Chinese autos:Looking for another Geely in 2018
Geely's big strides to continue but in the price; not a substitute in sight.
More price cuts likely; premium segment is still the relative safe haven
More price cuts inevitable; premium segment is still the safe haven
In this sector report, we look to answer two key questions for 2018. The first iswhether Geely Auto can maintain its exceptional performance (in terms of bothsales and stock price), how it has achieved such progress, and whether thereis potential upside for the shares. The second is whether Great Wall Motor canrealistically be expected to take over the leadership baton in 2018 and how best toanticipate changes in brand performance and sales, using search data to supportour growth projections. We also trim estimates for BAIC Motor and Brilliance, andtest the assumptions behind our Buy recommendations on them.
Chinese passenger vehicle (PV) wholesale sales rose 2.3% YoY in June, in linewith our mild growth expectation. As sector inventory appears to be rising again,we think extra price incentives are likely for the July-August slow season, asspearheaded by underperforming brands. Our top OEM Buys are BAIC Motor,Brilliance and Guangzhou Auto-H (GAC-H) on their key brands' sales strength.
China passenger vehicle (PV) wholesale declined 2.6% YoY in May, below our mild growth expectation. With sector inventory still staying on the high side, we think extra price incentives are inevitable during the June-August slow season, as demonstrated by underperforming brands. Our top Buy preferences are BAIC Motor and Brilliance, whose earnings are mainly from the resilient premium segment, as well as Guangzhou Auto-H (GAC-H), given the successful SUV line-ups in its various PV entities.
Geely is a unique local brand leader in a crowded space.
Slight wholesale rebound in June; 1H growth at 1.6%
No strong wholesale rebound in May