Since 2021, domestic demand has been resilient and exports have continued to break through, driving the continuous growth of China’s passenger car demand. In this process, Chinese brand passenger cars increase their domestic and overseas market share through the selection and reserve of driving technology paths, continuous technological innovation and significant cost-effective advantages. Looking to the future, we believe that the demand driven by the two wheels of “domestic demand growth” + “overseas expansion” is still worth looking forward to.
First, domestic demand: the old for new policy to stimulate the demand for passenger cars exceeded expectations, and the medium and long term domestic market still has room for growth
Short-term domestic demand We mainly focus on the sales performance after the increase of the old for new policy, after the increase of the old for new policy, the terminal demand for passenger cars exceeded expectations, and the business climate continued to recover. In accordance with the “Several Measures on Strengthening Support for large-scale equipment renewal and the replacement of old Consumer goods with new ones”, the subsidy standard for automobile scrapping renewal is increased. In August 2024, the sales volume of domestic passenger car traffic compulsory insurance (excluding imports, the same below) was 1.913 million, an increase of 2.2% year-on-year and 8.1% quarter-on-quarter; The demand performance in August exceeded expectations under the high base of the same month, and the effect of the old for new policy was significant. From the cumulative sales point of view, from January to August 2024, the cumulative sales of passenger car traffic insurance was 13.36 million, with a cumulative growth rate of 3.5%. “Slow release agent” type policy care under the passenger car terminal boom continues to rise, based on the normal seasonal law of policy stimulus years in history, the year-on-year growth rate of passenger car traffic insurance sales is expected to show a “low before high” demand performance, and the year-on-year growth rate of traffic insurance sales from September 2024 is expected to move up.
Medium – and long-term domestic demand We mainly focus on the demand structure of passenger cars, and the replacement demand is expected to become a new driving force for the growth of total domestic demand for passenger cars in the future. From the perspective of the ownership structure of passenger cars, passenger cars have entered a new stage in which replacement/scrapping can drive sales, demand-side passenger car sales are easy to go up but difficult to go down, and updated demand is accelerating to release the sales center or move up the step, which is expected to usher in a new round of opportunities. We built a passenger car demand structure model through the key relationship between the first purchase, additional purchase, replacement demand and the supply of new and used cars. By 2023, replacement demand still accounts for only 44% of the total demand. Under the future policy incentives and guidance, it is expected to promote the increase of second-hand car trading volume and scrap recycling volume. In the future, the demand for replacement will show a rapid increase trend in a certain period of time, driving the total demand upward. Data source: GF Securities Development Research Center
Data source: China Automobile Dealers Association, Ministry of Public Security, Ministry of Commerce, GF Securities Development Research Center
Second, overseas demand: Since 2024, the export boom of passenger cars is still good, and the “new category” + cost-effective ratio will jointly drive the overseas terminal share of Chinese brands to continue to rise
In the short-term export demand, we mainly focus on the overseas terminal market share of Chinese brands. In the first half of 2024, the increase slope of the overseas terminal market share of Chinese brands is still relatively fast, and exports still maintain a good trend and a bright growth rate. According to data from the China Association of Automobile Manufacturers, 438,000 passenger cars were exported in August 2024, an increase of 25.7% year-on-year and 9.8% month-on-month. From the cumulative export sales point of view, from January to August 2024, the cumulative export of passenger cars was 3.175 million, an increase of 29.4%, and the export boom of passenger cars since 2024 is still good. According to Marklines, the annual sales range of passenger cars overseas from 2019 to 2023 excluding the US, Japan and South Korea markets is 30 million to 40 million, which we believe is the overseas market space that Chinese brands are expected to break through. In the first half of 2024, the terminal weighted market share of Chinese brand passenger cars was 7.4%, an increase of 2.1%, and the increase slope of overseas market share of Chinese brands is still relatively fast.
We mainly focus on the overseas competitiveness and breakthrough path of Chinese brands, and we believe that “new category” + cost performance is the two paths for Chinese brands to break through. One path is in the traditional Europe, America, Japan and South Korea dominated by the fuel (ICE) and high pressure hybrid (HEV) market, Chinese brands as a late entrant to win through cost-effective, high quality and low price in the competition to stand out; In the pure electric (EV) market, Chinese brands have achieved cost-effective performance with scale and supply chain advantages, and their share continues to rise. The second path is through the new category (plug-in hybrid PHEV, extended range hybrid REEV) will be competitive dimension, quality products for the global electrification process to provide a new choice, to lead the attitude of the leader in the incremental market to seek breakthroughs, gradually establish brand power, seeking excess returns, is expected to lead the global electrification change again.
From the perspective of domestic demand and export, China’s passenger car demand is supported in the short and medium term. In the future, in a certain stage, the demand driven by domestic demand growth and overseas expansion is still worth looking forward to, and Chinese brand passenger cars will continue to rise in this process.
