The implementation of the “new national standard” will not only bring replacement demand for vehicles exceeding the standard to the industry, but the increase in production thresholds and mature consumer mentality will also catalyze the clearance of rear production capacity, and the industry pattern will continue to be concentrated. The domestic electric bicycle market is not yet open, but with the establishment of a number of electric bicycle standards and the industrial chain boosting the domestic market to drive cost reduction, the domestic electric bicycle market is expected to reach a breakthrough. The annual sales volume of motorcycles in Southeast Asia is nearly 40 million. Against the backdrop of the acceleration of “oil to electricity”, the signing of the RCEP cuts tariffs on two-wheeler exports to major Southeast Asian countries, benefiting the exports of domestic motorcycle and electric motorcycle manufacturers.
▍ The growth rate of leading companies is significantly higher than the overall growth rate, and the industry pattern is concentrating at an accelerated pace.
From January to September 2020, the cumulative production of electric vehicles in China increased 27.3% year-on-year: on the one hand, the “new national standard” policy stimulated excessive vehicle exchanges, health incidents, and new demand for motorbike sharing in some regions; on the other hand, raising the threshold for manufacturers also promoted increased brand awareness and accelerated the concentration of the industry. We expect CR3 to exceed 50% in 2020. With the increase in the total volume of the industry and the release of production capacity of a large number of senior companies, we expect leading companies to continue to grow rapidly in the next 3 years.
▍ Electric bicycle industry standards are gradually taking shape, which is expected to promote the expansion of the domestic market.
Electric bicycles are popular in overseas markets due to their eco-friendly, safe and convenient characteristics, and sports and fitness functions. The compound growth rate of electric bike sales in Europe from 2009 to 2019 reached 23.3%, and we expect it to reach 4.5 million units in 2020. In comparison, the development of electric bicycles in China is not ideal due to the fact that prices are too high. However, with the maturity of the domestic electric bicycle supply chain and the gradual improvement of standards within the industry, electric bicycles are expected to enjoy good development driven by demand. Also, considering the high policy sensitivity of the electric two-wheeler industry, it is expected that electric bicycles will be the first to be promoted domestically through a shared 2B model to meet policy requirements and reduce procurement costs, and then gradually penetrate the 2C side after the standards are clarified.
▍ RCEP opens up the Southeast Asian market and benefits the exports of motorcycle and electric motorcycle companies.
The penetration rate of the Southeast Asian motorcycle market is extremely high. Indonesia, Vietnam, and Thailand, which have the top three motorcycles, have about 6000, 4500, and 30 million units respectively. In 2019, the three countries sold 649, 326, and 1.72 million motorcycles. According to the “Regional Comprehensive Economic Partnership Agreement” (RCEP) signed on November 15, Indonesia and Vietnam will reduce tariffs on two-wheeler exports from China. Some of the tariffs on motorbike exports to Indonesia will be reduced to zero next year, and some will be reduced to zero tariffs at a uniform rate within 15 years; most of the tariffs on motorbike exports to Vietnam will be reduced to zero tariffs at a uniform rate within 20 years. We expect that the reduction of tariffs will help domestic motorcycle and electric motorcycle manufacturers respond to the huge demand in the Southeast Asian market and benefit the export market of related enterprises.
▍ Risk Factors:
Overseas health events have seriously worsened; foreign trade policies are unstable; and demand in major markets has declined sharply.
▍ Investment Strategy:
The electric two-wheeler industry is facing demand expansion and rapid pattern optimization. Leading companies occupy the market at an accelerated pace with rich product lines, channel accuracy, and brand reputation. They focus on recommending electric two-wheeler leader Yadi Holdings (01585), high-end electric two-wheeler pioneer Maverick Maverick (NIU.US), and motor supplier Bifang Shares, which enjoys the flexibility of the incremental performance of electric two-wheelers; focus on Chunfeng Power, Qianjiang Motor, Company 9, and Shinni Co., Ltd.