Minsheng Securities: Auto companies independently impact the luxury market and define incremental space

The Zhitong Finance App learned that Minsheng Securities released a research report stating that the middle and high-end market of the automobile industry of 150,000 yuan or more has the following two characteristics: 1) there is plenty of room for autonomous share growth. Currently, the share is less than 50%, and joint ventures still dominate; 2) strong profitability, and brand power can avoid falling into a single dimension of price competition. The market of 150,000 yuan or more will become the core space that determines the profit elasticity of car companies in the future. We recommend Xiaomi Group-W (01810), Geely (00175), SAIC Motor Group (600104.SH), etc., and it is recommended to focus on BAIC Blue Valley (600733.SH) and JAC (600418.SH).

The main views of Minsheng Securities are as follows:

The mass market competes for independent stocks, and the middle and high-end markets determine future growth.

In 2024-2025, the main source of increase in the share of autonomous vehicle companies is the 50,000-150,000 yuan A-class car market. After the initial stages of electrification, intelligence, and global development are completed, future high-growth car companies will focus on observing the performance of the middle and high-end market of 150,000 yuan or more, and the core competition in the middle and high-end market will revolve around brand building.

The middle and high-end market space is large and profits are strong, and brand barriers maintain a stable share.

Starting with the price range of 150,000 yuan or more, the brand effect gradually became apparent. Consumers initially showed brand loyalty, so there is a certain threshold for entering this price band, so competition among car companies will not only revolve around the price field. The middle and high-end markets have high brand barriers and strong profitability. Using the 2024 sales scale, the annual sales volume of the 50-150,000 yuan market is about 11-12 million units, the overall market revenue volume is about 1.1-1.2 trillion yuan, and the overall market net profit is about 50-60 billion yuan; the 150,000-250,000 yuan market has annual sales volume of about 550-6 million vehicles, with annual revenue of 1.1-1.2 trillion yuan. The net profit volume of the market in this price band is about 550-60 billion yuan. With a total sales volume of only half of the 50-150,000 yuan market profitability; 250,000+ luxury The market has an annual sales volume of about 4 million vehicles. Based on the current net profit of 20,000 yuan of bicycles (BBA's net profit of 30,000 yuan), the forward market net profit volume of this price band is about 80 billion yuan, which exceeds the other two market segments. Therefore, the bank believes that the automobile market has completed the first stage of market competition with cost performance as the core, while a more reliant on brands and more profitable markets have yet to be discovered.

Overseas luxury brands differentiate and build brand labels, forming a competitive pattern at different levels.

Ultra luxury brands emphasize performance and scarcity, and maintain profits at extremely high unit prices through decentralization of racetrack technology and limited quantity strategies. Essentially, the logic of luxury goods. Traditional high-end brands BBA are at the core of luxury experiences and brand labels, and they occupy a monopoly position in their respective market segments with a complete product matrix. The core narrative of high-end brands incubated by popular brands is to provide reliability, a sense of quality and service experience that surpasses mainstream brands. Due to the natural weakness of brands, they need to establish and develop through relatively low premiums. Eventually, a hierarchical competitive pattern of ultra-luxury (Ferrari, Rolls Royce, etc.), first-tier luxury (BBA), and second-tier luxury (Lexus, Infiniti, etc.) was formed. Currently, the independent market is gradually deconstructing the position of luxury brands through product power advantages brought about by intelligence and electrification.

The pattern of autonomous leaders in the 250,000+ luxury market is clear, and the 150,000-250,000 yuan mid-range market is waiting for a new leader.

250,000 yuan+ market. Ideal, Xiaomi, and Huawei each shape luxury car brands in the new energy era through changes in product form, leading the industry's intelligence and performance advantages brought about by electrification, and deconstructing the brand anchors that traditional luxury brands rely on for production. In the context of the convergence of electrification and intelligent technology paths, it is difficult to be defeated by the differentiated advantages brought by other brands through technological changes, and the overall competitive pattern is basically stable. The competitive pattern of the 150,000-250,000 yuan market is scattered, and there are no leaders. It is a market where traditional car companies and new second-tier forces should focus their efforts, and it is expected to replace joint venture car companies such as Volkswagen, Toyota, and Honda through advantages in intelligence or product design, and develop into a leader in the mid-range market. Currently, in the market above 150,000 yuan, the autonomous share is less than 50%, and there is still more than 5 million vehicle market space to be expanded by independent brands.

Investment advice

Recommended: Xiaomi Group (joint coverage with Electronics Group), the new middle and high-end forces, Ideal Auto, and Xiaopeng Motors; traditional autonomous Geely Automobile, Great Wall Motor, and BYD with high-end sub-brands; car companies with deep cooperation with Huawei; Cyrus, SAIC Motor Group, and Changan Automobile;

Recommended attention: BAIC Blue Valley, JAC.

Risk Alerts

The risk of a downturn in the car market; sales and demand for new models falling short of expectations; industry competition intensifies risks.