Asia Pacific Equity Research 22 June 2020 This report is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. Clients should contact representatives and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. Auto Sector Post-COVID19 World of Autos In this report, we lay out our observations and thoughts on the Asian Auto Asia Autos industry as we undergo COVID-19 in different levels and stages. We’re observing AC an increased propensity to own vehicles amidst COVID-19, which we believe SM Kim (82-2) 758 5710 would translate into resilient near-term demand if and when lockdowns are
[email protected] alleviated. This demand will likely be polarized to cheaper and expensive vehicle Bloomberg JPMA SMKIM <GO> options, hence companies that are levered to such skewness would likely prove J.P. Morgan Securities (Far East) Limited, defensive against the current industry turmoil – select OEMs and dealers that are Seoul Branch levered to higher segment cars, two-wheeler manufacturers and xEV players (see Nick Lai AC page 5 for our stock recommendations within the region). As for a potential and (86-21) 6106 6353 eventual dissipation of COVID-19, while it may render some of the arguments in
[email protected] the report less relevant in the future (i.e., the propensity to own vehicles may Bloomberg JPMA LAI <GO> decline), we do not deem it to be a headwind for the industry – COVID-19 is the SAC Registration Number: S1730520030008 single largest drag for the whole auto industry, hence the end of it, if it happens, J.P.