Xingbin LI Chief Representative AMT-Beijing Representative Office China Market Update Market Update Breakfast – China September 8, 2006

CONTENTS The China automotive industry The China automotive industry Production & growth rate Production & growth rate Opportunity Opportunity Production capacity (current production, production capacity and expansion plan) Production capacity (current production, production capacity and expansion plan) Key automakers Key automakers The China components industry The China components industry Production & growth rate Production & growth rate Opportunity Opportunity Demands (purchasing plans of major global automakers) Demands (purchasing plans of major global automakers) New measures and tariff (technical barrier) New measures and tariff (technical barrier) Key suppliers (global suppliers and domestic suppliers) Key suppliers (global suppliers and domestic suppliers)

Facts 4 th Largest economy in the world in th Largest economy in the world in 2005 GDP: USD trillion GDP: USD trillion GDP growth rate: 9.9% GDP growth rate: 9.9% 2 nd Largest auto market in the world in nd Largest auto market in the world in 2005 Production: 5.75 million units of vehicle Production: 5.75 million units of vehicle Growth rate: 13.4% Growth rate: 13.4% The largest machine tool market in the world The largest machine tool market in the world USD10.9 billion USD10.9 billion Growth rate: 15% Growth rate: 15%

The China Automotive Industry Production & growth rate

117 Registered Automakers, Of which 90 company’s capacities Are less than 10,000 units a year. Vehicles (Million of Units) (1 – 6) Production Changes, % Source: China Auto Industry Year Book

The China Automotive Industry Production & growth rate China Car Productions (Million of Units) e (1-6) Production Change %

Production of Top 8 Chinese automakers from January-June, 2006 (in units) 1. 1.Shanghai Automotive Industry Corp 621, % First Automotive Works Corp 562, % Dongfeng Motor Corp 454, % Chang'an Motor Corp 369, % Beijing Automotive Industry Corp 337, % Chery Automobile 144, % Geely Automobile 105, % Guangzhou Automobile 105,700 (Source: China Association of Automobile Manufacturers)

The China Automotive Industry Opportunity – Production capacity Production in 2005: 5.75 million units Production in 2005: 5.75 million units Production capacity in 2005: 8 million units Production capacity in 2005: 8 million units Production capacity expansion plan: 16 million units by 2010 Production capacity expansion plan: 16 million units by 2010

The China Automotive Industry Opportunity - Key automakers

The China Components Industry Sales & growth rate “A Fragmented Industry” 1,540 Registered Enterprises 3,500-8,500 Non-Registered Components Statistics ($ billion) Total Sales Domestic Imports Exports Average Annual Sales Per Supplier: $5.0 to $10.0 million Source: China Auto Industry Year Book

The China Components Industry Opportunity - Demands Daimler-Chrysler (for China operation) Daimler-Chrysler (for China operation) To spend $840 million in buying parts in 2008 ($100 million in 2005) To spend $840 million in buying parts in 2008 ($100 million in 2005) BMW (for China operation) BMW (for China operation) To spend $300 million in buying parts in 2007 To spend $300 million in buying parts in 2007 Volkswagen (for overseas operations) Volkswagen (for overseas operations) To spend $1.0 billion in buying parts in 2006 ($300 million in 2005) To spend $1.0 billion in buying parts in 2006 ($300 million in 2005) Volkswagen (for China operations) Volkswagen (for China operations) To spend $2.5 billion in buying parts in 2006 To spend $2.5 billion in buying parts in 2006 Multinational firms totally (for overseas operations) Multinational firms totally (for overseas operations) To spend $35 billion in buying parts by the end of 2007 To spend $35 billion in buying parts by the end of 2007

The China Components Industry Opportunity – New tariff Cars Cars Displacement <3.0 L >3.0 L Parts & Components

The China Components Industry Opportunity – New measures “Measures for the Administration of Import of Automobile Components and Parts Featuring Complete Vehicles” “Measures for the Administration of Import of Automobile Components and Parts Featuring Complete Vehicles”  Promulgated by the Customs of China, MOC, MOF and NDRC on April 1, 2005  Go into effect on July 1, 2006

The China Components Industry Opportunity – New measures – Key Points Article 21 - Under any of the following circumstances, the imported automobile components and parts shall be considered bearing the features of a complete vehicle: Article 21 - Under any of the following circumstances, the imported automobile components and parts shall be considered bearing the features of a complete vehicle: Importing CKD or SKD to assemble automobiles. Importing CKD or SKD to assemble automobiles. The total price of the imported components and parts is not less than 60% of the total price of the complete vehicle type. The total price of the imported components and parts is not less than 60% of the total price of the complete vehicle type. If, within the scope as prescribed in Article 4 of the present Measures: If, within the scope as prescribed in Article 4 of the present Measures: Importing both the vehicle body (including the cab) assembly and engine assembly to assemble vehicles; Importing both the vehicle body (including the cab) assembly and engine assembly to assemble vehicles; Importing either the vehicle body (including the cab) assembly or engine assembly and 3 or more other assemblies (systems) to assemble vehicles; Importing either the vehicle body (including the cab) assembly or engine assembly and 3 or more other assemblies (systems) to assemble vehicles; Importing 5 or more assemblies (systems) other than the vehicle body (including the cab) assembly and the engine assembly to assemble vehicles. Importing 5 or more assemblies (systems) other than the vehicle body (including the cab) assembly and the engine assembly to assemble vehicles.

