China's auto sector continues to receive positive support and the certainty of recovery is increasing, Guotai Junan Securities said in a recently released research report.

The core of the auto industry recovery in the third quarter was the improvement in wholesale sales brought about by the industry's inventory replenishment behavior after the chip shortage problem eased, and the chip problem will continue to improve in the last two weeks, the team said.

Automotive chip factories in countries including Malaysia resumed production and chip supply is expected to gradually improve in mid- to late-August, the team said.

China began to regulate the chaos of auto chip dealers, which is expected to reduce the procurement costs of car companies and parts companies and accelerate the entry of auto chips into the market and the improvement of supply, the team said.

Starting from the third quarter, the industry will enter the inventory replenishment phase as chip shortages ease and wholesale sales gradually improve, according to the report.

In the fourth quarter, as the supply problem of best-selling models is resolved and car companies offer more incentives than in the first half of the year, some of the deferred demand for cars will be released, allowing passenger car sales to exceed market expectations, the team said.

The strength of China's manufacturing industry will lead auto parts companies to accelerate the globalization process and market share is expected to accelerate, the team said.

That also means good news for China's fast-growing new energy vehicle market.

On Monday, Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA), said the CPCA's June forecast for China's new energy passenger car sales to reach 2.51 million units this year was conservative and will be revised upward in the future.

China's new energy passenger car penetration rate, or their share of all new vehicle sales, is expected to reach 13 percent this year, Cui said.

China's new energy passenger car penetration rate on track to reach 13% this year, expert says

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