HONG KONG, 20 January 2020. Pengyuan International has today published a sector commentary on China’s passenger vehicle (PV) manufacturing industry, which highlights our view on how the creditworthiness of carmakers will evolve in 2020 amid the shipment downturn.  report is accessible at www.pyrating.com/ResearchPublications/List.


Here are some key takeaways from this report:


1.     Given our projection of low single digit fall in auto sales volume in 2020, we envisage the credit profiles of carmakers will face accelerating divergence. This will be mainly caused by the recent consumption upgrade which could benefit carmakers with attractive and high-quality products as they are able to gain market share at the expense of low-end players. The sector’s capital expenditure will continue to expand in 2020, due to investments in electrification and intelligentlisation, which will further widen the divergence in creditworthiness within the sector.   

 

2.     Our base-case scenario where we assume no further policy stimulus indicates that wholesale and retail shipments of PV will drop 5% and 6% year-on-year respectively in 2020. If stimulus policies on auto consumption should be introduced in 2020, we then expect the decline in auto shipment to be moderated to 3-4% year-on-year.

 

3.     New energy vehicles (NEVs), in our view, is the sub-sector that could face the largest uncertainty in 2020, due to the great complexity in terms of policies and consumption. The lack of charging facilities and good-quality models, coupled with a slash in subsidies by 73% in 2019, could cloud the prospect for NEVs in the near term. On the other hand, the localisation of Tesla’s Model 3 could be a major stimulus on not only the private consumption but also the technology upgrade along the entire value chain of NEV in China.


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Primary Analyst

Danny Chen

+852 3615 8346

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media@pyrating.com

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Secondary Analyst

Tony Tang

+852 3615 8278

tony.tang@pyrating.com




Committee Chair

Tony Tang

+852 3615 8278

tony.tang@pyrating.com




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