Fintech News App learned that on August 16th, the Ministry of Commerce and other seven departments issued a notice on further improving the work of replacing old cars with new ones. Specifically, the subsidy standards have been significantly increased. In terms of scrapping and updating automobiles, the subsidy standard was increased from the original subsidy of 10,000 yuan for purchasing new energy passenger vehicles and 7,000 yuan for purchasing fuel passenger vehicles to 20,000 yuan and 15,000 yuan, respectively, more than doubling. Tianfeng Securities stated that with policies and supply-side reforms in the automotive industry, demand is expected to recover in the second half of the year, and the sector's market may gradually become more optimistic. Relevant symbols: BYD Company (01211), Li Auto Inc (02015), NIO Inc (09866), Xpeng Inc (09868).

This year, the government has been increasing incentives for new energy vehicles. On August 1st, the Ministry of Transportation and the Ministry of Finance released the "Implementation Rules for Subsidies for Urban Public Transportation Vehicles and Power Battery Replacement for New Energy Vehicles in Cities", which mentioned that a fixed subsidy be given for renewing urban public transportation vehicles and replacing power batteries. The guidelines also encourage the reasonable selection of new energy urban buses based on changing passenger flows and the development of the urban public transportation industry. The average subsidy for each vehicle is RMB 60,000 yuan, RMB 80,000 yuan for renewing new energy urban buses and RMB 42,000 yuan for replacing power batteries.

On July 25th, the National Development and Reform Commission and the Ministry of Finance issued the "Several Measures to Support Large-scale Equipment Updating and Replacement of Consumables, Such as Replacing Old Cars with New Ones," further increasing subsidies for key industries, including automobiles. For eligible automobile scrapping and updating, the subsidy standards have been increased from 10,000 yuan to 20,000 yuan for the purchase of new energy passenger vehicles.

It is worth noting that on August 8th, the National Passenger Car Market Information Joint Conference released monthly data. The data shows that in July, the national passenger car market retail sales were 1.72 million, a year-on-year decrease of 2.8% and a month-on-month decrease of 2.6%. Cumulative retail sales this year are 11.556 million, a year-on-year increase of 2.3%. Among them, the retail sales of new energy passenger vehicles in July were 0.878 million, a year-on-year increase of 36.9% and a month-on-month increase of 2.8%. The penetration rate reached 51.1%, marking the first time that monthly retail sales of new energy passenger vehicles in China surpassed those of gasoline passenger vehicles.

Cui Dongshu, Secretary-General of the National Passenger Car Market Information Joint Conference, analyzed that recently the country's "old-for-new" passenger car scrappage and renewal policy has gradually taken effect, and local governments have actively introduced follow-up measures, which have effectively stimulated automotive consumption. The trend of new energy vehicles in July was better than the forecast made by the China Association of Automobile Manufacturers.

The 'trade-in' policy for automobiles, led by the Central Committee for Financial and Economic Affairs, corrects pessimistic expectations for demand. According to a research report by Founder Securities:

1) The automotive off-season has passed, and the base effect is gradually dissipating: According to the China Passenger Car Association (CPCA), the retail sales of automobiles in July were 1.72 million units, a year-on-year decrease of 2.8%, and a month-on-month decrease of 2.6%; the wholesale volume in July was 1.965 million units, a year-on-year decline of 4.9%, and a month-on-month decline of 9.4%. As a result of the countercyclical stimulus in 2023, Founder Securities believes that the year-on-year growth rate of autos in August is expected to reach the bottom, and as autumn approaches, the tailwinds of the Gold, September and year-end shopping seasons gradually appear, with expected synchronous repair and upward movement in the annual growth rate. 2) The scrap-and-replacement policy is strengthened, and the passenger vehicle sector receives another favorable turn: This time, the scrap-and-replacement policy further supports the performance of the automobile consumer market by increasing subsidies for passenger and commercial vehicles, and it is estimated that it will boost 0.5 million to 1 million units in the annual sales performance. It is expected to bring structural benefits to new energy automobiles and independent brands, and mid- to low-end independent and joint ventures will benefit structurally.

3) Valuation adjustment is sufficient, and the bottom of the industry is catalytic and imminent: As of August 9, 2024, the automobile index PE-TTM had reached 26.45, a 6.85% decrease from the high point during the year, with factors such as costs, maritime transportation, exchange rates, and price wars being bearish and successively being reflected. With the subsequent catalytic effect at the bottom, the automobile sector will begin to recover and move upward, with a focus on domestic substitution, luxury cars, exports, autonomous driving, and oversold parts and components.

The relevant enterprises in the automobile industry include: BYD (01211), Great Wall Motors (02333), China National Heavy Duty Truck (03808), Geely Automobile Holdings (00175), Guangzhou Automobile Group (02238), Nio Inc. (09866), Xpeng Inc. (09868), Li Auto Inc. (02015), and Xiaomi (01810).

Dongxing Securities stated that in the second half of the year, the growth of new energy vehicles still has resilience. On the supply side, many new models will be launched and listed in the second half of the year. High-voltage fast charging penetration will accelerate, while high-end plug-in hybrid models will continue to increase. The significant trend towards product intelligence will drive the continuous growth of the penetration rate of new energy vehicles. The improvement of product strength and abundant supply is expected to continue to drive demand growth; on the demand side, under the catalysis of policies such as old-for-new, terminal consumer demand is expected to gradually be released.

Related concept stocks:

BYD Company Limited (01211): BYD's new energy vehicle sales in July increased by 30.6% year-on-year; this year's cumulative sales of new energy vehicles were 1,955,366 units, an increase of 28.83% year-on-year.

In July, li auto inc delivered a new record high of 0.051 million vehicles, a year-on-year increase of 49.4% in monthly deliveries; a total of nearly 0.24 million vehicles were delivered from January to July this year. As of July 31 this year, li auto inc has delivered more than 0.8733 million new vehicles.

In July, Nio Inc delivered approximately 0.0205 million new vehicles, a year-on-year increase of 0.17%, with monthly deliveries exceeding 0.02 million vehicles for three consecutive months. From January to July this year, Nio Inc delivered nearly 0.108 million new vehicles, a year-on-year increase of 43.85%.

XPeng Inc. (09868): XPeng delivered approximately 0.0111 million new cars in July, a year-on-year increase of 1% and a month-on-month increase of 4%. From January to July this year, XPeng has delivered about 0.0632 million new cars, a year-on-year increase of 20%.