According to data from Essence Securities Research Report, in 2019, the global retail sales of vaping e-cigarettes was 36.7 billion U.S. dollars, a year-on-year increase of 28.32%, accounting for 4.2% of the global tobacco market. From the perspective of the proportion of retail sales, the market share of e-cigarettes is not high, but from the perspective of development trends, the popular trend of e-cigarettes has emerged.

From 2014 to 2019, the global compound annual growth rates of cigarettes, vaping e-cigarettes, HNB and other tobaccos were 3.18%, 24.24%, 235.21% and 3.24%, respectively. vaping e-cigarettes and HNB were the fastest growing tobaccos According to the calculation of this growth rate, the market share of e-cigarettes is expected to increase from 4.2% to 9.3% by 2024.

Specific to the domestic e-cigarette market of segmented types, according to the data of Tou Leopard Research Institute, the domestic e-cigarette market is dominated by closed e-cigarettes. In 2016, the scale of closed e-cigarettes in China was only 2.010 billion yuan. In 2020, it will rapidly rise to 11.8 billion yuan, with a compound annual growth rate of 55.80%; due to the complicated replacement of open e-cigarette oil and fewer manufacturers, 2016 The annual market size was only 1.95 billion yuan, and the market size remained basically stable; during the same period, the sale of HNB was prohibited in China, but tobacco companies such as China Tobacco Group have already actively deployed the HNB market.

It can be seen that the domestic e-cigarette market demand is huge and the growth rate is rapid. Once the "finalized" regulatory policy of the e-cigarette industry is implemented, domestic e-cigarette consumer electronics-related companies will most likely usher in the second growth curve.

In recent years, as a new type of e-cigarette, the corresponding domestic regulatory policies are still in the exploratory period. From the order of policy promulgation, it can be seen that the supervision of e-cigarettes by national regulatory agencies has gradually become clear.

According to public information, on August 30, 2018, the State Administration for Market Regulation and the State Tobacco Monopoly Administration issued the "Notice on Prohibiting the Sale of Electronic Cigarettes to Minors". This notice has the same sales management standards for electronic cigarettes as cigarettes.

On January 1, 2019, the newly revised "Hangzhou Municipal Smoking Control Regulations in Public Places" was formally implemented, and e-cigarettes are included in the scope of smoking ban just like ordinary cigarettes. In June of the same year, the "Shenzhen Special Economic Zone Regulations on Smoking Control" officially included e-cigarettes in the scope of tobacco control.

On November 1, 2019, the State Tobacco Monopoly Administration and the State Administration for Market Regulation jointly issued the "Notice on Further Protecting Minors from E-cigarettes", which clearly stated that e-cigarettes should not be sold to minors and should not be approved. When selling electronic cigarettes on the Internet, it is not allowed to publish electronic cigarette advertisements through the Internet.

On March 22, 2021, the Ministry of Industry and Information Technology publicly solicited opinions on the "Decision on Amending the Implementation Regulations of the Tobacco Monopoly Law of the People's Republic of China" (Draft for Solicitation of Comments). In the draft opinion, an article is added to the supplementary provisions of the "Regulations on the Implementation of the Tobacco Monopoly Law": "E-cigarettes and other new tobacco products shall be implemented with reference to the relevant regulations on cigarettes in these regulations."

According to the research report of Industrial Securities, China Tobacco Group has started to deploy in the e-cigarette and HNB industry chain very early. In 2018, China Tobacco Group gradually commercialized e-cigarettes, launched its own brand of e-cigarettes, and invested in e-cigarette companies through strategic investment. At the same time, Sichuan China Tobacco launched the HNB brand "Wide and Narrow Kungfu"; in 2019, the e-cigarette brand "Laimi" under the Guangdong Wuyeshen Group was established; in 2020, the e-cigarette developed by Sichuan China Tobacco and South Korea YM was exported to the Korean market. Kuanzhai Kungfu is also testing the domestic market, opening offline experience stores in Nanjing and other cities.

In addition, domestic listed companies also low-key involvement in the e-cigarette industry. According to Xuanbao APP data, there are as many as 32 listed companies in the e-cigarette sector, among which Penghui Energy (300438.SZ) disclosed in July 2020 that the domestic e-cigarette leader Smol International (6969.HK) is its e-cigarette battery customer ; Yingqu Technology (002925.SZ) focuses on the research and development of heat-not-burn tobacco equipment, and its main customer is Philip Morris International (IQOS), the world’s largest tobacco company; Yiwei Lithium Energy (300014.SZ) has cooperated as early as 2011 McWell, which was established only two years ago, formed a supplier relationship and supplied it with small soft-pack lithium-ion batteries. In 2014, the company acquired 50.10% of McWell’s equity for 440 million yuan. In 2020, McWell will be in Hong Kong. Listed.

From this perspective, in the short term, policy supervision is the core risk to curb the development of the e-cigarette market, but in the long run, strong supervision will certainly accelerate the concentration of the brand structure to a certain extent.