Tianfeng: Large-displacement motorcycles launch a strong attack on the Asian market, large-displacement models may have a downgrading consumption attribute or be stronger.

Tianfeng released a research report stating that the consumption structure of motorcycles is changing, and the sales volume of high-displacement leisure motorcycles is gradually stabilizing. High-displacement leisure motorcycles are becoming increasingly popular, and the domestic supply and demand ecosystem is gradually maturing. By reviewing the markets in Italy and Japan, the team believes that in Asian markets with low penetration rates of high-displacement leisure motorcycles, in the era of consumption downgrading, high-displacement motorcycles are more likely to replace high-end cars rather than regular motorcycles. High-displacement motorcycles have stronger attributes of consumption downgrading. In today's highly developed social media dissemination environment, the penetration rate in China is increasing faster than in Japan. Assuming it reaches the level of Japan within five years, the domestic penetration rate of high-displacement motorcycles has a fivefold space in five years, with an average compound annual growth rate of 17% in per capita consumption. 1) Current Situation of Motorcycles: The consumption structure of motorcycles is changing, and the sales volume of regular motorcycles is gradually stabilizing, while the popularity of high-displacement leisure motorcycles is accelerating. The supply and demand ecosystem in China is gradually maturing. Motorcycles can be divided into regular motorcycles and high-displacement leisure motorcycles. Regular motorcycles are mainly used for short-distance travel, with the majority having a displacement of 150cc or less, while high-displacement leisure motorcycles have the functionality of transportation but with added recreational and social attributes, with displacements mostly above 250cc. Starting from 2019, the popularity of high-displacement motorcycles has been accelerating, with a five-year CAGR from 2019 to 2023 of 31.2%. The penetration rates for domestic sales and exports have increased from 2.1% and 0.1% in 2019 to 4.6% and 3.0% in the first half of 2024. On the supply side, Chinese brands have been releasing popular models, with many products being powerful and offering excellent value for money. On the demand side, high-displacement motorcycles have strong social attributes, and both motorcycle enthusiasts and social media app users are young demographics, with social media empowering motorcycle communication. The supply and demand for high-displacement motorcycles are thriving and gradually forming a mature ecosystem. 2) Are high-displacement motorcycles really a consumption upgrade? - Reviewing the markets in Japan and Italy, Tianfeng believes that in Western countries, the penetration rate of high-displacement motorcycles has already exceeded 50%, showing attributes of consumption upgrade. In emerging markets with low penetration rates of high-displacement motorcycles (such as China and Japan), high-displacement motorcycles are more likely to replace high-end cars, indicating a trend towards consumption downgrading. Italy Market Review: Motorcycle culture is prevalent in Italy, with a penetration rate of over 60% for high-displacement motorcycles. Reviewing the market, it is found that the sales of high-displacement motorcycles in Italy are highly correlated with economic growth and personal disposable income. Therefore, Tianfeng believes that for developed economies in Western markets, high-displacement motorcycles have stronger attributes of consumption upgrade. Japan Market Review: Tianfeng found that in Japan, high-displacement motorcycle sales have rapidly increased three times at the time of the 1992 Nikkei crash, the 2009 financial crisis, and the 2021 global pandemic, with each year accompanied by a significant decline in the sales of imported cars. Therefore, Tianfeng believes that in Asian markets with low penetration rates of high-displacement leisure motorcycles, in the era of consumption downgrading, high-displacement motorcycles are more likely to replace high-end cars rather than regular motorcycles, indicating stronger attributes of consumption downgrading. Comparing with Japan, how to view the growth space in China: The trend of high-displacement motorcycles in Japan started about 10 years earlier than in China, with a penetration rate of over 25% currently in Japan, while it is less than 5% in China. Japan's consumption of high-displacement motorcycles is 8.1 per 10,000 people, compared to only 3.7 per 10,000 people in China. Tianfeng believes that in today's highly developed social media dissemination environment, the penetration rate in China is increasing faster than in Japan. Assuming it reaches the level of Japan within five years, the domestic penetration rate of high-displacement motorcycles has a fivefold space in five years, with an average compound annual growth rate of 17% in per capita consumption. 3) How to view the export space? -High-displacement motorcycles are primarily exported to the European market and high-income markets in Asia, with Chinese brands successfully entering and gradually increasing market influence. Global motorcycle market sales remain stable, with a market capacity of 50-60 million units, mainly concentrated in the Asian region (85% in 2022), with mainstream products being regular motorcycles with lower unit prices, dominated by Japanese and Indian domestic brands. The export of high-displacement motorcycles from China focuses on the European and high-income markets in Asia, continuously gaining market recognition through participation in events and collaborations with high-end brands, and is expected to continue to expand its influence in the future. 4) Recommended targets: 1) Zhejiang CFMOTO Power (603129.SH) (covered by the automotive team) is recommended to pay attention to; 2) Loncin Motor (603766.SH); 3) Zhejiang Qianjiang Motorcycle (000913.SZ); 4) Chongqing Zonsen Power Machinery (001696.SZ) Risk warning: Risks related to trade friction, risks of overseas production capacity layout falling short of expectations, risks of fluctuating raw material prices, risks of overseas credit, and risks of calculation errors.