China Auto Market Prospect and Strategy of Dongfeng

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China Auto Market Prospect and Strategy of Dongfeng Motor Co. , Ltd April 19

China Auto Market Prospect and Strategy of Dongfeng Motor Co. , Ltd April 19 th, 2005 Dongfeng Motor Company LTD President, Katsumi Nakamura 1

Contents 1. What is Dongfeng Motor Co. , LTD? 2. China Market : Development

Contents 1. What is Dongfeng Motor Co. , LTD? 2. China Market : Development and Business Environment 3. Strategy of Dongfeng Motor Co. , LTD 2

Partnership Structure Dongfeng Automotive Industry Investment Co. , Ltd. 50% Nissan Motor Co. LTD

Partnership Structure Dongfeng Automotive Industry Investment Co. , Ltd. 50% Nissan Motor Co. LTD (Dongfeng holding company) Cash investment 8. 35 billion RMB Asset investment 8. 35 billion RMB and core business transfer Dongfeng Motor Co. LTD Non-automotive companies, etc. Core automotive operations PSA/Honda JVs Commercial vehicle division Passenger car division Equipment division Parts division 3

One Company, Two Brands DFL A single full-line auto company TRUCKS, CV’S & BUSES

One Company, Two Brands DFL A single full-line auto company TRUCKS, CV’S & BUSES PASSENGER VEHICLES Sunny Bluebird Tiida Teana Pickup Paladin (Produced by Zhengzhou Nissan) 4

Contents 1. What is Dongfeng Motor Co. , LTD? 2. China Market : Development

Contents 1. What is Dongfeng Motor Co. , LTD? 2. China Market : Development and Business Environment 3. Strategy of Dongfeng Motor Co. , LTD 5

China Market Prospect Continuous mid & long term market expansion The toughest competitive market

China Market Prospect Continuous mid & long term market expansion The toughest competitive market Risks on the market growth to be controlled through the governmental policies 6

CY 1996 -2010 TIV Remark:Including CBU 10 K units 900 Actual 800 748 700

CY 1996 -2010 TIV Remark:Including CBU 10 K units 900 Actual 800 748 700 610 600 525 500 457 400 343 222 300 200 100 0 846 Forecasting 183 144 157 160 106 38 CY 96 110 109 47 51 CY 97 CY 98 126 213 144 245 57 85 CY 99 CY 00 CY 01 266 235 271 300 CY 03 CY 04 CY 05 319 659 294 CV 303 276 272 203 160 69 254 566 772 338 PV 383 454 CY 07 CY 08 469 528 140 CY 02 Data source : (1) CY 96 -CY 04 : CAAM+CPVIA CY 06 CY 09 CY 10 (2) CY 05 -CY 10 : DFL Study 7

PV Growth Speed:Japan vs. China (10 K. Unit) 600 CY 2010 CY 1990 500

PV Growth Speed:Japan vs. China (10 K. Unit) 600 CY 2010 CY 1990 500 400 CY 2004 CY 1973 300 200 Japan: CY 1964 100 China: CY 1996 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 (Years) Data Source : (1) Japan data : Japan Auto Handbook (2) China data : CAAM & DFL Study 8

Population Structure of Japan (CY 1970) Population of CY 1970: 104. 67 Million 80

Population Structure of Japan (CY 1970) Population of CY 1970: 104. 67 Million 80 -84 70 -74 Female Male 60 -64 50 -54 40 -44 30 -34 20 -24 10 -14 0 -4 6 4 2 0 2 4 6 (Mil. ) MIL 9

<Japan> Population ratio of age 37 - 40 & Land Price Increase in six

<Japan> Population ratio of age 37 - 40 & Land Price Increase in six big cities Source:Daiwa Institute of Research (Japan) 10

Population Structure of China ( CY 2000 ) Population of CY 2000: 1242. 6

Population Structure of China ( CY 2000 ) Population of CY 2000: 1242. 6 Million (Not including 2. 5 million army man of Liberation Army) 100 ---90 -94 Male Female 80 -84 70 -74 60 -64 50 -54 40 -44 30 -34 10 years 20 -24 10 -14 0 -4 80 40 80 (百万) MIL 11

