Minsheng Securities: Policy subsidies combined with intelligent driving, optimistic about the development space of domestic passenger cars

Minsheng Securities stated in a report that in 2024, the total number of passenger cars benefited from the replacement of old cars with new subsidies, with overall wholesale and retail performances performing well. The scrappage replacement policy and increased exchange purchase continue to drive up terminal sales volume, and it is expected that the old-for-new policy will continue in 2025. In addition, joint venture vehicles are being rapidly replaced by domestically produced high-end vehicles, and urban NOA is accelerating the implementation of intelligent driving and reshaping the order. Independent automotive companies may see growth opportunities. The company is optimistic about the upward cycle of independent products, leading intelligent layout, and the increasing marginalization of overseas markets. They recommend investing in companies like BYD Company Limited (002594.SZ), GEELY AUTO (00175), SAIC Motor Corporation (600104.SH), Chongqing Sokon Industry Group Stock (601127.SH), and Ideal Cars (02015), as well as paying attention to Xiaomi Group (01810), and BAIC BluePark New Energy Technology (600733.SH). The main points of Minsheng Securities are as follows: In 2024, the total number of passenger cars benefited from the replacement of old cars with new subsidies, with overall wholesale and retail performances performing well. From January to October in 2024, there were 21.428 million units sold, an increase of 3.9% year-on-year. In terms of prices, overall price competition was moderate, and discount intensity tended to stabilize. In terms of structure: 1) New energy: Benefiting from the greater subsidy intensity of new energy than fuel and the price reduction driven by BYD Company Limited, the industry achieved "oil and electricity at the same price", with the penetration rate of new energy exceeding expectations from over 30% at the beginning of the year to over 50% currently; 2) Independent: The acceleration in clearing the end of joint ventures, autonomous passenger cars accounted for 64.4% of wholesale market share and 59.1% of the insured share from January to October in 2024, with significant increases in market share for BYD Company Limited, Xiaomi, and Huawei; 3) High-end: In January to October 2024, the market share of autonomous passenger cars in the price ranges of 25-30, 30-40, and above 40 million yuan were 59%, 35%, and 21%, respectively, representing a year-on-year increase of 28.7%, 7.7%, and 4.5 percentage points; 4) Overseas: Autonomous export models and regions are accelerating, with cumulative exports of passenger cars reaching 4.073 million units from January to October 2024, an increase of 25.1% year-on-year. In terms of profit, the profitability of whole vehicle enterprises exceeded expectations due to the benefits of high-endization, export, and reduced raw material costs. Outlook for 2025: Looking at the total volume, the scrappage replacement and increased exchange purchase will continue to drive up terminal sales volume. Minsheng Securities expects that the old-for-new policy will continue in 2025, but the duration is not certain: 1) If the policy continues in January and February 2025, the transition from the fourth quarter of 2024 to the first quarter of 2025 is expected to be smooth, with expected sales volume of 23.7 million units in 2025, an increase of 7.7% year-on-year; 2) If the policy does not continue in January and February 2025, there will be a tail effect in the fourth quarter of 2024, leading to an expected sales volume of 23.3 million units in 2025, an increase of 3.6% year-on-year. 1) Competitive landscape: Joint ventures are accelerating their retreat, while domestic high-end replacements are accelerating. The company believes that the market landscape in 2025 will be clearer than in 2024, as domestic automotive companies have already completed the clearance of joint ventures below 150,000 yuan, making it difficult for most companies to further reduce prices significantly. Within the 150-thousand-yuan price range, competition remains stable, with BYD Company Limited maintaining a leading position and Geely further impacting the fuel car market with new products in the 50-150 thousand yuan range. The new energy companies such as Xiaopeng and Leap Motor also have the potential to achieve high sales growth in this price range due to their advantages in intelligence and cost-effectiveness. In the high-end market, BBA enjoys pricing power but brand strength continues to decline, creating growth opportunities for independent automotive companies. With Huawei and Xiaomi, two major consumer electronics giants entering the automotive industry, they are expected to gain market share through their understanding of user needs, marketing capabilities, and ecological advantages. The company is optimistic about the increase in sales for Huawei, Xiaomi, and Ideal based on brand strength and technological capabilities. 2) Intelligence: Urban NOA accelerates the implementation of intelligent driving and reshapes the order. Overseas, Tesla has already formed a closed-loop in algorithm, data, and training for intelligent driving, with the FSDV12 achieving accelerated cumulative mileage, surpassing 2 billion miles by the end of the third quarter of 2024. Domestically, Xiaopeng has been the first to realize pure visual NGP in urban areas without maps, with Ideal, Xiaomi, Jikai, and Zhiji all planning their progress in intelligent driving. Looking ahead to 2025, low-cost intelligent driving, visual-based urban NOA, and end-to-end parking will become the focus of industrial implementation of intelligent driving. The company is optimistic about Huawei and Xiaopeng, which have already closed the loop in intelligent driving. Additionally, Xiaomi, Zhiji, and Ideal's performance in intelligent driving is promising. 3) Overseas: Technology and localization jointly drive exports, with broad space for independent players. In 2025, autonomous automotive companies will further increase export and overseas efforts: overseas factories of Changan, BYD Company Limited, and others will gradually be established; Great Wall will expand into Southeast Asia, South America, and other markets beyond the Russian market; Leap Motor is collaborating with Stellantis to accelerate the expansion of the European new energy vehicle market. The company expects passenger car exports to reach 5.8 million units in 2025, an increase of 16.5% year-on-year, boosting autonomous profitability. With the technological advantages of independent new energy vehicles and the cost-effectiveness of fuel cars competing for market share, the company expects that the global market share of Chinese brands will reach 18.1% in the long term, with export capacity reaching 10.22 million units and ample space for growth. Risk warnings: Increased competition in the automotive industry; slower progress in the development of intelligent driving; fluctuations in raw material costs exceeding expectations; lower-than-expected demand in the automotive industry.