On October 18, China Merchants Securities released a research report stating that according to data from the China Passenger Car Association, mainland China's passenger vehicle wholesale volume in September reached 2.5 million vehicles, a year-on-year increase of 2.1% and a quarterly increase of 16.1%, indicating the beginning of the peak season effect. In the first nine months of this year, the industry's cumulative wholesale volume reached 18.44 million vehicles, with a year-on-year growth of 3.4%. In terms of new energy vehicles, driven by intensified subsidy policies, 1.23 million vehicles were wholesaled in September, a year-on-year increase of 48.1% and a quarterly rise of 17.2%, with a record high penetration rate of 49.1%. The cumulative wholesale volume for the first nine months of this year reached 7.9 million vehicles, a 33.7% increase compared to the same period last year. According to data from a scrappage platform, as of October 4, 1.258 million subsidy applications were received, with new energy vehicles accounting for 62%. The volume of scrapped cars recovered in the first eight months of this year increased by 42.4% year-on-year. After the increase in subsidy amounts, the daily average number of scrappage applications has sharply increased on a quarterly basis. The bank believes that there is still enormous policy space next year. According to the China Automobile Dealers Association, by the end of 2023, the number of qualified old cars in circulation is estimated at approximately 14.55 million vehicles, close to half of the country's new car sales in a year. It is expected that this year's policies will drive the sale of 2 million to 3 million vehicles, and there will still be a huge policy space for industry stimulus sales next year. In addition, the Ministry of Industry and Information Technology stated that they will continue to hold special events for energy vehicles going to rural areas by the end of the year, while simultaneously promoting the rural deployment of charging infrastructure. China Merchants Securities mentioned that after the rapid increase in automobile stocks before the National Day holiday, they are now entering a period of adjustment back to the fundamentals. They are bullish on high-quality stocks that can continue the strong product cycle until next year, with a high probability of performance growth and high certainty, prompting a shift in valuation basis to next year. The bank has generally raised the target prices of automotive stocks and is particularly recommending Geely, BYD, Fuyao Glass, and Li Auto Inc.