On the 19th, the executive meeting of the State Council decided to use financial subsidies to encourage the replacement of vehicles and home appliances. This year, the central government will increase the retirement subsidies for old cars from 1 billion yuan to 5 billion yuan. On the basis of the existing retirement and replacement policies for old cars, the scope of subsidies will be expanded and subsidies will be intensified. The implementation of relevant policies is to meet the actual requirements of China to further promote the expansion of domestic demand, but also conducive to improving the efficiency of energy and resource use, reduce environmental pollution, and promote energy-saving emission reduction and recycling economic development. We believe that the good sales data of the auto industry in the first four months of the year and the strong support at the national policy level will make the auto industry obviously better. As an auto parts company in the automotive upstream industry, it will also enjoy the rapid recovery of the downstream industry. The major opportunities that come will be focused on the leading brands in the subdivided industries. Data preference over recovery in the automotive industry Recently, the Automobile Industry Association announced the production and sales data of automobile production and sales data in April. The entire industry continued to maintain the double growth in production and sales volume driven by the national policies and the end market demand. In terms of market segments, the sales growth of A00 and A-class vehicles in April was significantly higher than that of other models, and sales of cars above C and C grade rebounded. We believe that the low-end models are still the main driving force driving the rapid growth of sedan sales, and the apparent recovery in sales of mid- to high-end vehicles indicates that the stimulating effect of the wealth effect is beginning to show. In the context of increasing consumer confidence in the market, the consumption of medium-to-high-end cars has a certain degree of rigidity, and there is a possibility of further rebound in May. Therefore, the recovery of the industry is showing a very strong trend. For some time to come, China’s passenger cars or passenger cars will also be “into the family stageâ€, so it is expected to continue to maintain rapid growth. Operational improvement subdivision leads to substantial benefit The automobile industry has safely passed the highs of the 2008 stage under the promotion of policies and continues to maintain a substantial growth in April. The industry's future growth is still optimistic. With the recovery of the mid-to-high-class car market and the continuation of the blow-out situation of small-displacement cars, the sedan industry will achieve considerable earnings growth in the second quarter, and the annual results may exceed expectations. As parts and components are located in the upper reaches of the car industry, their recovery time will be lagging behind by 2-3 months. With the recovery of the auto industry, the business conditions of the future parts and components industry will improve significantly. Due to the production and consumption characteristics of the car industry, its profit fluctuates significantly. Parts and components companies usually focus on a certain accessory field and are easy to form their own core competitiveness in a certain subdivided area, with obvious asset-light characteristics, and output unit profit. Less investment is required, profits are more stable than cars, and asset returns are relatively higher. In the recovery of mid- to high-end cars, parts companies are expected to benefit substantially from this. Valuable and safe margins are higher From the perspective of car ownership, at the end of 2008, China’s car ownership reached 49.75 million vehicles (excluding 14.92 million three-wheeled vehicles and low-speed cars), and the nationwide automobile sales volume will maintain a compound growth of more than 10% in the next five years. Car ownership will grow steadily, and the aftermarket of parts and components will grow more clearly and more stably than the entire vehicle market. Considering that the growth and valuation centers of parts and components in the fast-growing stage of the industry are higher than that of the cars, investors can pay close attention to the investment opportunities of the parts and components companies, and the valuation of the PE companies whose major parts companies are lower than 20 times means that High investment security margin. In the coming quarter, spare parts companies will have greater opportunities to obtain excess returns. Combined with the low valuation, the extent of industry growth benefit, and future growth potential, it is recommended to focus on the leading company's bus shares in the auto parts industry, as well as Ningbo Huaxiang, Wanfeng Aowei and Fuyao Glass.