The Zhitong Finance App learned that Shenwan Hongyuan released a research report stating that vehicle production and sales volume continued to grow in 2024Q1, with a year-on-year production/sales ratio of +6.3%/+10.5%. In terms of passenger cars, sales volume was +10.6% year-on-year. Downstream demand and exports resonated, compounding the subsequent trade-in of complete vehicles, which partially dispelled the market's original concerns about downstream demand. In terms of commercial vehicles, sales volume was +10.1% year-on-year. The boom in the overseas market for buses and the continued rise in demand for trucks led to a year-on-year increase in commercial vehicles. Furthermore, the share of new energy sources increased to 31.1% in 24Q1, driving an increase in ASP for new vehicles and a new high market share of Chinese brands, helping the industry achieve revenue growth; while the profit side was mainly driven by the recovery of the commercial vehicle sector, the industry's revenue/net profit increased 9.5%/18.0% year on year, respectively.

Passenger car sector: The overall performance of the car market is good. Increased sales will drive revenue growth. Overseas exports will create new volume for passenger car manufacturers and jointly promote better performance. The 24Q1 passenger car segment's revenue was +9.1% year over year, and net profit to mother was -14.4% year over year, mainly affected by Changan's 23Q1 investment income. After excluding Changan Automobile, 24Q1 net profit increased 53.7% year over year. The 24Q1 passenger car sector achieved a gross profit margin of 15.43%, +2.68pct compared to the previous year. Low raw material price fluctuations eased the annual downward pressure on automakers, and increased sales in the highly profitable overseas export business, which together led to a marked improvement in the gross margin level of car companies. The cost rate during the 24Q1 period was 13.54%, compared with +2.34pct. The sales and R&D expenses rate increased.

Parts sector: The increase in automobile production has led to an increase in supply chain activity, the domestic substitution process is accelerated, and overseas market layout is being promoted, and the performance of the parts sector is improving. 24Q1 parts segment revenue was +10.4% year over year, and net profit to mother was +51.8% year over year. At the same time, the overall profitability of the 24Q1 parts sector rose upward, with gross margin of 19.01%, +1.49pct year on year; net margin was 6.50%, +1.47pct year on year.

Shen Wan Hongyuan believes that, on the one hand, the increase in profitability comes from low fluctuations in raw material prices and the further strengthening of the scale effect. At the same time, the profit improvement of the overseas business also contributed to the improvement of profits in the overseas business (in 2023, +15% compared to the same period, 20% overseas gross profit margin, 3 pct higher than domestic). It continues to emphasize the Matthew effect in the industry. Parts manufacturers with diversified customer structures, higher bargaining power, and global expansion can more effectively resist annual downward pressure.

New energy sector: 24Q1 sales continued to grow, and performance growth continued unabated. In 2024Q1, sales of new energy vehicles were 2.09 million units, +31.8% year-on-year. As of March 2024, the monthly sales volume of new energy vehicles was 883,000 units, with a penetration rate of 32.8%. The performance of the NEV sector continued to grow, with 24Q1 revenue +19.4% YoY to $157 billion, and net profit to mother +44.4% YoY to $3.8 billion. Among them, BYD's performance as the “leader” continued to maintain high year-on-year growth, while Cyrus 24Q1 also performed well, jointly driving the overall sector's revenue and profit improvement.

Commercial vehicle sector: Prosperity rebounded, and overseas exports led to an improvement in profits. In terms of buses, as demand for travel recovers and “carbon neutrality” policies continue to advance, the public's willingness to travel using public transportation is rising; at the same time, the competitiveness of domestic bus products continues to increase, and companies have switched to a direct investment model as the main overseas development model, driving bus sales to continue to rise.

24Q1 bus sales volume was 124,000 units, +24.1% year over year; operating income was +53.6% year over year, and net profit to mother was +3649.9% year over year. In terms of trucks, natural gas heavy trucks are more economical than diesel vehicles, and consumers' willingness to buy is increasing; under the influence of policy dividends, sales of new energy heavy trucks will also continue to rise. 24Q1 truck sales volume was 909,000 units, +8.5% year over year; operating income was +8.3% year over year, and net profit to mother was +12.6% year over year.

Combining the relatively stable sales volume of passenger cars this year and the continuous increase in autonomous market share, and commercial vehicle recovery channels+export expectations, we recommend 3 main lines:

① The policy focuses on “trade-in” and undervalued steady operating enterprises, such as BYD (002594.SZ), Geely (00175), Great Wall Motor (601633.SH); Weichai Power (000338.SZ); and Sinotruk (000951.SZ).

② Parts companies with core customers and strong performance are recommended to focus on Xingyu (601799.SH), Xinquan (603179.SH), Yinlun (002126.SZ), Songyuan (300893.SZ), Chuanhuan Technology (300547.SZ), etc.

③ The AI-driven robot, smart car sector, and Xiaomi's potential exceeded expectations after launch. It is recommended to focus on Huawei chains such as Celis (601127.SH), JAC (600418.SH), and Huguang (605333.SH), Xiaopeng Motors (09868), Ideal Auto (02015), Desai Xiwei (002920.SZ), Xiaomi Group (01810), and Wuxi Zhenhua (). 605319.SH

Core risks: raw material price fluctuation risk, geopolitical risk, industry recovery falling short of expectations.