Policy tailwinds (i.e. subsidies) will continue to provide incentives to car buyers and support demand growth for China鈥檚 EV industry; most managements we met believe China is still at the early stage of EV penetration and are looking for multiple times volume growth in the next decades, despite following different paths.
We note that in the first 6 months of 2014, China sales of new energy vehicles were over 20k units, representing c.250% yoy growth vs. 1H13 (5.9k). Our China Auto team remains constructive on the development of electronic vehicles and the China Association of Automotive Manufacturers (CAAM) expects new energy vehicle sales could surpass 50k units in 2014 (200% higher than the 18k units in 2013).
According to BYD, it sold 7,000-8,000 units of new energy vehicles in 1H14, accounting for c.38% of China鈥檚 new energy vehicle sales. BYD expects sales of its new energy vehicles to reach RMB8bn in 2014E (15% of total sales) and to more than double to RMB20bn in 2015E (25% of total sales) due to policy support and new models.
