vape management will be further improved

From the perspective of the cosmetics industry, there is not yet a specific regulatory details issued, and this doesn't mean that vape must go towards monopoly management. Regulatory policies do not prohibit or ban sales, but are aimed at guiding the Vape industry to develop in a standardized way. The superpower Implementation will effectively lift industry barriers, add concentration, large upper and lower industry enterprises will be beneficial.

1 - The Potential Headed Toward Monopoly Operation Within the Vape Industry

Aishide opened at the limit down on the 23rd. The closing price of the stock was 9-17yuan, and the limit down board was ordered 400 in the past. According to statistics of Choice data, 18 Vape concept stocks in A - share market 13 hands closed down. Yiwei lithium energy, one of them, held 32-44% of the issue share capital of Smoore international, the first (Chinese) Vape stock, and fell 15-85%.

The collective decline of the Vape industry originated from a news on the evening of the 22nd. The Ministry of Industry and Information Technology and the State Tobacco Monopoly Administration have researched and formulated the Decision on Amending the Regulations for the Implementation of the Tobacco Monopoly Law of the People's Republic of China (Draft for Comment). Another additional clause in the draft opinion is new tobacco products, such as vape, shall refer to the relevant provisions on cigarettes in these regulations for implementation.

In recent years, Vape market supervision, new situations and new problems have emerged, and in order to promote the legalization of Vape supervision, according to the relevant provisions on cigarettes in the implementation regulations, it can be implemented. The primary goal is to manage the manufacturing and usage of vape and address product quality and safety issues, as well as false ads and other issues of vape.

On October 18, 2024, the State Administration for Market Regulation and the State Tobacco Monopoly Administration jointly issued the Announcement on Further Protecting Adults from Vape, which stipulates that the online sale and advertisement of vape are prohibited, and then given vape forced to transfer to offline channel.

The market is confident that this comment draft would again tighten the supervision on vape, and vape would tend to a monopoly management model. In other words, the state will monopoly and unified manage the production, sales and import and export of atomized vape. As with the model of cigarettes, no tobacco monopoly license will be issued to individuals who are not inside the China Tobacco system in the production and wholesale links.

2- Not a Restriction, but Guidance for Standards Development

However, many market institutions believe that the treatment of e - cigarettes at the wild growth stage into the supervision, not a restriction or a ban on sales, is a guide to the standardized development of the e - cigarette industry, will not affect the long - term development trend of the industry.

First, this revision will clarify the regulatory subject of the atomized e - cigarette. China Tobacco will act as a regulatory agency to supervise and inspect. The primary goal is to reinforce supervision, with a very low likelihood of a total sales ban or total monopoly. Wu Li, deputy director of Tianfeng Securities Research Institute.

Shi Kefan, chief analyst of Zheshang Securities's light industry manufacturing industry, also thinks that e - cigarettes have played a huge role in providing employment opportunities in our country, and it has also created a large amount of export earnings. Moreover, the industrial technology of most of these companies has been controlled by Chinese enterprises. So we believe the possibility of China Tobacco restricting the development of e - cigarettes is very small, and a series of supporting measures may be introduced in the future, promoting the healthy development of the industry.

In this regard, Beijing Tobacco Control Association recently responded to the commercial draft for comments hot spot, saying that the chaos of e - cigarettes should be strengthened, but e - cigarettes are suggested that should not be included in the tobacco monopoly supervision scope, should be handed over to the health and health department, food and drug supervision department or market supervision bureau for supervision. According to Zhang Jianshu, president of the Beijing Tobacco Control Association, heat - not - burn e - cigarettes are tobacco products, while other major types are not tobacco products.

Many people at the same time believe that after the e - cigarette regulatory policy is implemented,that means atomized tobacco products (HNB) will be legal in the future.

Everbright Securities analysts believe that the draft for comments has clearly specified that e - cigarettes are tobacco products, and NHB will be legal in China in the future as a product closer to tobacco. A small talk - at blending level, the Long, the Original, the DUO & other countries: (1) HNB will be gradually released in all provinces; Have to meet more consumers needs for killing - reduce harm, improve consumer experience & cigarette structure.

3- Regulation Policies Will Increase Industry Concentration

CITIC Securities assumes that e - cigarettes are managed by monopoly in strict accordance with the law. In this extreme case, it means that, for RELX Technology, an e - cigarette enterprise that just hit the US stock market in January this year, its domestic operations are expected to cease to exist. Smoore's remaining pure e - liquids. e - liquids may be impacted by the exit of the business, only to retain the mainland atomization equipment production business. 2021 Smoores adjusted net profit is expected to be downward adjusted 20%-25% to around 4-5 billion, the performance of the next three years of compound growth is expected to fall from about 40% to about 30%.

On the other hand, in an optimistic case, if the revision of the Tobacco Monopoly Law Implementation Regulations becomes a hurdle, the country will regulate atomization e - cigarettes through registration and filing system + consumption tax method. In this case, the leading company will have strong operational visibility, solidified leading position over other competitors, stable revenue forecast, and higher valuation potential. RELX Technologys valuation multiple is more sensitive to dollars than Smoore.