The China Components Industry Opportunity – New measures-Key points Article 22 - under any of the following circumstances, the imported automobile components and parts shall be considered bearing the features of an automobile assembly (system) Article 22 - under any of the following circumstances, the imported automobile components and parts shall be considered bearing the features of an automobile assembly (system) Importing whole sets of KD components and parts to assemble an assembly (system) Importing whole sets of KD components and parts to assemble an assembly (system) Importing key components and parts or sub-assemblies to assemble an assembly (system), and the import of key components and parts or sub-assemblies reaches or exceeds the specified quantity. Importing key components and parts or sub-assemblies to assemble an assembly (system), and the import of key components and parts or sub-assemblies reaches or exceeds the specified quantity. The total price of the imported components and parts is not less than 60% of the total price of the assembly (system) The total price of the imported components and parts is not less than 60% of the total price of the assembly (system)

The China Components Industry Opportunity – New measures “Measures” REALLY means that Discouraging automakers from using imported car parts for vehicles they assemble in China and making car by CKD & SKD increases production cost (from 10% to 25%) Creating an incentive for car parts makers to shift production to China

The China Components Industry Opportunity – changes for global suppliers From shareholding to share controlling From shareholding to share controlling From JV to WOFE From JV to WOFE From market penetration to market monopoly From market penetration to market monopoly

Where are the Major Component Suppliers Located in China? Northeast (Jilin, Liaoning) Yangtze river delta (Shanghai, Jiangsu, Zhejiang) Greater Beijing area (Beijing, Tianjin) Middle China (Hubei) Pearl river delta (Guangdong, Fujian) Southwest (Chongqing, Chengdu)

The China Components Industry Opportunity – key suppliers Major global suppliers Major global suppliers ASIMCO ASIMCO Eaton Eaton Delphi Delphi Dana Dana TRW TRW Visteon Visteon Lear Lear BorgWarner BorgWarner Johnson Controls Johnson Controls Bosch Bosch Siemens VDO Siemens VDO ThyssenKrupp ThyssenKrupp GKN GKN Freudenberg Freudenberg Faurecia Faurecia Valeo Valeo Aisin Seiki Yazaki Denso ArvinMeritor ArvinMeritor Autoliv Autoliv Magna Magna Major domestic suppliers Major domestic suppliers FAW Fawer Auto Parts Co. Dongfeng Motor Co., Ltd Parts & Components Business Wanxiang Group Sanhua Holding Group Wanfeng Auto Holding Group

