The automotive industry enters the golden car sector in the second half of the year or is "stronger than the trend."

The automotive industry, which is in a booming cycle, will trend “stronger than the trend” in the second half of 2007. We give the industry an “overweight” rating. It is recommended to pay attention to four major investment themes such as the heavy oil segment market and listed companies that are expected to be listed as a whole.

The passenger car market continues to look promising

The growing non-synchronized development of high-income middle-income groups and urban and rural areas can provide a vast market for passenger cars. In 2010, sales of passenger cars in China are expected to exceed 10 million.

According to estimates by the Chinese Academy of Social Sciences, in 2020 China will employ more than 250 million employees in middle-income groups, and the average income of individuals in middle-income groups will generally be between 50,000 and 80,000 yuan. The expansion of high- and middle-income groups will surely promote the growth of high-end consumer goods, and durable consumer goods such as automobiles will further grow rapidly.

The existing regional structure in our country and the gap between urban and rural areas will also help to extend the boom cycle of the passenger car market. Due to the unbalanced development of long-term urban and rural areas and regions, the income of urban and rural areas and regions in China is very different. After 2002, urban disposable income has been more than 3 times of rural net income. Among the regions, the disposable income of urban residents in Shanghai, Beijing, and Zhejiang in 2005 was more than double that of Xinjiang, Qinghai, Gansu, Ningxia, and Hainan, and there were 22 provinces with per capita disposable income of urban areas below 10,000. With the sustained development of China's economy, the economy in backward areas will gradually improve, and the market for durable and durable consumer goods such as automobiles will prosper and develop over the long term. It can be foreseen that China's auto industry will experience a period of sustained growth that is much longer than that of Japan, South Korea and other countries.

In addition, upgrading of consumption structures that are important for improving travel conditions will continue until 2020. The formation of the national expressway network, the improvement of rural road conditions in the new rural construction, and the flourishing development of the logistics industry will provide favorable conditions for the development of the automobile industry.

At the end of 2006, the number of private passenger cars in China was 15 million, which is conservatively expected to increase to 120 million by 2020. With the rapid growth of the domestic market and the expansion of exports, it is estimated that around 2015, China's auto production and sales volume is expected to reach more than 18 million vehicles. The passenger car market is expected to maintain an annual growth rate of around 15%-20% over the next 10 years. According to the performance of the market from January to June this year, sales of passenger vehicles in 2007 are expected to increase by about 22% to 6.315 million vehicles.

Commercial vehicle performance worth the wait

Heavy trucks will be booming for another year. From January to June 2007, cumulative sales of heavy trucks totaled 44,000, a year-on-year increase of 58.05%. The cumulative sales of semitrailer tractors were 94,000, an increase of 122.7% year-on-year. High-growth fixed-asset investment, weight-based charges, the introduction of fuel tax, and severe strikes on overloading will make the heavy-duty truck market perform well in the coming years. The CAGR is expected to be 07-09. Will exceed 40%.

First, the strong macroeconomics and the continued growth in investment in fixed assets have stimulated an increase in the demand for heavy trucks, especially dump trucks. Since 2003, China’s investment in fixed assets has been growing rapidly, and the growth rate has remained between 25% and 30%. From January to May 2007, urban fixed assets investment was 3.2045 trillion yuan, a year-on-year increase of 25.9%. Strong macroeconomic performance will maintain high growth in fixed asset investment.

Second, as the country pays more and more attention to environmental protection issues, the policy on automobile emission standards has become more and more severe. Before each implementation of the new standard, consumers will advance the purchase plan in order to reduce the cost of acquisition. According to the requirements of the “Limits and Measurement Methods for Exhaust Pollutants of Heavy-Duty Vehicle Gasoline Engines and Vehicles (China III, IV Phase) (Draft for Solicitation), since July 1, 2007, all countries that do not meet State III requirements have The new engines and new automobiles required at the stage are not allowed to be announced. The phase IV stage will start July 1, 2010, and the on-board diagnostic (OBD) system test will be implemented on July 1, 2008. Registration of the corresponding standard new vehicle is required. The implementation date for registration, sales, and use is extended by one year. Therefore, it can be predicted that there will be a significant increase in sales of heavy trucks due to the early release of the purchase plan in 2007 and 2009.

The third reason is that the unit transportation cost of heavy-duty vehicles is much lower than that of medium-sized trucks. According to statistics from the domestic forestry transport department, the use of heavy trucks can reduce the unit cost by 28% compared to the use of medium-sized cards. The introduction of fuel tax will further stimulate the growth of heavy truck sales.

At the same time, the comprehensive development of the toll-by-weight charges has added another booster to the heavy trucks. At present, the fees charged are generally less than 10 tons per ton when the weight is more than 10 tons. This charging model will undoubtedly have a very positive impact on the sales of heavy trucks. In addition, China’s severe crackdown on overload in recent years is also good for sales of heavy trucks.

The passenger car sub-sector will also welcome the golden years of rapid sales growth and faster profit growth. Among them, thanks to the east wind of the 2008 Olympic Games and the 2010 World Expo, thanks to the demand of the tourism market and bus replacement, the demand for high-end passenger car market will increase significantly in the next few years, and the annual growth rate will be significantly higher than that of the passenger car sub-sector. The average growth rate of 15% is expected to be close to 30%.

Industry investment strategy

The automotive industry, which is in a booming cycle, will be able to “stronger than the trend” in the second half of 2007, suggesting that we pay attention to the four major investment themes:

First, the heavy truck segment. It is suggested that Weichai Power (000338), which owns the Weichai heavy truck engine, Fast transmission, and Shaanxi Heavy Duty truck heavy truck industry chain, will benefit from the control ability of the industry chain and the company's profitability will be higher than the industry's level. As a professional manufacturer of heavy trucks, China National Heavy Duty Truck (000951) is expected to exceed 12,000 in exports in 2007 thanks to the strong support of two strong brands, "HOWO" and "Sterire", and strong demand in Russia, Africa and the Middle East. Vehicles, exports increased by 100% year-on-year, and it is recommended that they increase their holdings.

The second is the overall listing of listed companies. The large amount of investment in research and development will make the company's cash flow relatively tight. To ease the capital pressure, the overall listing of the company will be the biggest attraction of the auto industry in 07, 08 and 09 years. It is recommended to “buy” Foton Motor (600166), FAW Xiali (000927), and “Accumulate” FAW Car (000800) and Changan Automobile (000625).

The third is an enterprise group with strong independent research and development strength. It is recommended to "buy" Jianghuai Automobile (600418), "overweight" Shanghai Auto (600104).

The fourth is the leading enterprises in various market segments. Shanghai Automotive (600104) will benefit from the strong support of GM and Volkswagen brands and the high investment of its own brand will still stabilize its leading position in the industry. The profit growth rate of Golden Dragon Motor (600686), a leading player in the mid- to high-end bus segment market, will be higher than the industry average, and it is recommended to increase its holdings. The single-factory leading Yutong Bus (600,066) of large and medium-sized passenger cars with simple prices, reliable quality, rapid export growth, and stable market performance is also worth “holding up”. ,