Number of Auto Enterprise China CY 2003 over 100   Global 27 brands + α  < Japan:

Number of Auto Enterprise China CY 2003 over 100   Global 27 brands + α  < Japan: 11 > Nissan Toyota Honda Mazda Mitsubishi Suzuki Daihatsu Isuzu Subaru Nissan Diesel Hino 11 Dongfeng Faw Shanghai Beijing Guangzhou Tianjin Nanjing Fujian Changan Brilliance Heavy truck Geely Chery Hafei Great wall Zhongxing < United 3 States : 3 > GM Ford DCM (C) < Europe: 10 > 10 VW・Audi PSA. Fiat BMW, DCM (D) Renault, Volvo Styer, Man 3 < Korea: 3 > Hyundai Kia Daewoo 12

No. of Models in China Market Source: Fourin (Japan) 120 14 100 Newly introduced models

No. of Models in China Market Source: Fourin (Japan) 120 14 100 Newly introduced models 80 41 60 15 40 20 101 12 7 17 9 24 33 45 60 Existing models 0 1999 2000 2001 2002 2003 2004 13

Market Price Trend Representative models’ weighted ave. price by segment MSRP: K RMB 260.

Market Price Trend Representative models’ weighted ave. price by segment MSRP: K RMB 260. 7 250 258. 1 251. 7 151. 0 152. 0 [Price down rate vs. ’ 03/Q 4] D-segment 249. 3 246. 8 -5. 3% C-segment 145 141. 8 134. 2 90 94. 8 -13. 6% B-segment 89. 6 '03/Q 4 130. 4 '04/Q 1 89. 7 '04/Q 2 88. 2 '04/Q 3 79. 5 -16. 1% '04/Q 4 14

Top 10 Sales PV Makes units 2004 1 st Q 1 2 3 4

Top 10 Sales PV Makes units 2004 1 st Q 1 2 3 4 5 6 7 8 9 10 Shanghai VW 100, 884 FAW-VW 68, 945 Shanghai GM 62, 496 Changan Suzuki 34, 763 Tianjin-FAW 30, 988 Jili 27, 827 Cherry 24, 487 GZ Honda 24, 424 Shenlong PSA 22, 273 Beijing Hyundai 21, 910 Data source: CPVIA 2005 1 st Q Shanghai VW Beijing Hyundai FAW-VW GZ Honda Tianjing-FAW Shanghai GM Cherry Shenlong PSA DF Nissan Jili 62, 962 56, 064 52, 799 42, 888 42, 294 39, 704 34, 695 32, 976 29, 191 26, 029 15

Raw Material Price Hike Supply and Demand Hot rolled steel Oku-ton 2. 0 1.

Raw Material Price Hike Supply and Demand Hot rolled steel Oku-ton 2. 0 1. 8 1. 6 1. 4 1. 2 1. 12 1. 0 0. 8 0. 6 0. 86 0. 4 0. 2 0 ‘ 03 0. 6 1. 78 1. 22 1. 21 0. 5 0. 3 0. 1 0 ‘ 04 ‘ 05 ‘ 06 ‘ 07 ‘ 08 ‘ 09 0. 40 0. 22 0. 30 0. 2 Demand ‘ 10 0. 55 0. 40 0. 4 1. 43 Supply Cold rolled steel Oku-ton 0. 16 ‘ 03 Supply ‘ 04 ‘ 05 ‘ 06 Demand ‘ 07 ‘ 08 ‘ 09 ‘ 10 Steel Market Economics Trend 170 160 150 Cold rolled steel Hot rolled steel in coil Steel plate Zinc plate steel Overall Index 140 >10% 130 120 approx. 20% 110 100 2003/12/end 04/5/17~21 04/8/23~8/27 04/12/6~10 05/3/28~4/1 16

