Ping An Securities: The policy of trading in old cars for new ones has become clear, stimulating effects will exceed 2024.

Ping An Securities released a research report stating that according to data from the Ministry of Commerce, in 2024, the number of scrapped cars to be replaced exceeded 2.9 million, and the number of replacements exceeded 3.7 million. The policy of trading in old cars for new ones had a significant stimulating effect on car consumption in 2024, especially the subsidy effect for replacements. The intensification of scrapped car replacements in July 2024, while local replacement policies were not implemented on a large scale until September. The policy for trading in old cars for new ones in 2025 was clearer early on, which resulted in a longer effective policy duration compared to 2024, and the policy expanded the subsidy implementation scope and increased the subsidy amount for new energy buses. The policy in 2025 had a stronger impact on car sales compared to 2024, especially when combined with the policy on new energy vehicle purchase tax, showing promising effects of stimulating new energy cars under the combination of multiple policies. Key points from Ping An Securities: Event: The National Development and Reform Commission and the Ministry of Finance issued a notice regarding expanding the scope of large-scale equipment renewal and consumer goods trade-in policies in 2025. Passenger cars: The range of old cars covered by scrapped car subsidies has increased by approximately 10 million compared to 2024. In 2025, the scrapped car replacement subsidy policy for passenger cars will cover fuel passenger cars of the National IV standard in the first year of implementation. According to data from the China Association of Automobile Manufacturers, the retail sales of passenger cars in the first year of the National IV standard reached 14.09 million units. Ping An Securities estimated that the number of old passenger cars meeting the scrapped car subsidy criteria in 2025 would be around 25 million, based on the number of old passenger cars meeting the requirements for scrapped car subsidies in 2024, the number of applications for scrapped car replacements in 2024, and the sales volume of passenger cars in the first year of the National IV standard. The subsidy range for operating trucks has expanded by more than double compared to 2024, and the subsidy for new energy buses has been increased to boost the replacement rate. Commercial vehicles: The effectiveness of the trade-in policy for commercial vehicles in 2024 was weaker than that for passenger cars. The subsidy intensity for trucks remained unchanged, with the range of subsidies expanded to include diesel vehicles compliant with National IV and lower emission standards (National III and lower in 2024). According to data from a truck forum, there are over 800,000 National IV heavy trucks (likely to be around 500,000 to 600,000 in actual effective numbers) and over 400,000 National III heavy trucks (likely to be around 200,000 to 300,000 in actual effective numbers). The subsidy range for heavy trucks in 2025 has doubled compared to 2024. In terms of new energy buses, the base number of old new energy buses that can be replaced is large, and the subsidy amount for new energy buses has been increased from 60,000 to 80,000 in 2025, with the policy reinforcement expected to boost the replacement rate of new energy buses. The central support ratio is the same as in 2024, while the funding size has significantly increased compared to 2024. The notice stated that long-term special national bonds would be directly allocated to support the trade-in of consumer goods, including cars, household appliances, digital products, and home furnishings, with the central-local funding ratio the same as in 2024. In terms of funding size, the total funds for supporting the "two new" initiatives in 2025 are significantly larger than in 2024, with the specific amount to be announced during the National People's Congress in 2025. The policy introduction time and coverage range of the 2025 policy are earlier and broader, with the stimulating effect expected to exceed that of 2024. According to data from the Ministry of Commerce, the number of scrapped car replacements in 2024 exceeded 2.9 million. The trade-in policy in 2024 had a significant stimulating effect on car consumption, especially the subsidy effect for replacements. The intensification of scrapped car replacements in July 2024 and the large-scale implementation of local replacement policies starting in September, the early introduction of the 2025 policy, the expansion of subsidy scope, and the longer implementation time of the policy compared to 2024. Elasticity calculation for passenger cars, heavy trucks, and new energy buses under the trade-in policy For passenger cars, considering the longer stimulating time of the 2025 policy, assuming an increase in the scrapped car replacement rate to 30% (compared to around 20% in 2024), the number of scrapped car replacements for passenger cars in 2025 is expected to reach 7.5 million. With the full implementation of local replacement policies for passenger cars in September 2024 (370,000 replacement vehicles), assuming the coverage of local replacement policy for the entire year in 2025, the scale of car demand benefited from the "two new" policies is expected to reach 10 million, with a total passenger car sales volume benefiting from the policy totaling around 17.5 million. In addition, 2025 is the last year for the exemption of vehicle purchase tax for new energy passenger cars, and the combination of multiple policies is favorable for releasing the sales of new energy vehicles in 2025. According to the estimate by Xu Changming from the National Information Center in early December 2024, the policy in 2024 drove car consumption by 1.5 million units, equivalent to 23% of the number of vehicles eligible for subsidy according to the Ministry of Commerce (1.5 million units out of 6.6 million units). Assuming that 20% of car consumption in 2025 is driven by policies, the scrapped car replacement and trade-in policies in 2025 are expected to drive car consumption by 3.5 million units. For heavy trucks, the effective number of National IV heavy trucks is over 500,000, assuming a replacement rate of 30%, the scrapped car replacements for heavy trucks in 2025 can reach 150,000 units. As for new energy buses, the base number of new energy buses eligible for subsidies is large, theoretically bringing greater elasticity from scrapped car replacements for new energy buses, but the procurement of buses is done by local governments, and the willingness for bus replacement is still low. The policy in 2025 has increased the subsidy for new energy buses by 20,000 yuan per unit, which is expected to boost the replacement rate for scrapped new energy buses by local governments. Stock recommendation: Recommend Chongqing Sokon Industry Group Stock.suggest paying attention to Xiaomi Group (01810) and LEAPMOTOR (09863). In terms of commercial vehicles, it is optimistic about the expansion of subsidies for operating trucks and the effects of increasing subsidies for new energy buses. Recommended companies to watch include Yutong Bus Co., Ltd. (600066.SH), Weichai Power (000338.SZ), and suggest paying attention to Sinotruk Jinan Truck (000951.SZ).Risk warning: 1) After the policy is implemented, the stimulus effect may not reach the expected level; 2) The uncertainty in the timing and duration of local government substitution and renewal subsidies may lead to policy uncertainty; 3) Reduced income expectations for residents may not be conducive to the release of demand for automobile consumption; 4) The automotive industry continues to engage in price wars, with potential car buyers having a high level of wait-and-see attitude.