This draft sought to solicit opinions, now does not have to take monopoly management route, but for long time, to grasp the value of the leader. CITIC Securities: once this receiving opinions draft released, the market tendency to monopoly management is increasing Nov caution statement, noting it does not mean that will definitely STR with monopoly management.

To note, the draft issued for comments does not contain the regulatory details. Wu Li stated that the "Preface" of this regulation clarifies the regulatory subject and direction for atomized vape. There are nuances to work out yet. The regulation will set the industry threshold, enhance the concentration of the industry, and promote the leading companies in the upstream and downstream of the industry.

According to Huatai Securities, from the US market, if our countrys revised content is eventually implemented, the development of our countrys Vape industry may slow down in the short term, and the performance growth of Vape production, brand and retail enterprises may be under pressure in the short term. In the long run, the monopoly of various links in the Vape industry will be further improved.

4- Additional Exploration of the Effect of Regulatory Policies

Here, the Vape industry is at the center of a larger system of lives, families, communities, and industries that balance social stability, economic equity, and public health for billions of people. For the consumer, the stricter regulations could result in more uniform products on the market. If the state adopts model of monopoly- like management, it will more seriously control the product quality and safety. This, in turn, would make it less likely that people would use substandard or counterfeit e - cigarettes. On the other hand, with more resources necessary to navigate the industry these practices could limit the quantity of products available in the market where smaller players might be forced out of the market since they don't have the money or human resources necessary to absorb the costs of increased regulation.

As highlighted, for the manufacturers, particularlyking companies like Smoore and RELX Technology, the governing changes are indicative of both a challenge but also an opportunity. Research of CITIC Securities shows that in the case of strict monopoly - style management, companies like RELX Technology may not be able to develop well in domestic operations. Their business models, which reaped the rewards of a relatively free - market environment, may need to be entirely reconfigured. Ultimately, at least its atomization equipment production business will be retained but Smoore will suffer from a shrinked profit margin to its shareholders, as well as growth rates in shares.

On the other hand, if the regulation is more of a registration and filing system with consumption tax, it would favor leading companies. They in particular have the means and scope to quickly adjust to the new regulatory demands. Might come to dominate even more, and could increase their market share if smaller, non-compliant players are driven out of the market. We would therefore see rising industry concentration, as noted above.

Raw material suppliers of the Vape industry, such as e - liquid ingredients, battery components, and vaping device parts, will also be affected. As stricter standards come into force, they might have to meet higher quality demands. This may result in a supply chain shake - out, where it only suppliers that pass the new requirements will be in business. Surviving suppliers may boost orders from the reduced number of, larger manufacturers the rest of the industry, however.

5- Cross-Cultural Perspectives and Comparisons

We have seen several regulatory approaches to vape adopted by countries across the globe. In certain European nations e - cigarettes are treated as consumer products, and media and sales regulations tend to be loose. This has enabled rapid growth of the vape market, with a diverse range of products open to consumers. Meanwhile, other countries, such as Singapore, have outlawed the sale of e - cigarettes completely, citing concerns about public health and potential youth vaping.

The U.S. has a patchwork of regulations for e - cigarettes. The Food and Drug Administration (FDA) gradually sharpened its rules. It has mandated pre - market authorization for e - cigarette products, resulting in the exit of many small - scale manufacturers from the market. US experience also shows that regulatory changes can dramatically steer the direction of the industrys development. If China going the same way of strict regulation, there would be a short - term slowdown at the e - cigarette industry, said Huatai Securities. However, it could also result in a healthier and more sustainable industry structure in the long term.

6- The Role of Technology in the Face of Regulatory Change

Under the background of new regulation scenario, the future development of the Vape industry will closely inextricable relationship with technology. Manufacturers should invest in R&D to enhance the quality & safety protocols of their products as focus around quality & safety of product short of regulations will take time. For instance, improving e-liquid formulations to minimize potential health risks, and advancing better battery technologies to significantly minimize the threat of overheating and exploding.

Moreover, technology may also enable companies to more efficiently meet the requirements of regulators. For example, monitoring the source and movement of raw materials in the supply chain using a blockchain, which can improve visibility and compliance with regulatory requirements for product traceability. Further innovation may also give rise to new categories of e - cigarette products that better meet regulatory conditions, including reduced nicotine content products or more effective harm - reduction features.

China's Vape industry is about to usher in new change of regulation. The draft of the Regulations for the Implementation of the Tobacco Monopoly Law amendment for comments has caused extensive discussions and reactions in the market. The industry might go towards monopoly management, and it might not. But the intention is certainly nothing else than to lock the industry in to develop in a more standard and therefore healthy way, whether regulatory policies take shape in one way or the other.

From manufacturers and suppliers to consumers, the impact of these regulatory changes will extend to all its parts. Leading companies must rapidly adjust to the new regulatory environment, whether it wants to go the direction of a more monopolistic model or a registration-and-filing- based approach. The development of the industry's future is inextricably linked to technological innovation, which can improve the industry's product developments, align with the technical requirements of regulatory authorities and regulations. In the future, as the details of the above topic gradually implemented, the Vape industry may be in the future of running-in, but it also has the possibility to be the future of halfway debut, becoming a more regulated and sustainable segment.

Vape User Feedback Reference

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