Pole Position "UBS European & US Autos Daily" Hummel

Research evidence excerpt

Pole Position "UBS European & US Autos Daily" Hummel

China Auto Sector : "Circulation reform & measures to

foster after-markets announced "

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Policy support on expanding consumption across auto value chain

On Jun 23, China government released a list of cities selected for the auto circulation

and consumption reform, aiming at removing unreasonable restrictions on circulation

and unleashing auto consumption potentials. On the same day, regulators also

announced measures to foster auto after-market, aiming at promoting innovative after-

market business model and auto culture.

40 pilot cities for auto circulation and consumption reform

To facilitate auto circulation and consumption reform, the government announced a list

of 40 pilot citiesure 1Figure 1, In these 40 cities, local authorities will streamline paper

work, remove unnecessary restrictions on auto circulation & consumption and

integrated development of auto business, culture and sports based on local

endowments. While we do not expect significant near-term sales boost from the

circulation reform, cutting red tape may improve circulation efficiency in the long term.

Measures for developing auto after-markets

Measures highlighted include 1) legalizing auto modification, promoting the launch of

national standards for auto modification and the establishment of access permit system

for modified auto parts; 2) supporting RV camping; 3) encouraging auto culture like

racing and vintage cars; and 4) giving consumers freedom to choose their repair &

maintenance services providers.

Stock implications:

These two policies focus on relatively niche segments and details, rather than providing

wider stimulus. We don't expect any significant near-term impact on the industry, and