Huachuang Securities: Are new energy vehicle companies ready for 2022?

Zhitong Finance APP learned that Huachuang Securities released a research report saying that 2022 is a key year for the new energy automobile industry. In the process of switching from quantity to quality in the industry, it is expected that car companies may have differentiation in their strategies: 1) bottom-line thinking: to meet the demand for double integration as the goal and ensure overall profitability. 2) Competitive thinking: Improve from the places where consumers can feel it, and expand market share. In the new energy long-distance run, the strategic choice of car companies is bound to cause fluctuations in the industrial chain, and it is recommended to continue to pay attention to: Tuopu Group (601689.SH), Xinrui Technology (300745.SZ), Fuyao Glass (600660.SH), Jifeng (603997.SH), Desay SV (002920.SZ) and Founder Motor (002196.SZ).

The main views of Huachuang Securities are as follows:

2022 is the last year of subsidies for new energy vehicles, can the industry carry forward the upper and lower levels?

The wholesale of 12M21 new energy vehicles exceeded 500,000 units / +114% year-on-year, +16% month-on-month, and the monthly penetration rate of new energy passenger cars reached 21%, achieving high growth for 17 consecutive months since 7M20, with about 3.32 million units / +1.8 times in the whole year. And 2022 will be the last year of subsidies for new energy vehicles, from the perspective of policy changes and supply and demand:

1) Policy: Short-term subsidies are moderate, and the trend of medium- and long-term support remains unchanged. From the perspective of subsidies, purchase tax, license plates, and double points, the economic value supported by the bicycle policy ranges from 52,000 to 131,000 yuan. From 2021 to 2023, the economic value of non-licensed policy bicycles will decline by 12,000 yuan, 0.6 million yuan and 13,000 yuan year-on-year, especially the complete withdrawal of subsidies in 2023, which is expected to promote the early release of demand in 22 years. In addition to the double credit policy changing with the supply and demand of the industry, we expect that the purchase tax and license policy will not change in the direction of support in the short term, and the penetration rate of new energy vehicle sales in 2025 is expected to reach 30%, ahead of the 2030 planning target.

2) Supply: From quantity improvement to quality improvement progress. In the past two years, the number of new energy passenger cars on sale has expanded at an average annual growth rate of 20%, and it is expected to reach 350 in 2022, accounting for 33% of the total number of passenger cars on sale. In 2021, the annual sales of new energy passenger vehicles will also reach 10,000 units, higher than the 0.5-0.6 million units in 19-20 years, and lower than the average of 21,000-23,000 units of fuel vehicles. Domestic new forces and independent car companies are obviously pulling.

3) Demand: ToC release is accelerated, and the demand for substitution and replacement purchase is highlighted in the dumbbell distribution. Tesla, new forces, and independent car companies in the field of new energy have continued to increase the market heat, and the proportion of ToC insurance has exceeded 80% under the trend of "attention realization". Structurally, the penetration rate of new energy passenger vehicles in the price band of 0-100,000 yuan and more than 200,000 yuan is outstanding, accounting for 70%-80% of new energy sales. The performance of new energy passenger cars in the low-end transportation, mid-to-high-end increase and exchange market is outstanding.

CR10 car companies are competing to accelerate, and domestic new energy passenger car sales are expected to be 5.7 million units/+72% in 2022. Under the current new energy vehicle market pattern, CR10 accounts for 70% and CR20 accounts for 90%, which has been generally stable in the past three years. From the perspective of models, the CR10 occupies nearly 50%, and the CR10-20 occupies only 1.5%. There are 12 car companies that are expected to sell more than 100,000 vehicles in 2022, of which BYD (~1.5 million units), SAIC Motor (~850,000 units), Tesla (~700,000 units), and Wei Xiaoli (~520,000 units, total), constitute the backbone of the market.

Switching from quantitative growth to profitability and quality improvement, are car companies ready?

The sales growth rate of 22-23 years may narrow, and the process will continue to face difficult problems in the supply chain: chip shortage, subsidy decline (up to about 5,000 yuan, 13,000 yuan), raw material prices (battery prices or > 10,000 yuan). In the process of switching from quantity to quality, it is expected that car companies may have divergent strategies:

1) Bottom-line thinking: The goal of meeting the demand for double points is to ensure overall profitability. The impact of subsidy decline is currently lower than the price increase of raw materials such as lithium ore, and some car companies will digest and absorb cost pressure through open source (price increases on sale, new sale pricing), cost reduction (cost reduction and efficiency increase), investment layout, and will also consider exerting efforts in the A00 or PHV market to cautiously develop long-endurance pure electric models that are most affected by profitability;

2) Competitive thinking: Improve from the places where consumers can feel it, and expand market share. Car companies with higher market targets will strengthen the competitiveness of models through configuration upgrades under the premise of taking into account profitability, especially in terms of pan-entertainment (audio-visual experience), pan-comfort (driving experience), and pan-intelligence (technology experience).

In the new energy long-distance run, the choice of car companies is bound to cause fluctuations in the industrial boom, and we recommend continuing to pay attention to:

1) Cost reduction: update of materials, processes and structures, integrated die-casting (Wencan shares, Guangdong Hongtu shares), lightweight (Tuopu Group, Aikodi, Xusheng shares), battery technology iteration (Hesheng shares);

2) Efficiency increase: energy consumption reduction, efficiency improvement, 800V high voltage (Xinrui Technology), thermal management (Yinlun shares, new coordinates, Kelai electromechanical);

3) Pan-entertainment: audio-visual experience, optics (Fuyao Glass, Huayang Group), acoustics (Shangsheng Electronics);

4) Pan-comfort: driving experience, interior and exterior decoration (Changshu auto decoration), seat (Jifeng shares), air suspension system (Zhongding shares);

5) Pan-intelligence: technology experience, domain control (Desay SV, Bethel), cockpit (Joyson Electronics, Fawer Shares), lidar (Hesai Technology / proposed listing, Sagitar Juchuang / proposed listing, Torch Technology);

6) Others: hybrid (Wanliyang, Ryo electric control), low-end market (Inball, Founder Motor).

Risk warning: Sales of new energy vehicles are less than expected, raw material prices are higher than expected, and chip supply is less than expected.