全球與零部件汽車行業(yè)樂觀進(jìn)入周期后階段

5FebruaryEquityResearchAutomobiles&GlobalTheCreditSuisseConnectionsSeriesleveragesourexceptionalbreadthofmacroandmicroresearchtodeliverincisivecross-sectorandcross-borderthematicinsightsfor5FebruaryEquityResearchAutomobiles&GlobalTheCreditSuisseConnectionsSeriesleveragesourexceptionalbreadthofmacroandmicroresearchtodeliverincisivecross-sectorandcross-borderthematicinsightsforourclients.DanielSchwarz,44207883daniel.schwarz.2@credit-Sascha44207888sascha.gommel@credit-Michaela44207888michaela.burckard@credit-Bin8522101bin.wang@credit-8522101nick.li.3@credit-Wei8522101wei.fang@credit-AutosIndiaJatin91226777jatin.chawla@credit-Pratik91226777pratik.rangnekar@credit-AutosJapanMasahiroAkita81345507361masahiro.akita@credit-Koji8134550koji.takahashi@credit-AutosSouthKoreaMichaelSohn8223707michael.sohn@credit-Joon8223707joonwha.lee@credit-AutosTurkeyOnurMuminoglu902123490454onur.muminoglu@credit-OptimisticintothelaststageoftheWehaveteamedupwithourglobalcolleaguestoanalysethemajorcarmarketsin2019,highlightingourtoppicksamongOEMsandsuppliers,includingCreditSuisseHOLT?analysis.WhileindustryheadwindsareVIstandardsphasingin—soarethevaluationdiscounts,particularlyinEurope.WeprefercompanieswithexposuretotheChinesemass-marketsegment.■China:Onthebasisofnewgovernmentmeasures(incentiveswereannouncedon29JanuaryandweexpectincrementalmeasuresoverthecourseofQ12019),ourChinaautosanalystshaveincreasedtheir2019salesgrowthforecastforpassengervehiclesto+5%.Webelievecomponentmakersshouldbenefitfromrisingproduction.OurChinaautosanalyst'stoppickisHuayu.Europe:AmongOEMs,VWshouldbenefitmostfromrisingdemandinChina(PorscheSEisourpreferredwaytogainexposuretoVW).Amongsuppliers,wethinkFaureciaandSchaefflershouldbenefitmost.WecutourestimatesandTPsforRNO,DAI,BMWandVWinaseparatereport.India:H218volumeswerewellbelowexpectations.Weexpectdecliningfuelpricestosupportaccelerationingrowthin2019.AstablegovernmentposttheMay2019electioncouldalsoboostsentiment.Ouranalyst'stoppickisMothersonSumi:valuationhascorrectedandweexpectmarginexpansion.Japan:Japaneseautoscontinuetofacestiffheadwinds,includingUS-JapanTradeAgreementonGoods(TAG)talks.Lingeringuncertaintiesareunlikelytobedispelledanytimesoon,inourview.Ouranalyst'stoppicksareSuzuki(7269)amongOEMsandDenso(6902)amongpartsmakers.SouthKorea:In2018,theKoreaautosectorunderperformedthemarketduetouncertaintyintheUSandChinaandFXheadwinds.However,ouranalystsbelieveearningsdowngradesarebottomingoutasweenterthenewSUVcycle(HyundaiMotorwasupgradedtoOutperforminOctober).Turkey:InFY18,retailsalesfellsharplyby35%duetomacrouncertainties.Weexpectanother7%declineinsalesin2019.FordOtosanisouranalyst'stoppickasitbenefitsfromthegovernment'ssupportforLCVsandtheplannedco-operationbetweenVWandFordinLCVs.■■■■■Figure1:Globalsalesgrowthby OtherCore Source:CreditSuisseestimates,IHS,DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:asonlyasinglefactorinmakingtheirinvestmentdecision.SECTOR每日免費(fèi)獲每日免費(fèi)獲關(guān)注公回復(fù)：研究報(bào)加入“起點(diǎn)財(cái)經(jīng)”微信群。