Sinolink: The price range of car companies at both ends is clear, and the winners and losers in the middle are accelerating.

Sinolink released a research report stating that independent brand automakers have an advantage at both ends of the price smile curve. Below 150,000 RMB, independent brands have an absolute advantage, with the top five in the price range below 100,000 RMB all being independent brands. In the 100,000-150,000 RMB price range, independent brands occupy 4 of the top rankings, with BYD Company Limited holding an absolute advantage in the 50,000-150,000 RMB price range. In the 150,000-200,000 RMB price range, the competition in the industry is fierce, with joint venture brands having a relative advantage. However, in terms of electric vehicles, independent brands have an advantage. Currently, in terms of industrial prosperity, the electrification and outbound industrial cycle have not ended, and the prosperity of independent brands and supply chains will continue to be stronger than the industry beta in the automotive industry. Sinolink's main points are as follows: 0-150,000 RMB: BYD Company Limited dominates the market with obvious competitive advantages The DM-i technology builds a competitive barrier, and BYD Company Limited dominates the low-end market. The energy-saving and low prices of DM-i technology give BYD Company Limited a clear advantage in the low-end market, relative to fuel-based cars, and in the electric car competition, with sales and profitability combined. According to Sinolink statistics, in the 50,000-100,000 RMB market, the total domestic sales in the first half of 2024 reached 2.613 million vehicles. BYD Company Limited sold 587,000 vehicles, with a market share of 22.5% dominating the market. In the 100,000-150,000 RMB market, the total domestic sales in the first half of 2024 reached 3.755 million vehicles, with BYD Company Limited selling 700,000 vehicles, a market share of 18.6%, also ranking first. Looking at the fuel type, BYD Company Limited's pure electric and plug-in hybrid models are the top sellers in the 50,000-150,000 RMB price range, with market shares of over 60% in most sub-markets. Meanwhile, in the plug-in hybrid market, the market share of BYD Company Limited is significantly higher than in the purely electric market. Other automakers outside of BYD Company Limited have relatively balanced market shares. With low technological barriers, the market presents clear signs of perfect competition, with companies relying on cost-effectiveness to capture market share. 150,000-400,000 RMB: Fierce competition drives the winners and losers in the high-end intelligent driving era 150,000-200,000 RMB market: The market is mainly composed of models priced above 200,000 RMB, such as the main selling models of Volkswagen/Toyota, with a relatively dispersed market. In the first half of 2024, the total domestic sales reached 1.79 million vehicles. The top five automakers were SAIC Volkswagen with 240,000 vehicles, Dongfeng Honda with 148,000 vehicles, GAC Toyota with 148,000 vehicles, FAW Hongqi with 140,000 vehicles, and BYD Company Limited with 135,000 vehicles. Due to price reduction strategies, the prices of fuel-based cars have fallen into the 150,000-200,000 RMB market, with a large space for domestic substitution. Electric cars are currently dominated by BYD Company Limited, with a strong performance in the plug-in hybrid sedan market, capturing 62.3% of the market share. 200,000-300,000 RMB market: The market competition is the most intense, with traditional joint venture brands, BYD Company Limited and other traditional independent, new forces, and Tesla all having a presence in the market. In the first half of 2024, the total domestic sales reached 1.642 million vehicles. The top five automakers were Tesla China with 427,000 vehicles, GAC Honda with 142,000 vehicles, FAW Volkswagen with 131,000 vehicles, Brilliance BMW with 122,000 vehicles, and BYD Company Limited with 120,000 vehicles. Although Tesla is in the lead, its market share is declining due to increased competition. Overall, the market is relatively dispersed. Particularly in the plug-in hybrid market, the competitive situation is not yet clear, with Ideal and Huawei dominating at present, but as more automakers enter the market, competition is expected to intensify. 300,000-400,000 RMB market: The space for domestic substitution is significant in the high-end market, which is currently dominated by BBA (Beijing Benz, BMW, Audi). In the first half of 2024, the total domestic sales reached 1.168 million vehicles. The top five automakers were Beijing Benz with 248,000 vehicles, FAW Volkswagen with 154,000 vehicles, Ideal with 101,000 vehicles, Brilliance BMW with 100,000 vehicles, and Huawei Select with 79,000 vehicles. The high-end market remains a blue ocean for automakers, with the impact of smart and electric vehicles catalyzing significant changes in the BBA market, making it a key focus for independent automakers in the future. Above 400,000 RMB: Huawei's advantage is expanding, still in the blue ocean market Huawei Select has risen unexpectedly, with the total sales in the first half of 2024 in the segment above 400,000 RMB reaching 374,000 vehicles, an increase of 32.7% year-on-year. The top five automakers were FAW Volkswagen with 102,000 vehicles, Brilliance BMW with 95,000 vehicles, Huawei Select with 59,000 vehicles, Ideal with 49,000 vehicles, and SAIC Volkswagen with 16,000 vehicles, with market shares of 27.4%, 25.4%, 15.8%, 13.2%, and 4.3% respectively. In terms of fuel types, the Wenjie M9 performed strongly, and Huawei has a significant advantage in the high-end market, which remains a blue ocean market. Overall, the market structure shows a clear smile curve characteristic: the situation is clear at both ends of the price range, with fierce competition accelerating in the middle Independent brands have an advantage at both ends of the price smile curve. Below 150,000 RMB, independent brands have an absolute advantage, with the top five in the below 100,000 RMB price range all being independent brands. In the 100,000-150,000 RMB price range, independent brands occupy 4 of the top rankings, with BYD Company Limited holding an absolute advantage in the 50,000-150,000 RMB price range. In the 150,000-200,000 RMB price range, the industry competition is fierce, with joint venture brands having a relative advantage. However, in terms of electric vehicles, independent brands have an advantage, with BYD Company Limited holding a 21.2% market share in the 150,000-200,000 RMB electric vehicle segment. In the 200,000-300,000 RMB price range, the competition is extremely intense, with a total of 14 companies selling over 5,000 vehicles monthly in the first half of 2024, and Tesla taking a large lead in this price segment. In the 300,000-400,000 RMB price range, the level of competition is only slightly weaker than in the 200,000-300,000 RMB range, with over 10 companies selling more than 5,000 vehicles monthly. In the above 400,000 RMB range, only 6 automakers had total sales exceeding 10,000 vehicles in the first half of 2024, with 3 of them being independent brands.Je suis trs content de te rencontrer.Investment advice From the perspective of industry prosperity, the cycles of electrification and international expansion in the automotive industry have not yet ended. The prosperity of independent brands and supply chains will continue to be stronger than the industry average. From the competitive landscape, price and product competition in the future sub-segments will become more intense, and the outlook for individual companies will revolve around the differentiation of the competitive landscape. In the second half of the rise of the Chinese automotive industry, only high-quality leading companies in good competitive landscapes will benefit. We continue to favor leading companies in various price segments of complete vehicles, as well as the seven major high-quality sub-segments of automotive parts. We recommend BYD Company Limited (01211), LEAPMOTOR (09863), and Li Xiang Auto (02015). Risk warning: Lower-than-expected automotive consumer demand and profit variability due to price wars.