Analysis of strategic trends in the display market for smart cockpits of automobiles (Part 1)

1. The winter of automobile sales has passed, is spring far away? The overall sales trend in 2021 and the next five years

The original car-buying group, those born in the 1960s and 1970s, are aging rapidly and are rapidly exiting the Chinese car market. The subsequent car purchases are mainly low-speed electric vehicles for the elderly.

The original car purchasing group, those born in the 1980s, have entered the stage of additional purchases and replacements, but their contribution to the increase is very limited. Considering that they have elderly parents and young children to take care of, the number of people who can purchase additional cars or replace them is also very limited. 

The population of those born after 1990, the main new growth body, is decreasing year by year, which continues to dilute the consumption foundation of the auto market;

Social wealth is accelerating its differentiation, and some of the low-end and mid-end car markets, which are the main sales entities, are suppressed, especially the processing and manufacturing groups affected by Sino-US trade and the epidemic. The employment groups in this field have made great contributions to the car market, which has brought great uncertainty to the car market;

If the epidemic had not occurred in 2020, the total sales volume would have exceeded that of 2019. In 2020, my country's automobile production and sales reached 25.225 million and 25.311 million respectively, down 2% and 1.9% year-on-year respectively. The decline narrowed by 5.5 and 6.3 percentage points respectively compared with the previous year. This has already demonstrated great resilience and internal motivation.

As we all know, cars are the largest consumer product for ordinary consumers in the Chinese market besides houses, right? A car costs at least 100,000 yuan. Of course, the rich are a different story. A watch costs several million yuan, which is much more expensive than a car. Moreover, passenger cars are very similar to houses. They are both optional consumer products that can be purchased with leverage. Therefore, passenger car sales are highly sensitive to macroeconomic changes.

First, let's talk about the impact on the macroeconomy. Since 2018, the quarterly GDP growth rate has been declining quarter by quarter. In the third quarter of 2019, the GDP growth rate was 6%, the lowest since 2000. Passenger cars are optional consumer goods and are relatively expensive (the average sales price of passenger cars from 2015 to 2019 was around 140,000 yuan). They can be purchased with leverage (China's current auto finance penetration rate is around 40%), so changes in passenger car sales are very sensitive to changes in the macroeconomic growth rate and the growth rate of goods. Therefore, under the reality that the macroeconomic growth rate continues to decline, the passenger car terminal has received a relatively obvious negative impact.

Statistically, there is a strong correlation between the year-on-year growth rate of passenger car sales, the growth rate of M2 and the macroeconomic prosperity index (released by the National Bureau of Statistics). Through the research data of Great Wall Securities, it is found that the year-on-year growth rate of passenger car sales has the strongest linear correlation with the year-on-year growth rate of M2, and the correlation coefficient between the two is 0.74.

Well, let's take a look at the growth rate relationship between vehicles, GDP and housing. From 2006 to 2019, the overall cycle of the three is synchronized, and the length of a cycle is about 3-4 years. 2008, 2012, and 2015 are all time points for the cycle alternation in the history of passenger cars. From 2005 to 2008, the high growth of the macro economy brought about a sharp increase in the demand for first-time passenger car purchases. From 2009 to 2012, the 4 trillion fiscal policy + car going to the countryside policy + purchase tax subsidy policy led to the overdraft of 2009-2010 demand in 2011-2012, which caused cyclical changes.

From 2013 to 2015, passenger car demand changed with the natural cycle of the macro economy, but the downward trend in 2015 came to an abrupt end due to a new round of purchase tax subsidies starting in October. From 2016 to 2019, the new round of purchase tax subsidies caused a serious overdraft of demand in 2016-2017, and the adjustment that had not yet responded to the downward trend in 2015 led to the longest and deepest downward trend in passenger car demand in history.

We roughly divide the passenger car industry from 2008 to 2019 into two stages, the front end from 2008 to 2013 and the back end from 2014 to 2019, so that we can observe the details of each cycle of passenger car changes in more detail. In terms of the two stages, the front stage is a bit like the state of feature phones, which is a stage of skyrocketing demand. As long as the car can be built, it can be sold, such as Yinxiang in the past. The second stage is the winning stage of smart phones, such as Huawei, OPPLE, Xiaomi, etc.

