In Q3, the 'price war' in the passenger vehicle market continued, and consumer wait-and-see sentiment affected market sales, while the commercial vehicle market was impacted by weak domestic demand, putting pressure on the automotive sector's performance.
Zhitong Finance and Economics APP learned that China Galaxy Securities released a research report stating that since October, benefiting from the local substitution subsidy policy introduced in September, the effect of the policy became evident in October, leading to a significant increase in passenger vehicle sales in October compared to the previous month, driving a good upward trend in the passenger vehicle and parts sectors. From the sales perspective, in Q3, commercial vehicles dragged down overall sales by -4% year-on-year, while the penetration rate of new energy passenger vehicles maintained rapid growth, reaching 48.4%. Overall, in Q3, the 'price war' in the passenger vehicle market continued, and consumer wait-and-see sentiment affected market sales, while the commercial vehicle market was impacted by weak domestic demand, putting pressure on the automotive sector's performance. Looking ahead to Q4, the reinforcement of the local subsidy is expected to support a recovery in sales, leading to an improvement in the sector's performance.
China Galaxy Securities' main points are as follows:
Market: The Q3 market rebounded across the board, with the parts sector achieving excess returns.
In Q3 2024, the automotive sector (ZX) had an absolute return rate of 16.03%, the passenger vehicle sector (ZX) had an absolute return rate of 17.42%, the parts sector (ZX) had an absolute return rate of 19.03%, and the commercial vehicle sector (ZX) had an absolute return rate of 7.64%. The automotive, passenger vehicle, and commercial vehicle sectors all underperformed the Wendu full-A index by 1.64%, 0.26%, and 10.04% respectively, while the parts sector outperformed the Wendu full-A index by 1.35%. Due to the positive stance of the government on supporting the capital market and real economy on September 24, the A-share market rebounded across the board in the third quarter. The parts sector achieved excess returns during the market recovery phase due to its previous large decline and generally smaller market capitalization of parts companies compared to complete vehicles. Since October, benefiting from the concentrated introduction of local substitution subsidies in September, passenger vehicle sales in October showed a significant increase compared to the previous month, driving a good upward trend in the passenger vehicle and parts sectors.
Sales: In Q3, commercial vehicles dragged down overall sales by -4%, while the penetration rate of new energy passenger vehicles maintained rapid growth, reaching 48.4%.
Q3 automotive market accumulated sales of 7.524 million vehicles, a year-on-year decline of -3.9%, a month-on-month increase of +2.7%. Mainly affected by the commercial vehicle market, the cumulative sales of the passenger vehicle market were 6.7 million vehicles, a year-on-year decline of -2.4%, a month-on-month increase of +6.5%. Since September, various regions have successively introduced local substitution subsidy policies, with consumers showing strong wait-and-see sentiment in the early period, leading to some lag in the release of consumer demand during the 'Golden September, Silver October' period. The cumulative sales of commercial vehicles in Q3 were 0.824 million vehicles, a year-on-year decline of -14.9%, a month-on-month decline of -20.5%, influenced by weak domestic demand.
In terms of new energy, in Q3, the cumulative sales volume of new energy passenger vehicles was 3.241 million units, up 34.3% year-on-year, up 19.2% from the previous quarter, with a penetration rate of 48.4%, close to 50%. The cumulative sales volume of pure electric passenger vehicles and plug-in hybrid passenger vehicles was 1.842 million units and 1.40 million units respectively, year-on-year growth of 12.6% and 80.0% respectively. The proportion of pure electric vehicles in new energy passenger vehicles decreased to 56.8%, with plug-in hybrids contributing 0.622 million units to the new energy passenger vehicle sales increment, accounting for 75.1% of the total increment. In terms of exports, the cumulative export sales volume of passenger vehicles in Q3 was 1.294 million units, up 22.1% year-on-year, up 5.2% from the previous quarter, while commercial vehicle cumulative export sales volume was 0.225 million units, up 19.7% year-on-year but down 6.0% from the previous quarter, with export growth slowing down.
Performance: The overall segment's non-GAAP net profit attributable to mothers decreased by 15% year-on-year, mainly dragged down by passenger vehicles (non-GAAP net profit attributable to mothers decreased by 26%).
In the first three quarters of 2024/Q3 2024, the automotive industry achieved revenue of 2.59 trillion yuan/914.2 billion yuan, up 5%/0.2% year-on-year, and achieved non-GAAP net profit attributable to mothers of 83.2 billion yuan/28.5 billion yuan, up 8%/-15% year-on-year.
Passenger Vehicles: The 'price war' continued to impact the segment's performance, with the scale advantage enhancing the leading profitability. In the first three quarters of 2024/Q3 2024, the passenger vehicle sector achieved revenue of 1.41 trillion yuan/519.5 billion yuan, up 6%/2% year-on-year, and achieved non-GAAP net profit attributable to mothers of 312 million yuan/12.6 billion yuan, down 5%/-26% year-on-year.
Components: With stable profitability, scale effects help drive the rebound in gross margin. In the first three quarters of 2024/Q3 2024, the component sector achieved revenue of 691.2 billion yuan/240.2 billion yuan, up 6%/2% year-on-year, and achieved non-GAAP net profit attributable to mothers of 33.8 billion yuan/10.8 billion yuan, up 13%/-6% year-on-year.
Commercial Vehicles: The sluggish sales volume affected the segment's performance, with strong business resilience. In the first three quarters of 2024/Q3 2024, the commercial vehicle sector achieved revenue of 393.7 billion yuan/117.8 billion yuan, with slight growth/down 12% year-on-year, and achieved non-GAAP net profit attributable to mothers of 13.5 billion yuan/3.5 billion yuan, up 34%/2% year-on-year.
Overall, in Q3, the passenger vehicle market's 'price war' continued and consumer watchful sentiment affected market sales, while the commercial vehicle market was impacted by weak domestic demand. The automotive sector's performance is under pressure. Looking ahead to Q4, the stimulation of local subsidies is expected to support sales recovery, leading to a rebound in sector performance.
Investment Recommendations: For complete vehicles, BYD Company Limited (002594.SZ) and Li Auto Inc (02015) are recommended, benefiting from Geely Auto (00175) and Loncin Motor (603766.SH). For intelligent components, Huayu Automotive Systems (600741.SH), Bethel Automotive Safety Systems (603596.SH), Huizhou Desay SV Automotive (002920.SZ), Keboda Technology (603786.SH), Ningbo Joyson Electronic Corp. (600699.SH), and Changzhou Xingyu Automotive Lighting Systems (601799.SH) are recommended. For new energy components, Xiamen Faratronic (600563.SH), Zhongrui Electric (301031.SZ), Hua Wei Technology (001380.SZ), Jiangsu Pacific Precision Forging (300258.SZ), Ningbo Tuopu Group (601689.SH), and Ningbo Xusheng Group (603305.SH) are recommended.
Risk warning: Risks of lower-than-expected auto sales; Risks of policy outcomes falling short of expectations; Risks of intensified industry competition; Risks of overseas policy uncertainties affecting exports.
