According to Zhito Finance APP, China Merchants has released a Research Report stating that based on the heavy truck emission standard cycle, the concentrated sales period for National III heavy trucks was from 2008 to 2010, and for National IV heavy trucks, it was from 2013 to 2017. Currently, the number of National IV vehicles operating in the freight market significantly exceeds that of National III vehicles. Therefore, after the subsidy scope is expanded in 2025, the potential demand for replacing old vehicles is expected to double compared to last year, which will further boost the elasticity of domestic demand in the heavy truck Industry. The implementation of the heavy truck trade-in policy in 2025 is expected to effectively support domestic demand for the entire year, while the demand in the export market is steadily increasing. The certainty of the upward cycle in the heavy truck Sector is further enhanced, and investment opportunities in the Sector continue to be Bullish.

The main points of China Merchants Securities are as follows:

On January 8, the National Development and Reform Commission and the Ministry of Finance jointly issued a notice regarding the implementation of large-scale equipment updates and the old-for-new policy for consumer goods in 2025, proposing to expand the scope of subsidies for the scrapping and updating of old operating freight vehicles to include those that meet National IV and below emission standards, with subsidy standards executed according to the notice on implementing the scrapping and updating of old operating freight vehicles (Jiao Planning Fa [2024] No. 90).

Compared to the national subsidy policy of 2024, this time the scope of subsidies for freight vehicles has expanded to National IV vehicles, while the subsidy standards remain unchanged.

Looking back at the old-for-new policy for freight vehicles introduced in 2024, subsidies were provided for the early scrapping of National III and below emission standard operating diesel freight vehicles, the early scrapping and new purchase of National VI emission standard freight vehicles or New energy freight vehicles, and the purchase of qualifying New energy freight vehicles, with tiered subsidies. The highest subsidy for the early scrapping of old National III diesel heavy trucks is 0.045 million yuan, while the highest subsidy for purchasing National VI vehicles is 0.065 million, and for purchasing New energy heavy trucks, it is 0.095 million.

The scope of the subsidy for old freight vehicles has been expanded to include National IV vehicles, and the subsidy amount per vehicle continues the standards from last year. Based on the heavy truck emission standard cycle, the concentrated sales period for National III heavy trucks was from 2008 to 2010, and for National IV heavy trucks, it was from 2013 to 2017. Currently, the number of National IV vehicles operating in the freight market significantly exceeds that of National III vehicles. Therefore, after the subsidy scope is expanded in 2025, the potential demand for replacing new vehicles is expected to double compared to last year, further boosting the elasticity of domestic demand in the heavy truck Industry.

The heavy truck Sector possesses certain cyclical attributes, combined with policy stimulation, the industry's sales elasticity is expected to increase in 2025.

According to the China Association of Automobile Manufacturers, the total sales volume of the heavy truck Industry in 2023 was 0.911 million units, a year-on-year increase of 36%, indicating that the industry's fundamentals have emerged from a low point; according to the First Commercial Vehicle Network, the industry's sales volume in 2024 is expected to be around 0.9 million units, nearly flat year-on-year. Currently, the heavy truck Industry in China has a fleet size of 8 million units, and based on a 10-year scrapping cycle for heavy trucks, the theoretical midpoint for natural renewal and replacement sales in the industry is 0.8 million units per year. Under policy stimulation, a comprehensive judgment suggests that the wholesale sales of the heavy truck Industry in 2025 is likely to exceed 1 million units, with a year-on-year growth rate of about 10%, including export volume of 0.32 million units, also with a year-on-year growth rate of 10%, and domestic sales of 0.68-0.7 million units, with a year-on-year growth rate of 13-15%.

In terms of symbols: key recommendations for leading symbols in the heavy truck industry are SINOTRUK (000951.SZ) and Weichai Power (000338.SZ), while also suggesting to pay attention to Beiqi Foton Motor (600166.SH) and Weifu High-Technology Group (000581.SZ) related symbols.

Risk warnings: terminal demand may not meet expectations; the progress of policy implementation and promotion may not be as expected, etc.