<News Alert> China Auto Sector: Vehicle subsidy to boost market sales
- Market news of introduction of vehicle subsidy in June to promote vehicle sales in rural areas, positive in our view
- Expect to benefit the Chinese auto OEMs with product prices at not more than Rmb150k per vehicle
- Reiterate our view that supportive measures are needed to boost vehicle sales, given Apr-22 weak sales
- Beneficiaries are BYD, Geely, Great Wall Motor and Guangzhou Auto
What’s new
There are news report that the government is considering to provide Rmb3-5k subsidy to encourage vehicle consumptions in rural areas, covering both gasoline and NEV. This is not a surprise to us as we have previously written about supportive measures to boost vehicle sales, given the impact of the pandemic lockdowns and macro uncertainty are slowing vehicles sales. In our report dated 27 April 2022, we revised down our PV sales growth assumption to 6%. <https://www.dbs.com/insightsdirect/industry/INd00055a2787009432996a78763bde3a5?pagesec=whatsnew&pagesecid=8819>
Subsidy is an effective tool to boost consumption and the target market is for vehicle price not more than Rmb150k per vehicle. Many of the local brands fall under this affordable range and the key beneficiaries include BYD, Geely, Great Wall Motor and Guangzhou Auto.
The subsidy is estimated to boost an additional 200-300k of gasoline and 300-500k units of NEV sales.
April total vehicles plunged c.47% y-o-y to about 1.2m units, contributing to the government’s decision to roll out supportive measure to support the vehicle market.