China Specialist, Auto and Industrial Specialist

Victoria Li

20 years experience as sell side analyst focusing on China's Industrial and Auto sectors

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<h2>China's PV (passenger vehicle) demand is getting sluggish since 2017. It's getting weaker recently. CCMA reported a 4.6% yoy decline on August PV shipment, after a 5.3% yoy decline in July. SUV, which had the highest demand growth, has its sales growth become lower than sedan's since this May. Its August shipment declined by 4.7% yoy, vs. a 3.4% yoy decline of sedan's, after a 8.2% yoy decline in July ( vs. a 1.3% yoy decline on sedan). That new models launching, especially SUV models, would increase OEMs' earnings for sure, is no longer the case.</h2><h2>In the new era with laggard auto demand, traditional OEMs who can catch new earnings engines would be the winners. The potential earnings drivers include:</h2><ul>
<li><h2>The industry trend of NEV's gaining market shares from ICE vehicles is formed. NEV market is still at early stage with limited models available. Most leading OEMs don't spend enough resources on NEV R&amp;D and new model launching yet. To add well positioned NEV models into product portfolio would be a new earnings driver in the next 5 years, in our view. </h2></li>
<li><h2>Market shares between local and JV brands would vary only in a limited range. Local OEMs' market shares would be concentrated to several leaders. </h2></li>
<li><h2>Overseas markets would be a new focus for market share gaining. </h2></li>
</ul><h2>Based on our analysis, SAIC (600104.CH) and Geely (175.HK) have better capability on catching the above earnings drivers in the next 10 years. BYD may still benefit as a first-mover in NEV area to gain market share in NEV market.</h2>

China's PV (passenger vehicle) demand is getting sluggish since 2017. It's getting weaker recently. CCMA reported a 4.6% yoy decline on August PV shipment, after a 5.3% yoy decline in July. SUV, which had the highest demand growth, has its sales growth become lower than sedan's since this May. Its August shipment declined by 4.7% yoy, vs. a 3.4% yoy decline of sedan's, after a 8.2% yoy decline in July ( vs. a 1.3% yoy decline on sedan). That new models launching, especially SUV models, would increase OEMs' earnings for sure, is no longer the case.In the new era with laggard auto demand, traditional OEMs who can catch new earnings engines would be the winners. The potential earnings drivers include:
The industry trend of NEV's gaining market shares from ICE vehicles is formed. NEV market is still at early stage with limited models available. Most leading OEMs don't spend enough resources on NEV R&amp;D and new model launching yet. To add well positioned NEV models into product portfolio would be a new earnings driver in the next 5 years, in our view. 
Market shares between local and JV brands would vary only in a limited range. Local OEMs' market shares would be concentrated to several leaders. 
Overseas markets would be a new focus for market share gaining. 
Based on our analysis, SAIC (600104.CH) and Geely (175.HK) have better capability on catching the above earnings drivers in the next 10 years. BYD may still benefit as a first-mover in NEV area to gain market share in NEV market.

Chongqing Changan Automobile Company (200625 CH)

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