CICC: Passenger car accelerating full range going abroad. The challenge remains, but the long-term trend is unchanged.

The China International Capital Corporation (CICC) released a research report stating that since 2022, the export volume of passenger vehicles has continued to increase, with more and more automotive companies deepening their overseas market layout. The large global market space and good structure have created opportunities, but at the same time, automotive companies also face complex and changing external environmental challenges. The period from 2024 to 2026 is an important strategic time for Chinese companies to comprehensively go global, which requires closely tracking changes in the external environment and company strategies. Challenges: Trade policy risks are increasing, with many regions tightening import taxes and fees on passenger vehicles. The process of Chinese companies going global is not smooth sailing. This year, there have been frequent increases in taxes and fees, anti-subsidy sanctions, etc., making it increasingly important to respond to policy risks. For example, the EU plans to impose anti-subsidy taxes on imported pure electric vehicle models from China, with a minimum additional rate of 17%; Brazil plans to gradually increase import tariffs on new energy vehicles starting on January 1, 2024, with the ultimate goal being 35%. Outlook: Overcoming trade risks through overseas production capacity and joint ventures, leveraging new energy advantages to stimulate greater incremental demand according to local conditions. Strategically, expanding production capacity overseas or joint partnerships is a necessary choice to mitigate the impact of unfavorable trade policies. Local manufacturing, light-asset processing, joint ventures, and other methods are worth considering. Tactically, starting from traditional fuel-based vehicles, new energy has greater potential. Actively exploring market opportunities in Southeast Asia, Latin America, etc., considering factors such as the price difference between fuel and electricity, market environment, consumer preferences, etc., playing to the advantage of hybrid cars based on local conditions. From high growth to stable growth, automotive companies face greater differentiation, with long-term space and profits still worth anticipating. According to the China Passenger Car Association (CPCA), the narrow definition of passenger car exports in the first half of 2024 reached 2.186 million vehicles, a year-on-year increase of 30.3%, with a surge in vehicle exports and a more balanced market structure. Influenced by policy changes and a high base, it is expected that the growth rate will slow down in the second half of 2024, with the total export volume expected to maintain a 25% growth for the year. Looking ahead, the policy game and localization construction will still take time, and the export growth rate is expected to decline, with greater differentiation in company performance. In the long term, Chinese brand overseas sales are expected to reach nearly 8 million vehicles, with new energy accounting for over 50%. Market supply and demand determine pricing, while operational efficiency determines costs. Compared to the domestic market, overseas markets are expected to maintain better profitability. Recommendations: Focus on leading traditional domestic brands with higher overseas sales growth sustainability, higher share of total sales, and significant profit contributions, while having relatively low valuations, such as Great Wall Motor (02333), GEELY AUTO (00175), Chongqing Changan Automobile (000625.SZ), etc. Leading new energy companies with global competitive new energy technologies and products, large growth potential in overseas sales, and relatively complete overseas localization layout, such as BYD Company Limited (002594.SZ,01211), LEAPMOTOR (09863), Chongqing Sokon Industry Group Stock (601127.SH), XPENG-W (09868), NIO-SW (09866), etc. Risk factors: Overseas market policy risks; overseas operational risks; unexpected delays in overseas new energy transformation.