sedan models have
experienced massive prices cuts since 2Q12 and are selling below
Rmb100,000, exerting high pressure on low-end automakers such as Geely.
■ Key challenge: localisation of Volvo. With the takeover of Volvo, Geely
hopes to crack China's fast-growing luxury car market. But a made-in-China
Volvo might not be very popular. Geely will likely face a tough challenge in
the future to convince brand-conscious Chinese consumers to buy a homegrown
Volvo. Its future strategy for Volvo is to build plants for Volvo cars
tailored for Chinese consumers. Volvo cars are known for high safety
standards, while Geely cars are not that safe. Despite quality improvements
in recent years, Geely’s reputation actually remains unchanged.
■ Valuation. We believe Geely will face severe challenges in its rebranding
strategy, selling a made-in-China Volvo, as well as intensified competition in
China’s low-end sedan segment. We value Geely based on 10x 2013E P/E
as we believe it should trade on par with the sector average given similar
growth rate. Potential upside risks to our TP include improvement in its
exports and better-than-expected sales of its Emgrand brand.
Financial and valuation metrics
Year 12/11A 12/12E 12/13E 12/14E
Revenue (Rmb mn) 20,964.9 24,279.3 30,238.6 37,365.5
EBITDA (Rmb mn) 3,043.7 3,538.7 4,230.9 4,935.1
EBIT (Rmb mn) 2,401.8 2,757.3 3,395.1 4,060.8
Net profit (Rmb mn) 1,543.4 1,743.8 2,107.0 2,535.4
EPS (CS adj.) (Rmb) 0.21 0.23 0.28 0.34
Change from previous EPS (%) n.a.
Consensus EPS (Rmb) n.a. 0.23 0.28 0.33
EPS growth (%) 11.5 12.7 20.7 20.3
P/E (x) 15.8 14.1 11.6 9.7
Dividend yield (%) 0.8 0.9 1.1 1.3
EV/EBITDA (x) 9.5 8.0 6.5 5.2
P/B (x) 2.6 2.2 1.8 1.5
ROE (%) 17.5 16.7 17.0 17.2
Net debt/equity (%) 18.4 9.9 1.6 Net cash
Source: Company data, Thomson Reuters, Credit Suisse estimates.
China Auto Sector 62

Struggling to climb up
Intensifying competition in the low-end segment
Geely is China’s largest domestic sedan maker with intensive exposure in the low-end
segment. More than 90% of its sales are from models with official prices below
Rmb100,000. Over 60% of its sales are from models classified as low-end sedans. Due to
the relatively low entry barrier in the low-end sedan segment, the number of players has
already increased significantly during the past few years. Slowing down of demand in this
segment will intensify competition and reduce average selling prices. Moreover, many JVs
have launched their self-owned brands with prices close to the low-end, which we believe
will continue to compress low-end automakers’ margins.
Rebranding remains difficult
Geely is trying to move its coverage to the mid-end segment under its new brands,
Emgrand and GLEagle. It has always been Geely’s goal to move upwards to the mid-end
sedan segment. It even launched these brands with different logos with some of them
priced above Rmb100,000. However, a proliferation of brands could confuse consumers
and is likely to require significant additional marketing spend. This may hardly change
consumers’ perceptions of Geely. Moreover, many JV automakers have introduced their
self-owned brands, with similar prices to Geely’s Emgrand and GLEagle. Many JVs’ lowto-mid
end models are also offering massive prices cuts since 2Q12, with some of them
selling below Rmb100,000. We believe these brands and models will gain market share
from domestic low-end players, such as Geely, and post high pressure on their margins.
Volvo: Limited growth in China
Most notably, Geely’s acquisition of Volvo was probably aimed at increasing its exposure
to the luxury sedan market, though also putting pressure on Geely’s capital and
management. Geely’s takeover of Volvo granted it access to China's fast-growing luxury
car market. However, Volvo’s sales in China were much weaker than other large produced
luxury brands such as BMW and Mercedes-Benz. Geely is also likely to face a tough
challenge in the future to convince brand-conscious Chinese consumers to buy a made-in-
China Volvo. Volvo cars are known for high safety standards, while Geely cars are usually
deemed to be not as safe. Geely’s low-cost image may affect Volvo’s brand value and hurt
its image in China’s luxury auto segment.
Initiate with UNDERPERFORM
We rate Geely an UNDERPERFORM with a target price of HK$3.50 based on 10x 2013E
EPS (sector average) given: (1) severe challenges from JV brands moving towards the
low-end; (2) challenges over its multi-brand strategy; and (3) intensified competition in the
low-end segment. Potential upside risks to our target price include improvement in Geely’s
export and better-than-expected sales performance of its Emgrand brand.
08 January 2013
We believe Geely will
continue to face margin
pressure due to its intensive
exposure to the low-end
segment
We expect Geely to have a
tough rebranding and high
competition pressure from
JVs’ low-to-mid end models
Geely may have difficulty in
fully localising Volvo in
China in the next few years
Initiate with an
UNDERERFORM with a
target price based on 10x
2013E EPS
China Auto Sector 63

Geely Automobile Holdings Ltd 0175.HK / 175 HK
Price (04 Jan 13): HK$4.08, Rating:: NEUTRAL [V], Target Price: HK$3.50, Analyst: Jack Yeung
Target price scenario
Scenario TP %Up/Dwn Assumptions
Upside 3.65 (10.54) 2013E sales: 575,000 units
Central Case 3.50 (14.22) 2013E sales: 551,000 units
Downside 3.14 (23.04) 2013E sales: 500,000 units
Income statement (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Sales revenue 20,965 24,279 30,239 37,365
Cost of goods sold 17,145 19,920 24,848 30,839
SG&A 2,322 2,889 3,598 4,446
Other operating exp./(inc.) (1,546) (2,068) (2,438) (2,855)
EBITDA 3,044 3,539 4,231 4,935
Depreciation & amortisation 641.9 781.4 835.8 874.3
EBIT 2,402 2,757 3,395 4,061
Net interest expense/(inc.) 211.4 271.9 271.9 302.6
Non-operating inc./(exp.) — — — —
Associates/JV (7.2) — — —
Recurring PBT 2,183 2,485 3,123 3,758
Exceptionals/extraordinaries — — — —
Taxes 467.4 546.8 780.8 939.5
Profit after tax 1,716 1,939 2,342 2,819
Other after tax income — — — —
Minority interests 172.4 194.8 235.4 283.2
Preferred dividends — — — —
Reported net profit 1,543 1,744 2,107 2,535
Analyst adjustments — — — —
Net profit (Credit Suisse) 1,543 1,744 2,107 2,535
Cash flow (Rmb mn) 12/11A 12/12E 12/13E 12/14E
EBIT 2,402 2,757 3,395 4,061
Net interest (122.1) (235.9) (228.6) (247.0)
Tax paid (280.7) (546.8) (780.8) (939.5)
Working capital (1,647) (104) (717) (701)
Other cash & non-cash items 689.7 709.4 749.2 763.1
Operating cash flow 1,042 2,580 2,418 2,936
Capex (1,420) (1,000) (1,000) (1,000)
Free cash flow to the firm (379) 1,580 1,418 1,936
Disposals of fixed assets — — — —
Acquisitions (998.4) (215.4) — —
Divestments 1,153 191 191 191
Associate investments (90.9) (46.4) — —
Other investment/(outflows) (1,596) (614) (457) (444)
Investing cash flow (2,953) (1,685) (1,266) (1,253)
Equity raised 13.9 13.6 — —
Dividends paid (170.4) (192.9) (218.0) (263.4)
Net borrowings 715.6 (100.0) 100.0 100.0
Other financing cash flow — — — —
Financing cash flow 559.0 (279.3) (118.0) (163.4)
Total cash flow (1,352) 616 1,034 1,519
Adjustments (10.2) — — —
Net change in cash (1,363) 616 1,034 1,519
Balance sheet (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Cash & cash equivalents 3,030 3,646 4,680 6,200
Current receivables 12,215 14,168 16,983 19,962
Inventories 1,358 1,583 1,974 2,450
Other current assets 403.4 403.3 403.3 403.3
Current assets 17,006 19,801 24,041 29,016
Property, plant & equip. 6,796 6,993 7,173 7,336
Investments 83.7 130.1 130.1 130.1
Intangibles 2,228 2,708 3,002 3,273
Other non-current assets 1,483 1,480 1,480 1,480
Total assets 27,597 31,112 35,826 41,235
Accounts payable 12,114 14,189 16,679 19,433
Short-term debt 2,532 1,409 1,459 1,510
Current provisions — — — —
Other current liabilities 338.8 338.8 338.8 338.8
Current liabilities 14,985 15,937 18,477 21,281
Long-term debt 2,370 3,393 3,442 3,491
Non-current provisions — — — —
Other non-current liab. 92.2 92.2 92.2 92.2
Total liabilities 17,447 19,422 22,011 24,865
Shareholders' equity 9,582 11,360 13,485 16,040
Minority interests 567.9 330.1 330.1 330.1
Total liabilities & equity 27,597 31,112 35,826 41,235
08 January 2013
Key earnings drivers 12/11A 12/12E 12/13E 12/14E
Automobile sales volume
(Unit)
421,385 474,789 550,960 627,920
— — — —
— — — —
— — — —
— — — —
Per share data 12/11A 12/12E 12/13E 12/14E
Shares (wtd avg.) (mn) 7,450 7,471 7,478 7,478
EPS (Credit Suisse)
0.21 0.23 0.28 0.34
(Rmb) DPS (Rmb) 0.03 0.03 0.04 0.04
BVPS (Rmb) 1.29 1.52 1.80 2.15
Operating CFPS (Rmb) 0.14 0.35 0.32 0.39
Key ratios and valuation
Growth(%)
12/11A 12/12E 12/13E 12/14E
Sales revenue 4.3 15.8 24.5 23.6
EBIT 11.6 14.8 23.1 19.6
Net profit 12.8 13.0 20.8 20.3
EPS
Margins (%)
11.5 12.7 20.7 20.3
EBITDA 14.5 14.6 14.0 13.2
EBIT 11.5 11.4 11.2 10.9
Pre-tax profit 10.4 10.2 10.3 10.1
Net profit
Valuation metrics (x)
7.36 7.18 6.97 6.79
P/E 15.8 14.1 11.6 9.7
P/B 2.55 2.16 1.82 1.53
Dividend yield (%) 0.79 0.89 1.07 1.29
P/CF 23.5 9.5 10.1 8.4
EV/sales 1.38 1.16 0.90 0.69
EV/EBITDA 9.5 8.0 6.5 5.2
EV/EBIT
ROE analysis (%)
12.1 10.2 8.0 6.4
ROE 17.5 16.7 17.0 17.2
ROIC 18.1 17.3 18.9 20.9
Asset turnover (x) 0.76 0.78 0.84 0.91
Interest burden (x) 0.91 0.90 0.92 0.93
Tax burden (x) 0.79 0.78 0.75 0.75
Financial leverage (x)
Credit ratios
2.72 2.66 2.59 2.52
Net debt/equity (%) 18.4 9.9 1.6 (7.3)
Net debt/EBITDA (x) 0.61 0.33 0.05 (0.24)
Interest cover (x) 11.4 10.1 12.5 13.4
Source: Company data, Thomson Reuters, Credit Suisse estimates.
0
2008 2009 2010 2011 2012 2013
China Auto Sector 64
25
20
15
10
5
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
12MF P/E multiple
12MF P/B multiple
0.0
2008 2009 2010 2011 2012 2013
Source: IBES

Intensifying competition in the lowend
segment
Largest domestic sedan maker focusing on low-end
Geely has overtaken Chery to become the largest domestic sedan maker in China, with
around 4% market share in the sedan sector in the first 11 months of 2012 (Figure 128).
Currently, about 15% of domestic branded sedans sold in China are made by Geely
(Figure 129). However, over 90% of its sales are from models with average official prices
below Rmb100,000 (Figure 130) and over 60% of its sales are from models classified as
low-end sedans (Figure 131). Given its intensive exposure to the low-end sedan segment,
we believe Geely will be more easily affected by the slowing demand and tough price
competition in the low-end segment.
08 January 2013
Figure 128: Geely’s market share in China’s sedan sector Figure 129: Geely’s sedan sales as % of domestic brands’
Geely Auto
4%
Others
45%
Jan-Nov 2012
Chang'an
Ford
4%
SH GM
12%
FAW VW
12%
SH VW
10%
DF Nissan
6%
BJ
Hyundai
6%
sedan sales
China Auto Sector 65
Lifan
4%
Zhonghua
(Huachen)
4%
Others
33%
Jianghuai
4%
Jan-Nov 2012
Great Wall
7%
Source: CAAM, Credit Suisse estimates Source: CAAM, Credit Suisse estimates
Geely
15%
Chery
13%
BYD
12%
Chang'an
8%
Figure 130: Geely product portfolio (by price) Figure 131: Geely product portfolio (by product category)
Average
Official
Prices >=
RMB100k
9%
Jan-Nov 2012
Avearge
Official
Prices <
RMB100k
91%
Mid- to
high-end
sedan
0.2%
Low-end
sedan
61%
Jan-Nov 2012
Source: Geely, Credit Suisse estimates Source: Geely, Credit Suisse estimates
Affected by the weakening demand of low-end sedans, Geely’s domestic sales slowed in
2012. It sold 332,893 vehicles in the domestic market in the first 11 months of 2012, about
2% lower than the same period last year. During the past 11 months, Geely has
experienced YoY sales decline for six months. Among this, its monthly sales declined by
over 5% YoY in five consecutive months, from March to July (Figure 132).
Given Geely’s intensive
exposure to the low-end
sedan segment, we believe
it will be affected by slowing
demand and the tough price
competition in this segment
Mid-end
sedan
3%
Low- to
mid-end
sedan
30%
Low- to
mid-end
SUV
6%
Slowdown of Geely’s
domestic sales in 2012

