中國汽車業(yè)：汽車市場減速

1、By: Yuqian Ding (S1700519090001)Equity ResearchReportDecember HYPERLINK / China AutosChinas car market shifts to a low geara be We initiate on GAC (A/H) at Buy; Great Wall (A/H), Brilliance, Dongfeng and Changan (A) at Hold; BAIC at Reduce&reportbepartWhy read this report?After a bruising two years

2、for Chinas auto market, we see car demand bottoming in 2020e and then improvingslowlyIndustry profitability will be weighed down by the high costs needed to meet fuel consumption and electric vehicle (EV)targetsInitiate on GAC (A/H) at Buy; Great Wall (A/H), Brilliance, Dongfeng and Changan (A) at H

3、old; BAIC atReduceYuqian Ding* (S1700519090001) Head of A-share Auto Research HSBC Qianhai Securities Limited HYPERLINK mailto:yuqian.ding yuqian.ding+86 10 5795 2350* Employed by a non-US affiliate of HSBC Securities(USA)Inc,andisnotregistered/ qualified pursuant to FINRAregulationsChinas car marke

4、t is on track to shrink for a second consecutive year. Smaller manufacturers are shutting down and the large players have reported double-digit sales declines. But that part of the story is fairly well known. This report looks ahead to see when growth will return. We analyse the experiences of South

5、 Korea and Japan to use as a guide, given China has followed a similar path to them so far. We also identify who the winners might be and how the industry is grappling with two major challenges: meeting stricter fuel consumption compliance targets (i.e. more lower-emission cars), and trying to meet

6、targets for more electric vehicles. So what do we find?Industrygrowth:Wesee Chinaautosdemandbottomingin2020andimprovingin2021Margins: Rising competition, faster model roll-outs and more R+D mean margins willfallLuxury: A rare pocket of double-digit growth as buyers are mostly in wealthiercitiesSUVs:

7、 The most important segment for OEMs, but the market issaturatedEVs: Were cautious given subsidies are being phased out and because of the high compliancecostsWe initiate coverage on 6 original equipment manufacturers (OEMs)For GAC H/A (2238 HK, Buy/601238 CH, Buy), we think its joint ventures with

8、Toyota and Honda will drive earnings growth, in part because they use a so-called twin model strategy where a successful SUV model thats used in one JV is also sold in another JV with small adjustments. We also see losses at its local brands and other JVs narrowing. Our target prices are HKD10.22/RM

9、B14.11 with 15.2%/20.8% implied upside.For BAIC (1958 HK, Reduce), its BAIC-Mercedes entity is the biggest earnings contributor but we see its product cycle peaking and the BAIC-Hyundai entity likely to remain challenged in terms of limited volume accretion from model refreshes/launches. We also see

10、 BAICs local brands struggling and continuing to make losses. Our target price is HKD3.95, with 12.0% implied downside.Contents HYPERLINK l _TOC_250014 Why readthisreport?1 HYPERLINK l _TOC_250013 ExecutiveSummary3 HYPERLINK l _TOC_250012 Demand stuck in alow gear16Industry profitabilitytonormalise2

11、7 HYPERLINK l _TOC_250011 Navigating thepolicywinds32 HYPERLINK l _TOC_250010 ESG lens on Chinaautos40 HYPERLINK l _TOC_250009 Earnings andvaluation43 HYPERLINK l _TOC_250008 Companysection49 HYPERLINK l _TOC_250007 GAC (2238HK/601238CH)50 HYPERLINK l _TOC_250006 BAIC(1958HK)60 HYPERLINK l _TOC_2500

12、05 Great Wall (2333HK/601633CH)70 HYPERLINK l _TOC_250004 Brilliance(1114 HK)79 HYPERLINK l _TOC_250003 Dongfeng (489 HK)87 HYPERLINK l _TOC_250002 Changan Automobile A(000625CH)94 HYPERLINK l _TOC_250001 Disclosureappendix101 HYPERLINK l _TOC_250000 Disclaimer104Executive SummaryDemand to stay stuc

13、k in a low gearOur big picture view: we see car sales growing at-8%/-1%/+5% in 2019e-2021eCar sales to normalise after a strong decadeOver the past decade, one of the key planks of support for new car sales growth in China was that the market was relatively under-penetrated and the economy was expan

14、ding rapidly.However both those factors have plateaued. Growth has slowed down, while car penetration will reach 147 units per 1,000 people by the end of 2019e, a level where car markets slowed down considerably in Japan (46 years ago) and South Korea (23 years ago).As a result, we estimate 2018-28e

