Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Autos & Shared Mobility - **Date**: February 10, 2025 - **Market Context**: Overall January sales were better than expected due to trade-in subsidy extensions, but most electric vehicle (EV) manufacturers have extended or increased promotions to secure orders during the low season in Q1 [1][5] Company-Specific Insights BYD - **Price Trends**: January blended price decreased by 0.5% month-over-month (MoM) with discounts slightly down by 0-1% [2] - **Promotions**: Continued offering trade-in subsidies of Rmb6-8k and Rmb5k insurance subsidies [2] - **Future Strategy**: Upcoming smart driving strategy to be unveiled, with potential L2+ NOA features in new models [2] - **Key Questions**: 1. Will highway NOA be standard across all models or limited to mid/high-end editions? 2. Expected price gap between new and legacy models is speculated to be Rmb5-10k. 3. Will there be official price cuts on legacy models to boost Q1 sales? [2] Li Auto - **Price Stability**: Blended prices remained steady MoM in January, with non-cash incentives increasing in February [3] - **Promotions**: Offering an additional Rmb6-8k replacement subsidy across all models [3] - **Market Sentiment**: January sales were lackluster, supporting bearish market views that further discounts may be forthcoming [3] NIO - **Price Stability**: Retail prices were largely steady MoM in January, with increased non-cash incentives in February [3] - **Promotions**: Offering Rmb10k cash subsidies and additional BaaS vouchers, with a reduction in spec upgrade subsidies [3] XPeng - **Price Trends**: Blended prices fell by 2% MoM, with specific models seeing price reductions of 2-6% [4] - **Promotions**: Introduced a 0% interest rate and 0% down payment campaign for certain models [4] Market Dynamics - **Discount Trends**: Anticipation that discounts will persist or worsen in the coming weeks as OEMs aim to reduce inventory ahead of new model launches in March/April [5] - **Competition**: Monitoring local players' adoption of L2+ NOA in the mass market segment, which could introduce new competition in 2025 [5] - **Upcoming Launches**: Pricing strategies for new models from Tesla, AITO, Xiaomi, BYD, Denza, and XPeng are under observation [5] Promotional Changes Summary - **Tesla**: Introduced an Rmb8k insurance subsidy for Model 3 and a 0% interest rate [9] - **Xiaomi**: No changes in promotions [9] - **Li Auto**: New local subsidies and financing promotions introduced [9] - **NIO**: Adjusted subsidy structure and increased BaaS vouchers [9] - **XPeng**: Launched a 0% interest rate and down payment campaign [9] - **BYD**: Continued existing discounts without changes [9] Conclusion - The Chinese auto market, particularly in the EV segment, is experiencing aggressive promotional strategies as companies navigate a low sales season. The focus on subsidies and pricing adjustments indicates a competitive landscape as manufacturers prepare for new model launches and seek to maintain market share.

