China Finance app learned that Sinda Securities released research reports stating that before the exit of the current policy of trading in old for new, combined with the peak season for automotive consumption at the end of the year, the supply of new cars from various car companies in the second half of the year has increased. It is bullish on the continuation of the high prosperity of the automotive industry by the end of the year, and the expected further increase in automotive sales growth is expected to bring extra returns to the automotive sector. Also, approaching the end of the year, the market may anticipate the 2025 policy expectations in advance. It is expected that if the policy of trading in old for new continues or if new policies are introduced, it will provide better support for automotive consumption in 2025, and the rally for extra returns is expected to continue. On the other hand, without relevant stimulus policies, the early automotive sales in 2025 may be under pressure. In this case, focusing on four major logics (domestic substitution trend, penetration rate improvement track, globalization development, exploration of new business models) to find incremental directions and layout structural opportunities.

The policy of trading in old for new promotes the addition of the traditional 'Golden September and Silver October' peak season demand for stocking up. In October, the sales of passenger cars at both wholesale and retail ends achieved a high year-on-year growth.

In October, the wholesale sales of narrow-definition passenger cars were 2.732 million units, up by 11.5% year-on-year and 9.1% month-on-month. The arrival of the traditional 'Golden September and Silver October' peak season and the promotion of inventory replenishment by car companies drove demand growth. The retail sales of narrow-definition passenger cars in October were 2.261 million units, up by 11.3% year-on-year and 7.2% month-on-month. Recently, the country has vigorously supported the replacement of old for new consumer goods, and many local governments have also introduced various subsidy measures, which have stimulated the improvement in demand for passenger cars.

In October, the penetration rates of wholesale and retail sales of new energy vehicles were 50.1% and 52.9% respectively.

According to the data from the China Passenger Car Association, in October, wholesale sales of new energy passenger cars were 1.369 million units, up by 55.2% year-on-year and 11.2% month-on-month. Among them, pure electric wholesale sales were 0.776 million units, up by 32.7% year-on-year and 19.5% month-on-month; plug-in hybrid wholesale sales were 0.472 million units, up by 116.0% year-on-year and 19.5% month-on-month; extended range wholesale sales were 0.121 million units, up by 53.9% year-on-year and 4.9% month-on-month.

The automotive consumption index in October 2024 was 90.3, up by 9.3% year-on-year and 5.7% month-on-month; the dealer inventory alert index was 50.5%, down by 8.1 percentage points year-on-year and 3.5 percentage points month-on-month. Looking ahead to November 2024, with the advancement of the comprehensive consumer promotion policies at the national level, the encouragement of scrappage renewal and trading in old for new subsidy policies, coupled with the recent stock market rally driving the repair of household balance sheets. The car market is expected to maintain a strong growth in November.

From the individual stock perspective: Focus on companies with high performance and growth certainty, continuously strengthening competitive advantages, and continuously improving competitive landscape in the subdivided leading companies of the track.

In the vehicle sector, look for leading car companies benefiting from optimized market conditions and continuously strengthening their position in the new car cycle. Key focus on BYD + Huawei's vehicle sector: such as BYD (01211), Anhui Jianghuai Automobile Group Corp.,Ltd. (600418.SH), Chongqing Sokon Industry Group Stock (601127.SH), Chongqing Changan Automobile (000625.SZ); Pay attention to Hong Kong stocks such as XPeng Motors (09868), Li Auto (02015), Geely Auto (00175), Leapmotor (09863), NIO (09866), as well as high dividend, low valuation, and global expansion commercial vehicle leaders such as Yutong Bus Co.,Ltd. (600066.SH), Sinotruk (03808).

In the auto parts sector, focus on the following three directions: (1) Single-category leaders, companies with stable market share and significant competitive advantages, such as glass - Fuyao Glass (600660.SH); car lights - Changzhou Xingyu Automotive Lighting Systems (601799.SH); brakes - Bethel Automotive Safety Systems (603596.SH); domain control - Huizhou Desay SV Automotive (002920.SZ); thermal management - Zhejiang Yinlun Machinery (002126.SZ); interior - Jiangsu Xinquan Automotive Trim (603179.SH); engine - Weichai Power (000338.SZ); wiring harness - Kunshan Huguang Auto Harness (605333.SH); (2) Expansion with multiple categories, possessing platform advantages, such as Ningbo Tuopu Group (601689.SH), Anhui Zhongding Sealing Parts (000887.SZ), Ningbo Shuanglin Auto Parts (300100.SZ), etc.; (3) High-quality auto parts with valuation repair space such as IKD Co., Ltd. (600933.SH), Shanghai Baolong Automotive Corporation (603197.SH), Wuxi Zhenhua Automotive (605319.SH), Jiangsu Bojun Industrial Technology (300926.SZ), etc.

Risk Factors: Macroeconomic fluctuations, lower-than-expected passenger vehicle sales, fluctuation in raw material prices, etc.