20151021-三星证券-After_Diesel-gate,_who_will_lead_the_next_paradigm__58页_4mb

Sector Update Summary: Automotive Industry Post-Dieselgate

Core Content

This document analyzes the impact of the Volkswagen (VW) Dieselgate scandal on the global automotive sector, with a focus on the long-term implications for the industry, particularly for Korean automakers and suppliers. It also discusses the potential for electric vehicles (EVs) to become mainstream, the role of US automakers in the EV transition, and the financial and strategic implications for VW.

Main Points

1. VW Dieselgate Scandal Overview

• Scandal Details: VW was found to have used a "defeat device" to manipulate emissions tests, leading to a global recall of 11 million vehicles.
• Market Impact: In the US, diesel cars account for only 3% of auto demand, and VW's recall is expected to result in a loss of at most 0.5% market share, offering limited short-term gains to US automakers.
• Consumer Perception: VW's reputation as a leader in green technology is at risk, but the scandal is unlikely to significantly impact its sales in China, where gasoline cars dominate.

2. Will VW Collapse?

• Cost Estimates: VW may face costs of KRW62t-86t, but it has up to KRW92t in available funds.
• Government Support: The German government is likely to support VW due to its economic importance, with over 600,000 employees globally.
• Long-Term Survival: VW is expected to recover by focusing on EVs and hybrid technology, and potentially forming partnerships with US and Chinese automakers.

3. US Automakers' Opportunity

• Technological Shift: The scandal has raised doubts about German automakers' technological capabilities, giving US firms a new chance to gain global leadership.
• EV Strategy: US automakers like Tesla and General Motors (GM) are betting on EVs and smart cars, with GM targeting a battery cost of USD145/kWh by end-2016 and USD100/kWh by 2022.
• Market Trends: EV demand is expected to surge in 2017 when 200-mile range EVs priced at USD30,000 hit the market.

4. EV Market and Battery Innovation

• Battery Cost Reduction: Rechargeable battery prices are falling faster than anticipated, increasing the viability of EVs.
• EV Adoption Challenges: Even at USD30,000, EVs are still 50% more expensive than a current-day Toyota Camry, and need additional value beyond mobility and cost to become mainstream.
• Handset Market Analogy: The auto industry could follow the handset industry's trajectory, where innovation in design and connectivity could significantly increase EV value.

5. Korean Automakers and Suppliers Need to Innovate

• Focus on Smart Cars and EVs: Korean carmakers, IT firms, and battery manufacturers are urged to invest in and innovate for the future of smart and electric vehicles.
• Key Players: Hyundai Mobis, Hanon Systems, Mando, and LG Chem are highlighted as potential beneficiaries of the EV and smart car trends.

Key Information

Market Share and Sales Trends

• VW's US Sales: Only 10% of VW's sales are at risk due to the scandal.
• Korean Market: VW and Audi sales in Korea increased by 26.7% and 44.8% in September 2015, suggesting limited impact from the scandal.

Financial Impact

• Costs: VW has set aside EUR6.5b (KRW8.6t) for recall, but may need up to EUR65b (KRW86t) to fully address the issue.
• Fines and Litigation: US estimates suggest fines could reach USD7.2b-18b, but these are likely to be settled at a lower amount than initially proposed.

Competitive Landscape

• EV Development: VW plans to develop a new modular platform for compact EVs and transition to cleaner diesel technologies.
• Strategic Shifts: VW may form capital partnerships with US or Chinese automakers, and could take its subsidiaries public to raise funds.

Investment Outlook

• Auto Parts: Companies like Hyundai Mobis, Hanon Systems, and Mando are recommended as they provide critical components for EVs and smart cars.
• Battery Manufacturers: LG Chem, SK Innovation, and Samsung SDI are highlighted as key players in the EV battery market, with strong ratings and market caps.

Summary Table

Category	Companies	Rating	Market Cap (KRWb)	Key Products
Auto Parts	Hyundai Mobis	BUY	22,778	Regenerative brakes, ADAS
	Hanon Systems	BUY	4,292	Electric compressor, electric water pumps
	Mando	BUY	1,305	Regenerative brakes, ADAS, steering systems
	S&T Motiv	BUY	949	Start motors, driving motors
	Halla Holdings	HOLD	605	ADAS, brake ECUs, sensors
	PHA	BUY	315	Active hood systems, power trunks
Material/Equipment	LG Chem	BUY	19,152	Cells
	SK Innovation	BUY	10,310	Cells
	Samsung SDI	BUY	7,323	Cells
	Ecopro	BUY	137	Anodes (NCA)
Tech Firms	LG Innotek	BUY	2,016	Motors, sensors
	MCnex	Not rated	249	Camera modules
	MDS Technology	Not rated	211	Embedded software

Conclusion

The Dieselgate scandal has significant implications for the global automotive sector, particularly for German automakers like VW. While the scandal may not lead to VW's collapse, it is a catalyst for the industry to shift focus towards EVs and smart cars. Korean automakers and suppliers are positioned to benefit from this transition, especially as they invest in innovation and technology. The future of EVs depends heavily on automakers' ability to innovate and reduce costs, with the potential for the market to grow rapidly as battery prices fall and consumer demand increases.