Figure 132: Geely’s domestic sales in 2011 and 2012
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Unit
-26%
10%
-7% -6% -5%
-11%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Geely, Credit Suisse estimates
-8%
0%
08 January 2013
China Auto Sector 66
11%
20%
11%
2011 Domestic Sales 2012 Domestic Sales 2012 Domestic Sales y-y
Due to the relatively low entry barriers in the low-end sedan segment, the number of players
has already increased significantly during the past few years. Slowing down of demand will
intensify competition and reduce average selling prices. For example, dealers are offering 4-
11% discount on Geely’s major low-end models over the past three months, and we expect
these discounts to continue into 1Q13 (Figure 133). Moreover, without strong demand
growth to boost production and enhance economies of scale, it becomes more difficult to
lower the average cost. Therefore, we believe the average margin in the low-end sedan will
narrow drastically. Other than that, there may be risk of overcapacity if demand for low-end
sedans grows more slowly than expected. As new capacities built for low-end sedans are
less likely to be fully utilized, production efficiency should decline. In the long term, rising idle
resources may further erode the squeezed margins of auto producers.
Figure 133: Retail prices of Geely’s major low-end models
Official Oct-12 Price Nov-12 Price Dec-12 Price
price retail price cut retail price cut retail price cut
Model (’000 Rmb) (’000 Rmb) (%) (’000 Rmb) (%) (’000 Rmb) (%)
FreeCruiser 1.3L 45.8 41.8 9 40.8 11 41.8 9
FreeCruiser 1.5L MT 46.8 40.8 13 40.8 13 40.8 13
FreeCruiser 1.5L AT 52.8 46.8 11 46.8 11 46.8 11
Panda 1.0L Basic 37.8 34.8 8 33.8 11 33.8 11
Panda 1.0L Comfort 43.8 40.8 7 39.8 9 39.8 9
Panda 1.0L Luxury 47.8 44.8 6 43.8 8 43.8 8
Panda 1.3L Delux 58.8 55.8 5 54.8 7 54.8 7
GC7 1.8 MT Elite 2012 69.9 66.9 4 66.9 4 63.9 9
GC7 1.8 AT Comfort 2012 76.9 73.9 4 73.9 4 70.9 8
GC7 1.8 MT Delux 2012 76.9 73.9 4 73.9 4 70.9 8
Kingkong II 1.5MT 2010 52.8 47.8 9 47.8 9 47.8 9
Kingkong II VVT 1.5MT 2010 53.8 48.8 9 48.8 9 48.8 9
Kingkong II 1.5MT Delux 2010 56.8 51.8 9 51.8 9 51.8 9
Kingkong II VVT 1.5MT Delux 2010 57.8 52.8 9 52.8 9 52.8 9
Source: Channel checks with dealers
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
We believe the low-end
segment will continue to
face high margin pressure

Rebranding remains difficult
Sub brands didn’t change Geely’s low-end image
Launching new models under different brands is part of Geely’s strategy to make its
products appealing to a wider range of consumers. Currently, it is using three baby
brands: GLEagle, Emgrand and Englon. GLEagle is to be used for all affordable
subcompacts, Englon for tasteful and friendly cars and Emgrand for more upscale vehicles.
Most of GLEagle and Englon products are priced below Rmb100,000 (Figure 136). GX7 is
the first low- to mid-end SUV of Geely priced above Rmb100,000. TX4 is priced above
Rmb200,000 in the mid- to high-end segment, but sold only 724 units in the first 11
months of 2012. Emgrand’s brand mainly consists of low-to-mid end sedans, accounting
for about 32% of Geely’s total sales. However, over 90% of Emgrand’s sales were from
the EC7 and EC7-RV, which were mainly sold below Rmb100,000. Geely's multi-brand
strategy can be deemed as a tall task on changing its low-end image. However, a
proliferation of brands could confuse consumers and is likely to require significant
additional marketing spending.
08 January 2013
Figure 134: Geely’s vehicle models
Brand Model Price ('000 Rmb) Launch time of new model 2012E sales (‘000 units) 2013E sales (‘000 units)
Emgrand EC7 69.8 - 109.8 141.5 152
EC7-RV 66.8 - 105.8 0 0
EC8 105.8 - 159.8 11.2
Upgraded EC8 148 - 159.8 1Q13
EX6 60 - 80 1H13 8
EX8 130 - 180 1H13 8
EV8 80 - 120 2H13 2
SX7 92.8 - 129.8 Early 2013 12
GLEagle Panda 37.8 - 69.8
GX2 51.8 - 65.8
China Auto Sector 67
12.8
31.3 32.7
GX7 92.9 - 129.9 32 51.2
GC7 61.9 - 89.9 15.6 18
Vision 50.9 - 69.9 30.8 32.3
Free Cruiser 33.8 - 55.8 64.2 67
Englon Kingkong 52.8 - 60.8 76.6 80
SC3 40.8 - 47.8 12.7 14
SC5-RV 55.3 - 59.3 2.3
SC5-RV 1.3T 56 - 61 2H13
SC6 53.8 - 60.8 11.4 12.3
SC7 53.9 - 85.9 44.7 45
TX4 208 - 228 0.8 0.9
Volvo XC60 330 - 600 0.1
Total 475 551
Source: Geely, Credit Suisse estimates
Figure 135: Launching time of Geely’s new models
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
SX7 Early 2013
Upgraded EC8 1Q13
EX6 1H13
EX8 1H13
EV8 2H13
SC5-RV 1.3T 2H13
XC60 End-2013
Source: Geely
Geely’s multi-brand strategy
could not drastically change
its low-end image
2.6

Figure 136: Official prices of Geely models
Volvo
Source: Geely
08 January 2013
- 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000
EC7
RMB
EC7-RV
EC8
Upgraded EC8
EX6
EX8
EV8
SX7
Panda
Emgrand
GX2
GX7
GC7
Vision
Free Cruiser
Kingkong
GLEagle
SC3
SC5-RV
SC5-RV 1.3T
SC6
SC7
TX4
XC60
Englon
Existing model New model
Figure 137: Comparison of Geely Emgrand EC8 and its major competitors
Model
Geely Emgrand EC8 Chery New Eastar BYD F6 Hyundai Sonata moInca
2.0MT Advance 2.0MT Elegant 2.0CVT VIP 2.0M GL Comfort
Official price (’000 Rmb) 99.8 103.8 109.8 116.8
Dec-12 retail price (’000 Rmb) 89.8 88.8 89.8 91.8
Size (m) 4.905/1.830/1.495 4.866/1.840/1.500 4.846/1.822/1.465 4.770/1.820/1.440
Wheelbase (m) 2.805 2.768 2.74 2.7
Trunk volume (Litre) 504 585 480 430
Tank volume (Litre) 63 65 65 65
Complete mass (kg) 1490 1480 1435 1435
Engine size (L) 1.997 1.971 1.991 1.975
Max power (kW/rpm) 104/6000 102/5750 103/6000 101/6000
Max toque (n.m/rpm) 178/4000-4500 182/4300-4500 186/4000-4500 180/4500
Acceleration 0-100 km/h (s) 9.5 15.6 11 14.2
Transmission 5MT 5MT CVT 5MT
Fuel consumption (L/100km) 9.8 6.7 8.3 8.1
Warranty 3 years or 100,000km 3 years or 60,000km 5 years or 100,000km 2 years or 60,000km
Emission standard National IV National IV National IV National IV
Source: Xcar, Channel checks with dealers
China Auto Sector 68

Figure 138: Comparison of Geely Englon Kingkong II and its major competitors
Model
Geely Englon Kingkong II Xiali Weizhi BYD F3 Lifan 620
08 January 2013
1.5MT Standard 1.5MT Standard 1.5MT Comfort 1.5MT ComfortA
Official price (’000 Rmb) 52.8 53.8 54.9 54.9
Dec-12 retail price (’000 Rmb) 47.8 50.8 48.9 49.9
Size (m) 4.342/1.692/1.435 4.245/1.680/1.500 4.533/1.705/1.490 4.550/1.705/1.495
Wheelbase (m) 2.502 2.425 2.6 2.605
Trunk volume (Litre) 450 450 450 650
Tank volume (Litre) 45 45 50 58
Complete mass (kg) 1090 995 1210 1150
Engine size (L) 1.498 1.498 1.499 1.498
Max power (kW/rpm) 69/6000 75/6000 80/5800 69/6000
Max toque (n.m/rpm) 128/3400 130/4400 145/4800 128/3500-5000
Acceleration 0-100 km/h (s) 12.8 14 14.9 12
Transmission 5MT 5MT 5MT 5MT
Fuel consumption (L/100km) 7.3 7.5 6.5 6
Warranty 3 years or 100,000km 2 years or 50,000km 4 years or 100,000km 3 years or 60,000km
Emission standard National IV National IV National IV National IV
Source: Xcar, Channel checks with dealers
Figure 139: Comparison of Geely GLEagle FreeCruiser and its major competitors
Model
Geely GLEagle
FreeCruiser
Lifan 520 Changan Yuexiang V3 Suzuki Cultus II
1.3MT Fashion II 1.3MT Navi Basic 1.3MT Basic 1.3MT Basic
Official price (’000 Rmb) 40.9 40.9 43.9 41.8
Dec-12 retail price (’000 Rmb) 36.9 37.9 40.9 38.8
Size (m) 4.152/1.680/1.440 4.370/1.700/1.473 4.180/1.650/1.465 4.1105/1.590/1.395
Wheelbase (m) 2.434 2.54 2.41 2.365
Trunk volume (Litre) 300 630 580 500
Tank volume (Litre) 45 51 36 40
Complete mass (kg) 1052 1155 985 895
Engine size (L) 1.342 1.342 1.298 1.298
Max power (kW/rpm) 63/6000 65/6000 69/6000 67/6000
Max toque (n.m/rpm) 110/5200 110/3500-5000 121/4000-5000 115/2500-3500
Acceleration 0-100 km/h (s) 14.7 9.9 10.4 15
Transmission 5MT 5MT 5MT 5MT
Fuel consumption (L/100km) 7.1 5.8 5.6 5.8
Warranty 2 years or 60,000km 3 years or 60,000km 2 years or 60,000km 3 years or 100,000km
Emission standard National IV National IV National IV National IV
Source: Xcar, Channel checks with dealers
China Auto Sector 69

Low utilization rate for Geely’s mid-end capacity
Geely has around 130,000 units of capacity reserved for its three mid-end and mid-to-high
end models: the Jinan plant has 60,000 units of capacity for EC8, the Chengdu plant has
60,000 units of capacity for GX7, and the Shanghai plant has 10,000 units for TX4. In the
first 11 months of 2012, their utilization rates were only around 49.7%, 19.5%, and 7.9%,
respectively. If we divide Geely’s capacity into two groups categorized by engine size, it
has 530,000 units of capacity for vehicles with engine size lower than 2.0L, whose
capacity utilization rate has improved by 8.3% to 84.9% in the first 11 months of 2012
(Figure 140). However, the utilization rate of its capacity for vehicles with engine size
larger than or equal to 2.0L dropped by 4.9% to 17.8% (Figure 140). In the absence of
strong sales of mid-end and mid-to-high end models, we expect their capacity to continue
to be a huge burden for Geely. Without substantial structural change in its product portfolio,
we expect the company to retain its low-end image in the next few years.
Figure 140: Utilisation rate of Geely’s capacity by engine size
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
Unit
530,000
76.6%
405,756
485,833
84.9%
412,380
70,000
15,855
08 January 2013
China Auto Sector 70
22.7%
17.8%
64,167
Engine size =2L
11,449
2011 Capacity (LHS) 2011 Sales (LHS)
Jan-Nov 12 Capacity (LHS) Jan-Nov 12 Sales (:HS)
2011 utilization rate (RHS) Jan-Nov 12 utilization rate (RHS)
Source: Company data, Credit Suisse estimates
Competition pressure from JVs and domestic peers
Geely’s mid- to low-end sub brand Emgrand is mainly priced between Rmb80,000 and
Rmb130,000, with its current retail prices between Rmb78,000 and Rmb124,000 (Figure
141). Some of the models, such as EC8 and EC7 CVT, are priced above Rmb100,000,
higher than most JVs’ self-owned brands. They are also facing price pressure from JVs’
mid- to low-end sedan models, which have experienced massive prices cuts since 2Q12
and are selling below Rmb100,000 (Figure 142). Given Geely’s low-end image and the
relatively high selling prices of its Emgrand models, we expect more customers to choose
JVs’ low-to-mid end models, which may bring down Emgrand’s prices and hurt its margins.
Moreover, Geely’s other mid-to-low models—its first SUV, GX7—exhibited much weaker
ramp-up of sales compared with its domestic peers: Great Wall Hover H6 and BYD S6.
Although these three SUVs have similar prices and specs, GX7’s monthly sales remained
below 5,000 units after it was launched, while monthly sales of both H6 and S6 exceeded
10,000 units within ten months of their launch (Figure 103). The large gap between GX7
and its peers suggests Geely’s weak brand image in the SUV segment, which we believe
is unlikely to substantially improve in the near term.
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
We expect Geely’s mid-end
capacity to maintain low
utilisation rate in next few
years.
We believe Geely will face
intensifying competition from
JVs’ low-to-mid end models
and its domestic peers such
as Great Wall and BYD

