20220516-招银国际-China_Auto_Sector_Will_April_showers_bring_May_flowers__16页_1mb

China Auto Sector Summary

Core Content

The China auto sector experienced significant disruptions in April 2022 due to the resurgence of COVID-19, impacting both supply chain and consumer demand. The report outlines different scenarios for the sector's performance in 2022, including base-case, bull-case, and bear-case forecasts, and provides insights into the NEV (New Energy Vehicle) segment and major automakers.

Main Points

Market Performance in April 2022

• Passenger Vehicle (PV) Sales:
  • Wholesale volume fell 43% YoY, 47% MoM, to about 54,000 units.
  • Retail sales volume dropped 39% YoY, better than the previous forecast of 50% YoY decline.
  • Inventory levels fell by about 106,000 units, and inventory months increased to 1.91 months.
• NEV Sales:
  • Retail sales volume for NEVs rose 58% YoY, but dropped 41% MoM to about 265,000 units.
  • NEV market share declined to 26.4% from 30.3% in March 2022.
  • BEV market share in the NEV segment dropped to 77.4% from 81.5% in 2021.
  • BEV sales were dominated by Chinese brands, with BYD leading in YTD sales.
• City Tier Performance:
  • Tier-1 cities saw the largest YoY decline in retail sales, at 48%, due to the Shanghai lockdown.
  • Tier-3 and below cities showed stronger NEV adoption, with trailing 12-month market share increasing to 16% and 12%, respectively.
  • Retail sales in tier-1 cities were driven by NEVs and luxury ICE models.

2022 Forecasts

• Base-case:
  • PV retail sales volume is expected to be flat YoY at 21.09mn units.
  • PV wholesale volume is projected to grow 4.3% YoY to 22.41mn units.
  • NEV retail sales volume is forecasted to rise 0.30mn units to 4.92mn units.
  • NEV wholesale volume is expected to increase 25% in 2022.
• Bull-case:
  • PV retail sales volume could grow 4.5% YoY.
  • PV wholesale volume could increase 7.5% YoY, assuming strong stimulus measures.
• Bear-case:
  • PV retail sales volume is projected to fall 5.7% YoY.
  • PV wholesale volume could decline 1.0% YoY.

Stimulus Measures and Impact

• The effectiveness of stimulus measures is limited due to weakened demand.
• Possible measures include:
  • Purchase-tax cuts for small-engine vehicles.
  • Subsidies for NEVs, which are more likely to be effective given Chinese dominance.
  • Rural subsidies, which may be of limited use due to urban migration.
  • Subsidies for higher-tier cities to support higher and more resilient income levels.
• Guangzhou has already started subsidizing replacement purchases, but its impact is likely less than previous measures.

Company Insights

• Great Wall Motor:
  • Wholesale volume fell 41% YoY, 47% MoM.
  • Inventory restocking of 2,900 units.
  • Order backlog of about 150,000 units.
• Geely:
  • Wholesale volume dropped 28% YoY, 29% MoM.
  • NEV sales were supported by strong exports.
  • Discounts widened due to showroom closures.
• BYD:
  • PV wholesale volume rose 1% MoM to about 105,000 units.
  • Retail sales volume fell 16% MoM.
  • Inventory level was estimated at 1.4 months.
  • Changsha plant is undergoing environmental investigation, potentially affecting half of its production capacity.
• GAC Group:
  • GAC Toyota showed resilience with a 7% YoY decline.
  • GAC Honda faced significant sales cuts for models like Accord and Vezel.
  • GAC Motor saw a 50% MoM drop in Aion sales due to lockdowns.

NEV Segment Analysis

• Market Share Trends:
  • NEV market share in tier-1 cities fell to 30.8% in April 2022.
  • NEV market share in tier-3 cities increased to 15.7%, and in tier-4 and below to 12.2%.
• Top NEV Brands:
  • BYD led with 17.4% YTD market share.
  • Wuling rose to 13.2% YTD market share.
  • Tesla fell to 11.2% YTD market share, with 1,733 units sold in April 2022.
• PHEV Segment:
  • PHEV retail sales volume rose 109% YoY, but 23% MoM.
  • BYD led in PHEV sales with 56.9% YTD market share.
  • Lixiang retained second place with 12.5% YTD market share.

Key Indicators and Outlook

• Pent-up Demand: Expected to drive growth in cities like Shanghai, Suzhou, Zhengzhou, and Changchun after lockdowns are lifted.
• Discounts: Widened across the sector due to inventory clearance and weak demand.
• Supply Chain: Chip shortages and lockdowns in Shanghai affected production and sales, with recovery expected in May-Jun 2022.
• Market Share Trends: Chinese brands have seen a 22-month streak of rising market share, reaching 42% as of April 2022.
• Luxury Brands: Continued underperformance, with Tesla showing resilience in some segments.

Summary Table

Conclusion

The China auto sector is navigating a challenging environment due to lockdowns, supply chain disruptions, and weakened demand. While NEVs continue to grow and dominate the market, luxury brands and BEVs face headwinds, particularly due to the Shanghai lockdown and Tesla's production halt. The report suggests a base-case scenario with flat retail and 4.3% YoY growth in wholesale volume, with potential for bull-case growth if stimulus measures are effective. Chinese brands are expected to outperform, with BYD and Geely leading in NEV and PHEV segments, respectively. The market share of Chinese brands is on an upward trend, and pandemic-related disruptions are likely to persist into June 2022, with recovery expected in the second half of the year.