5FebruaryKeyFigure2:Globalvolumes–absolute(inm Figure3:Globalvolume GlobalChina EuropeSource:CreditSuisseestimates,IHS,Source:CreditSuisseestimates,IHS,Figure4:Chinapassengervehiclesalesgrowthvs.autostimulusFigure5:Chinaauto5FebruaryKeyFigure2:Globalvolumes–absolute(inm Figure3:Globalvolume GlobalChina EuropeSource:CreditSuisseestimates,IHS,Source:CreditSuisseestimates,IHS,Figure4:Chinapassengervehiclesalesgrowthvs.autostimulusFigure5:Chinaautoownership(vehiclesontheroad,orcarPARC)byemissionstandardNote:theyellowbarsarethefirstyearsofstimuluspoliciesrelease;Source:CAAM,CreditSuisseestimatesSource:ChinaVehicleEnvironmentalManagementAnnualFigure6:DevelopmentofHOLTP/B 1999-2000-2001-2002-2003-2004-2005-2006-2007-2011-2012-2013-2014-2015-2016-2017-2018- HOLTPricetoHistoricalSource:CreditSuisse2Global5FebruaryTableof48Globalautomotivesupplier9China–WeexpectfurtherstimulusfromthecentralChinaEurope–Challengesarehighbutvaluationdiscountiseven5FebruaryTableof48Globalautomotivesupplier9China–WeexpectfurtherstimulusfromthecentralChinaEurope–ChallengesarehighbutvaluationdiscountisevenEuropeIndia–Post-buyandpre-IndiaJapan–LookingbeyondthestormJapanSouthKorea–BottomingoutSouthKoreaTurkey–Mayhavepassedthetrough;valuationstoAmericas–USmarkethasHOLTviewontheglobalautomotive3Global5FebruaryExecutiveIn2018,the5FebruaryExecutiveIn2018,theglobalautossectorfacedseveralheadwinds,■■■NewtariffsthatwereimplementedforvehiclesexportedfromtheUStoChinaDemandinChinadeclinedforthefirsttimesince1990TheintroductionofWLTPinEuroperesultedinsignificantsupply■■BrexitnegotiationshavenotyieldedInterestratesintheUSBecauseofthesenegativefactors,wehaveseenasignificantnumberofprofitwarnings,especiallyaroundQ3reporting.Thishasresultedinafurtherde-rating,andautomotivestocksarecurrentlytradingathistoricaltroughlevelsrelativetothebroadermarket.Withinthesector,thevaluationpremiumofsuppliersrelativetoOEMshasdecreased.Asweenter2019,webelievethatseveralofthenegativedriversnotedabovearelikelytoWenowexpectunitsalesinChinatoincreaseby5%forpassengervehicles,drivenbyabroadgovernmentincentiveprogram■WeexpecttariffsforcarsexportedfromtheUStoChinatobeWeexpectnegativeeffectsfromWLTPtophase■WhilerisksaroundBrexitandpotentiallynewtariffsbetweentheUSandEuroperemain,webelievethatthisislargelypricedin.Withthebackdropofweaksentimentandlowvaluation,thesignificantearningsrevisionsoverthelast12monthsandourexpectationofrisingdemandinChina,weexpectAutostooutperformin2019.Inparticular,webelievethatstockswithexposuretoChina(particularlyforeignbrandsthatwillbelessimpactedbythetechnicalrequirementsfromChinaVIregulation)shouldoutperform.Figure7liststhecompaniesinourcoverageuniversewithsalesandearningsexposuretoChina.Inthisreportwedescribewhywebelievethecentralgovernmentwilltakemeasuresincrementaltothosealreadyannounced.Weexpectthistospurdemandin2019.4Global5FebruaryFigure7:ChinaexposurebyOEMandChinain%oftotal5FebruaryFigure7:ChinaexposurebyOEMandChinain%oftotalunitEstimatedshareofearningsinGreatChinain%oftotalEstimatedshareofearningsinAisinSeiki>>>>>>Source:Companydata,CreditSuisseGlobally,ourtopideasChina:HuayuandMinth–theleadingChinesepartsmakers,bothratedOutperform.WealsolikeChinesedomesticplayersGWM,BYDandGeely.WerateGACOutperformowingtoitslargelocalbrandoperation(GACTrumpchi).Europe:Porsche/Volkswagen–Webelievetheinterestsoftheownerfamilies,managementandminorityshareholdersaremuchbetteralignedthanpreviouslyandthewidely-expectedTruckIPO(Volkswagenhasheldkick-offmeetingsaccordingtoaReuterspressreportdated26October2018)andanincreasedcashconversionratereflectsthis.Webelievethe€9-10bnFCFissustainable(andbelievethatthecurrent14%FCFyieldcannotbesustainable).VWhasthehighestexposuretoChinaamongEuropeanOEMs.Europe:Faurecia–Faureciawasamongtheweakestperformingstocksin2018(-49%)despitestrongresults,noprofitwarningandlimitedearningsdowngrades(-0.2%forEPS2019E).Weconsidercurrentvaluationlevelsattractive(2019EEV/EBITof4.7x,~45%discounttosector).WethinkFaureciashouldreachitsFY18targetsandprovideasolidFY19outlookagainstverynegativesentiment.Weseelimiteddownsideriskto5Global5February5Februaryconsensusestimates.Moregenerally,welikeFaurecia’sasset-lightbusinessmodel~25%Europe:Schaeffler–ThecompanysufferedfromweakvolumesinEuropeandChinainH2.However,webelievethecurrentvaluationdiscountsanoverlynegativescenario(2019EEV/EBIT6.4x,~23%discounttothesector).ApotentialincentiveschemeinChinacouldbeamajorpositiveasthecompanyhasthehighestrelativeexposurewith21%ofAutomotiverevenuescomingfromChina.Fundamentally,welikeSchaeffler'sstrongoperatingbusinesswithdouble-digitmarginsandalmost20%ROCE.India:MothersonSumi–PostaweakFY19,whenmarginsinbothIndiaandSamvardhanaMothersonPeguform(SMP)disappointed,weexpectanimprovementinbothinFY20.InIndia,marginimprovementwillbedrivenbypass-throughofcopperpricesandFX(anyreversalcouldbehelpfultemporarily).InSMP,marginimprovementwillbedrivenbythescalingupatthethreenewplantsandreductioninlossesattheseplants.India:Mahindra&Mahindra–Afterastrongrallyin1HCY18,M&Mstockcorrectedonconcernsthatthetractorcyclewaspeakingout.However,LCV(pick-ups)growthremainsstrongandtractorgrowthcouldbereasonableintheeventofadecentmonsoonseason.UVperformancewillbedeterminedbythesuccessofthenewS201Tivoli.Japan:Suzuki–SuzukihaslimitedexposuretotheUSmarket,andwemaintainourlong-termgrowthscenarioforIndia.Thesharepricehascorrectedsharply,withthestocknowtradingatanI/B/E/Sconsensus12-monthforwardP/Ethatistwostandarddeviationsbelowitshistoricalaverage,whilethediscounttoaSOTP-basedtheoreticalsharepricecontinuestowiden.Japan:Denso–WefindDensotobethebest-placedautopartsgrouptobenefitfromnext-generationtechnologiesinelectrification,automation,andinformation.Weexpectaboosttosalesandsetunitprices,withtop-linemomentumoutpacingautomobiledemand,drivenbygrowingxEVdemandandfull-fledgedexpansionofLevel3+self-drivingtechnology.SouthKorea:HyundaiMotor–CompletionoftheSUVline-upin2019,growingconvictionontheUSturnaround,andKoreaplants'exportsalesrecoveryshouldleadtothefirstYoYsalesvolumegrowthinfiveyears.Withthelowbase,weforecastHMCtopost2019EOPgrowthof61%YoY.Asacatalyst,(1)as56%ofHMC'svehiclesareproducedinitsEMplants,soEMforexstabilizationcouldaccelerateHMC'searningsrecovery;(2)HyundaiMotorGroup(HMG)restructuringcouldtriggerthedeploymentofHMC'snetcashofW14.3trnasahigherdividend.Turkey:FordOtosan–FordOtosan’sdomesticbusinessispoisedtobenefitfromtheTurkishgovernment'songoingstimulusmeasuresthroughitsc.1/3marketshareinthelightcommercialvehiclesegment.TherecentalliancetalksbetweenFordandVolkswagencouldbring(partof)T6TransportervanproductionintoFROTOfrom2019onwards,accordingtotheTurkishdailyHurriyet(12November2018).China:Chang’an–WerateChang’an(000625.SZ)UnderperformowingtoitsrichvaluationandthesignificantriskssurroundingthetransferofFord'sstakeasmorethanhalfofitsprofitscomefromitsFordjointventure.Brilliancesolda25%staketoBMWin2018–Chang’ancouldsellastaketoFord,accordingtoourChinaautosanalysts.Europe:ElringKlinger–ElringKlinger’skeyprobleminourviewisthelackofFCF.ThecompanyhasnotgeneratedorganicFCFsince2009,whichresultedinnetdebt/LTMEBITDAreaching3.4xattheendof9M18.Westruggletoseethecompanyturningfreecashflowpositiveinthecomingyears.Onbackofachallengingyearin2019(€22mpositiveone-offwilldropout)andahighvaluation(2019EEV/EBIT11.8x,~40%premium6Global5February5Februarytothesector),weseesubstantialchallengesforthestock.Apotentialequityincreasecannotberuledout,inourview,althoughmanagementrecentlystatedthatitseesnoneedforequitycapitalmeasures(formoredetailsseeour7Novemberreport,Anotherweakquarter,reducingtargetprice)Europe:NokianTyres–OurnegativestanceonNokianisbasedontwopillars.OngoingearningsdowngradesarelimitingupsidepotentialasconsensusisonlyslowlyadjustingtotheUSexpansion,whichwillbeastructuraldragonprofitabilityfrom2020onwards(4%downsidefor2020E).Inaddition,weseede-ratingriskasvaluationmultiplestendtocorrelatewithprofitability.Thus,afallingmarginshouldalsoresultinafallingvaluationpremiumforNokian(currently~25%overthesectoraverage).7Global5FebruaryGlobalautomotiveFigure8:GlobalautomotiveOEMpeerAstonMartinAnhuiJianghuaiAutomobileGroupCoBaicBlueparkNewEnergyTechnologyCo.,LtdBAICMotorCorporationLimited5FebruaryGlobalautomotiveFigure8:GlobalautomotiveOEMpeerAstonMartinAnhuiJianghuaiAutomobileGroupCoBaicBlueparkNewEnergyTechnologyCo.,LtdBAICMotorCorporationLimitedBrillianceChinaAutomotiveHoldingsLimitedBYDCoLtdChongqingChanganAutomobileCompanyLimitedDongfengMotorGroupCompanyLimitedGeelyAutomobileHoldingsLtdGreatWallMotorGuangzhouAutomobileGroupNioIncSAICMotorCorpHondaMotorMazdaMotorMitsubishiMotorsNissanMotorSubaruCorporationSuzukiMotorToyotaMotorHyundaiMotorCompanyKiaMotorsHeroMotocorpLtdEscortsLtdTVSMotorsMarutiSuzukiIndiaLtdTataMotorsLtd.AshokLeylandNote:estimatesforUScompaniesbasedonIBESconsensus;pricesasof01February2019;O=Outperform,N=Neutral,U=Underperform,NC=NotCovered,R=RestrictedSource:CreditSuisseestimates,IBESconsensus8Global Rating TP(LC)CP