Wake Up The Sleeping Car Market: New Energy Vehicles, Used Cars Welcome Policy Dividends

"The news is good lately, but I believe this is the most recent policy advantage." In March 31st, He Xiaopeng, chairman of Xiaopeng automobile, said on his personal social platform. As the head of the new electric vehicle enterprise, he pays special attention to the policy trend of the new energy vehicle industry.

The "good news" that He Xiaopeng is so excited about is that the new energy vehicle purchase subsidy and exemption from purchase tax policy have been extended for 2 years. This is the policy support that the industry has been calling for since last year. Under the influence of the new crown epidemic, this advantage has come so far ahead of schedule.

This is the new energy vehicle and even the entire automobile industry's heavy profit, is also the long-awaited national automobile consumption support policy. The executive meeting of the State Council in March 31st announced the above news and regarded it as an important part of promoting automobile consumption.

In addition to new energy vehicles, the sale of old cars and second-hand cars is also regarded as the main direction to promote automobile consumption. On the same day, the National Convention also announced that the central finance will take the diesel truck which will replace the three and below emission standards in the key areas such as Beijing, Tianjin, Hebei, etc., while selling the old cars to the distribution enterprises, and will increase the value added tax by 0.5% from May 1st to the end of 2023.

"The core of these policies is to promote environmental upgrading, improve the environment, and effectively promote the sustainable development of automobile consumption in the future, and promote the upgrading of automobile consumption." Cui Dongshu, Secretary General of the information conference of the national passenger car market, said that especially the new energy vehicles will benefit significantly. He expects that the number of new energy vehicle sales in China will reach 1 million 600 thousand this year, bringing about an increase of nearly 30%.

Under the influence of the new crown pneumonia epidemic, both new energy vehicles and traditional fuel vehicles are facing great challenges. Although there has been a warmer trend in March, the decline in auto sales in the first quarter is a foregone conclusion, and this year's performance will inevitably be affected.

In the past month, ministries and commissions have released signals to promote automobile consumption, and many local governments have announced stimulus measures such as relaxing restrictions on purchase and providing subsidies for car purchases. With the introduction of policies at the national level, the automotive market has entered an all-around stage of preparation.

Since the first decline in China's auto market in 2018, the industry began to call for "bailout" in 2019, but the overall market did not improve. In 2020, the outbreak of the epidemic made it even worse for the industry in the adjustment period. Compared with last year's support policy, this round of policy package not only covers a wider range, but also has greater strength.

On the whole, the current central and local automobile consumption stimulating policies include the policy of relaxing the restriction and purchase of new energy automobiles, including the policy of stock replacement with incentives to replace old cars and reduce the cost of second-hand cars. Under all kinds of combined punches, the car market is expected to usher in an accelerated recovery.

New energy vehicle policy exceeded expectations

The new energy vehicle purchase subsidy and exemption from purchase tax policy will be extended for 2 years, which will bring great benefits to the industry and help boost industry development confidence.

China Merchants Securities research team analysis that subsidies and exemption from purchase tax will enhance the cost performance of new energy vehicles, especially the middle and low end vehicles, on the other hand, will directly ease the profit pressure of car companies, and give vehicle enterprises more than two years to reduce the buffer period.

Providing subsidies and exemption from purchase tax is one of the main policies to promote the development of new energy vehicles, and to a large extent, support the growth of new energy vehicles. However, as the industry matures, new energy vehicles will no longer enjoy special privileges.

According to the plan, this year is the last window for policies to promote the development of new energy vehicles: the purchase subsidy will further decline on the basis of last year, and will be completely withdrawn next year, and the exemption of purchase tax will end by the end of this year.

But the industry accepts some "incompetence" for such a rhythm. Twenty-first Century economic report reporter learned that last year, many new energy vehicle enterprises "written" suggestions, the appeal is 2020 subsidies do not decline, and extend the policy of exemption from purchase tax.

According to the documents submitted by policy makers, according to the prediction of the cost of the industry, the exit policy is not mature at the end of the year. That is to say, at present, new energy vehicles have not yet reached the level of development that can be divorced from policy support.

The industry has had a brutal lesson last year. In 2019, China's new energy vehicle sales volume was 1 million 206 thousand, down 4% compared with the same period last year. This is the reason why China has vigorously promoted the new energy vehicle for the first time since ten years. The reason for the negative growth is that, besides the overall market downturn, the biggest factor will come from the average over 70% subsidy.

In January this year, China's electric vehicle 100 person forum, the Minister of industry and culture minister Miao Wei's "new energy vehicle subsidies in July 1, 2020 no longer further decline", sparked a round of applause from industry experts and business people. Although the Ministry of public security later said that it was a slip of the tongue, it also responded that the subsidy policy will be relatively stable this year, and it will not go down sharply. This has also given psychological expectations to the industry to meet policy buffers.

From this perspective, the policy of extending the subsidy and purchase tax for 2 years has largely exceeded the expectations of the industry. For the new energy vehicle industry, this will not only help to tide over the difficulties of the market this year, but also help the long-term development of the industry.

Many of the views of the industry believe that two years later is the real turning point of the new energy vehicle industry, when the cost of new energy vehicles will be significantly reduced, and sales will also usher in explosive growth. After praising the best results, He Xiaopeng added: "we just think 2022 will be the starting point of the smart car, seamless connection."

