Soochow: Implementation of the policy of exchanging old for new, the continued high prosperity of passenger cars can be expected by 2025.

Soochow released a research report stating that the scrap/replace new policy has been implemented, shortening the policy window period, improving the terminal car purchase wait-and-see sentiment, and making a positive contribution to the recovery of passenger car demand in Q1 2025 and annual passenger car consumption in 2025. In the next 2-3 years, the domestic vehicle market will still be in a reshaping period, as the wave of intelligence will bring changes to the competitive elements of vehicle companies. Looking forward to 2025, look for leaders in intelligent technology among private car companies (represented by Xiaopeng Motors), and look for deep reformers among state-owned car companies (represented by SAIC Motor Corporation). The implementation of national and local subsidy policies at the terminal is expected to perform better than expected, and the performance of the passenger car segment is still promising under the driving force of the four factors of "policy bottoming out total volume + electrification penetration continues to increase + L3 intelligence landing accelerates + high export growth". Review of policy and implementation effects in 2024: better than expected In 2024, the scrap/replace new policy for passenger cars achieved positive results, with over 2.9 million cars scrapped and over 3.7 million cars replaced. Compared with mid-2024 expectations, the additional sales due to subsidies were about 1.5 million cars. Policy overview for 2025: Subsidy scope expanded, new limits set for replacement subsidies According to the regular press conference of the State Council on January 8th, 1) This subsidy expands the scope of support for vehicle scrapping and renewal to some National IV oil vehicles and adds a range of new energy vehicle subsidies. Personal consumers scrapping gasoline passenger cars registered before June 30, 2012, diesel and other fuel passenger cars registered before June 30, 2014, or new energy passenger cars registered before December 31, 2018. And purchase a new energy passenger car or a gasoline passenger car with a displacement of 2.0 liters or less included in the "Catalog of New Energy Vehicles Exempt from Vehicle Purchase Tax", with a subsidy of 20,000 yuan for a single new energy passenger car and 15,000 yuan for a single gasoline passenger car with a displacement of 2.0 liters or less. 2) Improve the subsidy standards for vehicle replacement and renewal. The new limit for the single vehicle subsidy for replacement and renewal is set: the subsidy for a single new energy passenger car should not exceed 15,000 yuan, and the subsidy for a single gasoline passenger car should not exceed 13,000 yuan. According to statistics, in 2024, some provinces and cities offered slightly higher subsidies for buying new cars to replace old cars above 200,000 yuan, which exceeded the limit of 15,000/13,000 yuan in most provinces and cities. Predicted policy effects for 2025: Expected to bring 1.07-1.7 million units of sales growth According to the budgeted subsidy amounts of 80/100/120/140/200 billion yuan for automobiles, respective simulated calculations were done. Considering the factors of expanded subsidy range and a slight decline in single vehicle replacement amount, an incremental assumption was made for each additional 10,000 units of sales, and the corresponding range of sales growth contribution compared with the previous year was estimated to be between 1.07 million and 1.7 million units. Calculated at the lowest value, the domestic retail sales volume in 2025 is expected to be 23.73 million units, a year-on-year increase of 4.7%. Target selection Preferred A-shares: Huawei Group (Chongqing Sokon Industry Group Stock (601127.SH) + Chongqing Changan Automobile (000625.SZ) + BAIC BluePark New Energy Technology (600733.SH), etc.) + BYD Company Limited (002594.SZ) + Great Wall Motor (601633.SH) + SAIC Motor Corporation (600104.SH) + Guangzhou Automobile Group (601238.SH), etc. Preferred Hong Kong stocks: Xiaopeng Motors (09868) + LEAPMOTOR (09863) + Ideal Motors (02015) + Great Wall Motor (02333) + GEELY AUTO (00175) + Guangzhou Automobile Group (02238), etc. Risk warning Intensified industry competition; risks of worsening export trade environment; risks of policy implementation falling short of expectations.