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RTNominal down10.260 -0.820 (-7.401%)

12/11/2019 17:50

{I-bank focus}China's PV growth seen down 4% in 4Q - JPM

[ET Net News Agency, 12 November 2019] J.P. Morgan said China autos' share prices have
enjoyed a nice rally in the past month on the back of sequential improvement in industry
sales and anticipation that November's yearly growth will finally turn positive after a
16-month consecutive decline.
This is despite the fact that 3Q results saw more misses than beats among OEMs, the
research house noted.
In 2020, JPM believes overall China autos' performance will be hostage to a no-growth
scenario after 10% slippage in 2019. In NEV (new energy vehicle), JPM also expects muted
growth. It, therefore, believes it is unlikely that the sector will see a meaningful
structural or sustained share price rebound. This may apply to the NEV segment as growth
decelerates to 10-15% in 2019/20 versus >50% in 2017/18 after sizable subsidy cuts.
Further, JPM believes 2020 will be a year of survival for tier-two Chinese brands and EV
(electric vehicle) start-ups. JPM said it would not be surprising to see marginal players
being forced to exit. In the near term, JPM's base case is that industry PV growth
will fall by 4% YoY in 4Q.
With October down 5.8%, November/December collectively would still be down slightly by
1-2%, so those anticipating a turnaround in November could be disappointed. Among OEMs, we
believe Japanese firms will continue to perform well, in particular, Toyota and Honda,
while German premium brands (Benz, BMW, and Audi) will also deliver sustained growth
thanks to premiumization. This reflects JPM's preference for Guangzhou Auto (02238) and
Zhongsheng Auto (00881). (KL)

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