This policy further clarifies funding channels and specific amounts, among which the central government bears a high proportion and provides strong support. It is expected to vigorously promote the replacement of old cars with new ones and stimulate demand. On the product structure, the operating income of 10-30 billion yuan products were respectively 401/1288/60 million yuan.
Zhixin Finance App learned that Minsheng Securities released a research report stating that on July 25, the National Development and Reform Commission and the Ministry of Finance issued Several Measures to Support Large-scale Equipment Renewal and Consumption of Old-for-New, raising the subsidy standard for scrapping and updating of automobiles. Compared with the previous policy, this policy further clarifies funding channels and specific amounts, among which the central government bears a high proportion and provides strong support. It is expected to vigorously promote the replacement of old cars with new ones and stimulate demand.
The main points of the Minsheng Securities report are as follows:
On July 25, the National Development and Reform Commission and the Ministry of Finance issued Several Measures to Support Large-scale Equipment Renewal and Consumption of Old-for-New, raising the subsidy standard for scrapping and updating of automobiles.
Clear funding channels, high proportion of central funding support.
This policy is clear that the National Development and Reform Commission takes the lead and directly arranges approximately RMB 150 billion of ultra-long-term special national bond funds to implement the support policies listed in (III), (IV), (****III), and (IX) (among which III, V, and VIII are related to automobiles) at the local level. The support funds involved in the automobile industry subsidy policy in the policy are implemented on the principle of 9:1 for the overall central-local sharing, and the proportion of central funding in the eastern, central, and western regions is 85%, 90%, and 95%, respectively. Compared with the previous policy, this policy further clarifies funding channels and specific amounts, among which the central government bears a high proportion and provides strong support. It is expected to vigorously promote the replacement of old cars with new ones and stimulate demand.
The amount and scope of the subsidy policy are beyond expectations, stimulating demand for heavy trucks.
The old-for-new policy supports scrapped Tier-3 and lower emission-class commercial diesel trucks, and accelerates the updating to low-emission trucks. For each scrapped and updated truck that meets the conditions, the subsidy is an average of 0.08 million yuan; for each updated truck that meets the conditions without scrapping, the subsidy is an average of 0.035 million yuan; for each old commercial diesel truck scrapped in advance, the subsidy is an average of 0.03 million yuan. From the perspective of the amount, the subsidy intensity exceeds market expectations, and it is expected to stimulate car purchase demand when the capacity is at a low level. From the perspective of the scope, the subsidy policy covers all aspects, not only considering the replacement demand of vehicles, but also covering the subsidy for simply eliminating old vehicles, which exceeds market expectations. According to compulsory traffic insurance data, the cumulative number of heavy trucks registered in China in H1 2024 is 0.301 million, a year-on-year decrease of 5.5%, and domestic demand is waiting to be revived. According to Fand.com, as of 2022, there are approximately 0.36 million Tier-3 heavy trucks in China. We assume that the old-for-new policy will bring a replacement demand of 20%, which will directly drive an increase in domestic demand of approximately 0.072 million additional vehicles. We believe that the unexpected weight of the truck old-for-new policy may provide a solid and powerful foundation for the recovery of domestic demand in the second half of the year.
The scrapping and updating subsidy standards for passenger vehicles are increased to promote demand. The policy specifies that individual consumers who scrap Tier-3 and lower emission-class fuel passenger vehicles or new energy passenger vehicles registered before April 30, 2018 (including that day), and purchase new energy passenger vehicles or fuel passenger vehicles with a displacement of 2.0 liters or less included in the Catalogue of New Energy Vehicle Models Eligible for Exemption and Reduction of Vehicle Purchase Tax will receive a higher subsidy standard of 0.02 million yuan for the purchase of new energy passenger vehicles, and 0.015 million yuan for the purchase of fuel passenger vehicles with a displacement of 2.0 liters or less. The subsidy amount for new energy vehicles and fuel vehicles is increased by 0.01 million yuan and 0.008 million yuan, respectively. According to the policy details, consumers who applied for subsidies in the early stages can also enjoy the subsidies according to this policy standard.
