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Yang Tian

CSCI-Auto-China Auto Sector:Lacklustre ICE shipments, but strong NEV shipments likely to remain in FY18E - 20180206

Lacklustre ICE shipments, but strong NEV shipments likely to remain in FY18E  

  • We anticipate total ICE shipment growth to be maintained at a low single-digit in FY18E due to tax rollback that had started since Jan-18, coupled with the sluggish 4Q17 ICE sales growth being an indication of over-consumption of small displacement vehicles during FY16-FY17 prior to the tax rollback.
  • On the back of the robust NEV shipments in Dec-17 which led to a 53% YoY growth in FY17, we anticipate solid but lower shipment growth of 30%-50% YoY in FY18E with potential subsidy cuts ahead of previous schedule to weigh on the sales of A00 models with a range per charge below 300km, in our view.
  • Geely (175.HK), GAC (2238.HK) and BYD (1211.HK) remain our top picks in the auto OEM sector under our coverage in FY18E. Meanwhile, we expect BYD will likely be a more volatile play relative to both Geely and GAC due to its likely turnaround potential in FY18E.

ICE shipments likely to maintain a low-single-digit growth in FY18, dragged by small engine vehicles post tax rollback policies. Total ICE shipments posted a 3.6% YoY growth in FY17, slowing down significantly from 13.7% YoY growth in FY16, primarily due to the slowdown in sales of vehicles with displacement of 1.0L-1.6L with an almost 60% contribution to total ICE shipments for the year. Meanwhile, we believe the sluggish 4Q17 ICE shipments also signaled the demand of small engine vehicles in FY18E may have been largely over-consumed in advance during FY16-FY17 with lower tax rate. Looking forward, we anticipate total ICE shipments will likely continue to grow at a low-single-digit in FY18E on the back of the small-engine vehicles’ weak growth momentum, in our view.

Strong NEV shipments will continue to be driven by the dual-credit scheme, despite potential subsidy cuts to affect A00 models in FY18. In view of the total NEV PV shipment number in December being more substantial than November, which we believe was due to the dual-credit scheme announced in Nov-17 scheduled to come into effect in 2019, we expect this scheme will continue to drive NEV shipments in FY18E. However, the growth rate is estimated to come in lower at 30%-50% given majority of the best-selling NEV models in FY17 are A00 models with range per charge lower than 300km, which are very likely to see subsidy cuts in FY18E ahead of schedule, according to rumours.

Geely, GAC and BYD remain our top picks in FY18E. Geely (175.HK), GAC (2238.HK) and BYD (1211.HK) remain our top picks in the auto OEM sector under our coverage in FY18E. Meanwhile, we expect BYD will likely be a more volatile play relative to both Geely and GAC due to its likely turnaround potential in FY18E.

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CSCI
CSCI

中信建投国际研究部是中信建投证券香港子公司中信建投国际下属研究部门,负责香港上市公司、行业和宏观研究。我们的研究产品和服务包括行业报告、公司、宏观、常规日报、新闻摘要、分析员路演、上市公司非交易路演和反向路演 以及策略会。

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Yang Tian

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