20230621-招银国际-Can_possible_strong_Jun_sales_extend_into_2H23__22页_1mb

CMB International Global Markets - Equity Research: China Auto Sector

Date: June 21, 2023

Key Highlights

1. Market Overview

   • May 2023 Performance:
     • China auto retail sales volume surged 33% YoY, while wholesale volume grew 26% YoY, exceeding the team's prior forecast due to strong demand, largely driven by NEV (New Energy Vehicle) sales.
     • NEV market share on a trailing 12-month basis hit 28.5% in May 2023, with primarily BYD and Tesla leading.
   • Future Outlook:
     • 2023 H1 sales volume may decline YoY due to high base, but NEV market share is expected to rise throughout the year.
     • Tier-1 cities drove most of the growth, while lower-tier cities saw a slower rate.

2. Stock Performance & Ratings

   • BUY: Li Auto, NIO, BYD (U.S./China markets), Geely.
   • HOLD: Tesla, Xpeng Auto.
   • Market-Perform: Auto industry expected to align with broader market benchmarks.

3. Company Analysis

   • BYD:
     • Dominated NEV segment with over 10% global market share.
     • Sales momentum driven by aggressive pricing and new models (e.g., Qin, Song, Seagull).
     • Inventory levels at dealers reached ~1.4 months in mid-2023, with discounts narrowing.
   • Geely/JieLi Auto:
     • Strong sales growth (55% YoY), with its NEV brand Zeekr posting significant unit increase (doubling YoY).
     • Facing competition from BYD and Tesla, with model pipeline supporting near-term growth.
   • CAAM (China Automobile Manufacturers Association):
     • China's auto market led by Chinese brands, achieving ~45.1% trailing 12-month market share.

NEV Segment

• Market Growth: NEV retail sales rose 43% YoY to 2.28mn units in 1-5M 2023, supporting stock outlook for BYD, NIO, Li Auto, etc.
• Top Models: Tesla Model Y maintained top sales position, while BYD models (Qin Plus, Song Plus) surpassed Tesla in some categories due to pricing.
• Challenges:
  • Mini-BEV market share falling (from 26% in 2022 to 16% in 2023) due to competition in low-tier segments.
  • NEV inventory at dealers reached ~2.1 months, raising concerns about 2H23 demand sustainability.

Risks & Concerns

• Inventory Buildup: Dealer inventories rose ~750k units year-to-date, potentially leading to restocking-driven demand in H2.
• Competition Intensity: Price wars, discounts, and aggressive new model rollouts (e.g., BYD's expanded brand portfolio) squeeze margins.
• Regulatory/Policy Changes: End of local subsidies may impact demand momentum.

Disclosures

• Analyst certifications and no conflicts of interest declared.
• Forward-looking estimates subject to market risk, with no guarantees of performance.

Disclaimer: This report is for informational purposes only; readers are encouraged to seek independent financial advice.