Summary of Conference Call Notes on China Autos & Shared Mobility Industry Overview - The China auto industry has shown signs of consolidation since 2023, but remains highly segmented with intense competition [1] - A restructuring plan for central state-owned OEMs is anticipated to facilitate meaningful industry consolidation [1] Company-Specific Developments - Changan announced on February 9, 2025, that its ParentCo is planning a restructuring with other central SOEs, potentially altering controlling shareholders while maintaining ultimate ownership under the State-owned Assets Supervision and Administration Commission [2] - Dongfeng has made a similar announcement, suggesting a potential merger between their ParentCos or inclusion of other central SOEs [2] Implications of Restructuring - If the restructuring occurs, it could significantly impact the long-term dynamics of China's auto industry, given the annual vehicle sales involved: 2.7 million units for Changan and 2.5 million units for Dongfeng in 2024 [3] - Short-term impacts on daily operations are expected to be limited, indicating a gradual restructuring process starting at the ParentCo level, with business-level integration taking longer [3] - The restructuring is expected to lead to more disciplined investment by the involved central SOEs, better resource allocation towards competitive brands, and accelerated industry consolidation [3] Company Performance Insights - Changan is favored among SOEs for its growth potential and strong position in the smart EV segment [4] - Dongfeng is currently facing challenges with pressured joint venture sales and profitability erosion from local brands, but the restructuring could enhance its intrinsic value through centralized resource allocation and improved asset utilization efficiency [4] - Despite the potential benefits, Dongfeng may incur near-term restructuring costs due to inferior capacity utilization projected for 2024 [4] Market Outlook and Risks - The overall industry view remains in-line, with expectations of better-than-expected sales from both domestic and overseas markets, aided by an expedited NEV transition [6] - Risks include weaker-than-expected NEV sales amid competition, demand slowdowns, and potential profit volatility due to shrinking ICEV demand [12] Valuation Methodology - Changan's valuation is based on a DCF model with a WACC of 11.6% and a terminal growth rate of 2% [8] - Dongfeng's valuation also follows a DCF model, with a WACC of 10.8% and a terminal growth rate of 1% [9] Conclusion - The restructuring of central SOEs in the Chinese auto industry represents a significant shift that could enhance competitive dynamics and operational efficiencies in the long term, despite short-term challenges and risks associated with market competition and demand fluctuations [3][4][12]

Summary of Key Points from the Conference Call on the Chinese Industrial Automation Industry Industry Overview - The report focuses on the **Chinese industrial automation industry** and presents trends up to the fourth quarter of 2024 [1][2]. Core Insights and Arguments - **Demand Recovery**: - Factory automation (FA) demand began to recover in the second half of 2024, with industrial robot shipments growing by **1% YoY** [2]. - Collaborative robot (cobot) shipments saw a significant increase of **25% YoY** [2]. - The CNC segment experienced double-digit growth, driven by strong demand from consumer electronics and automotive sectors [2]. - **Sector Performance**: - The AC servo market started to show year-on-year growth in Q4 2024, supported by electronics, consumer products, and export-related products [2]. - The decline in low-voltage variable frequency drives (VFD) narrowed, with improving demand partially offset by declines in property-related sectors [2]. - Small and medium/large programmable logic controllers (PLCs) remained weak due to high exposure to solar and elevated channel inventory from EU/US brands [2]. - **Battery and Solar Industry Impact**: - Demand from the battery sector turned positive in Q4 2024, while solar demand continued to decline, contributing less than half of its peak from 1.5 years ago [3][9]. - **Market Share Dynamics**: - Local players are gaining market share in six-axis robots and PLCs, with companies like Inovance and Estun leading in various segments [4]. - Chinese players' collective market share in six-axis robots increased by over **600 basis points** in 2024, reaching **44%** by year-end [4]. - In small PLCs, Inovance and Xinje became the second and third largest players in the second half of 2024 [5]. - **End-Industry Mix**: - The end-industry mix for industrial robots remained stable, with automotive and auto parts accounting for high 20s percentage, electronics in low 20s, and new energy sectors in mid-teens [6]. Additional Important Insights - **Cobot Applications**: The diversification of applications for cobots increased, with the fastest growth observed in food & beverage, semiconductors, and automotive sectors [6]. - **Foreign Brand Resilience**: Not all foreign brands are negatively impacted by increasing competition from Chinese companies; technology leaders like FANUC and Keyence are managing to defend their market positions effectively [5]. - **Market Trends**: The report indicates that the overall recovery in the automation sector is broad-based, particularly strong in automotive and electronics verticals, as confirmed by multiple Chinese FA companies [2]. Conclusion - The Chinese industrial automation industry is experiencing a recovery phase, with significant growth in specific segments like cobots and CNCs. Local players are increasingly dominating the market, while established foreign brands continue to adapt to the changing landscape. The report highlights the importance of monitoring these trends for potential investment opportunities and risks in the sector.

