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2026-10-13 13:27:33 JPM released a research report stating that China's Ministry of Finance unexpectedly announced that the export value-added tax rebate for passenger new energy vehicles (NEVs) will be reduced from the current 13% to 9%, effective from April 2027. The broker noted that the policy itself may not surprise most investors, as the market had expected the Chinese government could adjust export tax rebates in coordination with negotiations with the European Union to secure better market access arrangements, although the timing of the announcement was earlier than expected. The broker said the reduction in export tax rebates applies only to passenger NEVs, excluding fuel vehicles and new energy heavy trucks, meaning SINOTRUK (03808.HK) will not be affected. In contrast, automakers with higher exposure to passenger NEV exports may see their 2027 earnings impacted by about 10% to 20%, including BYD COMPANY (01211.HK), LEAPMOTOR (09863.HK), GEELY AUTO (00175.HK), and to a lesser extent GWMOTOR (02333.HK) and CHERY AUTO (09973.HK). Based on the broker's sensitivity analysis, assuming automakers do not raise prices, potential declines in 2027 earnings would be about 18% each for BYD COMPANY (01211.HK) and LEAPMOTOR (09863.HK), around 10% for GEELY AUTO (00175.HK), and about 6% to 8% each for GWMOTOR (02333.HK) and CHERY AUTO (09973.HK). If automakers are able to pass higher costs onto customers, the earnings impact may be lower than the above estimates. The broker maintained a cautious view on China's auto sector for 2027. Strategically, it favors SINOTRUK (03808.HK), while also positive on CHERY AUTO (09973.HK) due to its high free cash flow yield and cash-to-market capitalization ratio. Even if earnings face downside revision risks, valuations would still be cheaper than peers under the worst-case scenario. GAC GROUP (02238.HK) is expected to benefit from long-term industry consolidation, although the positive impact on earnings may only become more apparent in the later part of 2027. The broker added that the European Union plans to set annual export quotas for Chinese hybrid and plug-in hybrid vehicles starting from 2027, with reports indicating an initial quota of 350,000 vehicles and annual increases of 6% thereafter. If implemented, this would deal a severe blow to Chinese automakers heavily reliant on related exports to the EU, such as BYD COMPANY (01211.HK), SAIC MOTOR (600104.SH), and to a lesser extent CHERY AUTO (09973.HK). The broker will closely monitor the final decision at the European Council summit on October 15-16.(da/ad)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |