The global market volume and price have grown steadily, with North America as the core growth region. Global all-terrain vehicle sales were $15 billion in 2023 and are expected to increase to $29.5 billion in 2033 (10-year CAGR 7%). 1) From the perspective of volume: In 2023, the global sales of all-terrain vehicles will be 960,000 units (34/620,000 ATVs/UTVs respectively), and the sales growth rate is highly correlated with the GDP growth rate of North America (North America will account for 84% of the world's sales in 23 years), and the future sales will maintain steady growth; 2) From the perspective of price: the attributes of optional consumer goods for all-terrain vehicles are obvious, and the dual logic of product structure upgrading + facelift outperforming inflation has become the main driving factor for the industry's average price to continue to rise.

U.S. and Japanese manufacturers are leading the world, and domestic companies are emerging with their supply chain advantages. We estimate that in 2023, major U.S. and Japanese manufacturers together will account for more than 80% of global production capacity. Domestic manufacturers export to Europe and the United States with manufacturing and cost advantages, and the global share is increasing year by year, and the price of products with the same performance is only 50%-70% of that of the North American leader Polaris.

As a "leader" in going overseas, Chunfeng Power currently has the largest market share in the European market after ten years of precipitation, and during the shutdown of the supply chain in Europe and the United States caused by the epidemic, it has accelerated its entry into the European and American markets with its excellent supply system and products, with a global sales share of 15% in 2023, and the gap with the global leader has gradually narrowed.

Domestic enterprises are deeply involved in North America and build long-term competitive barriers. The business attributes of all-terrain vehicles are similar to motorcycles and automobiles, and companies are required to compete with the logic of consumer goods. From the perspective of Chunfeng Power: 1) Products: By improving product coverage (the number of models on sale has increased year by year, and the number of SKUs on sale in January 25 has reached 21) and the upgrading of product structure, it has cut into the market segment market demand and driven the overall average price of products upward; 2) Channels: Continue to lay a channel network (585 dealers in the United States in 23 years), and open up the front-end and back-end systems through the reform of the supply system to improve the efficiency of production, inventory and terminal sales; 3) Brand: Integrate into the American Powersport culture through marketing, club participation, event sponsorship, celebrity endorsements, etc., and improve the after-sales system to enhance the market brand influence; 4) Organization: American and Chinese companies are more focused on the all-terrain vehicle market segment than comprehensive groups such as Honda, and can concentrate resource investment in the all-terrain vehicle industry, quickly respond to demand, preempt product layout and gain competitive advantages.

The layout of overseas production capacity weakens external risk factors, which is conducive to the improvement of the valuation center. Affected by the tariffs imposed in the early stage and the high sea freight, the profit center of domestic enterprises has fluctuated greatly in recent years. At present, the United States still imposes a 25% tariff on all-terrain vehicles in China, and the sea freight has returned to a reasonable range. With the active deployment of overseas production capacity by domestic enterprises such as Chunfeng Power and Taotao Vehicle, the tariff risk is gradually controllable, which is expected to further improve the long-term profitability and valuation center of the industry.

Investment suggestion: the global all-terrain vehicle industry has entered a period of steady growth, in the future, with the economic development and product structure upgrading, the industry through the volume and price rise to maintain steady growth, North America is the main consumption area, we are optimistic about the first-mover advantage, deep cultivation of North America and has overseas production capacity of the domestic vehicle target, domestic all-terrain vehicle to the sea company Chunfeng Power (603129. SH), No.9 Company-WD (689009.SH), Taotao Vehicle Industry (301345. SZ), which is expected to achieve an increase in global share and a continuous upgrade of product structure, covering Chunfeng Power for the first time (603129. SH), No.9 Company-WD (689009.SH), Taotao Vehicle Industry (301345. SZ) has an "overweight" rating.

Risk analysis: terminal demand fell more than expected, market competition intensified more than expected, tariffs and sea freight exceeded expectations