BAIC Motor Corp:Beijing-Benz auto sales up 21%in September

Beijing-Benz: high-priced models driving volume growth and mixupgrade. Total auto sales for the JV increased 21% YoY to 29,483 units,mainly driven by two high-priced models, the GLC SUV and the new E-Classsedan. The new E-Class, which was launched in August, ramped up to~8,000 units in September, which is faster than we expected. The GLC SUV,launched in November 2015, sold ~7,000 units. We believe sales of the GLChave more upside going forward, as there is a waiting list at dealers, and thediscount is zero at the moment. The higher volume contribution from the twomodels should be positive for product mix and profitability, as they have bettermargins than the C-Class sedan and the GLA SUV.

Beijing-Hyundai: total auto sales increased 16% YoY. Total auto saleswere 104k units, up 16% YoY. Total SUV sales (including the new Tucson,ix25, ix35 and Santa Fe) increased 15% YoY to 37k units. The new TucsonSUV, which was launched in September 2015, reached a record high of20,146 units in September. Overall, the Beijing-Hyundai JV should be able toachieve its full-year sales target of 1.12m units (+5% YoY).

BAIC local brand. Total auto sales surged 76% YoY to 47k units, mainlydriven by SUVs (24k units, +500% YoY). The new model Senova X35(launched in May) sold 10,189 units in September, which was a major volumedriver.

Consensus earnings likely to be revised up. We believe that overall autodemand should be strong in 4Q this year, due to seasonality, strongconsumer confidence and potential panic purchasing ahead of the expiry ofthe purchase tax cut (although the tax cut could be extended into 2017). Sothe earnings from the three major brands should be higher in 2H vs 1H thisyear. We estimate BAIC’s total earnings in FY16 will be Rmb5.8bn, 15%higher than consensus.