15、 car sales CAGR to normalise at 1.9%, from 15% in 2008-18. In fact, assuming no further stimulus directed at the autos industry by Beijing, we see 2020e growth falling -1% year-on-year (y-o-y) as we have yet to see a material improvement in major demand drivers. In 2021e, we see growth recovering to

16、 +5% y-o-y on new car and replacement demand.Exhibit 1. We benchmark Chinas autos penetration growth to Japan and KoreaKorea (1977-2007)Korea 2006Korea (1977-2007)Korea 2006Japan (1957-1987)China (2000-2030E)Japan1986China2029EKorea 1996China 2019EJapan 197325,000GDP per capita (in USD)20,000GDP per

17、 capita (in USD)15,00010,0005,000-50100150200250300Car penetration (unit per 1000 people)Source: CEIC, HSBC Qianhai ResearchUnlike the overall market, we see luxury autos doing well given most of the demand is in wealthier tier-1 and -2 citiesLuxury to outperformWhile there was overall car market we

18、akness in 2019, the luxury segment (including domestically made and imports) grew 12% in the first three quarters y-o-y. Demand for luxury cars is mostly centred in the wealthier tier-1 and -2 cities, and therefore is typically more resilient. We see the luxury segment continuing to outgrow the over

19、all market as the number of wealthy consumers keeps rising and driven by upgrades and replacement demand. We forecast the luxury segment to grow at +10%/+8%/+6% in 2019e-21e.Exhibit 2. We forecast luxury market to grow at +10%/+8%/+6% in 2019e-2021eExhibit 3. 65% of luxury demand comes from tier-1 a

20、nd -2 cities500,000-18%16% 17%12%16% 17%12%10%7%8%Luxury car sales volumeyoy growth20152016201720182019E2020E2021ETier1Tier2Tier3Tier4Tier5Luxury car sales volumeyoy growth20152016201720182019E2020E2021ESource: IHS, HSBCQianhaiSecuritiesSource: ChinaAutoMarket, HSBC QianhaiSecuritiesThe SUV segment

21、is saturatedSUVs have become very popular in China and are now the biggest segment for original equipment manufacturers like Great Wall, with SUVs making up 44% of the overall market SUV mix, from 10% back in 2008. However, we see the segment as close to saturation given the global average for the S

22、UV mix is just 40%. Still, while we see growth slowing down it should remain slightly higher than the overall market given consumers still like this style of car and many new models are being rolled out. We forecast the SUV market to grow at -7%/0%/6% in 2019-2021e.Even despite the slowdown and an i

23、ncreasingly crowded segment, we see SUVs as likely to remain the volume and profit drivers for OEMs given their prices are higher than for models like sedans. As per the industrys new car calendar, 183 out of the 301 new model launches in 2019-21 will be SUVs and we see that trend continuing.Exhibit

24、 4. SUVs have higher prices vs. sedans in the same size segmentCompact SUVEntryHighCompact SedanEntryHighEntry diff.High diff.Volume diff.Compact SUVEntryHighCompact SedanEntryHighEntry diff.High diff.Volume diff.Local brandsGAC GA473,800115,8004,6928,732GAC GS489,800151,8004,525 77,93722%31%793%Cha

25、ngan Eado69,900103,9004,71090,703Changan CS7579,800174,8004,650 108,15514%68%19%Local average71,167106,1674,67853,15386,133161,1334,573 103,74921%53%307%Intl brandsVW Lavida107,900161,9004,670338,797VW Tiguan194,800231,8004,506 187,63481%43%-45%Toyota Corolla119,800159,8004,635245,334Toyota RAV4174,

26、800264,8004,600 97,27046%66%-60%Honda Civic119,900169,9004,650173,967Honda CRV169,800276,8004,585 150,90442%63%-13%Intl average115,867163,8674,652252,699179,800257,8004,564 145,26956%57%-39%Source: Autohome, CPCA, HSBC Qianhai ResearchLength Volume MSRP range (RMB) Length VolumeSUV vs. Sedan (samese

27、gment)Note: Volume is retail sales volume 2019 Jan-Sep YTD; despite of same segment similar length, there might also be engine/equipment difference to account for price difference, among intl brands.One way international brands are trying to muscle in and gain more SUV share is by using a so- called

28、 twin model strategy where a successful SUV model thats used in one of their JVs is also sold in another of their JV with small adjustments. This meaningfully lowers the costs of development as the alternative is developing a new model from scratch. Plus when the modelisTo save costs, brands are rol

