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original citic securities research citic securities research

text｜yin xinchi li jingtao li zijun wu pingle dong juntao

in 2024q2, domestic demand for automobiles declined, but exports grew rapidly, maintaining a stable total volume. looking ahead to the second half of the year, the effect of the "old for new" policy is evident, domestic demand is expected to be further boosted, and the industry is booming. the parts sector was affected by factors such as bulk and freight rates in 24q2, but the margins improved in 24q3, and profit release is expected to accelerate. recommended attention: (1) structural opportunities in the passenger car sector; (2) leading commercial vehicle companies with an upward cycle and open long-term profit margins; (3) parts companies that are in the incremental track and are accelerating global expansion; (4) two-wheeled vehicle leaders with product upgrades and accelerated overseas expansion.

passenger cars: leading car companies are operating steadily, and the “old for new” policy is taking effect.

according to the china automobile association and the compulsory traffic insurance, in q2 24, the domestic wholesale sales of narrow passenger cars were 6.21 million (up 2.4% year-on-year), the retail sales were 4.87 million (down 5.5% year-on-year), and the export sales were 1.17 million (up 22.5% year-on-year). the retail + export totaled 6.04 million (down 1.2% year-on-year). domestic demand was slightly under pressure, and exports contributed the main growth. although the impact of the industry price war continues, the alpha of the leading automakers is obvious, relying on exports and product structure upgrades. profits continue to rise month-on-month. on the policy side, the "old for new" subsidy has been implemented. we estimate that as of the first half of 2024, the number of old vehicles that meet the policy standards will be about 14.5 million, of which 5.5 million are expected to be converted into sales in 2024, and the sales increase will reach 1 million, corresponding to 4% of the total domestic automobile sales.

commercial vehicles: as the industry recovers, “trade-in” and exports contribute to growth.

the commercial vehicle industry as a whole is in the recovery channel, and heavy trucks and large and medium-sized buses have their own highlights. according to the china association of automobile manufacturers, the sales volume of the commercial vehicle industry in 2024q2 was 1.036 million vehicles, a year-on-year increase of 0.3%; among them, the cumulative sales volume of the heavy truck industry in 2024q2 was 232,000 vehicles, a year-on-year decrease of 6.2%; the cumulative sales volume of the large and medium-sized bus industry in 2024q2 was 25,000 vehicles, a year-on-year increase of 19%. the overall commercial vehicle industry in 24q2 showed a recovery trend, and the year-on-year increase in profits was more significant under the influence of operating leverage. the export profit of commercial vehicles is significantly better than that of domestic vehicles at the current stage, and the growth of exports is expected to provide strong support for profits. on the other hand, the introduction of the "old for new" policy is expected to accelerate the recovery of the industry. we estimate that as of 2024h1, the old buses will be at the level of 100,000 vehicles and the national iii heavy trucks will be at the level of 500,000 vehicles. domestic demand is expected to be driven, and the replacement of old vehicles is expected to contribute significantly to the industry.

components: intelligent and high-end upgrades continue to drive sector growth.

affected by the year-on-year decline, rising prices of raw materials and shipping costs, the 24q2 sector's profitability faces short-term pressure. however, from the product perspective, the asp upgrade and penetration rate of smart driving/cockpit/chassis configurations continue, and the revenue and profits of companies related to the intelligent industry chain continue to grow rapidly, generally exceeding market expectations. from the customer perspective, the production and sales performance of mid-to-high-end brands is outstanding, and the ramp-up of new models has injected new growth momentum into companies in the industry chain. looking ahead to the third quarter, we expect that the negative impact of the year-on-year decline, raw materials and shipping costs will be greatly eliminated. at the same time, the policy increase will help the industry gradually get out of the off-season, which will drive the increase in capacity utilization and restore the profitability of the sector.

two-wheeled vehicles: details of the old-for-new exchange policy have been implemented, and policy changes have brought about improvements in the industry structure and expanded demand.

on august 30, the details of the two-wheeled vehicle trade-in have been implemented. some local governments have begun to provide subsidies of up to 500 yuan per bicycle. subsequent subsidies will be implemented nationwide, which will stimulate the demand for the two-wheeled vehicle industry. we believe that the "new national standard for two-wheeled vehicles" (announced by the ministry of industry and information technology) will be implemented at the end of this year. under the background of strong supervision on both the production and consumption sides, the replacement of old two-wheeled vehicles in the next 1-2 years will bring incremental industry demand. the leading companies with stronger comprehensive capabilities will obtain it, and the entire industry will show an accelerated concentration of shares to the leading companies. 24q2 large-displacement motorcycles are both popular at home and abroad. on the one hand, domestic brands have quickly established a foothold in the field of medium-sized consumer motorcycles (400-500cc), showing world-class competitiveness; on the other hand, the domestic demand for entry-level consumer motorcycles (250cc) has shown a rapid growth trend (year-on-year +81.2%), dispelling the market's concerns about the industry's long-term ceiling; and with the development of the south american market and the european and american markets preparing for 2025, the performance of the 24q4 sector is expected to rise again.

risk factors:

the risk of further escalation of regional conflicts such as the russia-ukraine conflict; the risk of intensified international trade frictions; the risk of domestic macroeconomic recovery falling short of expectations; the risk of insufficient overseas demand, insufficient domestic consumption or lower-than-expected government investment; the risk of relevant industrial policies meeting expectations; the risk of chip shortages leading to lower-than-expected vehicle shipments; the risk of slowing growth in automobile demand; the risk of a sharp increase in the prices of key raw materials; the risk of a sharp decline in the valuations of related companies due to autonomous driving accidents; the risk of insufficient data privacy management of smart cars; the risk of an upward risk-free rate in overseas markets and a decline in liquidity; the risk of a declining market confidence in the development prospects of the new energy industry or intelligence.

investment strategy:

the strengthening of overseas expansion and the accelerated penetration of autonomous driving will be the most obvious industrial trend in the automotive industry in 2024, and it is also the clear direction for the automotive industry to escape from internal circulation. the current valuation headwinds facing auto stocks will not last long, especially since the profit elasticity brought by overseas expansion has been verified in many leading companies. we expect the profit structure of vehicle and parts companies to continue to diversify and globalize in the medium and long term. looking forward to 24q3, the implementation of the "old for new" policy details is expected to drive the continued recovery of domestic demand. we focus on recommending: (1) structural opportunities in the passenger car sector; (2) leading commercial vehicle companies with upward cycles and open long-term profit margins; (3) companies in the parts sector that are in the incremental track and are accelerating global expansion; (4) two-wheeled vehicle leaders with product upgrades and accelerated overseas expansion.