The subsidy standard for scrapping and updating passenger vehicles is raised: The policy is clear that individual consumers who scrap Tier-3 and lower emission-class fuel passenger vehicles or new energy passenger vehicles registered before April 30, 2018 (including that day), and purchase new energy passenger vehicles or fuel passenger vehicles with a displacement of 2.0 liters or less included in the Catalogue of New Energy Vehicle Models Eligible for Exemption and Reduction of Vehicle Purchase Tax will receive a higher subsidy standard of 0.02 million yuan for the purchase of new energy passenger vehicles, and 0.015 million yuan for the purchase of fuel passenger vehicles with a displacement of 2.0 liters or less. The subsidy amount for new energy vehicles and fuel vehicles is increased by 0.01 million yuan and 0.008 million yuan, respectively. According to the policy details, consumers who applied for subsidies in the early stages can also enjoy the subsidies according to this policy standard. It will promote demand upwards.
Promoting demand upwards. As of 12:00 noon on June 25, the Ministry of Commerce's Automobile Scrapping and Renewal Information Platform has received approximately 0.113 million applications for automobile scrapping and updating subsidies, showing a trend of accelerating growth. We expect that Tier-3 and lower-emission fuel passenger vehicles and new energy passenger vehicles before April 2018 will generally have favorable scrap-and-replace cost-effectiveness. The replacement demand for the former and the latter is expected to be mainly for middle and low-end fuel vehicles and mid-to-high-end new energy vehicles, respectively. We estimate that the scrapped and recovered amount in 2023 will be approximately 4.5 million vehicles. According to the old-for-new policy guidance, the scrapped and recovered amounts in 2024/2025/2026/2027 will be approximately 0.551/6.75/7.79/9 million vehicles. The replacement demand for scrapped-for-new policy in 2024 is expected to bring about an additional 1+ million units of passenger vehicles, and further stimulate demand upwards with policy enhancements.
How will the automobile industry chain benefit?
Passenger vehicles: 1) The demand for replacement of national III passenger vehicles is mainly for low-end models. Car companies with more layout in the sinking market and high sales proportion of new energy / small-displacement vehicles are expected to benefit first. The car companies with a share of less than 0.1 million yuan in 2023 are SAIC-GM-Wuling (25%), Changan (16%), Geely (11%), BYD (11%), and Chery (7%); The car companies with a market share of 0.1-0.15 million yuan are BYD (18%), Changan (11%), Geely (9%), and Chery (6%); The car company with the highest sales proportion of 0-0.1 million yuan accounted for SAIC-GM-Wuling (95%), SAIC passenger car (47%), Changan (32%), Chery (30%), and Geely (23%). We are bullish on the replacement demand of mid-to-low-end vehicle models stimulated by policies and optimistic about the market share leading companies such as BYD, Changan, Geely, and Chery, which will launch new cars intensively in 2024. 2) The replacement structure of new energy vehicle owners tends to be high-end. Car companies with rich product lines in the high-end market have the chance to benefit first, such as Huawei, BYD, Ideal, Great Wall, and Geely JiKe (with market shares above 0.3 million yuan respectively in 2023 by 18%, 10%, 27%, 6%, and 3%). The policy promotion and the rich supply of new cars launched during the April Auto Show brought upward momentum to the fundamentals of the auto industry. If auto stimulus policies land, it will drive the resonance of auto parts with the recovery of vehicle sales, and both volume and price will rise, entering a virtuous cycle. The high-quality independent auto parts companies that match the core car companies are expected to achieve performance recovery first. In 2024, we are optimistic about the customer dimension T + Huawei + Xiaomi industry chain and the product dimension of intelligence.
Investment advice
Passenger vehicles: We are bullish on the acceleration of intelligence and globalization breakthrough by high-quality independent car companies, and suggest paying attention to BYD, Chongqing Sokon Industry Group, and Changan Automobile. Auto parts: Mid-term growth continues to strengthen. We are bullish on the new power industry chain + intelligent electric increment: 1. New power industry chain: we suggest paying attention to T-chain - Tuopu Group, Jiangsu Xinquan Automotive Trim, and Zhejiang Shuanghuan Driveline; Huawei industry chain - Kunshan Huguang Auto Harness, Rayhoo Motor Dies, Wencan Group, and Changzhou Xingyu Automotive Lighting Systems. 2. Core line of intelligence: we suggest paying attention to intelligent driving - Bethel Automotive Safety Systems, Huizhou Desay SV Automotive, and Keboda Technology + intelligent cockpit - Shangsheng Electronics and Ningbo Jifeng Auto Parts. Heavy trucks: Natural gas heavy trucks are reaching higher volume and demand. We suggest paying attention to Weichai Power and Sinotruk.
Risk warning
The competition in the auto industry has intensified, and the demand is lower than expected; the progress of intelligent driving has not met expectations.