2023 New Energy Vehicle Sector Investment Thoughts and Analysis

This article only represents my investment thinking and analysis records, and does not constitute investment advice or recommendation. All information in this article comes from public information and is for reference and learning purposes only, not commercial use.

Entering 2023, as an investor who has been following new energy vehicles for a long time, I will conduct a rough analysis and outlook on the overall new energy vehicle industry today, in order to prepare for my personal thinking and analysis of investing in this sector this year.

After going through the stage of ultra-high-speed explosive growth, the new energy vehicle sector is now seeing a mix of old and new forces. This year, fierce competition will further intensify, and the industry will also present some new trends and characteristics.

1. The comprehensive vehicle market has grown steadily, and new energy vehicles have maintained rapid growth

Looking at the overall automobile industry, China’s overall production and sales have maintained a relatively low and steady growth rate of about 5-7%. Shi introduced that as a pillar industry of China’s national economy, the output of automobiles has ranked first in the world for many years in a row. At present, there are more than 17,000 auto manufacturers above designated size in China, employing more than 4 million people. The market share of Chinese brand passenger vehicles reached 47.2%. The number of automobiles in China exceeds 300 million, and the number of automobiles per thousand people reaches 220. From January to November this year, the production and sales of automobiles exceeded 24 million units, a year-on-year increase of 6.1% and 3.3% respectively. Among them, the production and sales of new energy vehicles exceeded 6 million units, and the export volume was 593,000 units, a year-on-year increase of 1 times. China Automobile has not only made outstanding contributions to the development of the world’s automobile industry, but also made important contributions to stabilizing China’s national economic fundamentals and realizing the “six guarantees” and “six stability”.

According to the above industry figures, as of 2022, the number of automobiles in China will exceed 300 million, and the number of automobiles per thousand people will reach 220. This number has been greatly improved from 170 2-3 years ago. However, compared with the level of developed countries such as 837 in the United States and 591 in Japan, there is still a big gap.

According to the figures from Zhiyan Consulting, according to statistics from the Ministry of Public Security, the number of motor vehicles in China will reach 395 million in 2021, an increase of 23 million compared with 2020, an increase of 6.18% year-on-year, of which the number of cars will reach 302 million, an increase of 302 million compared with 2020. An increase of 21 million vehicles, a year-on-year increase of 7.47%. In 2021, the number of cars in 79 cities across the country will exceed 1 million. There are 79 cities across the country with more than one million cars, an increase of 9 cities year-on-year, 35 cities with more than 2 million cars, and 20 cities with more than 3 million cars, including more than 5 million cars in Beijing, Chengdu and Chongqing, Suzhou and Shanghai , Zhengzhou, Xi’an more than 4 million vehicles, Wuhan, Shenzhen, Dongguan, Tianjin, Hangzhou, Qingdao, Guangzhou, Ningbo, Foshan, Shijiazhuang, Linyi, Jinan, Changsha and other 13 cities more than 3 million vehicles.

According to the number of new energy vehicles disclosed by Zhiyan, the number of new energy vehicles will be 2.6% in 2021. I also checked the number of new energy vehicles in 2022. According to the China Energy News, in 2022, the number of new energy vehicles will reach 13.1 million, and 5.35 million new registrations will be registered throughout the year. As of the end of 2022, the number of new energy vehicles in the country will reach 13.1 million, accounting for 4.10% of the total number of vehicles, and the number of canceled write-offs will increase by 5.26 million compared with 2021, an increase of 67.13%. From this point of view, there is still a lot of room for improvement in the number of new energy vehicles.

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From the number of cars owned by thousands of people, the penetration rate of new energy vehicles (the penetration rate will reach 25% in 2022), and the number of new energy vehicles, it can be expected that market demand can still support the stable growth of the overall industry. The most rapid growth opportunities still lie in the new energy vehicle sector.

At the recent media communication meeting of the 2023 China Electric Vehicle 100, Zhang Yongwei, vice chairman and secretary-general of the China Electric Vehicle 100, reviewed the development of the new energy vehicle industry in 2022 and released the development trend forecast for 2023. He expects In 2023, domestic sales of new energy vehicles will maintain a growth rate of 30% – 40%. Based on the sales volume of nearly 7 million in 2022, China is likely to become the first country in the world with sales of new energy vehicles reaching tens of millions this year. .

Personally, I feel that this year, the new energy vehicles in the automobile sector that drive consumption are expected to maintain rapid growth under the dual promotion of policies and the market. Enterprises whose investment target business accounts for a high proportion of new energy vehicle-related businesses will also have greater performance flexibility and performance. better.

2. The concept of new energy vehicles has shifted from hype to competition for high-quality growth

With the withdrawal of state subsidies from the state, the high growth of auto companies relying on state subsidies will gradually turn to relying on their own hematopoietic and profitability, and in this way, they have to return to the traditional positioning thinking of the auto industry, that is, the asset-heavy industry relies on competition for scale A competition of comprehensive strengths such as efficiency, cost control, supply chain, model development, and channel network. In this area, with the layout of new energy vehicles and the launch of a large amount of production capacity by traditional forces, even traditional car companies have invested and cultivated a number of new energy vehicle companies and brands with reference to new forces’ car manufacturing ideas and models. Cars such as SAIC’s Zhiji, Feifan, GAC Aian, Changan and Ningde Huawei’s Avita, Changan’s own dark blue, and BAIC’s polar fox are not only novel in design, but also directly impact the price range of new forces. This has made new forces feel unprecedented pressure and further accelerated the industry’s involution.

