[ET Net News Agency, 26 September 2018] Jefferies Research said China's August car
retail sales were below its expectations (registrations -11% yoy). As well as low-end
market weakness since March and tariff distortion since May, car sales in most cities
weakened in August due to lower consumer confidence.
But the research house is encouraged by the government's pledge on 20 September to
promote car sales in rural areas to facilitate consumption, yet no details have been
given, but the comment could be a positive near-term catalyst.
Jefferies prefers SAIC Motor (Shanghai: 600104) and GAC Group (02238) given their
comprehensive product lines and new car pipelines.
In 2009, the first time the government supported the car market with an incentive
policy, the rural market was the main growth driver.
Meanwhile, Jefferies adjusted its forecasts for Great Wall Motor (GWM)(02333) based on
the views that decelerating retail growth will pressure the company's wholesale volumes,
and price war in a stagnating market will erode margins.
It reduced its target price for GWM to HK$8.3 from HK$10.2, and maintained its "buy"
call. (KL)