Guohai Securities: Independent brands are expected to go overseas and reach the next level to maintain the “recommended” rating for the automotive industry

The Zhitong Finance App learned that Guohai Securities released a research report saying that the next stage of localization+high-end promotion of independent brands going overseas is expected to take the scale of overseas travel to the next level. Benchmarking Japan, the bank believes that own-brand vehicles already have significant advantages in the field of electrification and intelligence. In the future, the bank determined that own-brand exports are expected to further interpret deep localization and high-end routes, leading to a second increase in exports. Considering that there is plenty of room for passenger cars to grow overseas, the bank maintains a “recommended” rating for the automotive industry, and it is recommended to focus on key companies.

Guohai Securities's main views are as follows:

Japanese globalization revival

Product advantages+the opportunities of the times created the first wave of going overseas, and localization and high-end technology helped internationalization take off for the second time. There are two main waves of the global rise of Japanese cars: 1) Japan emerged from the two oil crises in the 1970s with core advantages such as fuel economy. From 1970 to 1980, Japan's automobile exports increased from 1.087 million to 5.967 million units, with a cumulative increase of 449.1% over ten years; 2) Japanese companies accounted for 21% of the US passenger car market in 1980, then faced trade boycotts, and Japanese overseas switched to localization and high-end development, achieving a second take-off in the Japanese global market. Japan exported about 6.73 million vehicles in 1985, then rose through the Chinese market. Continuing to increase its overseas share, Japanese overseas sales reached a high level of around 24.78 million vehicles in 2018, accounting for about 27.6% of the global overseas (within and outside of Japan) market. In the process of the rise of the Japanese system as a whole, Toyota grew into a global automobile leader.

Internationalization of independent brands

Compared to Japanese, own-brand passenger cars are currently in the first wave of the overseas travel cycle, and there is still room for growth in the future. Compared to the internationalization of independent brands, there are many “similarities” and “differences” in the history of Japanese internationalization. Similar points include: 1) Self-branded new energy vehicles have a complete industrial chain and multiple product advantages such as zero low carbon, economy, and intelligence. Against the backdrop of rising oil prices and the acceleration of global electrification, independent brands are interpreting the early growth path of Japanese internationalization in non-American markets such as Europe, Southeast Asia, and South America; 2) Independent brands are also promoting localization, and there is great potential for high-end development. The differences include: 1) The tariffs and trade barriers faced by independent brands going overseas were significantly different from those of the Japanese at the time, and the dominant market and degree of penetration of independent brands were very different from the situation of Japanese cars at the time; 2) Total exports of independent brands have surpassed the high level of Japanese exports in the early days, but they have not reached the high level of Japanese overseas in terms of global penetration depth, brand premiums, and system resilience, and there is still plenty of room.

Risk warning: export progress falls short of expectations, export policy fluctuations, geopolitical influence, overseas supply chain construction falls short of expectations, changes in tariffs and trade barriers, fluctuating raw material costs, sharp drop in crude oil prices, and Japan's national conditions are not fully learnable