According to relevant reports, Tesla, the catfish, cut prices first, reduced dimensionality, attacked and seized the peer market, and achieved remarkable results. Musk denied the doubts about Tesla’s weak demand caused by price cuts in the fourth quarter earnings call. , And gave a set of data, saying that in January Tesla ushered in the strongest order period in history, “the number of orders is almost twice the production speed.”

Looking at the licensing situation in various places, the number of listings after Tesla’s price cuts has also surged, and these will be reflected in the performance of leading companies in the Tesla industry chain in the first and second quarters.

Coupled with the ebb of the national subsidy, the profit margins of new forces will be further compressed, and some companies that have achieved double word-of-mouth effects in the brand and the market, as well as technological accumulation advantages, such as Weilai, should be the first to get rid of excessive dependence on subsidies, while others For example, Xiaopeng and Ideal will go through a round of cruel baptism in the market, while some latecomers such as Evergrande and Baoneng will face being eliminated by the market.

Traditional OEMs have relatively large advantages in channels, large-scale production, and supply chain control. In addition, the overall valuation of integrated companies is at a historically low level, such as GAC, SAIC, and Changan B. SAIC is in the ten-year low-end valuation position, and its dividend rate is as high as 4.53%, which is a historical high. This is very attractive to long-term funds that focus on safety and high dividends, as well as investors who invest in new allocations. Once the valuation is restored There will also be better investment returns.

3. Intelligence is the general direction

Intelligence is the key and direction of competition among OEMs. The market demand and proportion of intelligent cockpits will continue to increase rapidly. You can pay attention to companies with advantages in this area of ​​layout and business, such as Huayu Automobile and Inovance Technology.

4. Cost reduction and efficiency increase are the trend and industry consensus

It has become an industry consensus and trend that Tesla takes the lead in promoting the reduction of vehicle costs. Therefore, the cost-reducing technology-integrated molding technology will continue to maintain a high growth momentum this year. In this area, we must focus on companies with a high proportion of new energy vehicle manufacturers among customers, such as Top Group and Xusheng.

With the further expansion of upstream lithium mining and construction, the release of production capacity will be further strengthened in 2023-2024, and the prices of upstream lithium metal and lithium carbonate are expected to further decline. .

I personally think that the current market share prices of some leading lithium mines have already reflected the market’s expectation of a sufficiently large price cut, that is, the current price has been priced in by the market. As the valuation has fallen, some varieties such as Ganfeng Lithium have entered the valuation history The low position, superimposed technical oversold and a deep correction that lasted for one and a half years, the opportunity for a strong rebound due to the resonance of many factors has already been obtained, and the lithium mining sector has obvious capital intervention on the last trading day before the festival. It can be seen that there are funds for The post-holiday market has been laid out in advance, and you can also pay attention to the chance of an oversold rebound in this sector.

As the demand for new energy vehicles continues to heat up and the price of upstream raw materials falls, fully adjusted battery anode and cathode companies such as Putailai and Shanshan have brought certain opportunities to reduce costs and increase efficiency.

5. The demand for the core three-electricity related sectors of new energy vehicles is expected to be strong, and it is expected to follow the sector to strengthen

The core of new energy vehicles is three electric vehicles. Tesla’s price cuts have driven sales to increase significantly. According to public information, the performance of batteries, motors, and electronic controls has improved from the first quarter to the second quarter. After a deep correction, although the valuation has a certain space from the bottom, but considering that Sanden’s performance is relatively flexible, the valuation requirements can be lowered appropriately. Motors of concern include Dayang Motor, Founder Motor, etc. The battery sector focuses on Ningde Times and BYD (however, the valuation is still relatively expensive, depending on the technical rebound), and the electronic control and drive assembly focuses on Inovance Technology, Inbolt, Jingjin Electric and Xinrui Technology, among which Inovance Technology has the strongest comprehensive strength, is superimposed with the recent national policy support for robotics, which is worthy of attention.

6. Unmanned driving has shifted from embryonic development to commercial applications permitted by laws and regulations

Although laws and regulations have not yet been finalized for the commercial application of high-level unmanned driving, a large number of road tests have been released. It can be expected that the release of laws and regulations in the future can be expected. Enterprises related to unmanned driving technology layout will usher in better development opportunities. Coupled with the fact that China is facing an aging trend, there will be a lot of room for unmanned driving in the future.

Targets related to unmanned driving pay attention to Sagitar Juchuang (a leader in lidar, planning to go public, Geely, BAIC and GAC shareholding), Desay SV, Zhongji InnoLight, etc.

7. The recovery of domestic business activities and the recovery of personal consumption travel demand drive the demand for new energy buses

The new energy transformation of the bus industry is also part of the demand for public travel. Since 2020, due to the impact of the epidemic, commercial and personal travel demand has been greatly suppressed, which has caused a general downturn in the performance of this sector. With the shift in epidemic control policies, combined with the Spring Festival During the period, tourism and travel in various places are booming, consumption recovery is expected, and the valuation of the new energy bus related sector is also at a historically low level. With the recovery of performance, there will also be opportunities for valuation restoration. However, compared with passenger cars, the opportunity for this sector may grow slightly. Worse. Pay attention to Yutong Bus, which has been deeply involved in unmanned driving and new energy layout all year round. Of course, the leader BYD also has opportunities, but from the perspective of valuation, the beholder has different opinions, and the wise see wisdom. Buffett’s reduction of holdings may have a certain impact on market sentiment.

New year and new weather, after the baptism of the market, new energy vehicles are still promising, let us wait and see.

$Huayu Automobile(SH600741)$ $GAC Group(SH601238)$ $Changan Automobile(SZ000625)$

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