Why do auto stocks go higher?

The Ministry of Industry and Information Technology issued an opinion paper on the procurement catalog of official vehicles at the end of last week. All the finalists were self-owned brands. Stimulated by this news, yesterday's car stocks jumped open higher, but then quickly fell back, closing up little. Market analysts believe that although the new purchase of official vehicles will promote the sales of self-owned brand cars this year, the improvement effect depends on the implementation and promotion of follow-up policies.

This year, the Ministry of Industry and Information Technology released the “2012 Catalogue of Selected Vehicles for Official Vehicles of the Party and Government Organs (Consultation Draft)”. The 412 models selected by the Ministry of Industry and Information Technology are self-owned brands, and none of them are international brands. This means that independent brands are expected to enjoy the "cake" of the official car market. Analysis generally believes that the official car procurement catalog reveals that the government encourages the automotive industry, especially the development of self-owned brands, and will benefit domestic-funded auto companies.

However, yesterday's auto stocks generally opened higher and declined. With the exception of Dongfeng Motor and Jianghuai Automobiles, the final gains of other benefit vehicle manufacturers fell below 5%. Jiangling Motors, one of the beneficiary stocks, had a maximum increase of more than 7%, closing slightly up 0.04%. The SAIC Group, the largest auto company, even turned green.

"The official procurement of new vehicles will certainly have a greater role in promoting domestic-funded car companies. However, the lack of resources, local protectionism, and rent-seeking factors will reduce this positive effect," said automotive analyst Zhang Zhiyong. Chen Pengyang, a researcher at China International Capital Corporation, believes that this policy is only for general official vehicles and law enforcement duty vehicles. It is expected that this part of the procurement volume will be around 200,000 vehicles per year, accounting for only 2% of the sales volume of narrow passenger vehicles. Even if all of them purchase their own brands, they will only draw 5.3% of their self-owned brand sales. According to estimates by Cui Dongshu, an analyst at the association, the annual purchase amount of official vehicles is about 30 billion yuan, not the 100 billion yuan of social rumors.

Rao Da, Secretary-General of the Federation of Travel Unions, said, don’t make expectations too high. The symbolic significance of this policy is more significant than actual meaning. The extent to which the real help for the self-owned brand is still unknown depends on the implementation level. Joint venture brands will not easily abandon the bus procurement market.

Judging from the specific car companies, the entire line of JAC products are self-owned brands. Both cars and commercial vehicles will benefit from the procurement of new policies for official vehicles. Therefore, the market response is also more positive. SAIC's main source of profit is its joint venture, and the current contribution of its own brand is not large.