08 January 2013
Figure 141: Retail prices of Geely’s major low-to-mid end models
Official Oct-12 Price Nov-12 Price Dec-12 Price
price retail price cut retail price cut retail price cut
Model (’000 Rmb) (’000 Rmb) (%) (’000 Rmb) (%) (’000 Rmb) (%)
EC7 1.8L Basic 79.8 76.8 4 73.8 8 70.8 11
EC7 1.8L Comfort 82.8 79.8 4 76.8 7 73.8 11
EC7 1.8L Delux 89.8 84.8 6 83.8 7 80.8 10
EC71.8L CVT RV Delux 98.8 93.8 5 92.8 6 88.8 10
EC71.8L CVT Delux 101.8 96.8 5 95.8 6 91.8 10
EC8 2.0L MT Basic 105.8 100.8 5 97.8 8 99.8 6
EC8 2.0L MT Comfort 109.8 104.8 5 101.8 7 101.8 7
EC8 2.0L AT Basic 117.8 112.8 4 109.8 7 107.8 8
EC8 2.0L AT Comfort 121.8 116.8 4 113.8 7 109.8 10
EC8 2.0L AT Luxury 128.8 123.8 4 120.8 6 113.8 12
Source: Channel checks with dealers
Figure 142: Retail prices of JVs' major low-to-mid end models
Official Oct-12 Price Nov-12 Price Dec-12 Price
price retail price cut retail price cut retail price cut
Brand Model (’000 Rmb) (’000 Rmb) (%) (’000 Rmb) (%) (’000 Rmb) (%)
Honda City 1.5 MT Comfort 79.8 59.8 25 61.8 23 62.8 21
City 1.5 AT Comfort 89.8 69.8 22 71.8 20 72.8 19
City 1.5 MT 99.8 79.8 20 81.8 18 82.8 17
Toyota Yaris 1.6E MT 88.8 73.8 17 73.8 17 73.8 17
Yaris 1.6E AT 94.8 79.8 16 79.8 16 79.8 16
Yaris 1.6GS AT 106.8 91.8 14 91.8 14 88.8 17
New Yaris 1.3E AT 2011 93.0 78.0 16 78.0 16 75.0 19
New Yaris 1.6E MT 2011 88.8 73.8 17 73.8 17 70.8 20
New Yaris 1.6G MT 2011 94.8 79.8 16 79.8 16 76.8 19
New Yaris 1.6E AT 2011 94.8 79.8 16 79.8 16 76.8 19
New Yaris 1.6G AT 2011 100.8 85.8 15 85.8 15 82.8 18
Corolla EX 1.6 MT Classic 97.8 77.8 20 79.8 18 82.8 15
Corolla EX 1.6 MT Delux 106.8 86.8 19 88.8 17 91.8 14
Corolla EX 1.6 AT Classic 105.8 85.8 19 87.8 17 90.8 14
Corolla EX 1.6 AT Delux 114.8 94.8 17 96.8 16 99.8 13
Mazda Mazda2 1.3L MT 81.8 70.8 13 73.8 10 66.8 18
Mazda2 1.3L AT 89.8 78.8 12 81.8 9 74.8 17
Mazda2 1.5L MT 88.8 77.8 12 80.8 9 73.8 17
Mazda2 1.5L AT 96.8 85.8 11 88.8 8 81.8 15
Mazda2 1.5L AT Delux 105.8 94.8 10 97.8 8 90.8 15
Buick Excelle 1.6 LX MT2012 99.9 81.9 18 76.9 23 71.9 28
Excelle 1.6 LX AT2012 104.9 86.9 17 81.9 22 76.9 27
Excelle 1.6 LE MT2012 107.9 89.9 17 84.9 21 79.9 26
Excelle 1.6 LE AT2012 117.9 99.9 15 94.9 20 89.9 24
Chevloret Spark P-TEC 1.0MT Energy 43.3 36.3 16 36.3 16 38.3 12
Spark P-TEC 1.0MT Fashion 46.8 39.8 15 39.8 15 41.8 11
Spark 1.2MT Sport Excellence 42.8 34.8 19 35.8 16 37.8 12
Spark 1.2MT Sport Energy 45.8 37.8 17 38.8 15 40.8 11
Spark 1.2MT Sport Fashion 49.8 39.8 20 42.8 14 44.8 10
Hyundai Elantra 1.6 MT 2011 version 89.8 80.8 10 78.8 12 79.8 11
Elantra 1.6 AT 2011 version 98.8 89.8 9 87.8 11 88.8 10
Ford Focus 1.8L MT Classic 104.8 97.8 7 89.8 14 89.8 14
Focus 1.8L MT Comfort 114.8 107.8 6 99.8 13 99.8 13
Source: Channel checks with dealers
China Auto Sector 71

Volvo: Limited growth in China
Volvo remains a small player even after a decade
Apart from the latest batch of new models, Geely’s US$1.8 bn acquisition of Volvo may
provide it the ability to improve the quality of its cars by incorporating Volvo’s advanced
technology. Moreover, the deal could provide Geely with a highly recognized brand equity
and a shortcut to the global automobile market. However, it remains to be seen if Geely
has sufficient financial muscle and management wisdom to make Volvo profitable quickly.
It looks very hard for Geely to turn Volvo around from its poor performance within a few
years. Even in China’s fast-growing luxury auto sector, Volvo’s sales in 1H12 only
increased by 1.7% YoY, compared to the sector’s average of around 25%. Its Chinese
market share dropped to around 3.4% in 1H12, slightly higher than its 2.9% share in 2004
(Figure 143). Given the weak sales performance, we believe Volvo is unlikely to easily
recover its competitiveness against other luxury brands. We expect Volvo to maintain its
current market share in China’s luxury auto sector, which would still be around 3% by
2015 (Figure 145).
Figure 143: Volvo’s market share in China
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
units
2003 2004 2005 2006 2007 2008 2009 2010 2011 1H12
BMW Group sales (LHS) Benz sales (LHS) Audi sales (LHS)
Lexus sales (LHS) Volvo sales (LHS) Volvo market share (RHS)
Source: Company data, Credit Suisse estimates
08 January 2013
Figure 144: China market share of luxury brands (2004) Figure 145: China market share of luxury brands (2015E)
Volvo Others
Lexus
0%
3% 3%
Audi
68%
BMW
16%
Mercedes-
Benz
10%
China Auto Sector 72
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Mercedes-
Benz
24%
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Volvo
3%
Lexus
5%
Audi
26%
Others
15%
We believe it is difficult for
Volvo to change its weaker
position than other luxury
brands in China.
BMW
27%

Long way to massive localization
Based on Volvo’s historical sales performance, we do not think Geely can quickly turn
around Volvo’s competitiveness after a decade of weak performance. In the Chinese
luxury car market, localization is key to luxury brands’ success. Many luxury brands have
already established JVs with Chinese partners. These JVs have their own plants and have
been producing China-made or China-only models for a few years (e.g., Audi built its first
product line in FAW in 1990). Localized production lowers the cost of labor, transportation
and tariffs. It also cultivates a localized platform to create diversified models to satisfy endusers’
requirements. Volvo also produces locally under Chang’an Ford’s plant, but it did
not seem to give the brand a strong support in its sales. Since 2009, Volvo experienced
the steepest decline in its localization rate compared with other major luxury brands in
China (Figure 146). Sales of its China-made models also dropped by about 17% to 14,200
units in 2011 (Figure 147).
Figure 146: Sales of China made cars as a percentage of Chinese sales
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2006 2007 2008 2009 2010 2011 2012E
Source: Company data, Credit Suisse estimates
BMW Benz Audi Volvo
Figure 147: Sales of China-made luxury vehicles
300,000
250,000
200,000
150,000
100,000
50,000
-
Unit
93,168 98,461
104,867
77,192
77,551
69,878
61,276 62,017
50,101
43,702
30,600 35,163
38,856
3,052 8,661
15,300
22,550
5,614 7,018
14,355 15,921
17,091 14,200
3,324 5,644 5,605 15,145
08 January 2013
China Auto Sector 73
137,790
194,920
2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Company data, Credit Suisse estimates
BMW Benz Audi Volvo
252,000
Given Volvo’s historical
performance in China, it
may difficult for Geely to
fully localise this brand in a
short while

Volvo plans to build two new plants from scratch in Shanghai and Daqing. It is also using
Geely’s existing production facility in Chengdu to build another plant, mainly for SUVs,
which may commence operations next year with initial capacity of around 50,000 units.
Each of Volvo’s new plants in China has phase I designed capacity of 100,000 units. We
expect its total capacity in China to reach around 315,000 units by 2015, including
Chang’an Ford’s existing capacity (Figure 148). This would be equivalent to around 50%
of Audi’s China capacity, during that time (Figure 148). However, Volvo only sold around
325,000 units globally and about 47,000 units in China in 2011. Given its small market
share in China’s luxury auto market, its 300,000 units of planned new capacity seem to be
very aggressive and expensive at the moment. Moreover, Geely does not have strong and
experienced technical teams like FAW, Brilliance, and Beijing Auto. So we think it may be
difficult for Geely to quickly import and digest Volvo’s technology. Recalling FAW and
Audi’s 20-year efforts towards localization, it looks very difficult for Geely to fully localize
Volvo to directly challenge Audi, BMW, and Benz in the Chinese luxury car market.
Figure 148: Capacity expansion of luxury brands in China
'000 units
700
600
500
400
300
200
100
0
200 200
300 300
200
105
120
95
75
40
50
25 15 15 15 15
390
360
220
08 January 2013
China Auto Sector 74
65
490
460
320
190
600
560
2009 2010 2011 2012E 2013E 2014E 2015E
Source: Company data, Credit Suisse estimates
Audi BMW Mercedes-Benz Volvo*
*Volvo capacity between 2009-2012 was estimated based on Changan Ford’s Volvo production volume
Geely’s low-cost image may smear the Volvo brand
Another major obstacle to Volvo’s growth in the Chinese market is its relatively low brand
recognition, which may also be affected by Geely’s image as a low-end sedan
manufacturer. In China’s luxury car market, Volvo’s models are sold at a much cheaper
price than other luxury brands, especially after its recent massive price cuts by around 10-
30% (Figure 149). However, its sales volume is much smaller. Even if Geely applies its
low-cost strategy to Volvo, we do not think an even lower price will solve Volvo’s problem.
Volvo labeled "security" as its brand DNA—similar to BMW’s “driving”, Benz’s “comfort”
and Audi's “technology”. However, we do not believe that this means that luxury car
buyers will think of BMW, Benz or Audi as unsafe, or even that they are any less safe than
a Volvo. These competitors' brand DNAs—to enjoy “driving” a BMW, or to own “comfort” in
a Benz—are prime considerations of consumers. We think Volvo’s overemphasis on its
security attributes will inevitably miss the key features end-users pursue, which we think
was a great drawback for Volvo’s China brand strategy prior to Geely’s acquisition of it.
420
315
Volvo will have two new
plants in China but still lag
behind other luxury brands’
expansion of their China
capacity.
Geely’s low-cost image will
likely hurt Volvo’s brand
recognition and sales in
China

Figure 149: Retail prices of major luxury brands
08 January 2013
Official Oct-12 Price Nov-12 Price Dec-12 Price
price retail price cut retail price cut retail price cut
Brand Model (’000 Rmb) (’000 Rmb) (%) (’000 Rmb) (%) (’000 Rmb) (%)
Volvo S40 2.0DCT Smart 2011 268.0 223.0 17 208.0 22 208.0 22
S40 2.0DCT Elegant 2011 288.0 243.0 16 228.0 21 228.0 21
S40 2.0DCT Delux 2011 308.0 263.0 15 248.0 19 248.0 19
C30 2.0DCTAktive 2012 299.0 274.0 8 269.0 10 279.0 7
C30 2.0DCTAktive Joy 2012 225.0 200.0 11 195.0 13 205.0 9
C30 2.0DCTAktive Flash 2012 233.8 208.8 11 203.8 13 213.8 9
S60 2.0T DCTT5 Smart 2012 249.8 199.8 20 199.8 20 199.8 20
S60 2.0T DCTT5 Comfort 2012 319.9 269.9 16 269.9 16 264.9 17
S60 1.6T DCTDRIVe Smart 2012 282.8 232.8 18 222.8 21 212.8 25
S60 1.6T DCTDRIVe Comfort 2012 306.8 256.8 16 246.8 20 236.8 23
S60 1.6T DCTDRIVe Smart 2012 334.8 284.8 15 274.8 18 264.8 21
S60 2.0T DCTT5 Comfort 2012 339.8 259.8 24 264.8 22 259.8 24
S60 2.0T DCTT5 Delux 2012 369.8 289.8 22 294.8 20 289.8 22
S60 3.0T ATT6 AWD Delux 2012 529.8 454.8 14 454.8 14 429.8 19
Mercedes-Benz C180K Classic 308.0 233.0 24 218.0 29 158.0 49
C200 CGI 348.0 258.0 26 248.0 29 193.0 45
C200 CGI Fashion 388.0 283.0 27 268.0 31 233.0 40
BMW 318i 2.0 AT Advance 2012 296.0 249.0 16 246.0 17 241.0 19
320i 2.0 AT Morden 2012 351.0 304.0 13 301.0 14 296.0 16
320i 2.0 AT Delux 2012 388.8 341.8 12 338.8 13 333.8 14
325i 2.5 AT Fashion 2012 413.8 333.8 19 338.8 18 333.8 19
Audi A6L 2.0 TFSI Basic 2011 389.0 359.0 8 329.0 15 319.0 18
A6L 2.0 TFSI Comfort AT 2011 355.0 325.0 8 295.0 17 285.0 20
A4L 2.0 TFSI(155kW) Sport 2012 369.8 329.8 11 329.8 11 309.8 16
A4L 2.0 TFSI(155kW) Delux 2012 399.0 359.0 10 359.0 10 339.0 15
A4L 1.8 TFSI MT Comfort 2012 272.8 232.8 15 234.8 14 217.8 20
A4L 1.8 TFSI CVT Comfort 2012 291.0 251.0 14 253.0 13 236.0 19
A4L 2.0 TFSI CVT Standard 2012 309.8 269.8 13 271.8 12 254.8 18
A4L 2.0 TFSI CVT Comfort 2012 329.9 289.9 12 291.9 12 274.9 17
A4L 2.0 TFSI CVT Tech 2012 369.8 329.8 11 331.8 10 314.8 15
Lexus CT200h 1.8 CVT Elite 2012 279.0 234.0 16 239.0 14 229.0 18
CT200h 1.8 CVT Advance 2012 339.0 294.0 13 289.0 15 289.0 15
CT200h 1.8 CVTF Sport 2012 365.0 320.0 12 315.0 14 315.0 14
Source: Channel checks with dealers
Due to shortcomings of Volvo’s brand strategy in China, we think that Chinese customers’
current interpretation of its brand does not reflect its true value. Geely’s image as a lowend
auto manufacturer may further affect Volvo’s reputation as a premium brand. From
Geely’s point of view, it always wanted to have its own luxury brands, which usually takes
a long time to achieve. The acquisition of Volvo may shorten the time to achieve this, but
the corresponding damage to Volvo’s brand may be unavoidable. A 26-year-old Chinese
private enterprise controlling an 85-year-old European classic brand might be something
that many people would not accept easily—especially luxury car buyers. Most importantly,
the low-cost image of Geely may smear the outstanding attributes of Volvo in the Chinese
market—namely, its quality and security. Geely intends to use a few low-cost strategies
with regards to Volvo, to obtain a price advantage, which can boost product sales in the
short term, but which we feel, is more likely to drag Volvo away from the Benz, BMW and
Audi luxury car camp. For some things “the cheaper the better” does not apply—this
includes luxury cars. The paradox is that Geely has to reduce the cost of the Volvo, which
is believed to be the root cause of the latter’s failure over the past decade—a failure that
could not even be handled by Ford since it took over Volvo.
Volvo’s failure in brand
market strategy in China
would not be easily handled
by Geely
China Auto Sector 75

