The National Development and Reform Commission and the Ministry of Finance announced yesterday (8th) the notice on implementing the large-scale equipment update and Consumer product trade-in policy for 2025, which mentioned the improvement of subsidy standards for Automobile replacement and updates. Individual consumers who transfer their registered Passenger Vehicles and purchase new Passenger Vehicles will receive Automobile replacement and update subsidies, with the maximum subsidy amount for New energy and RBOB Gasoline Passenger Vehicles being 0.015 million and 0.013 million yuan respectively.

UBS Group released Research Reports indicating that the current round of subsidy plans is more generous than expected, but demand may be delayed again until the second half of this year. The bank believes that the total budget for Automobile replacement and update subsidies may be higher than last year, reflecting the central government's firm determination to stimulate the economy.

The bank predicts that the stimulative effect of the Automobile replacement and update subsidies will remain strong until the end of this year, but it will be relatively slow at the beginning of this year. Last year, the number of applicants for scrapping Automobile subsidies reached about 3 million, while those who applied for trade-in subsidies exceeded 3 million. The bank believes this drove an increase in demand of about 2 million over the entire year last year, and has increased overall Automobile demand by more than 20% in the past few months.

UBS Group added that this demand was satisfied at the end of last year, and other eligible consumers are not in a hurry to execute their choices, which may lead to relatively slow demand. This could result in investors becoming more pessimistic, believing that even with the implementation of stimulus measures, they may no longer be effective. The bank predicts that the electric vehicle market may be particularly strong by the end of this year, mainly because the purchase tax for electric vehicles will increase from 0% to 5% in 2026.

UBS Group also stated that although stimulus measures may create later burdens and long-term side effects, the overall outlook for the Automobile Industry this year is more positive, and BYD (01211.HK) is likely to become the biggest beneficiary again. The bank has given BYD a 'Buy' rating.

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