Energy Consumption – Oil G ton 5. 0 Oil consumption Oil production 4. 0

Energy Consumption – Oil G ton 5. 0 Oil consumption Oil production 4. 0 Oil import 3. 0 2. 0 1. 0 0. 0 '96 '97 '98 '99 '00 Data source: CPEA '01 '02 '03 '04 '05 F '10 F '15 F 17

Social & Environmental Issues Emission Control ’ 03 ’ 04 ’ 05 ’ 06

Social & Environmental Issues Emission Control ’ 03 ’ 04 ’ 05 ’ 06 ’ 07 ’ 08 ’ 09 ’ 10 Fuel Consumption New regulation EUR 1 Step 2 New model Jul/’ 05 Jan/’ 08 Existing Jul/’ 06 Jan/’ 09 EUR 2 EUR 3 EUR 4 <Beijing> Safety Infrastructure ü Traffic Fatalities: 104, 372 (’ 03) 99, 217 (’ 04) 43. 3 times of JPN ü Stalled Traffic ü Lack of Parking <per UIO, 2003> Source) China: MPS, Japan: NPA, JAIA 18

Contents 1. What is Dongfeng Motor Co. , LTD? 2. China Market : Development

Contents 1. What is Dongfeng Motor Co. , LTD? 2. China Market : Development and Business Environment 3. Strategy of Dongfeng Motor Co. , LTD 19

Strategy of DFL ü Market and Customer Focus ü Ability of “Producing Excellent Products”

Strategy of DFL ü Market and Customer Focus ü Ability of “Producing Excellent Products” 20

Brand Promise NISSAN: “Bold and Thoughtful” SHIFT_ § products beyond the expectations § “value

Brand Promise NISSAN: “Bold and Thoughtful” SHIFT_ § products beyond the expectations § “value for our customers” 21

TEANA Proposal of New “Innovative Luxury Car” 22

TEANA Proposal of New “Innovative Luxury Car” 22

TEANA Proposal of New “Innovative Luxury Car” 23

TEANA Proposal of New “Innovative Luxury Car” 23

TEANA – VQ 35 DE Engine World’s 10 Best Engine <’ 93 -’ 04>

TEANA – VQ 35 DE Engine World’s 10 Best Engine <’ 93 -’ 04> 24

TEANA “Car of the Year in 2005 Award in China” 25

TEANA “Car of the Year in 2005 Award in China” 25

TIIDA “All New Specious and Comfortable Sedan” 26

TIIDA “All New Specious and Comfortable Sedan” 26

TIIDA “Brand-New Comfort Car” 27

TIIDA “Brand-New Comfort Car” 27

TIIDA – HR 16 DE New Engine 28

TIIDA – HR 16 DE New Engine 28

Products Introduction Plan New introduction Full model change Passenger vehicle serious 2003 2004 Minor

Products Introduction Plan New introduction Full model change Passenger vehicle serious 2003 2004 Minor change 2005 2006 2007 Upper, middle & entry class cars and multi-purpose vehicle(MPV) 29

Sales & Service Network NSSW (Nissan Sales & Service Way) Number of Dealers *)

Sales & Service Network NSSW (Nissan Sales & Service Way) Number of Dealers *) incl. 2 nd tier dealers Customer Satisfaction SSI CSI 2007 2003 2004 <objective> No. 10 No. 5 Top level No. 9 No. 5 Top level 30

State-of-the-art Technology New Plant – Huadu Vehicle Plant: May/’ 04 SOP (150 K units)

State-of-the-art Technology New Plant – Huadu Vehicle Plant: May/’ 04 SOP (150 K units) – Xiangfan Plant: Sep/’ 04 SOP (70 K units) – Engine Plant: Beg/’ 06~ (360 K units) NPW (Nissan Production Way) – “Zero” inventory by synchronized production R&D Site – PV New R&D Center: End/’ 05~ (330 M RMB, 200, 000 m 2) QCD “KAIZEN” – GENBA-KANRI, IE, Quality Management, etc. 31

Our Destination To be; One of the Best Brand in China, providing “Value for

Our Destination To be; One of the Best Brand in China, providing “Value for our customers” 32