Initiate with UNDERPERFORM
We initiate coverage on Geely with an UNDERPERFORM rating, as we believe it will
continue to feel pain from: (1) intensifying completion in the low-end segment; (2)
challenges over its multi-brand strategy; and (3) top-down competition from JVs’ mid- to
low-end models and self-owned brands. Our target price for Geely is HK$3.50 per share
based on 10x 2013E EPS. We believe Geely should be traded on par with the sector
average given similar growth rate, which is around 10x 2013E P/E (Figure 150).
08 January 2013
Figure 150: Valuation comparison table
Company (Local (USD m) P/E (x) P/B (x) Dividend yield % ROE (%)
H-share automaker
currency) 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E 11 12E 13E 14E
Brilliance China Auto 1114.HK 10.58 6,089 19.7 14.8 12.1 9.9 7.6 5.7 4.3 3.3 - 0.0 0.1 0.3 27.2 29.4 28.6 26.6
Dongfeng Motors 0489.HK 12.04 10,817 8.0 9.6 6.6 6.1 2.2 1.9 1.7 1.4 1.5 1.3 1.5 1.6 25.0 17.6 18.0 17.3
Geely 0175.HK 4.08 3,381 16.1 12.9 11.0 9.1 2.6 2.3 1.9 1.7 0.7 0.9 1.1 1.3 18.6 17.1 17.6 17.3
Great Wall Motor 2333.HK 25.35 10,105 16.3 12.7 10.9 9.5 3.8 3.0 2.5 2.1 1.4 1.9 2.1 2.4 25.6 24.9 23.3 21.6
Guangzhou Auto 2238.HK 7.14 4,955 7.8 15.0 10.2 8.2 1.5 1.4 1.3 1.2 2.8 1.5 2.2 2.6 15.6 8.3 10.5 12.1
Qingling Motors 1122.HK 2.05 599 11.1 11.7 10.2 9.9 0.6 0.6 0.6 0.6 7.1 6.4 6.9 7.0 4.9 4.6 5.1 5.5
Sinotruk 3808.HK 6.2 1,632 11.1 29.4 13.9 10.1 0.8 0.8 0.8 0.8 1.6 1.1 1.4 1.6 5.4 2.8 3.8 5.0
Weichai Power 2338.HK 35.8 8,295 10.1 14.8 12.3 11.0 2.6 2.0 1.8 1.6 0.3 0.6 0.6 0.7 27.0 14.0 14.6 14.3
Mkt cap–wtd avg 12.5 13.5 10.3 8.9 3.2 2.6 2.1 1.8 1.2 1.2 1.4 1.6 23.3 18.4 18.4 17.8
A-share automaker
JAC 600418.SS 6.76 1,109 11.2 13.9 9.8 8.5 1.5 1.4 1.3 1.2 2.2 1.9 2.1 2.2 9.5 10.7 11.8
Foton Motor 600166.SS 6.61 2,620 10.7 6.4 7.9 7.6 1.6 1.2 1.1 1.0 1.8 1.9 1.9 1.1 13.4 15.8 11.8 10.1
DFAC 600006.SS 3 980 12.0 27.7 21.8 13.1 1.0 0.9 0.9 0.9 1.7 0.3 0.7 7.8 (0.1) 3.9 4.4
Faw Car 000800.SZ 7.9 1,671 48.2 50.1 53.9 40.3 1.5 1.6 1.6 1.6 - 0.1 0.1 - 2.6 (4.0) 0.5 1.5
HAIMA AUTO 000572.SZ 2.93 748 14.6 59.6 49.7 14.2 0.7 0.7 0.7 - 0.7 0.7
SAIC Motor 600104.SS 17.59 28,317 7.4 8.2 6.5 5.9 1.9 1.6 1.4 1.3 1.7 2.4 3.0 3.3 22.7 18.1 16.3 15.2
TJ FAW Xiali 000927.SZ 4.87 1,137 64.5 41.4 34.6 24.1 2.1 2.1 2.0 0.4 0.4 0.4 3.0
Mkt cap–wtd avg 11.6 12.6 10.9 8.5 1.8 1.5 1.4 1.1 1.5 2.0 2.5 2.6 18.6 15.0 13.7 12.8
Source: Bloomberg consensus
Valuation comparison with Dongfeng Motors
Figure 151: 12-month forward P/E band—GAC vs. DFM Figure 152: Geely’s P/E multiple premium to GAC
22
20
18
16
14
12
10
8
6
4
2
Jan-10 Aug-10 Mar-11 Oct-11 May-12 Jan-13
Geely 12m forward P/E Dongfeng Motor 12m forward P/E
Source: Bloomberg consensus Source: Bloomberg consensus
Both Geely and Dongfeng Motors are major sedan producers in China. Since 2010, Geely
has traded at an average premium of 32% to Dongfeng in terms of 12-month forward P/E
-100%
Jan-10 Aug-10 Mar-11 Oct-11 May-12 Jan-13
China Auto Sector 76
200%
150%
100%
50%
0%
-50%
Initiate with
UNDERPERFORM and TP
based on 10x 2013E EPS
Geely 12m forward P/E discount average premium
Valuation comparison with
Dongfeng Motors

(Figure 152). Currently it trades at a 38% premium to Dongfeng. Geely has traded at an
average 12-month forward P/E of about 9.7x since 2011, compared to Dongfeng's
average P/E of 9.2x. It now trades at 11.6x 12-month forward P/E, versus Dongfeng’s 8.4x.
We expect Geely’s 12-month forward P/E to gradually drop to the industrial average of
around 10x.
Valuation comparison with sector index
Geely’s average P/E multiple discount over the MSCI China Consumer Discretionary
Index is 28% for Jan 2010-Dec 2012, compared with Dongfeng’s average discount of 42%
(Figure 154). Since January 2011, Geely has traded at an average discount of 33% over
the MSCI China Consumer Discretionary Index (Figure 154). This compares with
Dongfeng’s average discount of 36% during the same period (Figure 154). Given all
Geely’s products are passenger vehicles, we believe it has a higher correlation with the
Consumer Discretionary Index than Dongfeng. Therefore, it would be reasonable that
Geely trades at the auto sector’s average P/E.
Figure 153: Forward P/E band (DFM, GAC, MSCI China Consumer Discretionary Index)
22
20
18
16
14
12
10
8
6
4
2
Jan-10 Apr-10 Aug-10 Nov-10 Mar-11 Jul-11 Oct-11 Feb-12 May-12 Sep-12 Jan-13
Source: Bloomberg consensus, MSCI
Geely 12m forward P/E
Dongfeng Motor 12m forward P/E
MSCI China Consumer Discretionary Index 12m forward P/E
Figure 154: P/E multiple discount to MSCI China Consumer Discretionary Index
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
-80%
Jan-10 Apr-10 Aug-10 Nov-10 Mar-11 Jun-11 Oct-11 Jan-12 May-12 Aug-12 Dec-12
Source: Bloomberg consensus, MSCI
Dongfeng Motor 12m forward P/E discount Geely 12m forward P/E discount
08 January 2013
Valuation comparison with
sector index
China Auto Sector 77

Risks to our investment case
Stronger-than-expected exports
Geely’s export volume almost doubled in 2011 and has increased 260% YoY in the first 11
months of 2012. It has maintained a strong upward trend of exports since August 2011,
with its monthly export volume exceeding 10,000 units in June 2012 from around 4,000
units in August 2011 (Figure 156). We also observed a strong growth in the share of its
exports in its total sales, which exceeded 25% during Jun-Oct 2012 from around 10% in
2011 (Figure 156). Geely’s export models mainly consist of low cost economy sedans.
These small economy cars are widely affordable in its major export markets such as the
Middle East, Eastern Europe, Southeast Asia, and Central America. We believe its export
models will remain attractive to customers in these regions due to their low prices, leaving
Geely with a relatively lower risk of being affected by economic changes during the global
recovery.
Figure 155: Geely's auto exports
Unit
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
20,100
37,940
19,350
20,555
08 January 2013
China Auto Sector 78
39,600
90,936
2007 2008 2009 2010 2011 Jan-Nov 2012
Source: Company data, Credit Suisse estimates
Figure 156: Geely’s monthly auto exports
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
2009-01 2009-06 2009-11 2010-04 2010-09 2011-02 2011-07 2011-12 2012-05 2012-10
Source: Company data, Credit Suisse estimates
Geely export (Unit) Export as % of Geely's sales
40%
35%
30%
25%
20%
15%
10%
5%
0%
Stronger-than-expected
exports of Geely would
boost its total sales

Although weakness in the US economy, and steps to curb bank lending and real estate
investment in China still remain, major economies are already on track for a slow recovery.
Particularly, we do not see any major changes in the trend whereby expansion in
emerging Asia leads the world economy. Therefore, China's exports should continue to
grow, but we expect the pace of growth to be slow as global restocking of inventory runs
its course. In Geely’s case, a stronger-than-expected export growth may favor its profit
growth in absolute terms.
Stronger-than-expected sales of Emgrand models
In 11M12, sales of Geely’s Emgrand brand grew over 40% YoY, higher than its other sub
brands (Figure 157). The low-to-mid end targeted Emgrand brand, has steadily increased its
monthly sales volume to more than 14,000 units since September 2012 from around 10,700
units in January 2012. We believe the low-to-mid end segment would have less margin erosion
than the low-end segment in the near term, given less intensive competition. We estimate the
company’s production capacity for Emgrand to be around 160,000 units, implying about 92.6%
of utilization rate in 11M12. If it is able to promote Emgrand more successfully, it is likely that
this model will achieve better-than-expected sales and contribute more to Geely’s blended
margin.
Figure 157: Geely’s sales by sub-brands
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012
Source: Geely, Credit Suisse estimates
Englon sales (unit) Emgrand sales (unit) GLEagle sales (unit)
Englon sales y-y Emgrand sales y-y GLEagle sales y-y
08 January 2013
China Auto Sector 79
160%
140%
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
Recovery of major
economies would benefit
Geely’s exports
Stronger-than-expected
sales of Emgrand brand
may help to improve Geely’s
blended margin

