The Zhitong Finance App learned that Guangfa Securities released a research report saying that in March, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, which proposes to support the trade-in of eligible cars through energy saving and emission reduction subsidy funds. In '27, the recycling volume of end-of-life vehicles will double compared to 23, and the volume of used car transactions will increase by 45%. The bank estimates the passenger car demand structure model. Judging from the medium- to short-term driving effects of the policy, terminal sales volume in 24 years will reach 2188/2246/23 million units respectively, +3.6%/+6.4%/+8.9% year-on-year respectively. The bank believes that demand for swaps will grow significantly in the next few years and is expected to become a new driving force for total volume growth in the next phase.

The views of GF Securities are as follows:

The bank believes that splitting demand into initial purchases, additional purchases, and exchange requirements is a viable method and necessary means to refine the total passenger car volume research.

Among them, demand for replacement is a key factor in the demand structure that can be reasonably calculated through the supply of used cars and the amount of scrapped cars. The bank built a structural model of passenger car demand through a close relationship between demand for initial purchases, additional purchases, and the supply of new and used cars, and identified that demand for replacement is expected to become a new driving force for total passenger car growth at a certain stage in the future.

The relevant plan of the State Council proposes targets for increasing the volume of used car transactions and waste recycling, and promotes the release of demand for car purchases through an incentive and guidance mechanism.

In March '24, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, which proposes to support the trade-in of eligible cars through energy saving and emission reduction subsidy funds. The recycling volume of end-of-life vehicles will double in '27 compared to '23, and the volume of used car transactions will increase by 45% in '27. Referring to the three-year action plan for the Blue Sky Defense War proposed by the State Council in '18, the increase in terminal sales brought about by the early elimination and renewal of low-emission heavy trucks in Beijing-Tianjin-Hebei and other regions, the bank believes that this trade-in policy is also expected to significantly boost demand for car purchases.

Demand for swaps will grow significantly in the next few years.

The essence of demand for replacement is that users replace or scrap existing vehicles, so from a quantitative perspective, the following formula is roughly established: replacement demand = used car supply (replacement volume) +scrap renewal volume. According to the bank's estimates, the used car supply/scrap renewal volume/replacement demand in 23 was 801/484/12.85 million units, respectively. Referring to the policy target, the bank's neutral expectation is that the used car supply/scrap renewal volume/replacement demand in 27 will reach 1161/968/21.29 million units, respectively, and the CAGR is +9.7%/+18.9%/+13.5%, respectively.

Demand for swaps is expected to become a new driving force for total volume growth in the next phase.

According to the passenger car demand structure model, the bank's 27-year replacement demand reached 1872/2129/27.63 million vehicles under conservative/neutral/optimistic expectations, which led to a CAGR increase of 5.3%/5.7%/9.4% in total demand in 23-27. Judging from the medium- to short-term driving effects of the policy, terminal sales will reach 2188/2246/23 million units in 24 under conservative/neutral/optimistic expectations, respectively, +3.6%/+6.4%/+8.9% year-on-year.

Investment advice: Considering the location of the industry and enterprise, combined with current market pricing and trade-in policies, it is expected to bring significant swapping demand:

1) For passenger cars, the bank still recommends Geely (00175), Changan Auto (000625.SZ), and Great Wall (601633.SH), which have basically established inflection points; focus on GAC Group (601238.SH) and SAIC Motor Group (600104.SH); it is recommended to focus on ideal cars (02015), BYD (002594.SZ), Xiaopeng (09868), and Zero Sports (09863); focus on Huawei, which is expected to break through in sales in 24 years.

2) Nexteer (01316), Zheng Coal Machinery (601717.SH), Minshi Group (00425), etc. are recommended for parts; (3) Automobile Service recommends China Automobile Research (601965.SH).

Risk warning: Industry prosperity has declined; industry competition has intensified; there is a certain degree of deviation between some assumptions and actual existence, etc.