Investment Rating - The report maintains a Sell rating on TUHU Car Inc [6][87]. Core Insights - The Q424 data indicates that TUHU and JD Auto accelerated store expansion, particularly in high-tier cities, while Tmall Auto's store count in tier-4 cities decreased, suggesting declining profitability for franchisees [2][3]. - Competition among TUHU, Tmall Auto, and JD Auto has intensified, with significant overlap in store locations, leading to limited differentiation and weaker marginal benefits from new store openings [4][5]. - The report highlights that over 85% of JD Auto and TUHU stores compete with themselves within a 15-minute drive, indicating increasing cannibalization [5][41]. Summary by Sections Store Footprint - TUHU leads with approximately 6,600 stores, followed by Tmall Auto with around 2,100 and JD Auto with about 1,900 stores. The expansion in Q424 saw JD Auto and TUHU adding over 210 and 160 stores respectively, while Tmall Auto only added 35 stores [3][10]. - The majority of new store openings (over 60%) were concentrated in tier-1 and tier-2 cities, with a notable decline in Tmall Auto's presence in tier-4 cities due to economic pressures [18][19]. Competition - The report notes a significant overlap in store locations, with an average of 4.6 JD Auto and Tmall Auto stores reachable within a 15-minute drive from a TUHU store, indicating high competition [4][22]. - Nearly 65% of TUHU stores compete with at least one JD Auto store within a 15-minute drive, reflecting the competitive landscape in high-tier cities [37][38]. Cannibalization - The cannibalization share for JD Auto and TUHU stores is over 85%, with the number of competing stores increasing significantly in Q424, suggesting that new store openings are not yielding the expected benefits [5][43]. - The report indicates that the internal competition is intensifying, with the number of stores competing with another store of the same brand increasing close to or outpacing net store additions [5][43]. Stock Implications - The report suggests that TUHU's pace of store openings is likely to slow down, which may negatively impact its topline growth and margin expansion [6].

Summary of China Auto Manufacturers CPCA Expert Call Takeaways Industry Overview - **Industry**: China Auto Manufacturers - **Key Expert**: Mr. Cui Dongshu from China Passenger Car Association (CPCA) Core Insights and Arguments 1. **2025 Old-for-New Subsidy Expansion**: - The scope of the old-for-new subsidy will expand to include gasoline vehicles registered before June 30, 2012, potentially driving 1.2-1.8 million incremental unit sales in 2025 [1][3] 2. **Demand Pull Forward**: - Demand of 1.0-1.6 million units has been pulled forward from the first half of 2025 to the second half of 2024 due to policy changes [1][4] 3. **January 2025 Sales Forecast**: - Expected decline in January 2025 retail sales by 20% YoY, with a 40% MoM drop observed in early January [1][5] - NEV wholesale volume is projected to drop 40% MoM to approximately 900,000 units, but still show a 30% YoY increase [1][5] 4. **2025 Sales Growth Projection**: - FY25 sales are expected to grow by 2% YoY, with a strong rebound anticipated in the second half of the year due to the full execution of the old-for-new policy and a halving of NEV purchase tax exemptions starting in 2026 [1][7] 5. **2024 Sales Performance**: - FY24 retail and wholesale volumes grew by 5.5% YoY, reaching 22.9 million and 27.2 million units, respectively, exceeding earlier forecasts [1][8] 6. **December 2024 Sales Trends**: - December 2024 retail sales reached 2.64 million units, a 12% YoY increase, but still below the historical peak of 2.75 million units in 2017 [1][9] - NEV wholesale volume in December 2024 was 1.51 million units, a 36% YoY increase [1][9] 7. **Pricing Trends**: - December 2024 pricing remained stable with average discounts of 9% for ICE vehicles and 8.9% for NEVs [1][11] - Price competition is expected to intensify in 2025, particularly among domestic brands leveraging PHEV cost advantages [1][12] 8. **Competitive Landscape**: - Traditional automakers like BYD, Geely, and Changan are expected to lead in volume growth, while NEV startups may face challenges due to a lack of PHEV models [1][14] Additional Important Insights - **Subsidy Impact**: The total subsidy for the old-for-new program is estimated at RMB 60-70 billion, with local trade-in volumes outperforming expectations [2][3] - **Production Adjustments**: Leading OEMs intentionally scaled back production in December 2024 to prepare for moderate growth in FY25 [1][10] - **Market Sentiment**: Consumer purchasing power and confidence appear weaker compared to previous highs, impacting sales performance [1][9] This summary encapsulates the key points from the expert call regarding the current state and future outlook of the China auto manufacturing industry, highlighting both opportunities and challenges.

Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the **US Autos & Industrial Tech** sector, particularly insights from **CES 2025** and discussions with various companies including **Mobileye**, **Aptiv**, **Visteon**, **Gentex**, **Innoviz**, **Luminar**, **Ambarella**, **Continental**, **BlackBerry**, and **Jabil** [1][2]. Core Insights and Arguments Mobileye - Mobileye positions itself as a **tech enabler of autonomy**, emphasizing a cost-effective and scalable approach for OEMs, but has not secured major wins since CES last year [3][4]. - The company believes it can convert potential program awards into contracts, with expectations for **SuperVision** and **Chauffeur** products to be deployed in **2026** and **2027** respectively [6][9]. - Mobileye's stock has seen a **22% decline** since January 7, 2025, attributed to the lack of new awards at CES and competition from other vendors like Nvidia [4][10]. - Key risks include market share competition, geopolitical tensions affecting operations in China, and reliance on HD maps for driving policy [13]. Aptiv - Aptiv highlighted its focus on **cost and flexibility** for OEMs, showcasing its ability to use various chip vendors to enhance customer time to market [14][15]. - The company is seeing increased interest in **L2-L2++ designs**, with its **Gen 6 ADAS** expected to ship in **2026** [15][16]. - Aptiv's stock is rated as a **Buy**, with a 12-month price target of **$71** [17]. Visteon - Visteon is focusing on **AI in the cockpit**, offering an end-to-end solution that is both power and cost-efficient for OEMs [19][20]. - The company believes it can achieve a **2X content uplift** with its AI cockpit solutions compared to non-AI systems [22]. - Visteon is rated as a **Buy**, with a price target of **$108** [25]. Gentex - Gentex showcased innovations in **thermal imaging technology** and **driver monitoring systems**, with a focus on upcoming regulations for nighttime pedestrian detection [28][29]. - The company announced a definitive agreement to acquire **VOXX International**, expected to increase annual revenue by **$350 million to $400 million** [35][38]. - Gentex is rated as **Neutral**, with a price target of **$30** [39]. Innoviz - Innoviz is strengthening its relationships with **Mobileye** and **Nvidia**, with expectations of receiving over **$80 million** through a multi-year NRE payment plan [41][45]. - The company is rated as **Neutral**, with a price target raised to **$2** [47]. Luminar - Luminar's **Halo lidar** product is expected to launch in **2026/2027**, with significant improvements in performance and cost [50][51]. - The company is rated as a **Sell**, with a price target lowered to **$7** [57]. Ambarella - Ambarella is focusing on its **CV3 chip** for automotive applications, with expectations of revenue ramping in **2026** [59][60]. - The company is exploring opportunities in telematics and edge AI applications [63]. Continental - Continental is developing scalable **ADAS/AV solutions** and emphasizes the importance of power efficiency in chip selection [66][68]. - The company is collaborating with **Aurora** for autonomous trucking, with plans to manufacture the Aurora Driver system starting in **2027** [69]. BlackBerry - BlackBerry is narrowing its focus on **QNX solutions** to simplify vehicle software development for OEMs [71][73]. - The company is positioning itself to capitalize on the growing demand for software-defined vehicles [73]. Jabil - Jabil is well-positioned to support OEMs in **autonomy, connectivity, electrification**, and **software-defined vehicles**, with a **95% win rate** in these areas [75][76]. - The company expects growth in its automotive segment, particularly tied to EVs [77]. - Jabil is rated as a **Buy**, with a price target of **$160** [83]. Other Important Insights - The conference highlighted the increasing role of **AI** in automotive technology, particularly in enhancing product capabilities and development for autonomous vehicles [2]. - Geopolitical challenges and supply chain resiliency were emphasized as critical factors for OEMs in navigating the current market landscape [2][10]. - The competitive landscape is intensifying, with traditional tech companies entering the automotive space, raising concerns about market share for established players [25][13].

