20140718-凯基证券亚洲-Explosive_growth_ahead_on_favorable_policies_16页_1mb

Alternative Fuel Vehicle (AFV) Sector Summary

Core Content

The Chinese government has significantly supported the development of the Alternative Fuel Vehicle (AFV) sector through a series of policy measures, including the exemption of purchase tax for AFV buyers and subsidies for charging facility construction. These policies are seen as more favorable than anticipated, signaling strong government commitment to promoting AFVs. The sector is expected to experience explosive growth, with sales projections of 40,000 units in 2014 and 100,000 units in 2015, representing over 100% year-over-year growth.

Main Points

• Government Support:

  • Policies launched in 2014 include purchase tax exemption and charging facility subsidies.
  • The government is conducting AFV trials in 89 cities, covering nearly 550 million people.
  • These trials aim to add 332,520 AFVs by 2015, with 67% targeting the public sector.

• Market Performance:

  • In 1H14, over 20,500 AFVs were sold, a 220% YoY increase.
  • Pure electric vehicles (EVs) accounted for 57.5% of sales, driven by stronger subsidies.
  • The AFV bus market grew the most, reaching 15% of mid-/large-sized bus sales in 1H14.

• Key Players:

  • BYD (1211 HK) is highlighted as a leading carmaker with strong performance in both passenger vehicles and buses.
  • Tesla (US) and SAIC Motor (600104 CH) are also recommended due to their advanced technologies and competitive models.
  • JAC (600418 CH) and BAIC are noted for their EV models with lower prices and good performance.

• Components & Sub-sectors:

  • Sub-sectors like electrolyte, cathode materials, and membrane are recommended for their market integration and potential.
  • Anode materials with ternary technology are expected to benefit from increased demand.
  • Upstream materials suppliers are likely to outperform due to the sector's growth and demand surge.

• Charging Infrastructure:

  • A total of 1,705 charging stations and 211,701 charging poles are planned for 2014-2015.
  • State Grid is accelerating the construction of charging stations, with a focus on intercity highway networks.
  • Tesla has introduced destination charging, which allows drivers to charge while working or shopping, improving convenience.

Key Information

• Purchase Tax Exemption: Expected to reduce AFV costs by 10–20%, narrowing the price gap with traditional vehicles.
• Charging Facility Subsidies: Aimed at expanding the charging network and reducing consumer concerns.
• Market Growth:
  • EV sales in 1H14 reached 20,500 units, up 220% YoY.
  • BYD's Qin model saw monthly sales over 1,000 units, outperforming peers.
• Consumer Preferences:
  • Domestic models are generally smaller and less powerful than foreign EVs like Tesla.
  • Tesla's Model S and BMW's i3 are seen as high-end options, though the i3 is considered overpriced for its performance.
• Business Models:
  • Automakers are adopting new models such as leasing, financing, and targeted buyer programs.
  • Kandi Technologies offers last-mile commuting minicars, and Tesla is introducing destination charging and supercharger stations.

Valuation & Recommendations

• Overweight Rating: Maintained on the Chinese AFV sector due to favorable policies and growth potential.
• Recommendations:
  • BYD, Tesla, SAIC, and BAIC are highlighted as key players.
  • Charging infrastructure providers and component suppliers are also recommended.
• Price Payback Period: For PHEVs, the payback period for price difference is expected to drop from 6 to 3 years due to tax exemption.

Risks

• Consumer Reception: May be weaker than expected due to concerns about vehicle performance and infrastructure.
• Charging Facility Construction: May be slower than anticipated, affecting long-term adoption.

Catalysts

• Tesla's Entry: The Model S's launch and marketing campaigns have drawn significant attention to the AFV sector.
• Government Programs: Initiatives such as destination charging and intercity charging networks are expected to enhance consumer confidence and market acceptance.