GF SEC: The core goal of the 26-year passenger vehicle policy may be to increase ASP. It is suggested to focus on longer-term dimensions for potential profits.

GF SEC released a research report stating that the cumulative sales of passenger vehicles in China from January to October in 25 years reached 18.769 million units, a year-on-year increase of 5.4%. The company predicts that the year-on-year growth rate of passenger vehicle sales in 25 years will be between 5-10%. The growth rate of October automobile retail sales hit a new low for the year, with the industry's average selling price (ASP) increasing by 2.9% compared to the previous year. Looking ahead to 26 years, the core goal of the passenger vehicle industry's future policies may be to increase ASP. The rise of new energy vehicles continues to boost the market share of Chinese brands. The company recommends focusing on the long-term profit potential and suggests stock selection based on the trend of industry ASP changes. GF SEC's main points are as follows: - The estimated year-on-year growth rate of passenger vehicle sales in 25 years will be between 5-10%. - Based on the data of compulsory insurance, the domestic compulsory insurance for passenger vehicles reached 2.086 million units in October of 25 years, a year-on-year decrease of 9.2% and a month-on-month decrease of 6.4%. The cumulative sales of passenger vehicles from January to October in 25 years reached 18.769 million units, a year-on-year increase of 5.4%. The overall demand performance in October aligns with seasonal patterns based on historical policy exit years (10/17). - Looking ahead to 26 years, the core goal of the passenger vehicle industry's future policies may be to increase ASP and move away from deflation. The change in ASP may be a key variable affecting policy direction. According to the National Bureau of Statistics, the year-on-year changes in ASP for passenger vehicles from 2021 to 2025 were +0.1%, +3.1%, -0.1%, -8.3%, and -5.2%, respectively. With the continuation of the policy of replacing old vehicles with new ones, the industry's ASP increased by 2.9% year-on-year in October. Under the premise of the continuation of the policy, the demand for replacement and upgrade will continue to provide underlying support. Assuming the policy continues in 26 years, the report estimates that the contribution of the replacement subsidy to the total sales of passenger vehicles in 26 years will be 2.1%, while the increase in the rate of replacement due to the increase in vehicle age will contribute 4.3% to total sales. In a neutral scenario, the domestic terminal sales of passenger vehicles in 26 years are expected to increase by 1% year-on-year. - As of the end of October in 25 years, industry inventory levels remain at a reasonable position. According to data from the China Association of Automobile Manufacturers and compulsory insurance, the industry's inventory of passenger vehicles as of the end of October in 25 years was 4.221 million units, with a dynamic inventory-to-sales ratio of 2.1. - The rise of new energy vehicles continues to increase the market share of Chinese brands in the domestic market. According to compulsory insurance data, the market share of Chinese brand passenger vehicles in October was 69.23%, an increase of 3.7 percentage points year-on-year. The market shares of European, Japanese, American, and Korean brands were 14.8%, 11.4%, 3.9%, and 0.6% respectively, with year-on-year changes of -1.7%, -1.3%, -0.7%, and 0.0 percentage points. Investment Recommendations: The company advises focusing on the long-term profit potential and suggests stock selection based on the trend of industry ASP changes. In terms of investments, the company recommends focusing on the passenger vehicle supply chain and offers specific stock recommendations. The company also suggests monitoring certain companies that may experience a turning point in their performance. Risk Warnings: Decrease in industry prosperity, policy stimulus effect falling short of expectations, increased industry competition.