Cui Dongshu also pointed out that the two-year policy dividend buffer period will improve the situation of new energy vehicles this year, and the effect will be more prominent in the next two years, and will ensure the world leading position of China's new energy vehicles.

Second hand car tax reduction "ten years grinding a sword"

The sale of second-hand car enterprises by sales tax of 0.5% is another major policy change.

According to the relevant policies, units and individual industrial and commercial households sell their used cars, and the value added tax should be paid at 2% of the actual transaction price. Other individuals will be exempt from VAT from selling second-hand cars that they have used.

From 2% of sales to 0.5%, the value added tax of second-hand car industry dropped by 75%. Luo Lei, Deputy Secretary General of China Automobile Circulation Association, told reporters on twenty-first Century economic report that this aspect will significantly reduce the circulation cost of second-hand cars, and on the other hand, it will provide better soil for the scale development of second-hand car transactions.

Since the sale of second-hand cars is exempt from VAT, many second-hand car enterprises have transformed the behavior of second-hand car buying into personal behavior, but this has not only brought management problems to second-hand car sales, but also affected the credit applications of second-hand car companies. And the second-hand car enterprises that pay VAT at 2% tax rate are also facing higher cost.

In fact, the second-hand car industry has implemented 2% vat for many years, and the industry has been appealed for the VAT reform of used cars. As early as ten years ago, the China Automobile Circulation Association had suggested to the relevant ministries and commissions that the value added tax of second-hand cars be reduced by half to 1%. Last year, the China Automobile Circulation Association put forward two plans: first, the existing full levy should be changed to the difference value added tax, and two is to give the second-hand car distribution enterprises the policy of reducing the value added tax before 2023.

Luo Lei said that the difference was characterized by the value added tax, but there were difficulties in the implementation process, because the voucher problem could not be solved. It is said that the China Automobile Circulation Association also proposed a proposal to collect 0.3% of the sales volume.

"We have roughly calculated that the average gross profit margin of the second-hand car industry is about 4%, multiplied by 13%, which is about 0.5%. Why is proposition 0.3%? We hope to expand the tax base through low tax rates and make more distributors bigger and stronger. Luo Lei said.

The value added tax of used cars has been reduced to 0.5% of sales. Luo Lei believes that it will also be beneficial to the increase of tax revenue and the development of enterprises. "More large enterprises will grow rapidly, dealers will enter the circulation of second-hand cars in a comprehensive way, and there will be a large number of regular troops in the used car market."

Increasing inventory and promoting automobile consumption

In the key areas such as Beijing, Tianjin and Hebei, the old car exchange incentives are also an initiative to promote vehicle consumption.

According to China Merchants Securities Information, as of the end of 2019, there were still 920 thousand vehicles in the key areas of Beijing, Tianjin and Hebei, with three or less medium and heavy diesel trucks. After the central superimposition of local subsidies, the old cars in Beijing, Tianjin and Hebei will be replaced faster, and new impetus will be injected into the auto market.

As a tough year to win the battle against the blue sky, 2020 will be the key year for the accelerated elimination of diesel vehicles with emission standards of three and below. In fact, in order to speed up the elimination process of the three models, many provinces and cities have already issued the three elimination subsidy policy, while controlling the operation of the three models by limiting the number of lines and stopping the annual inspection.

It is worth mentioning that in recent years, Beijing has also issued relevant policies to provide government subsidies to the three emission standard cars that are scrapped or transferred out of Beijing, while encouraging car manufacturers to increase the incentives to owners of new cars after they are scrapped or transferred.

GF automobile team pointed out that environmental protection or become an important starting point for stabilizing car consumption. In addition to providing updated incentives for old trucks, many local governments have also provided subsidies for passenger cars to replace old ones. Taking Guangzhou as an example, it said in early March that the purchase of new cars for replacement or scrapped second-hand cars was granted 3000 yuan subsidy per vehicle.

From a deeper perspective, encouraging replacement consumption is a wake-up call for the stock market compared with extended subsidies for new energy vehicles. Insiders told the twenty-first Century economic news reporter that the negative growth of China's automobile sales in the past two years has caused a neglected reason. After many years of rapid growth, China's automobile has entered the stock development stage, so the current "rescue measures" can not revolve around this idea.

In fact, in addition to the old car replacement, second-hand car encouragement is also stimulating the car consumption from the perspective of revitalize the stock. Luo Lei said that after the first phase of urban car consumption, the large number of vehicles entered cascade consumption each year, but the poor circulation and high circulation cost restricted the development of second-hand car market. After the second-hand car chain was opened, urban consumption would be stimulated two times.

From the central and local policies to encourage car consumption, incremental and stock is the main feature of the current "bailout". Guangzhou, Hangzhou and other limited licensing cities have provided more incremental indicators for minibus, while Beijing, Guangzhou and other places have also given awards or subsidies on the elimination of old models.

The significance of revitalize the stock is that for such a special market like Beijing, blindly pulling the increment may backfire. "The proper opening of the restricted purchase area is the most direct and lowest cost solution in the short term. However, due to the high number of thousands of people in some areas and the traffic congestion and other factors, the long-term side-effects of the full liberalization will be greater, and it will also play a limited role in stabilizing the automobile consumption and stimulating the economy in the whole country." GF Securities pointed out.