29、ling out a twin-model strategy by launching successful SUVs in other JVslaunched in another JV, given the prior success then the model typically performs well in terms of volumes and margins. However, one downside can be cannibalisation between these twin models. Given they use a similar chassis des

30、ign and platform base, we see a better cost structure too. For example, GAC-Honda is launching the Breeze and GAC-Toyota is launchingthe Wildlander (twin models of the CRV/RAV4, respectively) an end-2019e/Mar 2020e, which we believe will drive both strong volumes and earnings growth for GAC. On the

31、local brand side, OEMs are introducing coupes, crossovers, and sporty derivative models to improve sales in lower-pricedsegments.We are cautious on the EV segment in 2020eNew Energy Vehicles (NEVs), which include plug-in hybrids, have not had a good run recently. Volumes dropped 48% y-o-y in October

32、 and we see declines for November and December too, on:subsidies, including from the central and local government, are down by more than70%;there was front-loading of sales (especially fleet buyers) in 2Q ahead of the subsidy cuts starting in July;andweaker demand, partly due to an increase in the n

33、umber of car licence plates permitted in some cities and the expectation for further relaxation in car platerestrictions.The result is that we forecast NEV demand to be flattish in 2019e given the 2H19 volume contraction. Despite the governments aggressive target for 2m NEVs in 2020 implying 57% y-

34、o-y growth in 2020 vs. our 2019e estimated volume at 1.27m we take a cautious view in 2020e with 12% sales growth y-o-y. This is due to: easy-to-meet compliance requirements as we estimate compliance required for NEV volumes is only c.0.6m units; weak demand; and the full phasing out of subsidies. T

35、here will be no subsidies from 2021e and we dont know the details for the 2020 subsidy scheme, although we expect to see pre-buying once a cut-off date for NEV subsidies is announced. We see NEV demand accelerating in 2021 at 30% y-o-y on higher-quality models, attractive costs and a greater range o

36、f EV products to choose from as OEMs ramp up their launches ahead of the introduction of tougher compliance requirements in 2021e (we estimate compliance required NEV volumes will be 1.3m in2021).Exhibit 5. We forecast NEVs to grow at 1%/12%/30% in 2019-2021e-2013201420152016201720182019E2020ENEV (i

37、ncl.PV/CV)volumeGovt.targetest. Compliance rerquiredNEV(PV)volumeyoy growth(RHS)100%53%53%53%53%12%1%3062%80%70%60%50%40%30%20%10%0%Source: ChinaAutoMarket, HSBC Qianhai Research estimatesExhibit 6. 4Q NEV (PV) growth might be weak on a high base and lower subsidies-188%101%101%97%73%28%5%-7%-16%-33

38、%-45%-47%JanFebMarAprMayJunJulAugSepOctNovDec2018 NEV(PV)monthlyvolume2019 NEV(PV)monthlyvolumeYoy 200%150%100%50%0%-50%-100%Source: ChinaAutoMarketNew car sales to return to positive territory in DecemberThe good news is the car markets y-o-y decline narrowed in November to 4.6% vs. the Jan- Novemb

39、er 2019 y-t-d decline at 8.0%. December and the following months volumes should continue to improve. December is likely to see positive y-o-y growth, partly due to holiday seasonality. Next year will also get a small boost early on as the Chinese New Year holiday period starts on 24 January, earlier

40、 than 2019s 4 February, and usually car sales tend to rise the month before the holiday month.Key sector catalysts:Improving monthly sales data points with the y-o-y decline narrowing and likely turning positive in December, partly due to holidayseasonalityImproving pricing as demand returns, althou

41、gh this will vary between brands andregionsPotential policy support such as relaxing the restrictions on sales of car plates. We dont includeanypolicyinourashasExhibit 7. The decline in auto retail sales narrowed in November to 4.6%40%30%20%10%0%-10%-20%an-Feban-Feb15an-Feban-FebApr-19 Jun-19 Aug-19

42、JJJMonthly yoy growthSource: ChinaAutoMarketJJJMonthly yoy growthExhibit 8. November inventory was at 1.5 months, a relatively healthy level2.502.001.501.000.500.00JanFebMarApr2018MayJunJulAugSep2019OctNovDecSource: CADAIndustry profitabilityProfitability to normalise in the medium termOver the past

43、 decade, the average net profit margin of China OEMs has been consistently higher than global peers. But this gap has been narrowing amid slowing demand, fierce competition, increasing R&D and the costs to be compliant. Given we expect tepid growth over the medium to long term, lower prices of autos

