The Zhitong Finance App learned that Guotai Junan released a research report saying that leading autonomous vehicle companies and leading parts segments are expected to continue to rise sharply in volume and price, maintaining the industry's “gain” rating. The bank believes that the share and average price of its own brands will continue to increase in 2024, and that there is still room for continued improvement in profitability with contributions from exports and high-end brands; the domestic share of leading component segments will increase, and the value of bicycles will continue to increase due to increased electric intelligence. The bank said that starting in Q2 2024, pessimistic expectations for sales volume and profit are expected to be gradually revised. Coupled with the continuous strengthening of policy expectations, the sector is expected to usher in a valuation repair market.

Guotai Junan's views are as follows:

In 2023, passenger car wholesale sales grew steadily, and the share of independent brands in the mid-tier market increased significantly.

In 2023, China's passenger car exports grew by more than 60%. After the 2022 policy stimulus, retail sales increased slightly in 2023, and wholesale sales rose 10%; sales of new energy vehicles continued to grow rapidly, growing faster at the A0 level and above, and wholesale sales of fuel vehicles were basically the same as in 2022, driven by exports; the share of independent brands increased significantly, domestic substitution in the mid-tier market accelerated, and the price band of autonomous vehicle companies showed a clear upward trend. The share of second-tier joint venture brands declined markedly, and discounts on some first-tier joint venture brands increased markedly.

Exports and retail sales still have great potential for growth in 2024. Independent brands are expected to accelerate their strength in the middle and high-end markets, and overall competitive pressure has not increased significantly.

2009-2017 is a period of rapid growth in passenger car sales in China. In 2024, with support from trade-in and other policies, renewal demand is expected to accelerate and retail sales continue to grow steadily. Many independent brands continue to work hard to drive continued high export sales growth in the Belt and Road countries; on the one hand, independent brands use exports to absorb fuel vehicle production capacity and increase profitability, and on the other hand, use new energy vehicles to further boost the average price of bicycles in the middle and high-end markets; in 2024, the market inventory situation is better than 2023, and discounts remain at a high level.

Since 2021, the passenger car sector has generally been characterized by holding back first and then rising. It is expected that the sector will begin to repair the market in March 2024.

Since 2021, the passenger car sector has usually been under some pressure in Q1. On the one hand, passenger car sales have fluctuated around the Spring Festival, and the market will be relatively pessimistic about the overall sales volume for that year; on the other hand, promotions after the Spring Festival will raise market concerns about the competitive landscape, and annual decline negotiations will raise market concerns about the profitability of parts companies; starting Q2, as terminal sales gradually recover and parts companies' performance continues to grow at a high level, the market's pessimistic expectations will gradually be revised. The bank expects that in March 2024, with the recovery of the sales structure and the strengthening of policy expectations, the passenger car sector will begin a new round of repair.

Investment advice:

Recommended vehicle targets include JAC (600418.SH), Changan Automobile (000625.SZ), Ideal Automobile-W (02015), Great Wall Motor (601633.SH), BYD (002594.SZ), high-boom energy conversion main lines, recommended targets: Wuxi Zhenhua (605319.SH), Tuopu Group (), double ring drive (002472.SZ), etc.; intelligent main line, recommended targets Huayi Technology (Dubai), and Koboda (), Desai 601689.SH 688071.SH 603786.SH Seaway (002920.SZ).

Risk warning: policy risks in some export markets; increased competition, profits fell short of expectations