Guolian: How can independent large vehicle brands break into the high-end market?

Guolian released a research report stating that the domestic large car market is maintaining high-speed growth, with impressive performance from domestic SUVs. Domestic sales of large cars increased from 1.19 million in 2018 to 2.83 million in 2023, with a compound annual growth rate of 19.0%. In the first three quarters of 2024, sales of large cars reached 2.3 million, an increase of 19.6% year-on-year. Among brands, BYD Company Limited (01211), WENJIE, and IDEAL (02015) lead the market for large cars, accelerating their share in the market. In terms of vehicle types, large SUVs are driving growth, with a compound annual growth rate of 46.3% from 2018 to 2023. In terms of energy sources, the penetration rate of new energy in the large car market is rapidly increasing, rising from 3.1% in 2018 to 49.1% in 2023. How are domestic brands performing in the large car market? The market share of domestic brands in the large car market continues to increase. The share of domestic large SUVs/MPVs/sedans increased from 28.0%/13.9%/1.7% in 2018 to 79.6%/51.9%/53.5% in the first three quarters of 2024. In the SUV market, domestic brands have made a breakthrough, with all price segments exceeding 70% in the first three quarters of 2024, with impressive performances from models like WENJIE M7 and M9. In the MPV market, the share of domestic brands in the price segments of 200,000-300,000/300,000-400,000/400,000 and above in the first three quarters of 2024 was 59.1%/43.3%/77.1%. Among them, the share of domestic brands in the 300,000-400,000 price segment is low, with brands like Toyota Sienna and Greeve still competitive. In the large sedan market, models like BYD Company Limited Han and JIKE 001 have led the share of domestic cars below 400,000, while the share above 400,000 is still dominated by joint ventures, with a domestic share of only 3.1%. How are domestic brands in the large car market breaking through? Electrification and intelligence are helping domestic brands break through. The penetration rate of new energy is positively correlated with the domestic share, accelerating the reshaping of the domestic large car market. The penetration rate of new energy in the large car market increased from 3.1% in 2018 to 61.9% in the first three quarters of 2024; the share of domestic brands increased from 8.6% in 2018 to 64.8% in the first three quarters of 2024. Intelligence is expected to further increase the share of domestic brands, as the penetration rate of L2+ intelligence increased rapidly from 2.6% in 2022 to 6.0% in 2023, with an estimated increase to 21% in 2025 and 32% in 2030. What growth opportunities do domestic brands in the large car market still have? There is still ample room for growth for domestic brands in the large sedan, MPV, and import car markets. The large sedan market above 400,000 has vast room for domestic substitution, with annual sales of the "56E" remaining at around 450,000 units. In the MPV market, models like Buick GL8 and Toyota Sienna are still competitive, and domestic brand models are expected to accelerate substitution. The import market is still a blue ocean, with models like Toyota Alphard and Mercedes S-Class currently selling well, where domestic brands can leverage electrification, intelligence, and cost-effectiveness to create similar models that compete with popular imported cars. The current supply of domestic large cars is rich, and with the trend of electrification and intelligence, sales of domestic large cars are expected to continue to grow. Investment recommendation: bullish on the large passenger car market, recommend focusing on companies The domestic large passenger car market is favored by consumers for its spaciousness and comfort, especially with significant growth in sales of large plug-in hybrid SUVs and pure electric sedans. It is recommended to actively position companies in the large car market such as BYD Company Limited (01211), GEELY AUTO (00175), Chongqing Sokon Industry Group Stock (601127.SH), and IDEAL AUTO (02015), and to pay attention to Anhui Jianghuai Automobile Group Corp., Ltd. (600418.SH), BAIC BluePark New Energy Technology (600733.SH). (The report defines high-end large cars as C/D-class sedans, C/D-class SUVs, and MPVs priced above 200,000 yuan.) Risk warnings: Increased market competition risk; sales of new cars fall short of expectations risk; technological development falls short of expectations risk.