Rating (from Underperform) NEUTRAL*
Price (04 Jan 13, HK$) 7.14
Target price (HK$) (from 5.00) 6.50¹
Upside/downside (%) -9.0
Mkt cap (HK$ mn) 47,679 (US$ 6,152)
Enterprise value (Rmb mn) 40,527
Number of shares (mn) 6,435.02
Free float (%) 38.9
52-week price range 9.15 - 4.79
ADTO - 6M (US$ mn) 5.2
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
Share price performance
Research Analysts
Jack Yeung
852 2101 6779
jack.yeung@credit-suisse.com
12
10
8
6
4
Price (LHS) Rebased Rel (RHS)
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
The price relative chart measures performance against the
MSCI CHINA F IDX which closed at 6652.07 on 04/01/13
On 04/01/13 the spot exchange rate was HK$7.75/US$1
120
100
80
60
40
Performance over 1M 3M 12M
Absolute (%) 9.7 47.2 9.0
Relative (%) 2.4 30.4 -13.9
08 January 2013
Asia Pacific / China
Automobile Manufacturers
Guangzhou Automobile Group
(2238.HK / 2238 HK)
Sluggish recovery in 2013
■ Upgrade to NEUTRAL. We are upgrading Guangzhou Auto (GAC) to a
NEUTRAL from Underperform, given its recovering sales since the end of
October 2012. Therefore, we raise our 2013 earnings estimate for GAC by
5.5%. Accordingly, our target price rises to HK$6.50 from HK$5.00 based on
10x 2013E P/E (from previous 8x), which implies 9% potential downside.
■ Recovering GAC Honda and GAC Toyota sales. Our recent channel
checks have shown that retail sales of Honda and Toyota in Dec-12 have
recovered to similar levels as in Dec-11. Their inventories have also dropped
to around 1.5 months from 2.2-2.5 months in Oct-12. Accordingly, GAC’s
total PV shipment recovered over 70% from its October low in November
2012 and around 75-85% in December 2012. We believe the recovering
sales will help GAC to regain market share mainly in 2H13.
■ Lack of new models in 1H13. In 1H13 , GAC is likely to continue losing
market share to other mid-to-high end players mainly due to lack of new
models. GAC Toyota will only launch several facelifts of Camry and Yaris in
2013. GAC Honda will launch a compact sedan Concept C in Jun-13 and the
new-generation Accord in Sep-13. GAC Mitsubishi is likely to reach breakeven
in 3Q13, with sales supports from AXS and its new SUV model, Pajero
Sport (to be launched in 1H13). GAC Fiat will launch a hatchback model and
an SUV in 2H13 but may continue its losses due to high start-up costs and
low production volume. Moreover, we expect GAC’s self-owned brands to
maintain weak sales in 2013, given their low utilisation rates, high capex and
lack of new models.
■ Valuation. We believe GAC should trade at 10x 2013E P/E (from 8x
previously) on par with Chinese peers that trade at around 10x 2013E EPS.
Financial and valuation metrics
Year 12/11A 12/12E 12/13E 12/14E
Revenue (Rmb mn) 10,984.3 11,285.9 13,231.1 14,821.7
EBITDA (Rmb mn) 264.9 349.6 525.7 700.8
EBIT (Rmb mn) -224.8 -331.2 -231.1 -159.8
Net profit (Rmb mn) 4,271.7 1,789.1 3,362.5 3,777.9
EPS (CS adj.) (Rmb) 0.69 0.28 0.52 0.59
Change from previous EPS (%) n.a. 0 5.5 1.8
Consensus EPS (Rmb) n.a. 0.36 0.53 0.66
EPS growth (%) -24.4 -59.5 85.8 12.4
P/E (x) 8.3 20.4 11.0 9.8
Dividend yield (%) 3.6 0 2.7 3.1
EV/EBITDA (x) 150.7 115.9 79.8 61.7
P/B (x) 1.2 1.2 1.1 1.0
ROE (%) 15.6 5.9 10.4 10.8
Net debt/equity (%) 5.3 6.8 10.2 12.7
Source: Company data, Thomson Reuters, Credit Suisse estimates.
China Auto Sector 80

Sluggish recovery in 2013
Recovering Honda and Toyota sales
Our Dec-12 channel checks have shown that both Honda and Toyota retail recovered to
their similar levels as in Dec-11. Their inventories dropped to 1.3-1.6 months from 2.2-2.5
months in Oct-12 and 1.8-2.0 months in Nov-12. Supported by the retail recovery of these
two Japanese brands, GAC’s total PV shipments recovered around 71% from its October
low (Figure 159) and to 75-85% of its ordinary level in Dec-12. However, most of GAC’s
new models will be launched in 2H13. Due to lack of new models in 1H13, it is likely to
continue losing market share to other mid-to-high end players such as Volkswagen, GM,
and Hyundai. It also faces competition from economy models launched by luxury brands.
Figure 158: GAC PV sales YoY growth (%) Figure 159: GAC PV sales MoM growth (%)
150%
100%
50%
0%
-50%
-100%
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11
GAC PV sales YoY GAC Honda sales YoY
GAC Toyota sales YoY
Source: Guangzhou Auto Source: Guangzhou Auto
08 January 2013
China Auto Sector 81
200%
150%
100%
50%
0%
-50%
-100%
Mitsubishi and Fiat JVs: Struggling to breakeven
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11
GAC PV sales MoM GAC Honda sales MoM
GAC Toyota sales MoM
GAC Mitsubishi is likely to reach breakeven in 3Q13, with supports from AXS and its new
SUV model, Pajero Sport (to be launched in 1H13). GAC Fiat will launch a hatchback
model will 1.4L engine and an SUV in 2H13. It also plans to localize Jeep in 2014 with
phase I capacity of around 100,000 units. Due to high start-up costs and low production
volume, GAC Fiat may continue losses in 2013. These two JVs will focus on SUVs in the
next 3-5 years, which we expect will help GAC boost sales and improve its product mix.
Self-owned brands
Sales of GAC’s self-owned brand, Trumpche, were stronger than expected in 4Q12.
However, it may continue losses in 2013 given the high depreciation and amortization
expense. Due to low utilization rates, GAC’s other self-owned brands such as Changfeng
and Gonow would maintain their low margins and are unlikely to become major profit
drivers for the company.
Upgrade to NEUTRAL
We are upgrading GAC to a NEUTRAL from Underperform given its recovering sales
since end-October. We expect its sales to continue recovering in 2013 and therefore raise
our 2013 earnings estimate by 5.5%. Our target price increased to HK$6.50 from HK$5.00
based on 10x 2013E EPS (from previous 8x). We believe GAC should trade on par with its
Chinese peers, which are trading at around 10x 2013E EPS.
Due to recovering sales of
Japanese brands, we
expect GAC’s sales to
recover mainly in 2H13
GAC Mitsubishi may
achieve breakeven and
GAC Fiat will continue to
have losses in 2013
GAC’s self-owned brand will
continue to be its burden in
2013
Upgrade GAC to a
NEUTRAL with a target
price based on 10x 2013E
EPS

Guangzhou Automobile Group 2238.HK / 2238 HK
Price (04 Jan 13): HK$7.14, Rating:: NEUTRAL, Target Price: HK$6.50, Analyst: Jack Yeung
Target price scenario
Scenario TP %Up/Dwn Assumptions
Upside 6.91 (3.22) 2013 auto sales: 866,000 units
Central Case 6.50 (8.96) 2013 auto sales:816,000 units
Downside 5.71 (20.03) 2013 auto sales: 716,000 units
Income statement (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Sales revenue 10,984 11,286 13,231 14,822
Cost of goods sold 10,560 10,771 12,430 13,840
SG&A 1,806 1,862 2,157 2,327
Other operating exp./(inc.) (1,646) (1,697) (1,881) (2,046)
EBITDA 264.9 349.6 525.7 700.8
Depreciation & amortisation 489.7 680.8 756.8 860.5
EBIT (224.8) (331.2) (231.1) (159.8)
Net interest expense/(inc.) 356.9 420.2 404.0 433.9
Non-operating inc./(exp.) — — — —
Associates/JV 4,639 2,422 4,607 5,246
Recurring PBT 4,057 1,670 3,972 4,653
Exceptionals/extraordinaries — — — —
Taxes (109.9) (41.8) (79.4) (69.8)
Profit after tax 4,167 1,712 4,051 4,722
Other after tax income (1.1) — — —
Minority interests (104.8) (77.0) 688.7 944.5
Preferred dividends — — — —
Reported net profit 4,271 1,789 3,362 3,778
Analyst adjustments 1.1 — — —
Net profit (Credit Suisse) 4,272 1,789 3,362 3,778
Cash flow (Rmb mn) 12/11A 12/12E 12/13E 12/14E
EBIT (224.8) (331.2) (231.1) (159.8)
Net interest (92.8) (248.2) (188.9) (218.8)
Tax paid (80.8) 41.8 79.4 69.8
Working capital (422.0) 158.6 495.7 486.4
Other cash & non-cash items 187.1 418.0 541.7 645.4
Operating cash flow (633.2) 39.0 696.8 823.1
Capex (2,244) (1,808) (2,170) (2,288)
Free cash flow to the firm (2,877) (1,769) (1,473) (1,464)
Disposals of fixed assets — — — —
Acquisitions (683.1) — — —
Divestments 90.2 43.1 53.4 66.3
Associate investments (55.7) (51.0) (54.6) (56.6)
Other investment/(outflows) 2,625 891 1,071 1,261
Investing cash flow (267) (925) (1,100) (1,017)
Equity raised 279.1 287.0 — —
Dividends paid — — (1,009) (1,133)
Net borrowings 429.4 650.0 650.0 650.0
Other financing cash flow (909.9) — — —
Financing cash flow (201.4) 937.0 (358.7) (483.4)
Total cash flow (1,102) 51 (762) (678)
Adjustments (41.4) — — —
Net change in cash (1,143) 51 (762) (678)
Balance sheet (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Cash & cash equivalents 8,239 8,290 7,529 6,851
Current receivables 2,980 3,741 4,459 5,563
Inventories 1,537 1,564 1,703 1,896
Other current assets 8,903 8,903 8,903 8,903
Current assets 21,659 22,499 22,593 23,213
Property, plant & equip. 4,309 5,343 6,625 7,884
Investments 14,484 16,066 19,656 23,698
Intangibles 2,273 2,022 1,800 1,602
Other non-current assets 1,887 2,187 2,487 2,787
Total assets 44,612 48,117 53,161 59,184
Accounts payable 4,069 5,016 6,368 8,152
Short-term debt 2,100 2,500 2,900 3,300
Current provisions 3.5 3.5 3.5 3.5
Other current liabilities 33.8 33.8 33.8 33.8
Current liabilities 6,206 7,554 9,306 11,490
Long-term debt 7,737 7,987 8,237 8,487
Non-current provisions — — — —
Other non-current liab. 482.7 391.9 391.9 391.9
Total liabilities 14,426 15,933 17,935 20,369
Shareholders' equity 29,210 31,285 33,638 36,283
Minority interests 976 899 1,588 2,532
Total liabilities & equity 44,612 48,117 53,161 59,184
08 January 2013
Key earnings drivers 12/11A 12/12E 12/13E 12/14E
Auto Sales (Unit) 723,388 640,472 816,058 918,023
— — — —
— — — —
— — — —
Per share data
—
12/11A
—
12/12E
—
12/13E
—
12/14E
Shares (wtd avg.) (mn) 6,148 6,363 6,435 6,435
EPS (Credit Suisse)
0.69 0.28 0.52 0.59
(Rmb) DPS (Rmb) 0.21 — 0.16 0.18
BVPS (Rmb) 4.75 4.86 5.23 5.64
Operating CFPS (Rmb) (0.10) 0.01 0.11 0.13
Key ratios and valuation 12/11A 12/12E 12/13E 12/14E
Growth(%)
Sales revenue 25.6 2.7 17.2 12.0
EBIT (233) (47) 30 31
Net profit (0.5) (58.1) 87.9 12.4
EPS (24.4) (59.5) 85.8 12.4
Margins (%)
EBITDA 2.41 3.10 3.97 4.73
EBIT (2.05) (2.93) (1.75) (1.08)
Pre-tax profit 36.9 14.8 30.0 31.4
Net profit 38.9 15.9 25.4 25.5
Valuation metrics (x)
P/E 8.3 20.4 11.0 9.8
P/B 1.21 1.18 1.10 1.02
Dividend yield (%) 3.65 — 2.73 3.07
P/CF (56) 936 53 45
EV/sales 3.64 3.59 3.17 2.92
EV/EBITDA 151 116 80 62
EV/EBIT (178) (122) (181) (271)
ROE analysis (%)
ROE 15.6 5.9 10.4 10.8
ROIC (0.81) (1.03) (0.64) (0.39)
Asset turnover (x) 0.25 0.23 0.25 0.25
Interest burden (x) (18.0) (5.0) (17.2) (29.1)
Tax burden (x) 1.03 1.03 1.02 1.02
Financial leverage (x) 1.48 1.50 1.51 1.52
Credit ratios
Net debt/equity (%) 5.3 6.8 10.2 12.7
Net debt/EBITDA (x) 6.03 6.28 6.87 7.04
Interest cover (x) (0.63) (0.79) (0.57) (0.37)
Source: Company data, Thomson Reuters, Credit Suisse estimates.
0
Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
China Auto Sector 82
14
12
10
8
6
4
2
3.5
3.0
2.5
2.0
1.5
1.0
0.5
12MF P/E multiple
12MF P/B multiple
0.0
Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Source: IBES