U/(D)EPS2018EPS2019SalesCAGR17-20EPSCAGR17-20PE2018PE Rating TP(LC)CP U/(D)EPS2018EPS2019SalesCAGR17-20EPSCAGR17-20PE2018PE Rating TP(LC)CP U/(D)EPS2018EPS2019SalesCAGR17-20EPSCAGR17-20PE2018PESOUTH Rating TP(LC)CP U/(D)EPS2018EPS2019SalesCAGR17-20EPSCAGR17-20PE2018PE Rating TP(LC)CP U/(D)EPS2018EPS2019SalesCAGR17-20EPSCAGR17-20PE2018PE Rating TP(LC)CP U/(D)EPS2018EPS2019SalesCAGR17-20EPSCAGR17-20PE2018PE Rating TP CP U/(D)EPS2018EPS2019SalesCAGR17-20EPSCAGR17-20PE2018PE5FebruaryGlobalautomotivesupplierFigure9:Globalautomotivesupplierpeer5FebruaryGlobalautomotivesupplierFigure9:GlobalautomotivesupplierpeerFuyaoGlassIndustryGroupCoLtdGuoxuanHigh-TechCoLtdHuayuAutomotiveSystemsCo.,LtdMinthGroupLimitedNexteerAutomotiveGroupLimitedXinyiGlassHoldingsLimitedxxAisanIndustryAisinSeikiGSYuasaCorpIchikohIndustriesKoitoManufacturingStanleySumitomoElectricIndustriesSumitomoRubberIndustriesTokaiRikaHankookTireHyundaiWiaMandoCorpNexenTireApolloBoschLtd.MothersonSumiSystemsLimitedVarrocEngineeringLtd.Note:Pricesasof01February2019;O=Outperform,N=Neutral,U=Underperform,NC=NotCovered,Source:CreditSuisseestimates,IBES9Global TP CP U/ EPS EPS2019SalesCAGR17-20EPSCAGR17- PE2018PESOUTH TP CP U/ EPS EPS2019SalesCAGR17-20EPSCAGR17- PE2018PE TP CP U/ EPS EPS2019SalesCAGR17-20EPSCAGR17- PE2018PE TP CP U/ EPS EPS2019SalesCAGR17-20EPSCAGR17- PE2018PE TP CP U/ EPS EPS2019SalesCAGR17-20EPSCAGR17- PE2018PE5FebruaryGlobalvolumeFigure10:Global5FebruaryGlobalvolumeFigure10:GlobalOther--MiddleEastSource:CreditSuisseestimates,IHS,LMC;Note:Chinanumbersincludepassengervehiclesandcommercialvehicles(busandFigure11:Globalvolumes–absolute(inm Figure12:Globalvolumes GlobalChinaGlobalChinaCoreEuropeOthersSource:CreditSuisseestimates,IHS,Source:CreditSuisseestimates,IHS,Global -- -- -- MiddleEast/ W.Europe Europe Core N. Core 2015- 5FebruaryChina–WeexpectfurtherstimulusfromthecentralgovernmentInarecentinterview5FebruaryChina–WeexpectfurtherstimulusfromthecentralgovernmentInarecentinterviewwithCCTV(ChinaCentralTelevision),Mr.NingJizhe,theDeputyHeadofNDRC(China'sNationalDevelopmentandReformCommission),announcedthelaunchofnewmeasurescomingintoeffectin2019toboostcarconsumptionandhelptheeconomy.Hesaidthegovernmentwillsupportgreencarconsumptionandconsiderlaunchingpoliciestoencourageruralautoconsumption.AccordingtoourChinaautosanalyst,giventheautosector’simportance,theannouncedmeasuresindicatethattheChinesegovernmentplanstoboosteconomicgrowthviastimulationofconsumption.TheautoindustryisasignificantcontributortoChina’sGDP(>4%),employment(~4.7millionworkers),taxation(~4.5%)andnationalretailsales(~25%).On29January,theChinesegovernmentreleaseddetailsonitsconsumptionstimulusplan(includingautos)inadocumenttitled“Furtheroptimizingsupplytosupportconsumption'ssteadygrowthtoformastrongdomesticdemand(2019)executionplan”.Thisisthegovernment'slatestmovetoboosteconomicgrowthbystimulatingautoconsumption.Thisplanincludescashsupportforphasingoutpollutingoldcars(i.e.,'China3'emissionstandardsandbelow),cashsupportforencouragingruralautoconsumption,expandinggeographiccoveragetoallowpickupsaccesstourbanareas,easingpurchasequotacontrolorrecyclingabandonedquotaandsupportused-carsales.Therewere19mnvehicleswithChina2(orbelow)EmissionStandardsontheroadasofend-2017,andourChinaanalystsestimatethistohavereducedto15mnbyend-2018.Thesevehiclesweremorethan11yearsoldwhentheEmissionStandardwasupgradedfromChina2toChina3(on1July2007).ThecombinednumberofvehicleswithChina2orbelowandChina3EmissionStandardsontheroadreached63mnunitsasofend-2017,andaccordinglyourChinaanalystsestimatethistohavedecreasedto58mnbyend-2018.Unlikethelasttworoundsofautostimulusin2009and2015,whenthecentralgovernmentpaidallthecashsupportnationwide,thisplanwillbeimplementedonlyintheareaswhereconditionsarepermittedandlocalgovernmentspayallcashsupport.Asthisplanisunlikelyinadditiontowhathasalreadybeenannounced,weexpectthecentralgovernmenttostepinwithafurthertaxreductionin1Q19andevenfundtheabovementionedmeasures.Thus,weforecastpassengervehicledemandgrowthtobottomoutfrom4Q18’s15%dropandreturnconsensus’flatYoYgrowthaGlobal5FebruaryFigure13:Chinapassengervehiclesalesgrowthvs.auto Unit1517%851--0-2018e2019eNote:the5FebruaryFigure13:Chinapassengervehiclesalesgrowthvs.auto Unit1517%851--0-2018e2019eNote:theyellowbarsarethefirstyearsofstimuluspoliciesrelease;Source:CAAM,CreditSuisseestimatesPreviously,Chinalaunchedtworoundsofstimulusprogramsfortheautosector,bothofwhichreducedthevehiclepurchasetaxratefrom10%to5%.■Frommid-2008tothebeginningof2009,Chinapassengervehiclesalesslowedsignificantlyfollowingtheglobalfinancialcrisis.FromAugust2008toJanuary2009,vehiclewholesalesrecordedmonthlyYoYgrowthof-6.6%/-3%/+11.7%/-11.2%/-7.2%/-12.3%.InJanuary2009,theStateCouncilofChinaannounceda“PlanonAdjustingandRevitalizingtheAutoIndustry”,whichspecifiedthatthevehiclepurchasetaxwasbeingcutfrom10%to5%forvehicleswithenginesize<1.6litres.InMar-2009,theChinesegovernmentalsoinvestedRmb6bntostimulateautodemandinruralareasandacceleratethedisposalofagedvehicles.Afterthestimulusin2009,newcarwholesalesgrowthincreasedsignificantlyto47.2%YoYin2009fromonly7.2%YoYin■InJune-August2015,ChinapassengervehiclesalessawthreemonthsofYoY–down1.8%/5.9%/1.5%inJune/July/August.ItwasthefirstYoYdeclinesinceJanuary2009,ifweexcludetheimpactoftheChineseNewYearfestival.TheMinistryofFinanceandStateAdministrationofTaxationjointlyannouncedthe“Notificationofvehiclepurchasetaxcutforvehicleswith<1.6litreenginesize”.TheChinesegovernmentcutthevehiclepurchasetaxagainfrom10%to5%forvehicleswith<1.6litreenginesize.Inthisroundofstimulus,thenewcarwholesalesgrowthwas17.6%YoYin2016,whichisasubstantiallylowernumberthanin2009.InSeptember2018,theStateCouncilannouncedguidelinestostimulateconsumptionbyremovinginter-citytransactioncontrolforusedcars,maintainingnewenergyvehicle(NEV)purchasetaxexemptionandacashsubsidy,constructingmoreNEVchargingandvehicleparkingfacilities,andencouragingruralautoconsumption.ThiswasfollowedbytheNDRCdeputyhead’srecentremarkson"supportingreasonable,greenandupgradingcarconsumption,andconsiderlaunchingpoliciestoencourageruralautoconsumption".Wethinkthesemeasuresarenotabletoboostautodemandmeaningfullyin2019,andweexpectthegovernmentwilllaunchothermoreimpactfulpolicieslikeeasingthepurchasequotacontrolinsomeregions,phasingoutpollutedcars,andfurthertaxreductions(value-add-taxVATandvehiclepurchasetax).Global%%%%5FebruaryAutodemandstagnatedin2017andAfterastrongyearin2016supportedbyfavorablepolicy,theChinapassengervehiclessectorstagnatedin2017withworseningvolumegrowth–edgingupjust2.6%YoYin2017andestimateddown3.8%YoYin2018E,onourestimates.Thekeychangewastheless-supportivepolicy–thevehiclepurchasetaxforsmallercars(enginesizebelow1.6L)increasedfrom2016's5%to7.5%/10%in2017/2018,whichtriggerednotablefront-loadingofdemandin4Q16and4Q17andledtohigherpurchasepricesforcarbuyers.Meanwhile,consumers’overallwillingnesstospendmoney,especiallyforbig-ticketconsumerdiscretionarylikenewcars,stagnatedin2017and2018duetothehighhouseholdgearingratio.Chinesehouseholds'gearingratio(householdcreditasa%ofGDP)islikelytohaveexceeded50%in2018,after20yearsofcontinuousincreasesmainlyduetorisingproperty-relatedloans.Moreimportantly,thegearingratioincreasesinrecentyearsweremainlyfromlower-tierareas,wheretheautopenetrationwaslowerandgrowthindemandforautoswashigher.Inotherwords,consumersinlower-tierareashadpostponedtheirautopurchasesandusedtheirmoneyfordownpaymentsonproperty.Figure15:Quarterlypassengervehiclessales Figure14:China5FebruaryAutodemandstagnatedin2017andAfterastrongyearin2016supportedbyfavorablepolicy,theChinapassengervehiclessectorstagnatedin2017withworseningvolumegrowth–edgingupjust2.6%YoYin2017andestimateddown3.8%YoYin2018E,onourestimates.Thekeychangewastheless-supportivepolicy–thevehiclepurchasetaxforsmallercars(enginesizebelow1.6L)increasedfrom2016's5%to7.5%/10%in2017/2018,whichtriggerednotablefront-loadingofdemandin4Q16and4Q17andledtohigherpurchasepricesforcarbuyers.Meanwhile,consumers’overallwillingnesstospendmoney,especiallyforbig-ticketconsumerdiscretionarylikenewcars,stagnatedin2017and2018duetothehighhouseholdgearingratio.Chinesehouseholds'gearingratio(householdcreditasa%ofGDP)islikelytohaveexceeded50%in2018,after20yearsofcontinuousincreasesmainlyduetorisingproperty-relatedloans.Moreimportantly,thegearingratioincreasesinrecentyearsweremainlyfromlower-tierareas,wheretheautopenetrationwaslowerandgrowthindemandforautoswashigher.Inotherwords,consumersinlower-tierareashadpostponedtheirautopurchasesandusedtheirmoneyfordownpaymentsonproperty.Figure15:Quarterlypassengervehiclessales Figure14:Chinahouseholdgearingratio 