This article comes from Gronghui column: Citic Securities Research, author: Yin Xinchi, Li Jingtao, Li Zijun, Wang Shichen

On May 31st, the Ministry of Finance and the State Administration of Taxation issued a public notice on the reduction of the purchase tax on some passenger vehicles. The vehicle purchase tax will be halved for passenger cars with engines of 2.0L or less whose purchase date is from June 1, 2022 to December 31, 2022 and the price of the car does not exceed 300000 yuan (excluding VAT). The coverage of this policy exceeds market expectations, and the vast majority of fuel vehicles have been inclusive. At present, the worst time in the automobile industry has passed, purchase tax relief, cars to the countryside, consumer subsidies and other policies are expected to significantly boost automobile consumption, industry sales are expected to repair quickly, the current time point suggests overmatching the car sector.

CymbalThe purchase tax relief has officially landed, and the scope of the policy exceeds market expectations.

On May 31st, the Ministry of Finance and the State Administration of Taxation issued a public notice on the reduction of the purchase tax on some passenger vehicles. The vehicle purchase tax will be halved for passenger cars with engines of 2.0L or less whose purchase date is from June 1, 2022 to December 31, 2022 and the price of the car does not exceed 300000 yuan (excluding VAT). Previously, the market expected to purchase tax relief for models with engines below 1.6L, and the final policy landed for models with engines of 2.0L and below, and the policy coverage exceeded market expectations. Superimposed by local car consumption stimulus policies, "cars to the countryside" activities, and so on, the auto industry sales are expected to usher in a relatively rapid repair.

CymbalThe policy is expected to boost the demand for 108-1.8 million passenger cars.

In response to the 2009-2015 purchase tax relief stimulus policy, the cumulative purchase tax relief was 471 / 152.2 billion yuan, and the leverage factor (that is, how much car consumption can be driven by a tax reduction of 1 yuan) is about 14.65.4 times. Considering that the leverage multiplier has a certain marginal diminishing effect, assuming that the leverage multiplier of this stimulus policy is respectively times that of 3-4-5, based on the calculation of the 60 billion yuan purchase tax reduction proposed by the State standing Committee, it is expected to pull consumption of 1800 pounds 2400 yuan / 300 billion yuan, corresponding to the new car purchase demand of 108 pounds 144 / 1.8 million vehicles.

CymbalThe purchase tax relief covers a wide range of areas, and Pratt & Whitney covers most fuel vehicles.

In terms of displacement, according to the risk data, the sales of passenger cars with engines of 2.0L or less accounted for 97.4% of fuel vehicles in 2021, and accounted for 83.2% of all passenger vehicles. In terms of price, sales of models under 300000 account for 86.8 per cent of fuel vehicles. The purchase tax reduction policy covers a wide range of areas, has benefited the vast majority of fuel vehicles, and is expected to form an all-round stimulus and pull effect on automobile consumption. In terms of structure and flexibility, the top car companies that account for the proportion of sales below 2.0L in 2021 include: GAC MOTOR 100%, Guangzhou Automobile Honda 99%, SAIC General Motors 98%, FAW Volkswagen 96%, SAIC Volkswagen 96%, Geely 95%, Chang'an (independent) 91%, Great Wall 83%, SAIC passenger 79%, Guangzhou Toyota 77%.

CymbalThe purchase tax relief is aimed at fuel vehicles, but various places are also introducing policies to benefit new energy vehicles one after another.

Since there is no purchase tax on new energy vehicles, the advantages of the purchase tax relief policy are fuel vehicles and HEV. However, at present, local governments are also introducing incentive policies for new energy vehicles according to local conditions: for example, Shanghai subsidizes 10,000 yuan per vehicle for the replacement of pure electric vehicles, and Shenzhen gives subsidies of no more than 10,000 yuan per vehicle for newly purchased qualified new energy vehicles. In addition, the Ministry of Industry and Information Technology, the Ministry of Agriculture and Village, the Ministry of Commerce, and the National Energy Administration have decided to jointly organize a new round of activities for new energy vehicles to go to the countryside. New energy vehicles are expected to further sink to low-line cities, and the general trend of electrification continues.

CymbalRisk factors:

Macroeconomic growth is declining; industry sales are lower than expected; core shortage is aggravating.

CymbalInvestment strategy:The purchase tax relief policy has officially landed, and its coverage has exceeded market expectations, which is expected to have a significant impact on car sales.The pulling effect of the work is optimistic about the recovery and development of the automobile plate as a whole..

This policy will obviously benefit car companies with large sales flexibility and good profit margin, especially those with traditional fuel vehicles as the profit core: GAC GROUP, Geely Automobile, Great Wall Automobile, Chang'an Automobile, SAIC and so on. In addition, in the long run, we still believe that the hot sale of new energy vehicles is the most important investment thread, and even if there is no follow-up policy, the hot sales of Wei Xiaoli, BYD and Tesla will still be the main investment line throughout the year. We continue to recommend: ideal cars, Xiaopeng cars, Xilai and other new forces that lead intelligent innovation, as well as BYD (BYD), which has booming sales of new energy vehicles and is expected to greatly improve its profit margin. In the spare parts sector, our current key recommended targets include: Lingdian Electric Control, Xusheng shares, Baolong Technology, Huayang Group, Zhongke Chuangda, Desai Xiwei, Top Group, Zhongding shares, Berkeley, Fuyao Glass, Xingyu shares and so on. At the same time, we believe that high-quality dealer leading enterprises will also fully benefit from the recovery of car sales, with emphasis on recommendation: Zhongsheng Holdings, Meidong Automobile, Yongda Automobile.