We will find a more obvious pattern: domestic passenger cars are switching from the growth stage to the mature stage, and the marginal effect of automobile-related subsidy policies on demand is gradually decreasing. Each round of subsidy policies will overdraw future demand, which will normally affect 1-1.5 years. If we ignore the short-term downturn in 2015 and regard the passenger cars from 2014 to 2019 as a complete cycle, the early period of 2014-2016 can be regarded as an upswing period, and 2017-2019 can be regarded as a downturn period. Therefore, from the perspective of the entire cycle, 2020 will soon be an upswing period.

Low-end and high-end consumption stabilized and rebounded, while the proportion of mid-end consumption decreased.

① The proportion of consumption below 100,000 yuan continued to decline from the high of 45% in early 2017 to the bottom of 28% in July 2019, and gradually stabilized and rebounded to 30% in December 2019.

② The proportion of consumption of RMB 100,000 to RMB 150,000 slowly increased from 27% in 2017 to 30% in Q2 2019, and has rapidly increased to 39% since H2 2019;

③The proportion of consumption between RMB 150,000 and RMB 200,000 gradually increased from 8% at the beginning of 2017 to a peak of 12% in Q2 2018, and has been fine-tuning around 10% for the past year.

④ The proportion of consumption between RMB 200,000 and RMB 300,000 continued to increase from 11% at the beginning of 2017 to a high of 18% in Q2 2019, and then dropped rapidly to 12% in H2 2019

⑤The proportion of consumption above 300,000 yuan dropped from a peak of nearly 10% in Q2 2017 to 6% in 2018, and has continued to increase to 10% since 2019.

The sales share of third-, fourth- and fifth-tier cities has continued to decline from 60% at the beginning of 2017 to around 52% in Q3 2019. It has stabilized and rebounded from July 2019 to January 2020. Why do we say that the share of third-, fourth- and fifth-tier cities has stabilized? As for why the overall sales volume has rebounded, you can see it by looking at the distribution data of the selling prices above.

From the perspective of the proportion of automobile sales prices, vehicles priced below 0-100,000 yuan and 100,000-150,000 yuan account for the highest proportion, close to 69%, and it is highest in third-, fourth- and fifth-tier cities. Therefore, the reason why third-, fourth- and fifth-tier cities have stabilized is that the sales share of vehicles priced below 0-100,000 yuan and 100,000-150,000 yuan has stabilized. And from the sales rankings in March and April this year, the cars ahead of Lavida, Sylphy, Bora, Sagitar, Corolla, and Haval H6 are all in this price range.

The decline in the proportion of cars priced between 200,000 and 300,000 yuan is mainly because the prices of many cars have dropped to the range of 150,000 to 200,000 yuan. At the same time, the people who replace their cars are generally those born in the 1980s, who have strong purchasing power and mainly choose cars priced above 300,000 yuan. Therefore, the proportion of cars priced above 300,000 yuan continues to rise.

The growth rate of automobile sales has been declining for three years since the peak in September 2016, and there were signs of stabilization at the end of 2019. From the perspective of monthly sales, it has been in positive growth since March 2020. The decline in growth in April 2021 was due to excessive inventory consumption in March and chip shortages. It is expected that sales in 2021 will increase by 3%.

There will be a significant growth rate in 2021, and a relatively stable trend will be maintained in 2022 and 2023. In 2024, due to the release of L3-L4 level smart cars, a new round of automobile market prosperity will be ushered in, reaching a growth rate of 10%.

2. Overall market share of LCD instrument and central control display configuration rate in smart cockpit

Judging from the upgrade path of car cockpits, cockpit products are in the early stages of the intelligent era.

The car cabin will get rid of the single scene of "driving" and gradually evolve into an intelligent space integrating "home, entertainment, work and social interaction".

New products of mainstream car companies widely adopt large-size screens, voice interactive touch and other functions, and some models are also equipped with HUD

The cockpit chips are mainly from NVIDIA and Qualcomm. New car companies such as Tesla have prominent design styles, with the central control panel and instrument integrated into one.

According to statistics on the smart cockpit models announced by automakers in the past two years, there are currently three main types of companies equipped with smart cockpits:

New energy/new power car companies: Weilai, Ideal, Xiaopeng, Nezha, Skyworth

Domestic brands: From compact to mid-size cars, you can get a smart cockpit for as little as RMB 100,000. Most domestic brands have multi-screen smart cockpit models.

Joint venture/foreign brands; equipped with BBA mid-to-high-end models, with a general price of more than 300,000 yuan.