Rating OUTPERFORM*
Price (04 Jan 13, HK$) 12.04
Target price (HK$) 14.00¹
Upside/downside (%) 16.3
Mkt cap (HK$ mn) 103,738 (US$13,386 mn)
Enterprise value (Rmb mn) 60,006
Number of shares (mn) 8,616.12
Free float (%) 33.1
52-week price range 15.68–8.64
ADTO - 6M (US$ mn) 33.5
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
Share price performance
18
13
Research Analysts
Jack Yeung
852 2101 6779
jack.yeung@credit-suisse.com
Price (LHS) Rebased Rel (RHS)
8
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
The price relative chart measures performance against the
MSCI CHINA F IDX which closed at 6652.07 on 04/01/13
On 04/01/13 the spot exchange rate was HK$7.75/US$1
140
120
100
80
60
Performance over 1M 3M 12M
Absolute (%) 2.7 32.0 -9.2
Relative (%) -4.6 15.2 -32.1
08 January 2013
Asia Pacific / China
Automobile Manufacturers
Dongfeng Motors Group Co Ltd
(0489.HK / 489 HK)
Solid growth remains
■ Maintain OUTPERFORM. We maintain an OUTPERFORM rating on
Dongfeng Motors as we believe it will benefit from recovering Japanese auto
sales and strong SUV demand in China. Our target price for Dongfeng
remains HK$14.00, which implies 16.3% potential upside.
■ Recovering DF Nissan and DF Honda sales. Dongfeng’s PV shipments
recovered 29% MoM in Nov-12, while DF Nissan shipments recovered 72%
MoM and DF Honda shipment recovered 119% MoM. Our channel checks
have shown that inventories for both DF Nissan and DF Honda are currently
lower than one month. The company’s solid sales recovery is in line with our
expectation. With new model launches and continuing strong SUV demand,
we believe Dongfeng will stage a strong recovery in 2013.
■ New models to gain market share. We believe DF Nissan’s newgeneration
Teana to be launched in Mar-13 will be the key driver of its sales.
Moreover, Dongfeng’s major JVs are going to launch more economy models
such as compact sedans and compact MPVs in 2013. These models have
competitive prices and good brand image, which we believe will help
Dongfeng to boost sales and regain market share in 2013.
Figure 160: Launch time of Dongfeng Motors’ new models in 2013
Models Jan Feb Mar Apr May Jun Jul Aug Sep
New Teana Mar 2013
New Livina Sep 2013
New economy sedan under Venucia Mid-2013
A compact MPV under DF Honda Sep 2013
Peugeot 3008 Early 2013
Compact sedan under Peugeot Early 2013
Compact sedan under Citroen Early 2013
Source: Dongfeng Motors
■ Valuation. We value Dongfeng based on 9x 2013E P/E. We believe it
should trade on par with domestic peers, which trade at 9-10x 2013E EPS.
Financial and valuation metrics
Year 12/11A 12/12E 12/13E 12/14E
Revenue (Rmb mn) 131,441.0 122,036.0 145,191.1 161,908.5
EBITDA (Rmb mn) 17,498.0 16,168.9 19,955.8 21,741.2
EBIT (Rmb mn) 14,384.0 11,381.1 14,825.5 16,337.0
Net profit (Rmb mn) 10,481.0 8,077.3 10,650.5 11,769.0
EPS (CS adj.) (Rmb) 1.22 0.94 1.24 1.37
Change from previous EPS (%) n.a. 0 0 0
Consensus EPS (Rmb) n.a. 1.02 1.14 1.24
EPS growth (%) -4.6 -22.9 31.9 10.5
P/E (x) 8.0 10.3 7.8 7.1
Dividend yield (%) 1.9 1.4 1.9 2.1
EV/EBITDA (x) 3.5 3.7 2.7 2.1
P/B (x) 1.9 1.6 1.4 1.2
ROE (%) 25.9 16.7 18.9 17.9
Net debt/equity (%) Net cash Net cash Net cash Net cash
Source: Company data, Thomson Reuters, Credit Suisse estimates.
China Auto Sector 83

Solid growth remains
Recovery of DF Nissan and DF Honda sales
Dongfeng’s PV shipment recovered 29% MoM in Nov-12 (Figure 162). Among these, DF
Nissan shipments recovered 72% MoM and DF Honda shipments 119% MoM (Figure 162).
Through our channel checks, inventories for both DF Nissan and Honda are currently
lower than one month. The company’s solid sales recovery is in line with our expectation.
With new Teana to be launched in Mar-13 and continuing strong SUV demand, we believe
Dongfeng will stage a strong recovery in 2013.
Figure 161: Dongfeng PV sales YoY growth (%) Figure 162: Dongfeng PV sales MoM growth (%)
200%
150%
100%
50%
0%
-50%
-100%
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Dongfeng Motors PV sales YoY DF Nissan PV sales YoY
DF Honda PV sales YoY
08 January 2013
China Auto Sector 84
140%
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Dongfeng Motors PV sales MoM DF Nissan PV sales MoM
DF Honda PV sales MoM
Source: Dongfeng Motors Source: Dongfeng Motors
New models to gain market share
We believe DF Nissan’s new-generation Teana, to be launched in Mar-13, will be the key
driver of its sales. Moreover, Dongfeng’s major JVs are going to launch more economy
models such as compact sedans and compact MPVs in 2013. These models have
competitive prices and a good brand image, which we believe will help DFM to boost sales
and gain market share in 2013.
Figure 163: Launch time of Dongfeng Motors’ new models in 2013
Models Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
New Teana Mar 2013
New Livina Sep 2013
New economy sedan under Venucia Mid-2013
A compact MPV under DF Honda Sep 2013
Peugeot 3008 Early 2013
Compact sedan under Peugeot Early 2013
Compact sedan under Citroen Early 2013
Source: Dongfeng Motors
Maintain OUTPERFORM
We maintain our OUTPERFORM rating on Dongfeng Motors as we believe it will benefit
from recovering Japanese auto sales and strong SUV demand in China. Our target price
for Dongfeng Motors remains HK$14.00 based on 9x 2013E EPS. We believe it should
trade on par with its domestic peers, which are trading at 9-10x 2013E EPS.
We believe Dongfeng
Motors will have a strong
recovery in 2013 mainly due
to new models from DF
Nissan and strong SUV
demand.
Dongfeng is planning to
launch several new models
throughout 2013, which we
believe will help it regain
market share
Maintain OUTPERFORM
with a TP based on 9x
2013E EPS

Dongfeng Motors Group Co Ltd 0489.HK / 489 HK
Price (04 Jan 13): HK$12.04, Rating:: OUTPERFORM, Target Price: HK$14.00, Analyst: Jack Yeung
Target price scenario
Scenario TP %Up/Dwn Assumptions
Upside 14.52 20.56 2013E sales: 2.55m units
Central Case 14.00 16.28 2013E sales: 2.5m units
Downside 13.45 11.67 2013E sales: 2.45m units
Income statement (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Sales revenue 131,441 122,036 145,191 161,908
Cost of goods sold 105,051 98,939 117,008 130,676
SG&A 9,916 9,763 11,035 12,305
Other operating exp./(inc.) (1,024) (2,835) (2,807) (2,814)
EBITDA 17,498 16,169 19,956 21,741
Depreciation & amortisation 3,114 4,788 5,130 5,404
EBIT 14,384 11,381 14,826 16,337
Net interest expense/(inc.) 402.0 528.8 468.8 476.9
Non-operating inc./(exp.) — — — —
Associates/JV 379.0 366.1 435.6 485.7
Recurring PBT 14,361 11,218 14,792 16,346
Exceptionals/extraordinaries — — — —
Taxes 3,401 2,805 3,698 4,086
Profit after tax 10,960 8,414 11,094 12,259
Other after tax income — — — —
Minority interests 479.0 336.6 443.8 490.4
Preferred dividends — — — —
Reported net profit 10,481 8,077 10,650 11,769
Analyst adjustments — — — —
Net profit (Credit Suisse) 10,481 8,077 10,650 11,769
Cash flow (Rmb mn) 12/11A 12/12E 12/13E 12/14E
EBIT 14,384 11,381 14,826 16,337
Net interest 621.0 455.7 511.8 630.0
Tax paid (4,315) (2,805) (3,698) (4,086)
Working capital (2,505) (3,946) (1,308) (1,493)
Other cash & non-cash items 2,024 3,788 4,108 4,187
Operating cash flow 10,209 8,874 14,439 15,574
Capex (6,542) (6,500) (6,500) (6,500)
Free cash flow to the firm 3,667 2,374 7,939 9,074
Disposals of fixed assets — — — —
Acquisitions (16.0) — — —
Divestments 1,393 — — —
Associate investments (159.0) — — —
Other investment/(outflows) 3,796 — — —
Investing cash flow (1,528) (6,500) (6,500) (6,500)
Equity raised — — — —
Dividends paid (2,644) (1,551) (1,195) (1,576)
Net borrowings (701) (1,000) (1,000) (1,000)
Other financing cash flow 156.0 — — —
Financing cash flow (3,189) (2,551) (2,195) (2,576)
Total cash flow 5,492 (177) 5,744 6,498
Adjustments — — — —
Net change in cash 5,492 (177) 5,744 6,498
Balance sheet (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Cash & cash equivalents 31,381 31,204 36,948 43,447
Current receivables 25,306 30,091 34,806 39,035
Inventories 12,511 14,095 14,426 15,037
Other current assets 14,818 14,818 14,818 14,818
Current assets 84,016 90,209 100,998 112,337
Property, plant & equip. 21,578 23,262 24,610 25,688
Investments 4,581 4,963 5,439 6,035
Intangibles 3,001 3,029 3,051 3,069
Other non-current assets 4,357 4,357 4,357 4,357
Total assets 117,533 125,820 138,455 151,486
Accounts payable 53,145 55,569 59,305 62,653
Short-term debt 5,993 5,493 4,993 4,493
Current provisions — — — —
Other current liabilities 5,577 5,577 5,577 5,577
Current liabilities 64,715 66,639 69,875 72,723
Long-term debt 2,820 2,320 1,820 1,320
Non-current provisions — — — —
Other non-current liab. 414.0 414.0 414.0 414.0
Total liabilities 67,949 69,373 72,109 74,457
Shareholders' equity 44,843 51,725 60,799 70,827
Minority interests 3,190 3,527 3,970 4,461
Total liabilities & equity 117,533 125,820 138,455 151,486
08 January 2013
Key earnings drivers 12/11A 12/12E 12/13E 12/14E
Sales volume (unit) 2,162,92 2,078,49 2,501,97 2,814,60
— 4 — 7 — 9 — 3
— — — —
— — — —
Per share data
—
12/11A
—
12/12E
—
12/13E
—
12/14E
Shares (wtd avg.) (mn) 8,616 8,616 8,616 8,616
EPS (Credit Suisse)
1.22 0.94 1.24 1.37
(Rmb) DPS (Rmb) 0.18 0.14 0.18 0.20
BVPS (Rmb) 5.20 6.00 7.06 8.22
Operating CFPS (Rmb) 1.18 1.03 1.68 1.81
Key ratios and valuation
Growth(%)
12/11A 12/12E 12/13E 12/14E
Sales revenue 7.4 (7.2) 19.0 11.5
EBIT (0.9) (20.9) 30.3 10.2
Net profit (4.6) (22.9) 31.9 10.5
EPS
Margins (%)
(4.6) (22.9) 31.9 10.5
EBITDA 13.3 13.2 13.7 13.4
EBIT 10.9 9.3 10.2 10.1
Pre-tax profit 10.9 9.2 10.2 10.1
Net profit
Valuation metrics (x)
7.97 6.62 7.34 7.27
P/E 8.0 10.3 7.8 7.1
P/B 1.86 1.61 1.37 1.18
Dividend yield (%) 1.86 1.43 1.89 2.09
P/CF 8.2 9.4 5.8 5.4
EV/sales 0.46 0.49 0.37 0.28
EV/EBITDA 3.48 3.71 2.67 2.10
EV/EBIT
ROE analysis (%)
4.23 5.27 3.59 2.80
ROE 25.9 16.7 18.9 17.9
ROIC 42.2 28.4 32.1 32.4
Asset turnover (x) 1.12 0.97 1.05 1.07
Interest burden (x) 1.00 0.99 1.00 1.00
Tax burden (x) 0.76 0.75 0.75 0.75
Financial leverage (x)
Credit ratios
2.37 2.23 2.09 1.97
Net debt/equity (%) (45.5) (41.4) (45.4) (48.9)
Net debt/EBITDA (x) (1.29) (1.45) (1.51) (1.73)
Interest cover (x) 35.8 21.5 31.6 34.3
Source: Company data, Thomson Reuters, Credit Suisse estimates.
12MF P/E multiple
20
18
16
14
12
10
8
6
4
2
0
2008 2009 2010 2011 2012 2013
0.0
2008 2009 2010 2011 2012 2013
China Auto Sector 85
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Source: IBES
12MF P/B multiple

Rating OUTPERFORM* [V]
Price (04 Jan 13, HK$) 10.58
Target price (HK$) (from 11.00) 12.00¹
Upside/downside (%) 13.4
Mkt cap (HK$ mn) 53,173 (US$ 6,860)
Enterprise value (Rmb mn) 43,668
Number of shares (mn) 5,025.77
Free float (%) 27.3
52-week price range 10.58 - 6.29
ADTO - 6M (US$ mn) 17.6
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
[V] = Stock considered volatile (see Disclosure Appendix).
Share price performance
Research Analysts
Jack Yeung
852 2101 6779
jack.yeung@credit-suisse.com
12
10
8
6
4
Price (LHS) Rebased Rel (RHS)
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
The price relative chart measures performance against the
MSCI CHINA F IDX which closed at 6647.58 on 07/01/13
On 07/01/13 the spot exchange rate was HK$7.75/US$1
400
300
200
100
0
Performance over 1M 3M 12M
Absolute (%) 15.0 19.8 26.6
Relative (%) 7.8 3.1 3.7
08 January 2013
Asia Pacific / China
Automobile Manufacturers
Brilliance China Automotive
Holding (1114.HK / 1114 HK)
Growing brilliantly!
■ MAINTAIN OUTPERFORM. We maintain our OUTPERFORM rating on
Brilliance given BMW’s strong position in China’s luxury segment and
growing demand for luxury autos. Therefore, we raise our 2013 earnings
estimate for Brilliance by 1%. Our target price increases to HK$12.00 from
HK$11.00, implying 13.4% potential upside.
■ Rising wealth to enhance luxury auto sales. The number of millionaires in
China is growing significantly: the figure more than tripled during 2005-12. In
this scenario, we estimate the luxury auto segment will grow 15-25% YoY,
compared to around 10% YoY growth for the overall passenger vehicle
sector. China has already become BMW’s largest market. We believe strong
income growth in China will drive luxury auto sales, and BMW Brilliance will
be a major beneficiary.
■ New models to boost BMW sales. BMW Brilliance launched X1 last March
and the new 3 series last July. It also plans to launch a new-energy model
under its self-owned brand in Apr-2013 and probably a simplified BMW new
3 series below Rmb300,000 in 2013. The new 3 series LWB version is
expected to ramp up quickly, similar as the new 5 series LWB version when
it was launched in Aug-2010. We believe the new 3 series will boost
Brilliance’s 2013 sales and enhance its strong position in China’s luxury auto
sector. BMW currently has 24% share in China’s luxury market, ranked No.2
just after Audi. We expect its market share to rise to 27% in 2015 and
overtake Audi to become the largest luxury brand in China by 2015.
■ Valuation. Our TP for Brilliance is based on 14x 2013E P/E (from previous
13x). We believe it should trade on par with Chinese luxury goods, which are
trading at around 14-15x 2013E EPS.
Financial and valuation metrics
Year 12/11A 12/12E 12/13E 12/14E
Revenue (Rmb mn) 6,442.9 5,787.5 6,317.3 6,835.9
EBITDA (Rmb mn) 292.5 267.8 286.9 306.0
EBIT (Rmb mn) 154.9 134.6 140.6 145.3
Net profit (Rmb mn) 1,812.3 2,537.2 3,442.7 4,441.9
EPS (CS adj.) (Rmb) 0.36 0.51 0.69 0.88
Change from previous EPS (%) n.a. 0.1 0.7 4.2
Consensus EPS (Rmb) n.a. 0.48 0.62 0.76
EPS growth (%) 42.5 39.4 35.6 29.0
P/E (x) 23.4 16.8 12.4 9.6
Dividend yield (%) 0 0 0 0
EV/EBITDA (x) 148.5 163.1 153.7 145.7
P/B (x) 6.1 4.5 3.3 2.5
ROE (%) 27.2 30.7 30.6 29.2
Net debt/equity (%) 11.4 10.6 11.0 10.9
Source: Company data, Thomson Reuters, Credit Suisse estimates.
China Auto Sector 86