44、 as competition remains intense and the high costs of meeting fuel efficiency and NEV targets, we expect the Chinas auto industry profitability to normalise toward the global average in the coming years. Still, economies of scale, falling capex, a labour cost advantage and high productivity still re

45、main attractive vs. other major auto production markets like the US and Europe.while the performance of OEMs will start to divergeAmid the softening demand for cars, the profitability of OEMs has diverged over the past three years. The reason is market competition is getting more intense, and those

46、who failed to refresh models or new autos or adjust to preferences been struggling. We see the factors for to succeed are: a strong product cycle, through use of fuel and NEV compliance capabilities.Exhibit 9. We see Chinas auto industry profitability normalisingExhibit 10. and profitability divergi

47、ng between OEMs2012201420162018China major OEMs average NPM Global major OEMs average NPM20122014201620182020ELocalbrandsStable StrugglingJVsSource: Company data, HSBC QianhaiSecurities estimatesSource: Company data, HSBC Qianhai SecuritiesestimatesConsolidation to accelerate, sub-scale OEMs to exit

48、To get a sense of how crowded the market is, there are 89 passenger car manufacturers in China in 2019. But about 90% of the auto market is concentrated within the top 10 strategic auto groups. Small auto groups are mainly sub-scale manufacturers with an average annual volume of 50K units and are un

49、likely to survive in this challenging market, we think especially with the need to spend heavily on improving fuel consumption and developing NEVs. The industry has already seen weaker brands exiting and weak OEMs scaling down by closing or selling plants.Steering through the policy changesFurther r

50、elaxation of car plate restrictions is likely to support demandGovernment stimulus for the auto sector has been introduced when demand is weak. However, this time around we see the government being less likely to bring back purchase tax cuts to boost car demand given fiscal budget constraints and a

51、weaker marginal impact, as the growth boost after the latest stimulus was lower than during the previous stimulus. We also believe much of the high demand in 2016-17 (at 16%/4% respectively) was spurred by stimulus rather than organic demand, and that helps explain why 2018 and 2019 have been so wea

52、k.The relaxation of car plate restrictions is likely the most effective and efficient measure to boost demand as it doesnt require additional fiscal budget support and the resulting demand is organic. Our analysis of municipal and provincial level autos sales and car plate auctions and lottery syste

53、ms shows that if all car plate restrictions were removed, the impact to volumes would be an increase of 2.6m units, implying 11% of car market demand (in 2018). However, central and local government interests arent fully aligned as the central government would like to promote auto consumption while

54、local governments are responsible for city management like reducing traffic congestion. For instance, in Beijing and Shanghai, which are major car buying centres, it would be difficult to relax car plate restrictions given the local governments commitment to tackling the problem of traffic congestio

55、n.2019.6-2020.12CountCity/regionCar Plate2019.6-2020.12CountCity/regionCar PlateRestriction(inunit)changeCar sales volume (2018, in unit)Biddingcount(inunit)As % of total bidding pool1Beijing100,000503,017Lottery3,836,21044%2Shanghai100,000692,437Auction1,213,84814%3Shenzhen80,000Adding80Kfrom435,53

56、8Lottery + Auction1,305,83315%4Guangzhou120,000Adding100Kfrom542,980 Lottery+Auction729,2518%2019.6-2020.125Tianjin100,000260,451Lottery + Auction833,98410%6Hangzhou80,000383,960Lottery + Auction801,8979%7Guiyang80,000Removed202,760Lottery410,6568Hainan province120,000Removed122,005Lottery + Auction

57、960,000TotalTotal(excluding580,0002,818,3838,721,023Discount (from bidding count to demand)30%Total est. potential demand2,616,307Totalmarketvolume23,226,38123,226,38123,226,381As % oftotalmarket2.5%12.1%11%(2018)volume (2018)Source: Various government websites (respective cities ministries of trans

58、portation), ChinaAutoMarket, HSBC Qianhai ResearchNew proposals for the dual-credit systemThe draft of the proposed updated version for implementation of the dual credit system where auto makers get credits for compliance features like energy efficiency, or they can buy credits from others, and woul

59、d face penalties if they dont make enough NEVs was announced on 11 September by the Ministry of Industry and Information Technologies (MIIT).We believe the draft regulations stress the need for auto makers to keep focusing on NEVs and fuel consumption reduction. By increasing lower fuel consumption

60、vehicles, OEMs can lower their NEV volume target requirements. Our analysis shows that 29 units of low-fuel consumption vehicles is equivalent to 1 unit NEV in 2021, and needed to meet the NEV credit compliance.The result is that we see OEMs increasing their investments and R&D to improve their vehi