<News Alert> China Auto Sector: Shanghai auto stimulus policy to revive vehicle sales
- Release of additional 40,000 license plates and subsidy of Rmb10,000 per pure electric vehicle to boost sales
- Planning to reduce vehicle purchase tax in accordance with central government recent initiative
- Series of stimulus policy positive on vehicle market; Shanghai is the second largest vehicle production hub in China
- Positive on vehicle dealerships and auto makers
The Shanghai government announced a subsidy scheme and issuance of more vehicle license plates to revive the vehicle market. Private vehicle buyers will receive subsidy of Rmb10,000 per pure electric vehicle and the Shanghai government will also release an additional 40,000 license plates. The auto stimulus policy is valid from Jun 1 to Dec 31, 2022. In the pipeline including reduction of vehicle purchase tax and the details will be announced at a later stage.
Shanghai is the second largest auto production cluster in China, at c.2.8m units in 2021. The auto sector suffered its biggest decline with new vehicle registrations plunged 98% y-o-y in Apr-22 and May is expected to remain challenging.
The series of new stimulus policy is expected to be life the consumption sentiment in June, following the resumption of factories and government support to reduce supply chain disruptions and logistic bottlenecks.
Auto dealerships such as China Yongda Auto (3669 HK), Baoxin (1293 HK), SAIC (600104 CH) are beneficiaries of production resumption and stimulus support. We currently have BUY rating on China Yongda Auto with TP of HK$10.60.
Recently, we issued a sector report on “Auto cluster in Greater Bay Area shines” which we compared the pandemic impact on vehicle sales and the medium-term development outlook in GBA with other automobile hubs in China. Generally, the pandemic impact on vehicle sales is smaller and Guangdong government has a more comprehensive plan on the medium-term development of the auto sector.