Summary of Shenzhen Inovance Technology Conference Call Company Overview - **Company**: Shenzhen Inovance Technology (Ticker: 300124.SZ) - **Industry**: Automation and New Energy Vehicles (NEV) - **Market Capitalization**: Rmb153,107 million - **Current Share Price**: Rmb57.20 (as of January 9, 2025) - **Price Target**: Rmb65.00, indicating a 14% upside potential [5][8] Key Insights from the Conference Call Automation Market Outlook - Management expects the automation market to stabilize in 2025, driven by: - Ongoing consumption stimulus - Equipment upgrades - Energy-saving transformations - Emerging market demands, including humanoid robots and electric vertical takeoff and landing (eVTOL) vehicles [1][2] - New energy vehicle (NEV) orders in Q4 2024 accounted for approximately 10% of total orders, indicating stabilization [1] Product Development and Launches - Inovance plans to launch humanoid robot component products in 2025, focusing on upper limb applications [2] - The NEV powertrain business is projected to grow faster than the industry average, with the top five clients contributing around 60% of total NEV revenue [2] International Expansion - The company aims to accelerate overseas growth to 20-30% year-on-year in 2025, up from approximately 20% in 2024 [3] - Key markets include Southeast Asia, Korea, Turkey, and the Middle East, with negotiations ongoing for a potential plant in the US [3] Financial Projections - **Revenue Growth**: - 2024 Estimated Revenue: Rmb38,754 million - 2025 Estimated Revenue: Rmb46,408 million - 2026 Estimated Revenue: Rmb55,083 million [5] - **Earnings Per Share (EPS)**: - 2024 Estimated EPS: Rmb1.87 - 2025 Estimated EPS: Rmb2.17 - 2026 Estimated EPS: Rmb2.49 [5] Risks and Challenges Upside Risks - A stronger-than-expected macroeconomic environment could boost demand for automation products [9] - Enhanced sales of electric powertrains equipped with Inovance's EV control systems in 2024 [9] Downside Risks - Potential failure to develop high-end automation products, leading to declining average selling prices (ASP) for low-end products due to competition [10] - Larger-than-expected declines in gross margins due to raw material price increases [10] Conclusion Shenzhen Inovance Technology is positioned for growth in the automation and NEV sectors, with a focus on product innovation and international expansion. However, the company faces risks related to product development and market competition that could impact its financial performance.

Company-Specific Information * **Product Rollout**: Guangzhou Automobile Group (GAC) plans to launch 6 new products under its Aion and Trumpchi brands in 2025. This includes 3 brand new products and 3 facelifts for Aion, and 4 new products for Trumpchi. Sales contribution from these new products is expected to start from Q1 2024. [1] * **Huawei Partnership**: GAC has partnered with Huawei for product design and customer management. The first B-class luxury SUV under this partnership is expected to be launched in the second half of 2026. GAC aims to launch 4-5 new products in the near future, which management expects will support stable annual sales of 400-500k units. [2] * **GAC-Honda JV**: GAC-Honda's decision to reduce total capacity in 2024 resulted in a one-off impairment cost of approximately Rmb1.5bn for the joint venture. However, this move improved the total capacity utilization to a healthier level of around 70%, similar to the utilization rate of GAC-Toyota. Management expects both joint ventures to achieve decent profitability at this level of production. [3] Industry Information * **Economic Sanctions**: The research notes that the data and analysis are for informational purposes only and do not represent Morgan Stanley's view on the potential application of sanctions to any entities or securities mentioned. Users are responsible for ensuring compliance with applicable sanctions. [4] * **Export Controls**: The research mentions that certain items covered by the Export Administration Regulations (EAR) may be subject to export control restrictions. Users are responsible for ensuring compliance with applicable export control laws. [5] * **Industry View**: The research provides a detailed analysis of the China Autos & Shared Mobility industry, including stock ratings, price targets, and industry views. [7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78]