Growing brilliantly!
Expanding market share of BMW
Brilliance is the only Chinese automaker having a JV with BMW and its JV is the second
largest among luxury automakers in China after FAW Audi. BMW currently has around
24% share in China’s luxury market, ranked No.2 just after Audi. We expect its market
share to increase to 27% in 2015 and overtake Audi to become the largest luxury brand in
China by 2015. BMW Brilliance launched X1 last March and new 3 series last July. Its
monthly sales have generally maintained over 50% YoY growth throughout the year
(Figure 164). The new 3 series LWB version is likely to ramp up quickly, similar to the new
5 series LWB version launched in Aug-2010 (Figure 165). We believe this will boost
Brilliance’s sales and enhance its leading position in China’s luxury auto sector.
08 January 2013
Figure 164: BMW Brilliance’s sales YoY growth Figure 165: Sales ramp-up of new 3 series LWB version
150%
100%
50%
0%
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
-50%
-100%
-150%
Brilliance BMW sales YoY
Brilliance made 3 series and new 3 series sales YoY
Brilliance made 5 series sales YoY
vs. new 5 series LWB version
China Auto Sector 87
Unit
7,000
Source: Brilliance Source: Brilliance
Rising wealth to enhance auto sales
The number of millionaires in China is growing significantly: the number more than tripled
during 2005-12. In this scenario, we estimate the luxury auto segment will grow 15-25%
YoY, compared to around 10% YoY growth for the overall passenger vehicle sector. China
has already become BMW’s largest market. We believe strong income growth in China will
drive luxury auto sales, and BMW Brilliance will be a major beneficiary.
6,000
5,000
4,000
3,000
2,000
1,000
China auto sector: Top-down competition
Many luxury brands have launched their economy models with prices close to those for
mid- to high-end vehicles. We believe the top-down movement of China’s passenger
vehicle segment will continue in the next few years and help BMW Brilliance to gain
market share from mid-to-high end JV brands.
Maintain OUTPERFORM
We maintain our OUTPERFORM rating on Brilliance, given its strong position in China’s
luxury segment and growing demand for luxury autos. We raise our 2013 earnings
estimate for Brilliance by 1% as we believe BMW’s marketing share wil continue to grow in
2013. Our TP increases to HK$12.00 from HK$11.00, based on 14x 2013E EPS (from
previous 13x). We believe the stock should trade on par with Chinese luxury goods, which
are trading at around 14-15x 2013E EPS.
-
We believe Brilliance will
continue to benefit from
strong luxury auto demand
and BMW’s rising market
share
No. of months after launch
1st 2nd 3rd 4th 5th 6th
BMW new 3 series LWB version BMW new 5 series LWB version
Strong income growth in
China will drive luxury auto
sales, and BMW Brilliance
will be a major beneficiary
Luxury auto brands’
economy brands will help
them to expand market
share
Maintain an OUTPERFORM
with target price based on
14x 2013E EPS

Brilliance China Automotive Holding 1114.HK / 1114 HK
Price (04 Jan 13): HK$10.58, Rating: OUTPERFORM [V], Target Price: HK$12.00, Analyst: Jack Yeung
Target price scenario
Scenario TP %Up/Dwn Assumptions
Upside 13.91 31.47 BMW sales reach 292,000 units in 2013
Central Case 12.00 13.42 BMW sales reach 252,000 units in 2013
Downside 10.12 (4.35) BMW sales reach 212,000 units in 2013
Income statement (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Sales revenue 6,443 5,787 6,317 6,836
Cost of goods sold 5,587 5,024 5,490 5,947
SG&A 748.7 672.5 734.1 794.3
Other operating exp./(inc.) (185.6) (176.3) (193.4) (211.7)
EBITDA 292.5 267.8 286.9 306.0
Depreciation & amortisation 137.6 133.2 146.3 160.7
EBIT 154.9 134.6 140.6 145.3
Net interest expense/(inc.) 117.4 118.5 141.1 176.9
Non-operating inc./(exp.) — — — —
Associates/JV 1,912 2,831 4,083 5,300
Recurring PBT 1,949 2,847 4,083 5,268
Exceptionals/extraordinaries — — — —
Taxes 58.0 199.3 490.0 632.2
Profit after tax 1,891 2,648 3,593 4,636
Other after tax income — — — —
Minority interests 79.1 110.8 150.3 193.9
Preferred dividends — — — —
Reported net profit 1,812 2,537 3,443 4,442
Analyst adjustments — — — —
Net profit (Credit Suisse) 1,812 2,537 3,443 4,442
Cash flow (Rmb mn) 12/11A 12/12E 12/13E 12/14E
EBIT 154.9 134.6 140.6 145.3
Net interest (135.4) (118.5) (141.1) (176.9)
Tax paid (11.6) (199.3) (490.0) (632.2)
Working capital (946.6) 120.9 269.0 429.4
Other cash & non-cash items 131.9 133.2 146.3 160.7
Operating cash flow (806.7) 70.8 (75.2) (73.7)
Capex (306.3) (301.1) (354.1) (419.3)
Free cash flow to the firm (1,113) (230) (429) (493)
Disposals of fixed assets — — — —
Acquisitions (300.0) — — —
Divestments (0.73) — — —
Associate investments — — — —
Other investment/(outflows) 670.6 — — —
Investing cash flow 63.5 (301.1) (354.1) (419.3)
Equity raised 9.4 — — —
Dividends paid — — — —
Net borrowings 687.9 600.0 600.0 600.0
Other financing cash flow 203.7 — — —
Financing cash flow 901.1 600.0 600.0 600.0
Total cash flow 157.9 369.8 170.6 107.0
Adjustments — — — —
Net change in cash 157.9 369.8 170.6 107.0
Balance sheet (Rmb mn) 12/11A 12/12E 12/13E 12/14E
Cash & cash equivalents 586 955 1,126 1,233
Current receivables 2,423 1,416 1,320 1,337
Inventories 737.3 654.1 576.1 548.3
Other current assets 2,285 2,268 2,282 2,295
Current assets 6,032 5,294 5,304 5,414
Property, plant & equip. 1,393 1,494 1,618 1,770
Investments 4,171 7,002 11,085 16,385
Intangibles 197.5 197.5 197.5 197.5
Other non-current assets 1,018 1,085 1,169 1,275
Total assets 12,811 15,073 19,373 25,042
Accounts payable 4,256 3,401 3,495 3,870
Short-term debt 1,297 1,897 2,497 3,097
Current provisions — — — —
Other current liabilities 1,019 888 902 960
Current liabilities 6,572 6,186 6,894 7,926
Long-term debt — — — —
Non-current provisions — — — —
Other non-current liab. 1.6 1.6 1.6 1.6
Total liabilities 6,573 6,187 6,895 7,928
Shareholders' equity 6,989 9,527 12,969 17,411
Minority interests (752.1) (641.4) (491.1) (297.1)
Total liabilities & equity 12,811 15,073 19,373 25,042
08 January 2013
Key earnings drivers 12/11A 12/12E 12/13E 12/14E
BMW sales (Unit) 108,189 170,000 252,000 337,000
Minibus sales (Unit) 82,491 78,000 86,000 94,000
— — — —
— — — —
Per share data
—
12/11A
—
12/12E
—
12/13E
—
12/14E
Shares (wtd avg.) (mn) 4,998 5,021 5,026 5,026
EPS (Credit Suisse)
0.36 0.51 0.69 0.88
(Rmb) DPS (Rmb) — — — —
BVPS (Rmb) 1.39 1.90 2.58 3.46
Operating CFPS (Rmb) (0.16) 0.01 (0.01) (0.01)
Key ratios and valuation 12/11A 12/12E 12/13E 12/14E
Growth(%)
Sales revenue (28.0) (10.2) 9.2 8.2
EBIT (68.4) (13.1) 4.5 3.3
Net profit 42.6 40.0 35.7 29.0
EPS 42.5 39.4 35.6 29.0
Margins (%)
EBITDA 4.54 4.63 4.54 4.48
EBIT 2.40 2.33 2.23 2.13
Pre-tax profit 30.3 49.2 64.6 77.1
Net profit 28.1 43.8 54.5 65.0
Valuation metrics (x)
P/E 23.4 16.8 12.4 9.6
P/B 6.09 4.49 3.29 2.45
Dividend yield (%) — — — —
P/CF (53) 603 (568) (580)
EV/sales 6.74 7.55 6.98 6.52
EV/EBITDA 149 163 154 146
EV/EBIT 280 324 314 307
ROE analysis (%)
ROE 27.2 30.7 30.6 29.2
ROIC 2.52 1.49 1.05 0.78
Asset turnover (x) 0.50 0.38 0.33 0.27
Interest burden (x) 12.6 21.2 29.0 36.3
Tax burden (x) 0.97 0.93 0.88 0.88
Financial leverage (x) 2.05 1.70 1.55 1.46
Credit ratios
Net debt/equity (%) 11.4 10.6 11.0 10.9
Net debt/EBITDA (x) 2.43 3.51 4.78 6.09
Interest cover (x) 1.32 1.14 1.00 0.82
Source: Company data, Thomson Reuters, Credit Suisse estimates.
0
2008 2009 2010 2011 2012 2013
China Auto Sector 88
6
5
4
3
2
1
Source: IBES
12MF P/B multiple

Companies Mentioned (Price as of 04-Jan-2013)
Alcatel-Lucent (ALUA.PA, €1.21)
Audi (NSUG.DE^B12, €595.0)
Brilliance China Automotive Holding (1114.HK, HK$10.58, OUTPERFORM[V], TP HK$12.0)
BMW (BMWG.DE, €75.8)
BYD Co Ltd (1211.HK, HK$22.85, NEUTRAL[V], TP HK$20.0)
Camel Group (601311.SS, Rmb8.5)
Changan Auto (000625.SZ, Rmb6.5)
Daimler (DAIGn.DE, €42.63)
Desay Battery (000049.SZ, Rmb30.2)
DFAC (600006.SS, Rmb3.0)
Dongfeng Motors Group Co Ltd (0489.HK, HK$12.04, OUTPERFORM, TP HK$14.0)
EVE (300014.SZ, Rmb11.29)
Faw Car (000800.SZ, Rmb7.9)
Faw Xiali (000927.SZ, Rmb4.87)
Fiat (FIA.MI, €4.01)
Ford Motor Co. (F.N, $13.57)
Foton Motor (600166.SS, Rmb6.61)
Geely Automobile Holdings Ltd (0175.HK, HK$4.08, UNDERPERFORM[V], TP HK$3.5)
General Motors Corp. (GM.N, $29.86)
Great Wall Motor (2333.HK, HK$25.35, OUTPERFORM[V], TP HK$30.0)
Guangzhou Automobile Group (2238.HK, HK$7.14, NEUTRAL, TP HK$6.5)
HAIMA AUTO (000572.SZ, Rmb2.93)
Honda Motor (7267.T, ¥3,270)
HTC Corp (2498.TW, NT$287.0)
Hyundai Motor (005380.KS, W206,000, OUTPERFORM, TP W287,000)
JAC (600418.SS, Rmb6.76)
Jiangling Moto (200550.SZ, HK$18.54)
Kia Motors (000270.KS, W53,600, NEUTRAL, TP W70,000)
Lifan (601777.SS, Rmb6.33)
Mazda Motor (7261.T, ¥185)
Mitsubishi Corp (8058.T, ¥1,710)
Mitsubishi Motors (7211.T, ¥94)
Nissan Motor (7201.T, ¥854)
Nokia (NOK1V.HE, €3.22)
Peugeot (PEUP.F, €6.188)
Plantronics (PLT.N, $37.57)
Porsche Auto (PSHG_p.DE, €62.89)
Qingling Motors (1122.HK, HK$2.05)
Renault (RENA.PA, €40.77)
Research In Motion Limited (RIMM.OQ, $11.95)
SAIC Motor (600104.SS, Rmb17.59)
Samsung Engineering Co Ltd (028050.KS, W172,500, OUTPERFORM, TP W210,000)
Sinotruk (Hong Kong) Limited (3808.HK, HK$6.2)
Ssangyong Motor (003620.KS, W5,370)
Toyota Motor (7203.T, ¥4,260)
VTech Holdings (0303.HK, HK$86.75)
Weichai Power Co. Ltd (2338.HK, HK$35.8)
ZTE Corporation (0763.HK, HK$13.72)
Volkswagen (VOWG_p.F, €178.55)
Volvo (VOLVa.ST, Skr94.3)
Volvo (VOLVb.ST, Skr94.45)
Important Global Disclosures
Disclosure Appendix
08 January 2013
I, Jack Yeung, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this report.
China Auto Sector 89

