Two shows; same focus: We spent a week visiting companies and the
two largest auto shows in the region, Tokyo and Guangzhou Motor
Shows, both platforms for global OEMs showcasing new models in
coming years. Two common observations in these two events:
1. Huge number of new models or global debuts: 76 in Tokyo and
80 in Guangzhou. What is especially noticeable in China is not the
number of new models but the price concentration of those modelshalf are below Rmb200,000 in mid to lower end segments with <2 .0="" nbsp="" p="">liter engine as this is the fastest growing area but also the most
bloody battlefield. Brand recognition and perception by Chinese
customers will be the key to success as these models all look pretty
alike and attractive- namely, without the logo, one can hardly tell
whether it is a foreign or local brand or by which OEM (Figure 5-8).
2. Eco-friendly car is the main theme in both Tokyo and Guangzhou
but apparently automakers in Japan and China are adopting different
approaches. Japanese OEMs believe pure EV (electric vehicle) will
remain a small portion of global auto market even by 2020 and hence
focus more on enhancing the efficiency of traditional combustion
engine (i.e. turbocharger and compression ratio) and its application
and combination with hybrid and plug-in hybrid vehicle. The
Chinese, conversely, are pursuing EV, which is however a policydriven game. NDRC's recent announcement that subsidies for new
energy cars cover only pure EV and plug-in hybrid but not hybrid
clearly indicates where China aims to move.
Key drivers of selective automakers under our coverage in 2014
based on our management meetings during the trip:
1. Brilliance China (OW) is expected to see robust growth of BMW 3-
series with monthly volume doubling to ~10k from current ~5k units
by 2015. Potentially lower R&D expense in own brand Zinoro EV
business could be an upside surprise to 2013/14 earnings.
2. Great Wall's (OW) H8 SUV (priced Rmb202-237k) receives strong
orders, most the highest end 4WD version. We believe the stock can
re-rate if H8 reaches monthly sales of 4k units in 2Q14.
3. Geely’s (OW) new model cycle will kick in toward 4Q14 and its EV
business model in Hangzhou is interesting which can bring sizable
profit if it rolls out to other cities in China. Besides, Volvo's asset
injection could happen before 2015 in our view.
4. Guangzhou Auto (OW) has several new models in 2014 which
should lead its volume growth.
5. Other OEMs we visited include Toyota, Nissan, Mazda and BYD
(all not-rated) as well as Kia (Neutral).
We raise China’s 2013-15 PV sales growth forecast to 15%/9%/7% to
reflect our positive view. We still prefer SUVB and premium car
��
two largest auto shows in the region, Tokyo and Guangzhou Motor
Shows, both platforms for global OEMs showcasing new models in
coming years. Two common observations in these two events:
1. Huge number of new models or global debuts: 76 in Tokyo and
80 in Guangzhou. What is especially noticeable in China is not the
number of new models but the price concentration of those modelshalf are below Rmb200,000 in mid to lower end segments with <2 .0="" nbsp="" p="">liter engine as this is the fastest growing area but also the most
bloody battlefield. Brand recognition and perception by Chinese
customers will be the key to success as these models all look pretty
alike and attractive- namely, without the logo, one can hardly tell
whether it is a foreign or local brand or by which OEM (Figure 5-8).
2. Eco-friendly car is the main theme in both Tokyo and Guangzhou
but apparently automakers in Japan and China are adopting different
approaches. Japanese OEMs believe pure EV (electric vehicle) will
remain a small portion of global auto market even by 2020 and hence
focus more on enhancing the efficiency of traditional combustion
engine (i.e. turbocharger and compression ratio) and its application
and combination with hybrid and plug-in hybrid vehicle. The
Chinese, conversely, are pursuing EV, which is however a policydriven game. NDRC's recent announcement that subsidies for new
energy cars cover only pure EV and plug-in hybrid but not hybrid
clearly indicates where China aims to move.
Key drivers of selective automakers under our coverage in 2014
based on our management meetings during the trip:
1. Brilliance China (OW) is expected to see robust growth of BMW 3-
series with monthly volume doubling to ~10k from current ~5k units
by 2015. Potentially lower R&D expense in own brand Zinoro EV
business could be an upside surprise to 2013/14 earnings.
2. Great Wall's (OW) H8 SUV (priced Rmb202-237k) receives strong
orders, most the highest end 4WD version. We believe the stock can
re-rate if H8 reaches monthly sales of 4k units in 2Q14.
3. Geely’s (OW) new model cycle will kick in toward 4Q14 and its EV
business model in Hangzhou is interesting which can bring sizable
profit if it rolls out to other cities in China. Besides, Volvo's asset
injection could happen before 2015 in our view.
4. Guangzhou Auto (OW) has several new models in 2014 which
should lead its volume growth.
5. Other OEMs we visited include Toyota, Nissan, Mazda and BYD
(all not-rated) as well as Kia (Neutral).
We raise China’s 2013-15 PV sales growth forecast to 15%/9%/7% to
reflect our positive view. We still prefer SUVB and premium car
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