Automotive industry: What investment opportunities are brought by the market recovery?

In 2006, the automotive industry started well. According to the data released by the China Association of Automobile Manufacturers, the country sold 1.73 million vehicles in the first quarter, an increase of 37% year-on-year, of which sales of cars were 860,000, an increase of 67% year-on-year; commercial vehicle sales were 480,000, an increase of 6% year-on-year. Industry analysts generally believe that the sedan industry will continue its high growth trend in 2006 and 2007 and its growth rate will exceed 20%.

In March this year, the SUV and MPV markets were active due to the effect of the consumption tax adjustment. According to the new excise tax policy implemented on April 1, the taxation of cars is divided into two sub-heads. The medium and light commercial buses are subject to a uniform tax rate of 5%; the passenger cars (including off-road vehicles) are subject to a six-speed tax rate of 1.0 to 1.5. If the tax rate rises, the tax rate will fall by two percentage points, and other tax rates below 2.0 liters will remain unchanged. Above 2.0 liters, the higher the displacement, the higher the tax rate, and the tax rate above 4.0 liters is as high as 20%, which is an increase of 12% from the original. According to the report of the Central China Research Institute of Securities, domestic cars are mainly concentrated below 2.0 liters. The impact of the consumption tax rate adjustment on domestic cars is very high. After the consumption tax rate of the school is adjusted, the tax rates of the main products of Rexroth Toyota and Crown increase more due to FAW. Toyota is the main source of profit for FAW Xiali, so overall the tax adjustment has a greater negative impact on FAW Xiali. For FAW Car and Shanghai Auto, the tax rate adjustment also has a certain negative impact. Changan Automobile has a relatively small proportion of small cards, so the impact is relatively positive.

Compared with the adjustment of the consumption tax rate, the impact of oil prices on the auto industry appears to be even more long-term. The research report of Zhongyuan Securities believes that the overall technical level of small-displacement cars in China is low, and the advantage of fuel consumption level is not significant. For commercial vehicles, rising oil prices will have a positive impact on large passenger cars and heavy goods vehicles, and will be relatively unfavorable to medium-sized passenger cars and medium-sized goods vehicles, and will have little impact on light trucks and minivans. Among listed companies, Yutong Bus and G-Heavy Gas are expected to obtain structural gains.

For the investment strategy of the sedan industry, analysts recommend focusing on industrial policies that encourage small-displacement cars and encourage self-owned brands. Chang'an Automobile and FAW Xiali have been favored by several research institutions because of their strong competitiveness, continuous launch of new products, and large room for localization. The majority of commercial vehicle listed companies are dominant companies, and their capacity utilization rate, product gross margin, and return on net assets are much higher than their peers. In addition, due to its cost advantage and increasingly mature production technology, domestic commercial vehicle exports have soared. In the second quarter investment strategy report, China Merchants Securities Co., Ltd. proposed to focus on the investment opportunities brought by commercial vehicle exports, such as large passenger vehicles such as Yutong Bus and Jinlong Automobile, which have a higher proportion of export earnings, and Jiangling Motors, which has a faster export growth rate. Jianghuai Automobile, Dongfeng Motor and other light passenger and light truck companies.