Price and Rating History for Kia Motors (000270.KS)
000270.KS Closing Price Target Price
Date (W) (W) Rating
01-Feb-10 20,650 18,000 N
26-Apr-10 26,350 24,000
02-Aug-10 32,300 27,000
01-Nov-10 49,500 39,000
31-Jan-11 54,700 51,000
01-Aug-11 80,900 78,000
28-Oct-11 72,600 75,700
27-Jan-12 67,100 68,000
27-Apr-12 80,700 70,000
* Asterisk signifies initiation or assumption of coverage.
Price and Rating History for Hyundai Motor (005380.KS)
005380.KS Closing Price Target Price
Date (W) (W) Rating
29-Jan-10 113,000 84,000 U
23-Apr-10 130,000 88,000
30-Jul-10 149,000 110,000
22-Oct-10 168,000 125,000
28-Jan-11 188,000 206,000 N
29-Jul-11 235,000 266,300
24-Aug-11 180,500 239,500 O
27-Oct-11 223,500 262,000
28-Mar-12 232,500 289,500
26-Apr-12 262,000 332,500
31-Jul-12 237,000 R
01-Aug-12 237,500 332,500 O
26-Oct-12 226,500 287,000
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
U N D ERPERFO RM
N EU T RA L
O U T PERFO RM
REST RI C T ED
Price and Rating History for Geely Automobile Holdings Ltd (0175.HK)
0175.HK Closing Price Target Price
Date (HK$) (HK$) Rating
26-Jan-10 3.51 4.50 O
13-Apr-10 3.82 3.70 N
26-May-10 2.65 1.92 U
18-Jan-11 3.62 2.60
24-Mar-11 2.89 2.30
23-Aug-11 2.22 2.40 N
04-Dec-11 1.90 2.50 O
13-Feb-12 2.92 2.50 N
18-Jun-12 2.81 NR
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
N EU T RA L
U N D ERPERFO RM
N O T RA T ED
08 January 2013
China Auto Sector 90

Price and Rating History for Dongfeng Motors Group Co Ltd (0489.HK)
0489.HK Closing Price Target Price
Date (HK$) (HK$) Rating
26-Jan-10 9.78 13.50 O
15-Apr-10 12.32 12.50 N
26-May-10 8.86 8.10
31-Aug-10 12.08 14.30 O
07-Dec-10 14.80 14.30 N
18-Jan-11 13.96 14.70
11-May-11 12.44 12.25
29-Aug-11 12.02 16.50 O
04-Dec-11 12.14 17.00
19-Jun-12 13.26 NR
23-Nov-12 10.56 14.00 O *
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
N EU T RA L
N O T RA T ED
Price and Rating History for Brilliance China Automotive Holding (1114.HK)
1114.HK Closing Price Target Price
Date (HK$) (HK$) Rating
17-Jan-11 5.51 3.70 U
29-Mar-11 7.13 5.60
04-Dec-11 9.38 7.00
22-Feb-12 9.49 6.70
19-Jun-12 7.65 NR
24-Oct-12 9.56 11.00 O *
* Asterisk signifies initiation or assumption of coverage.
Price and Rating History for BYD Co Ltd (1211.HK)
1211.HK Closing Price Target Price
Date (HK$) (HK$) Rating
16-Mar-10 74.55 85.00 O
27-Apr-10 72.20 85.80
26-May-10 57.20 44.00 U
24-Aug-10 44.65 40.00
14-Oct-10 55.05 39.00
27-Oct-10 46.50 37.00
17-Jan-11 42.70 34.00
17-Feb-11 33.90 29.00
15-Mar-11 32.30 27.00
08-Apr-11 29.80 23.00
25-May-11 25.60 22.00
21-Jun-11 21.70 17.70
30-Jun-11 25.15 15.50
07-Jul-11 26.10 15.10
14-Jul-11 23.00 10.10
16-Aug-11 21.70 9.80
05-Dec-11 18.86 9.00
18-Jun-12 15.16 NR
* Asterisk signifies initiation or assumption of coverage.
U N D ERPERFO RM
N O T RA T ED
O U T PERFO RM
O U T PERFO RM
U N D ERPERFO RM
N O T RA T ED
08 January 2013
China Auto Sector 91

Price and Rating History for Guangzhou Automobile Group (2238.HK)
2238.HK Closing Price Target Price
Date (HK$) (HK$) Rating
05-Dec-11 7.29 8.20 N
18-Jun-12 6.85 NR
24-Oct-12 5.45 4.50 U *
31-Oct-12 5.31 3.50
06-Dec-12 6.42 5.00
* Asterisk signifies initiation or assumption of coverage.
Price and Rating History for Great Wall Motor (2333.HK)
2333.HK Closing Price Target Price
Date (HK$) (HK$) Rating
04-Dec-11 11.40 11.50 N
19-Jun-12 16.50 NR
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
N O T RA T ED
U N D ERPERFO RM
N EU T RA L
N O T RA T ED
08 January 2013
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which
consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total
return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the
most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings
are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Austr alia, New Zealand are, and prior to 2nd
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Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
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Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or
valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
China Auto Sector 92

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
08 January 2013
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 42% (53% banking clients)
Neutral/Hold* 39% (47% banking clients)
Underperform/Sell* 15% (43% banking clients)
Restricted 3%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely
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Price Target: (12 months) for Geely Automobile Holdings Ltd (0175.HK)
Method: Our 12-month target price of HK$3.50 for Geely is based on 10x 2013E P/E. We believe it should trade on par with its Chiense peers,
which are trading at around 10x 2013E EPS.
Risk: Risks to our target price of HK$3.50 for Geely are: (1) stronger-than-expected exports; and (2) stronger-than-expected Emgrand sales.
Price Target: (12 months) for Dongfeng Motors Group Co Ltd (0489.HK)
Method: Our 12-month target price of HK$14.00 for Dongfeng Motors is based on 9x 2013E P/E. Given its strong position in China's auto sector,
we believe it should trade on par with its Chinese peers, which are trading around 10x 2013E EPS.
Risk: Risks to our target price of HK$14.00 for Dongfeng Motors include: (1) continuing anti-Japanese sentiment in China; (2) massive price cut
across Japanese brands to recover sales; and (3) introduction of more economy models from other JV players.
Price Target: (12 months) for Guangzhou Automobile Group (2238.HK)
Method: Our 12-month target price of HK$6.50 for Guangzhou Auto is based on 10x 2013E P/E, as we believe it should be traded on par with its
Chinese peers, which are trading around 10x 2013E EPS.
Risk: Risks to our target price of HK$6.50 for Guangzhou Auto include: (1) potential introduction of new high-end models; and (2) faster-thanexpected
recovery of the macro economy.
Price Target: (12 months) for Kia Motors (000270.KS)
Method: Our target price of W70,000 for Kia Motors is based on SOTP valuation as applying target EBITDA multiple of 5.5x against 2011E
EBITDA for the consolidated entity.
Risk: Key risks to our W70,000 target price for Kia Motors include any sudden sharp fluctuations in currency movements, which could adversely
impact its profitability. In the short term, the W/US$ and W/Eu exchange rates are both depreciating against the Korean Won, contracting
the company's Won-denominated ASP.
Price Target: (12 months) for Brilliance China Automotive Holding (1114.HK)
Method: Our 12-month target price of HK$12.00 for Brilliance China Auto is based on 14x 2013E EPS.
Risk: Risks to our 12-month target price of HK$12.00 for Brilliance China Auto include further capital requirement for capacity expansion,
parent's motivation to transfer cash surplus, and strong competition from Audi.
China Auto Sector 93

Price Target: (12 months) for BYD Co Ltd (1211.HK)
08 January 2013
Method: Our 12-month target price of HK$20.00 for BYD is based on SoTP. We value its auto segment at HK$10.20 by using DCF. We apply 12x
2013E P/E to its battery segment and get its value at HK$0.70. We apply 18x 2013E P/E to its handset components and assembly
segment to get its value at HK$9.10.
Risk: Risks to our 12-month target price of HK$20.0 for BYD include: (1) unfavourable government polices regarding EVs; (2) unsuccessful new
model launches in its conventional automobile business; (3) weaknesses in the global economy, causing demand for the company's
products to decline severely.
Price Target: (12 months) for Great Wall Motor (2333.HK)
Method: Our 12-month target price of HK$30.00 for Great Wall Motor is based on 13x 2013E P/E. Given China's SUV sales growth is as fast as
luxury auto sales growth, we believe Great Wall—the No.1 SUV maker in China—should trade at a premium to its peers, which are
currently trading at around 10x 2013E EPS.
Risk: Risks to our target price of HK$30.00 for Great Wall Motor are: (1) tougher-than-expected competition in SUV segment; (2) slower-thanexpected
ramp up of its new capacities.
Price Target: (12 months) for Hyundai Motor (005380.KS)
Method: Our W287,000 target price on Hyundai Motor is derived with residual income analysis. Based on using a COE (cost of equity) of 8.9%
utilising a risk-free rate assumption of 3.01% and beta of 1.16, our residual income analysis over a 20-year business cycle suggests a
target 2013E P/B (price-to-book) multiple of 1.2x, within historical valuation range, given expected ROE (return on equity) of 15.6% in
2013.
Risk: Risks to Hyundai Motor achieving our W287,000 target price include the following: For the next 12-18 months demand volatility in the
global auto industry resulting from the completion of demand stimulus programmes in key demand centres may result in lower-thanexpected
demand. Adverse market liquidity can cause the stock price to either overshoot or undershoot our TP under volatile market
conditions.
Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the
target price method and risk sections.
See the Companies Mentioned section for full company names
The subject company (2238.HK, 000270.KS, 1114.HK, 005380.KS, 0763.HK, 2498.TW, 3808.HK, 7267.T, 7203.T, ALUA.PA, DAIGn.DE, F.N,
FIA.MI, GM.N, NOK1V.HE, RENA.PA, RIMM.OQ, VOLVb.ST, VOWG_p.F) currently is, or was during the 12-month period preceding the date of
distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (2238.HK, 1114.HK, 3808.HK, 7267.T, 7203.T, F.N, FIA.MI, NOK1V.HE,
VOWG_p.F) within the past 12 months.
Credit Suisse provided non-investment banking services to the subject company (000270.KS, 005380.KS, 0763.HK, 7267.T, 7203.T, DAIGn.DE, F.N,
FIA.MI, GM.N, NOK1V.HE, RENA.PA, VOLVb.ST, VOWG_p.F) within the past 12 months
Credit Suisse has managed or co-managed a public offering of securities for the subject company (7267.T, 7203.T, F.N, FIA.MI, NOK1V.HE,
VOWG_p.F) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (2238.HK, 1114.HK, 3808.HK, 7267.T, 7203.T, F.N,
FIA.MI, NOK1V.HE, VOWG_p.F) within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (0489.HK, 2238.HK,
000270.KS, 1114.HK, 1211.HK, 2498.TW, 3808.HK, 7261.T, 7201.T, 7211.T, 7267.T, 7203.T, ALUA.PA, F.N, FIA.MI, NOK1V.HE, RIMM.OQ,
VOWG_p.F) within the next 3 months.
Credit Suisse has received compensation for products and services other than investment banking services from the subject company (000270.KS,
005380.KS, 0763.HK, 7267.T, 7203.T, DAIGn.DE, F.N, FIA.MI, GM.N, NOK1V.HE, RENA.PA, VOLVb.ST, VOWG_p.F) within the past 12 months
As of the date of this report, Credit Suisse makes a market in the following subject companies (7201.T, 7267.T, 7203.T, F.N, GM.N, RIMM.OQ).
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (0489.HK, 0763.HK,
2498.TW, DAIGn.DE, FIA.MI, NOK1V.HE).
Important Regional Disclosures
Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (0175.HK, 0489.HK,
2238.HK, 000270.KS, 1114.HK, 1211.HK, 2333.HK, 005380.KS, 0303.HK, 0763.HK, 2498.TW, 3808.HK, 7261.T, 7201.T, 7211.T, 7267.T, 7203.T,
ALUA.PA, DAIGn.DE, F.N, FIA.MI, GM.N, NOK1V.HE, RENA.PA, RIMM.OQ, VOWG_p.F) within the past 12 months
China Auto Sector 94

08 January 2013
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The following disclosed European company/ies have estimates that comply with IFRS: (7201.T, ALUA.PA, DAIGn.DE, F.N, FIA.MI, NOK1V.HE,
RENA.PA, VOLVa.ST, VOLVb.ST, VOWG_p.F).
Credit Suisse has sent extracts of this research report to the subject company (0175.HK, 0489.HK, 2238.HK, 1114.HK, 1211.HK, 2333.HK) prior to
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Credit Suisse (Hong Kong) Limited ........................................................................................................................................................ Jack Yeung
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China Auto Sector 95

08 January 2013
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China Auto Sector AU0275.doc