Two-wheeled vehicles in Southeast Asia: the resonance of supply and demand, enterprises accelerate the export pace

- Possibly sluggish domestic industry growth in the future + big market in Southeast Asia (space for 4-5kw vehicles) + good profitability (ASP is much higher than that in China, and there is a high probability that the promotion sequence will be from top to bottom)

I. The growth rate of domestic two-wheelers exceeded expectations again this year, but there is a high probability that it will be on the stock market, with annual sales of about 50 million+ vehicles. The growth of the company mainly comes from 1) the optimization of the layout and the increase of market share. We expect CR2 to reach 47% in 22 years and 52% in 23 years, and there is a chance to get 60% in the future;

2) The increase in bicycle ASP, such as Yadea's bicycle ASP last year Raised to 2300 yuan, YOY+20%, there is still room for improvement; Emma's bid against Yadea, the previous year's bicycle ASP was only 1900 yuan, the first step is to benchmark Yadea's 2300;

3) The increase in net profit comes from CR2 is high enough.

The third line was cleared, and we began to pursue profit (from 5 points of low net interest rate to 8-10 points of net interest rate).

Because at the industry level, no more obvious growth point will be seen from next year. The growth of corporate performance mainly comes from the cultivation of internal strength. Therefore, it is imperative to open up new growth markets. Companies see the Southeast Asian market.

Enterprises are well prepared regarding products and production capacity, and supply is expected to create demand: before 2020, domestic two-wheeler enterprises are eager to try the Southeast Asian market. The Southeast Asian market is similar to the development stage of domestic motorcycles 20-30 years ago. Motorcycles are seriously polluted and noisy, and Southeast Asia may experience the process of electrification of motorcycles. Due to the disturbance of the epidemic, the plans of domestic two-wheeler companies to go overseas have slowed down. Still, the current policy + subsidy catalyze domestic two-wheeler companies' products and production capacity. The electrification of Southeast Asia is expected to accelerate in the next few years.

From the perspective of industrial space, in 2022, the sales volume of motorcycles in the six countries of Indonesia, Vietnam, Thailand, the Philippines, Malaysia, and Singapore will be 12.27 million units. Motorcycle sales are gradually recovering after a 30% decline due to the impact of the epidemic and chips in 2020. In addition to electric motorcycles replacing existing fuel motorcycles, domestic companies are expected to introduce models similar to domestic "electric bicycles" in the Southeast Asian market, further penetrating commuting and going to school. Other scenarios and the market space are expected to be 2-3 times the current annual sales of motorcycles, reaching an annual sales volume of 30-50 million electric two-wheelers.

Regarding policies, Indonesia, Vietnam, and Thailand, the top three motorcycle sales in Southeast Asia, have corresponding policy catalysts, especially Indonesia and Thailand have subsidies for electric motorcycles. Indonesia will receive a grant of about 3,165 yuan per electric motorcycle from March 2023. Thailand will approve a budget of 2.923 billion baht (about 585 million yuan) in August 2022 to subsidize electric motorcycles and electric vehicles. In March 2022, the tax bureau promulgated the subsidy standards and conditions, and the subsidy for electric motorcycles was about 3,600 yuan.

In terms of products, the consumption habits of motorcycles in Southeast Asia are high-quality and high-priced products with large wheel diameters. Taking Vietnam as an example, Honda's motorcycle market share is about 80%. Take Honda's 125cc effect, for example; the price is about 57 million VND (17,000 RMB). In 1999, Chinese motorcycle companies entered Southeast Asia, hoping to occupy the Southeast Asian market at low prices. Still, in less than three years, the market share of Chinese motorcycles in Southeast Asia dropped sharply. There was a gap between domestic and Japanese motorcycles regarding technical strength and product stability at that time. Although the appearance was similar, there was a big difference in riding quality and fuel consumption. Japanese motorcycles can often be ridden stably for seven or eight years, while Chinese Motorcycles will be overhauled in three or four years. There is a lot of rain in Southeast Asia, and a large wheel field is needed to launch motorcycle products that meet the preferences of local consumers.

On the supply side, Honda announced a motorcycle electrification strategy (fuel motorcycles will be discontinued in the mid-2040s). Yadea has built factories in Southeast Asia, and its product strength has gradually improved. At present, it can replace 50-60cc fuel motorcycles. In terms of economy, the five-year total cost of purchasing a 50cc gasoline motorcycle is 20 million for the car + 25 million for fuel costs + 7.5 million for maintenance costs = 52.5 million VND. The five-year total cost of purchasing a Yadea electric car is 17 million for car purchase + 1.38 million for charging + 3.85 million for battery replacement = 22.23 million VND. Average annual savings of VND 6 million. The average salary of enterprise employees in Vietnam in 2021 is 7.84 million VND/per month. Choosing a Yardi as a means of transportation will save a Vietnamese family one month's salary yearly.

III. Investment thesis: Be optimistic about the domestic two-wheeler companies that are the first to deploy in Southeast Asia, not only because of the flexibility of quantity but also the flexibility of net profit per bicycle. Among domestic two-wheeler companies, Yadea has a first-mover advantage in Southeast Asia. It is estimated that Yadea will ship 300,000 to 500,000 units in Southeast Asia in 2023 and 700,000 to 800,000 units in 2024 (conservatively estimated, with a high probability of exceeding 1 million units, but it is still insufficient in terms of sales elasticity, mainly because it is optimistic about the company's subsequent growth momentum ).

Regarding profitability, the price of two-wheelers in Southeast Asia is higher than that of domestic electric bicycles, and the profit of bikes is expected to exceed the household level. According to the prospectus of VinFast, despite the high price, electric motorcycles are still at a loss. In Vietnam, the price of Yadea terminals is about 6,000 yuan, the cost is 2,000-3,000 yuan, and the gross profit of distributors is approximately 25-30% (direct sales in Vietnam, distribution in Indonesia). There is much rain in Southeast Asia, and the product quality requirements are high. The ASP is almost 2X that of domestic models, and the net profit per bicycle is expected to be 2X that of trained models.