China Galaxy Securities: The effect of the government subsidy policy is significant, driving the domestic auto market to recover.

China Galaxy Securities released a research report stating that, according to data from the Ministry of Commerce, as of October 24th, there were 1.57 million applications for national automobile scrap subsidies, and 1.26 million applications for local automobile replacement and renewal subsidies. The growth rate of local subsidy applications is significantly faster than the national scrap renewal applications, providing a clear boost to domestic demand and reversing the five-month negative growth trend in domestic passenger car sales, thus driving the domestic car market recovery. In terms of new energy vehicles, in October, domestic sales of new energy passenger vehicles reached 1.248 million units, a year-on-year increase of 58.1%, with a penetration rate of 54.5%, an increase of 16.3 percentage points year-on-year, and a decrease of 0.1 percentage points month-on-month. It has been above 50% for five consecutive months, and with the peak consumer season of "Golden September and Silver October," top new energy vehicle companies show impressive performance in orders, which is expected to continue driving the market heat for new energy vehicles and sustain the upward trend in penetration rate. Key points from China Galaxy Securities include: The latest local subsidy policy has had a significant effect, with a year-on-year increase of 10.7% in passenger car sales in October, reaching a new high for the same period in history, second only to the end of last year. For passenger cars, sales in October reached 2.755 million units, a year-on-year increase of 10.7% and a month-on-month increase of 9.1%, reaching a new high for the same period in history. Domestic passenger car sales reached 2.289 million units, a month-on-month increase of 10.7% and a year-on-year increase of 10.7%. The local replacement subsidy policy, which was launched intensively in September, showed results in October. According to data from the Ministry of Commerce, as of October 24th, there were 1.57 million applications for national automobile scrap renewal subsidies and 1.26 million applications for local automobile replacement and renewal subsidies. The growth rate of local subsidy applications is significantly faster than the national scrap renewal applications, providing a clear boost to domestic demand and reversing the five-month negative growth trend in domestic passenger car sales, thus driving the domestic car market recovery. In the commercial vehicle sector, domestic sales reached 222,000 units in October, a year-on-year decrease of 25.5% and a month-on-month increase of 9.7. Exports reached 76,000 units, a year-on-year increase of 13.6% and a month-on-month decrease of 6.6%. The domestic market sales trend stabilized, while the export growth trend continued. In terms of vehicle types, truck sales reached 255,000 units, a year-on-year decrease of 20.9% and a month-on-month increase of 5.3%, while bus sales reached 43,000 units, a year-on-year increase of 1.5% and a month-on-month increase of 3.3%, with truck sales being more influenced by domestic demand. The penetration rate of new energy vehicles in the domestic passenger car market remains stable, having been above 50% for five consecutive months, with new models expected to continue driving the penetration rate upwards. In terms of new energy vehicles, in October, domestic sales of new energy passenger vehicles reached 1.248 million units, a year-on-year increase of 58.1%, a penetration rate of 54.5%, an increase of 16.3 percentage points year-on-year, and a decrease of 0.1 percentage points month-on-month. It has been above 50% for five consecutive months, and with the peak consumer season of "Golden September and Silver October," top new energy vehicle companies show impressive performance in orders, which is expected to continue driving the market heat for new energy vehicles and sustain the upward trend in penetration rate. For example, the Xiaopeng P7+ received over 10,000 orders within 12 minutes of its launch, with a total of 31,528 orders on the launch day. Zero Run had over 42,000 orders in October, while Deep Blue had a total of 36,000 orders for all models in October, and the S05 model received over 10,000 orders in its first 10 days on the market. The ZhiJie R7 received over 30,000 orders within 33 days of its launch. Additionally, recent launches of new models such as Geely's Galaxy Starfleet 7, AIONRT, and Avita 12 extended-range version will enrich the market supply, driving the accelerated substitution of new energy for fuel products. In the commercial vehicle sector, domestic sales of new energy commercial vehicles reached 54,000 units in October, a year-on-year increase of 26.6%, with a penetration rate of 24.4%, showing strong growth momentum. Regarding exports, passenger car exports reached 465,000 units in October, a year-on-year increase of 10.7% and a month-on-month increase of 1.8%, showing a steady growth trend. In October, new energy vehicle exports reached 128,000 units, a month-on-month increase of 16.0% and a year-on-year increase of 3.6%. Looking at vehicle types, pure electric vehicle exports reached 104,000 units in October, a year-on-year decrease of 9.2% but a month-on-month increase of 17.3%, while plug-in hybrid exports reached 24,000 units, a year-on-year increase of 1.6 times and a month-on-month increase of 10.7%, indicating a recovery in overseas market demand for new energy vehicle exports from China. In terms of enterprise performance, among the top ten automobile exporters, Chery exported 112,000 units, a year-on-year increase of 18.9%, accounting for 20.7% of total exports, and its market share continued to increase. Compared to the same period last year, Beijing Automotive Group had the most significant increase in exports, reaching 30,000 units, a year-on-year increase of 100%. From January to October, looking at the top ten automobile exporters in terms of growth, BYD Company Limited exported 332,000 units, a year-on-year increase of 79.6%; Beijing Automotive Group exported 218,000 units, a year-on-year increase of 63.2%; Changan exported 467,000 units, a year-on-year increase of 60.5%, showing the strong getting stronger in the export market and an increase in market concentration. Investment recommendations include recommending BYD Company Limited (01211) and Ideal Auto (02015) for the entire vehicle sector, and benefiting subjects such as GEELY AUTO (00175) and Loncin Motor (603766. SH). For components, smart recommendations include Huayu Automotive Systems (600741.SH), Bethel Automotive Safety Systems (603596.SH), Huizhou Desay SV Automotive (002920.SZ), Keboda Technology (603786.SH), Ningbo Joyson Electronic Corp. (600699.SH), and Changzhou Xingyu Automotive Lighting Systems (601799.SH). For new energy, recommended stocks are Xiamen Faratronic (600563.SH), Xi'an Sinofuse Electric (301031.SZ), Hwaway Technology Corporation (001380.SZ), and Jiangsu Pacific Precision Forgin.g(300258.SZ)Ningbo Tuopu Group(601689.SH)Ningbo Xusheng Group(603305.SH) g(300258.SZ), Ningbo Tuopu Group(601689.SH), Ningbo Xusheng Group(603305.SH).Risk warning: Risks of domestic automobile sales falling short of expectations; Risks of export growth being constrained by overseas policies; Risks of intensified industry competition; Risks of policies not meeting expectations.