Global Suppliers in China ASIMCO Parkview Center, 4/F, 2 Jiangtai Road (s), Chaoyang District , P. R. China (86) , Asimco Meilian Braking System (Langfang) Co.Langfang, Hebei ProvinceAir-compressor, brake Asimco Meilian Braking System (Langfang) Co.Langfang, Hebei ProvinceAir-compressor, brake Asimco International Costing Co.Jiang County, Shanxi ProvinceCasting for engine block and head Asimco International Costing Co.Jiang County, Shanxi ProvinceCasting for engine block and head Beijing Asimco Tianwei Fuel Injection Pump & Nozzle Co.BeijingFuel injection pump, oil nozzle Beijing Asimco Tianwei Fuel Injection Pump & Nozzle Co.BeijingFuel injection pump, oil nozzle Zhong Ding Automotive Components CoNingguo, Anhui ProvinceRubber products Zhong Ding Automotive Components CoNingguo, Anhui ProvinceRubber products Nanyue Fuel Injection & Pump Co.Hengyang, Hunan ProvinceFuel injection pump Nanyue Fuel Injection & Pump Co.Hengyang, Hunan ProvinceFuel injection pump Sichuan Dan Chi Industry Co.Sichuan ProvinceTransmissions Sichuan Dan Chi Industry Co.Sichuan ProvinceTransmissions Hubei Super-Elec. Auto Components Co.Shashi, Hubei ProvinceGenerators, starters Hubei Super-Elec. Auto Components Co.Shashi, Hubei ProvinceGenerators, starters Harbin Feibeng Auto-Elec. Co.Harbin, Heilongjiang ProvinceIgniters, ignition coils, relays, switches Harbin Feibeng Auto-Elec. Co.Harbin, Heilongjiang ProvinceIgniters, ignition coils, relays, switches Asimco Braking System (Zhuhai) Co.Zhuhai, Guangdong ProvinceDisc & Drum type brakes, vacuum boosters Asimco Braking System (Zhuhai) Co.Zhuhai, Guangdong ProvinceDisc & Drum type brakes, vacuum boosters Asimco Braking Braking System (Guangzhou) Co.Guangzhou, Guangdong ProvinceDisc & Drum type brakes, boosters Asimco Braking Braking System (Guangzhou) Co.Guangzhou, Guangdong ProvinceDisc & Drum type brakes, boosters Asimco Shuangtai Components (Sichuan) Co.Sichuan ProvinceWheels Asimco Shuangtai Components (Sichuan) Co.Sichuan ProvinceWheels Eaton Floor, 300 Huai Hai Zhong Road, Hong Kong New World Tower, Shanghai , P. R. China Eaton Floor, 300 Huai Hai Zhong Road, Hong Kong New World Tower, Shanghai , P. R. China (86) , Eaton Electrical (Suzhou) Co., Ltd. - EES Suzhou, Jiangsu ProvinceElectrical circuit protection devices Eaton Electrical (Suzhou) Co., Ltd. - EES Suzhou, Jiangsu ProvinceElectrical circuit protection devices Eaton Fast Gear (Xi'an) Co., Ltd. Xi’an, Shaanxi ProvinceTransmissions Eaton Fast Gear (Xi'an) Co., Ltd. Xi’an, Shaanxi ProvinceTransmissions Eaton Fluid Power (Jining) Co., Ltd. Jining, Shandong ProvinceHydraulic pumps and motors Eaton Fluid Power (Jining) Co., Ltd. Jining, Shandong ProvinceHydraulic pumps and motors Eaton Fluid Power (Shanghai) Co., Ltd ShanghaiFluid connectors Eaton Fluid Power (Shanghai) Co., Ltd ShanghaiFluid connectors Eaton Senstar Automotive Fluid Connector (Shanghai) Co.ShanghaiFluid connectors Eaton Senstar Automotive Fluid Connector (Shanghai) Co.ShanghaiFluid connectors Eaton Truck and Bus Components (Shanghai) Co., Ltd ShanghaiTransmissions Eaton Truck and Bus Components (Shanghai) Co., Ltd ShanghaiTransmissions Hangzhou Switches Power Systems Co., Ltd. Hangzhou, Zhejing ProvinceSwitches Hangzhou Switches Power Systems Co., Ltd. Hangzhou, Zhejing ProvinceSwitches Shanghai Eaton Engine Components Company, Ltd. ShanghaiEngine valves and hydraulic tappets Shanghai Eaton Engine Components Company, Ltd. ShanghaiEngine valves and hydraulic tappets Zhenjiang Eaton Electrical Systems Co., Ltd. ZhejiangElectrical devices Zhenjiang Eaton Electrical Systems Co., Ltd. ZhejiangElectrical devices FAW Eaton Gear-Box Co.Changchun, Jilin ProvinceTransmissions FAW Eaton Gear-Box Co.Changchun, Jilin ProvinceTransmissions Guangzhou Eaton Piston Ring Co.Guangzhou, Guangdong ProvincePiston rings Guangzhou Eaton Piston Ring Co.Guangzhou, Guangdong ProvincePiston rings Ningbo Eaton Shenglong Co.Jingbo, Zhejiang ProvinceHydraulic hose fittings and adapters Ningbo Eaton Shenglong Co.Jingbo, Zhejiang ProvinceHydraulic hose fittings and adapters

Domestic Suppliers in China FAW Fawer 245 Shenzhen Street, Economic Development Zone, Changchun, Jilin, P. R. China (86) , There are 23 manufacturing divisions/ companies under FAW Fawer Group. There are 23 manufacturing divisions/ companies under FAW Fawer Group. Dongfeng Motor Co., Ltd Parts & Components Business 8 dong Bin Gu Tai, Dong Cheng Road, Shiyan , Hubei, P. R. China (86) , There are 17 manufacturing/companies under Dongfeng Motor Co. Ltd Parts & Components Business. There are 17 manufacturing/companies under Dongfeng Motor Co. Ltd Parts & Components Business. Wanxiang Group Wanxiang Road, Xiao Shan District, Hangzhou, Zhejiang, P. R. China (86) , There are 8 manufacturing/companies under Wanxiang Group making auto parts and components. There are 8 manufacturing/companies under Wanxiang Group making auto parts and components. Sanhua Holding Group Xinchang, Zhejing, P. R. China Sanhua Holding Group Xinchang, Zhejing, P. R. China (86) , There are 7 companies under Sanhua holding group making auto parts. There are 7 companies under Sanhua holding group making auto parts.

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