BOCOM INTL: Expanding the scope of trade-in promotion to boost demand for new cars. Paying attention to the follow-up policy enhancements.

BOCOM INTL released a research report stating that the updated replacement subsidy policy related to the automotive industry this time basically continues the subsidy policy from July 2024, but the subsidy support scope has been further expanded, and the subsidy standards for automotive replacement and upgrades have been improved, further promoting the renewal of commercial vehicles and new energy buses. The range and intensity of this year's passenger car subsidies are expected to continue to increase in order to further stimulate consumption, and subsequent stimulus policies may be expanded to include first-time buyers (60% of car purchase proportion). On January 8, 2025, the National Development and Reform Commission and the Ministry of Finance issued the "Notice on Strengthening and Implementing the Expansion of Large-scale Equipment Renewal and Replacement Policy for Consumer Goods in 2025" (hereinafter referred to as the "Notice"), proposing to continue to allocate ultra-long-term special national bond funds directly to local governments and expand support for automotive scrappage renewal. The main viewpoints of BOCOM INTL are as follows: Further expansion of the range of automotive scrappage renewal support The "Notice" clearly states that individual consumers who scrap gasoline passenger cars registered before June 30, 2012 (inclusive of that date), diesel and other fuel passenger cars registered before June 30, 2014, or new energy passenger cars registered before December 31, 2018, and purchase new energy passenger cars included in the "List of New Energy Vehicle Models Eligible for Vehicle Purchase Tax Exemption" or petrol passenger cars with a displacement of 2.0 liters or less, will receive a subsidy of 2,000 yuan for each new energy passenger car purchased, and a subsidy of 1,500 yuan for each petrol passenger car with a displacement of 2.0 liters or less. The subsidy amount this time is consistent with previous ones, but the range of scrappage renewal has been expanded. Based on the "Notice on Further Improving the Work of Replacing Old Cars with New Ones", the scope of old cars eligible for scrappage renewal subsidies now includes fuel passenger cars sold in the first year after the implementation of the National IV emission standard. It is estimated that the range of scrappage renewal support has been expanded by approximately 11 million vehicles this time. Improvement of the subsidy standards for automotive replacement and renewal For individual consumers who transfer passenger cars registered under their own names and purchase new passenger cars, they will be given subsidy support for automotive replacement and renewal, with a maximum subsidy of 1,500 yuan for each new energy passenger car purchased and a maximum subsidy of 1,300 yuan for each petrol passenger car purchased. Promotion of the renewal of commercial vehicles and new energy buses 1) Expanding support for old commercial vehicles. Building on the 2024 support policy, the range of scrappage renewal subsidies for old commercial vehicles has been expanded to include National IV and below emission standard commercial vehicles (originally limited to National III and below emission standard diesel commercial vehicles). 2) Increasing the subsidy standards for the renewal of new energy city buses and power batteries. Accelerating the electrification of urban buses and renewing city buses aged 8 years and above and power batteries beyond the warranty period will now receive an average subsidy of 80,000 yuan per vehicle (up from 60,000 yuan). Accelerating the renewal of old electric bicycles Subsidies will be provided to individuals who trade in old electric bicycles for scrap and purchase new ones, and additional subsidies may be given to those who trade in old lithium-ion battery electric bicycles for scrap and purchase new lead-acid battery electric bicycles. With the official implementation of the new version of the 3C certification standards for electric two-wheelers in November 2024, coupled with the stimulus of the replacement policy, it is expected that the consumption sentiment for electric two-wheelers in 2025 will improve. Investment Implications: Quality targets in the relevant passenger car/two-wheeler sectors include BYD COMPANY (01211), LI AUTO-W (02015), NIO-SW (09866), XPENG-W (09868), and YADEA (01585).