On September 2, the two-wheeler sector led the opening bell. As of the time of writing, Jiangxi Firstar Panel Technology rose by nearly 18%, Jiangsu Xinri E-Vehicle hit the limit up, Ai Ma Technology, Jiu Qi Stock, Taineng Stock, Ninebot Company, Shanghai Phoenix Enterprise, and others followed the uptrend.

On August 30, the Ministry of Commerce and five other departments issued the 'Implementation Plan for Promoting the Replacement of Old Electric Bicycles with New Ones,' marking the first time that the country has introduced a policy for replacing old electric bicycles with new ones.

Continued favorable policies.

The 'Implementation Plan for Promoting the Replacement of Old Electric Bicycles with New Ones' puts forward four key tasks. These include: enhancing the supply capacity of high-quality electric bicycles, strict supervision of electric bicycle sales, conducting activities to promote electric bicycle consumption, and increasing support for the substitution of old for new to benefit the people.

In specific terms, it is proposed to coordinate the replacement of old electric bicycles with new ones into the '2024 Consumer Promotion Year' activities, organize qualified products from compliant electric bicycle manufacturers to participate in the trade-in campaign, encourage relevant companies to integrate upstream and downstream resources, set up online and offline zones, and facilitate the public to trade in old for new products.

Furthermore, the 'plan' also points out that consumers who return old electric bicycles under their name and purchase new electric bicycle models will receive subsidies, encouraging consumers eligible for subsidies to purchase new electric bicycles produced by companies that meet the 'Electric Bicycle Industry Standard Conditions'.

For consumers who trade in old lithium-ion rechargeable batteries for electric bicycles and buy lead-acid rechargeable battery electric bicycles, it is possible to increase subsidies appropriately; support electric bicycle sales enterprises, production enterprises, and recycling enterprises to jointly implement trade-in programs, providing additional discounts to consumers.

In addition, Yunnan Provincial Department of Commerce issued the "2024 Yunnan Electric Bicycle Trade-In Subsidy Implementation Rules" on the 31st.

"Rules" specify that from September 1, 2024 (inclusive) to December 31, 2024 (inclusive), individual consumers who return (deregister) their old electric bicycles under their name in Yunnan province and purchase 1 new electric bicycle will receive a subsidy of 500 yuan. Each returned (deregistered) old vehicle and purchased new vehicle can apply for a subsidy once, with a maximum of 4 subsidies per person.

In fact, this year's bullish policies for electric bicycles not only include the trade-in policy but also involve policies to strengthen industry standard management.

On April 25, the State Administration for Market Regulation issued the "Lithium-ion Rechargeable Battery Safety Technical Regulations for Electric Bicycles" to enhance the quality and safety levels of lithium-ion rechargeable batteries used in electric bicycles.

On April 30, the Ministry of Industry and Information Technology and two other departments jointly issued the "Electric Bicycle Industry Standard Conditions" and the "Electric Bicycle Industry Standard Notice Management Measures", strengthening the management of the electric bicycle industry. Among them, it is proposed to encourage companies or affiliated groups to increase research and development investment, develop lightweight, smart, and networked electric bicycle products to meet consumer upgrade demands, and promote the application of Beidou high-precision positioning.

On August 22, the Ministry of Industry and Information Technology announced the first batch of enterprises that meet the "Electric Bicycle Industry Standard Conditions" list, including: Yadea, Luyuan, Aima, Tailg, Green Source, and other brands, aiming to further demonstrate and lead the industry.

The industry is expected to further grow.

China is a large producer and consumer of electric bicycles. According to the data from the China Bicycle Association, in 2023, the national output of electric bicycles reached 42.28 million units, with a total ownership of 400 million units, and an average of 4 electric bicycles for every 5 households.

Against the backdrop of continuous growth in market size and demand, the performance of electric bicycle manufacturers also shows improvement.

In the first half of 2024, the traditional manufacturer AIMA Technology achieved an operating income of 10.591 billion yuan, a year-on-year increase of 3.66%; the net income attributable to shareholders of the listed company was approximately 0.951 billion yuan, a year-on-year increase of 6.24%.

In the first half of 2024, Green Source Group achieved a revenue of approximately 2.534 billion yuan, a year-on-year increase of 3.2%; and a net income of approximately 66 million yuan, a year-on-year increase of 9.6%.

The new force brand, Jiu Neng Company, achieved an operating income of 6.666 billion yuan in the first half of 2024, a year-on-year increase of 52.20%; and achieved a net income attributable to shareholders of the listed company of 0.596 billion yuan, a year-on-year increase of 167.82%.

In addition, despite the year-on-year decrease in revenue for Jiangsu Xinri E-Vehicle in the first half of 2024, the net income attributable to shareholders of the listed company achieved growth, reaching 49.95 million yuan, a year-on-year increase of 6.8%.

Looking ahead, with more industry bullish policies coming out, the market demand is expected to further expand, and the electric bicycle industry is expected to see further growth.

Haitong Securities believes that with the strengthening of relevant regulatory authorities and the cultivation of consumer safety awareness, the introduction of relevant policies for trading in old for new will further promote consumers to pay attention to replacing old electric bicycles, which is expected to drive the release of terminal replacement demand.

Open source securities said that in 2024, 62.1% of consumer demand in the electric two-wheeler industry comes from replacement demand, and China's two-wheeler electric vehicle ownership has reached 0.35 billion vehicles, which can stably release a large-scale demand for replacing old vehicles. On the other hand, the innovation of intelligent technology brings new demands and users to the industry. With the revision of the new national standard, leading brands with advantages in product research and development reserves and compliant operations are expected to achieve excessive growth in the optimization of the industry structure.

Debang Securities predicts that the fundamentals of major companies are about to improve and their valuations are at a low level. In the short term, with the arrival of the peak season in Q3, the impact of the base effect will weaken, and the sales growth of the leading companies is expected to accelerate, indicating that the fundamental turning point may be imminent. In the medium term, the introduction of the new national standard and the overlay of the trade-in policy will accelerate the concentration of the industry and promote the enhancement of compliance leading companies.