000--1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q0808090910101111121213131414151516161717Householdcreditas%of01Q-164Q-2Q-4Q-3Q-181616171717TotalPassengerVehicleSalesgrowthSource:CAAM,CreditSuisseSource:CAAM,CreditSuisseWhathasbeenOnTuesday(29January),China'sNationalDevelopmentandReformCommission,MinistryofIndustryandInformationTechnology,MinistryofCivilAffairs,MinistryofFinance,MinistryofHousingandUrban-RuralDevelopment,MinistryofTransport,MinistryofAgriculture,MinistryofCommerce,NationalHealthCommissionandStateAdministrationforMarketRegulation,togetherwithothergovernmentdepartments,issued“Furtheroptimizingsupplytosupportconsumption'ssteadygrowthtoformastrongdomesticdemand(2019)executionplan”.Thisisthegovernment'slatestmovetoboosteconomicgrowthbystimulatingautoconsumption.Thisplanincludescashsupportforphasingoutpollutingoldcars(i.e.,China3emissionstandardsandbelow),cashsupportforencouragingruralautoconsumption(i.e.,replacingthree-wheelswith<3.5tonnetrucksor<1.6LPV),expandingthegeographiccoveragetoallowpickupaccesstourbanareas,easingpurchasequotacontrolorrecyclingabandonedquotainsomeregionsandsupportingused-carsales.Detailsareasbelow:Supportagedvehicleproducts’scrappageandreplacement.Removetherestrictiononreproducingandrecyclingvehicles'majormodules,includingengine,steering,transmission,axleandchassis.Localgovernments(whereconditionspermit)couldrelyontradingplatformstooffercertainsubsidiestocarownerswhodisposeoftheirChina3orbelowemissionstandardvehiclesandbuynewones.TheGlobal5Februarygovernmentwillprovideabonus5FebruarygovernmentwillprovideabonustoareasofsignificantoutcomeinreducingairpollutionbydisposingofolddieselenginetrucksandpromotingNEVs.■ContinuouslyoptimizethestructureoftheNEVsubsidy.SticktotheguidanceofsupportingtheleadingNEVcompaniesandofferingmoreNEVsubsidytomoreadvancedcomprehensiveNEVproducts.EncouragethedevelopmentofNEVtechnology.ImplementadifferentiatedmanagementpolicyforNEVcargotoprovideconvenientroad-rightandenlargethescopeoftrafficaccess.■Encourageautoproductsupgradeinruralareas.Inareaswherelocalgovernments’conditionspermit,thelocalgovernmentcouldprovideasubsidytoruralresidentswhodisposeoftheirthree-wheelvehiclesandpurchasetrucksweighing<3.5tonnesandpassengervehicleswithenginesizes<1.6-litresinordertostimulateautoconsumptioninruralareas.SteadilypromotetheeasingofrestrictionsondrivingpickupsinurbanareasafterevaluatingtheoutcomeofallowingpickupstobedriveninurbanareasinHebei,Liaoning,Henan,Yunnan,Hubei,andXinjiang.■■Speeduptheprosperityoftheused-carmarket.Fullycanceltherestrictionofused-carintra-regionsales.Forused-carsalescompanies,thevalue-addedtaxisleviedat2%insteadoftheprevious3%taxrate.■Furtheroptimizevehiclemanagementatthelocalgovernmentlevel.Forplaceswithplaterestrictionpolicies,thelocalgovernmentsshouldconsideroptimizingtheplaterestrictionmanagementmethod.Thelocalgovernmentmightrecyclesomeabandonedquotainordertobetterserviceautoconsumption.Therecentstimulusprogramwillonlybeimplementedinareaswhereconditionsarepermittedandlocalgovernmentspayallcashsubsidies.However,ourChinaautosteamexpectsthecentralgovernmenttostepinwithtaxreductionsin1Q19andthinksthecentralgovernmentcouldevenfundsomeoftheabove-mentionedmeasures.WediscussthemeasuresinmoredetailinthesectionsbelowPurchasequotacontroltobeeasedinsomeBecauseofseveretrafficcongest