Summary of the Conference Call on Asian Industrial Technology - China Automation Pulse Check: December 2024 Industry Overview - The report focuses on the automation industry in China, highlighting trends in orders and demand from various sectors, particularly in December 2024 [1][3]. Key Points Overall Market Trends - Automation demand across most end industries is experiencing growth between 10% to 20% year-over-year (YoY) [3][12]. - The headwind from the new energy sector is diminishing, with December showing particularly strong performance, continuing the trend from the fourth quarter after a weak summer [3][12]. Company-Specific Insights - **AirTAC**: - Shipments to battery, machine tool equipment, general machinery, electronics, and automotive industries are maintaining high growth. - New orders intake has surpassed sales, indicating strong future growth potential. - Revenue growth is stronger than seasonal trends, with expectations for moderate growth in 2025 [3][12]. - **Inovance**: - General automation grew approximately 20% YoY, with the impact from new energy becoming mild [3][12]. - **Estun**: - Sales and orders from the new energy sector have drastically declined by over 50% YoY, particularly in solar. - Other sectors, especially electronics and automotive, have shown meaningful growth, with domestic orders growing over 20% YoY in 2024 [3][12]. - **Xinje**: - Solid demand from consumer electronics and packaging, with logistics growing over 20% YoY. The Li-ion battery industry is recovering moderately, while solar remains muted [3][12]. - **Yiheda**: - In December, demand and customer confidence improved, with shipments and new orders growing approximately 20% and 30% YoY, respectively. - New energy sectors contributed about 20% of shipments, with Li-ion battery shipments at approximately 18% and solar at 3% [3][12]. Financial Metrics - **AirTAC**: - December 2024 sales growth was reported at 13.7%, a significant recovery from previous months [4]. - **Inovance**: - Orders grew by around 20% YoY in December [4]. - **Estun**: - Orders remained flat in December, with a notable decline in new energy orders [4]. - **Yiheda**: - Shipment growth was approximately 20% YoY, with a strong performance in the 3C/mobile phone and automotive sectors [4][12]. Investment Implications - The report reiterates an "Outperform" rating for AirTAC and Inovance, while maintaining a "Market-Perform" rating for Estun [12]. Risks - Risks associated with the automation sector include potential weaker-than-expected demand in China, trade frictions, and currency fluctuations. Specific risks for each company include: - **AirTAC**: Weaker automation demand and price competition [22]. - **Estun**: Integration risks from acquisitions and slower margin improvements [23]. - **Inovance**: Weaker demand in segments outside of servo motors and variable frequency drives (VFD) [24]. Conclusion - The automation industry in China is showing signs of recovery, with several companies reporting strong growth in various sectors. However, potential risks remain that could impact future performance. The overall sentiment is cautiously optimistic, with specific companies positioned for growth in 2025.

Summary of Key Points from the Conference Call Industry Overview - The Chinese autos industry is projected to experience a **1% volume growth** in 2025, reaching approximately **27.5 million units**. This includes about **22.1 million units** for the domestic market (a **-1% decline**) and **5.4 million units** for exports (a **+10% increase**) [1][9][17] - Domestic demand is expected to face pressure, with a forecasted **-5% decline** due to significant demand being pulled forward into the second half of 2024, driven by government trade-in subsidies [1][9][17] Electric Vehicle (EV) Market - EV sales are anticipated to grow by **25%**, reaching **15 million units** in 2025, with domestic penetration expected to hit **60%** [2][10][19] - In 2024, EV sales re-accelerated, growing **48% year-over-year** in the first eleven months, with strong performances from Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) [2] - BEV sales penetration is projected to reach **33%** in 2025 (up from **27%** in 2024), while PHEV penetration is expected to reach **27%** (up from **19%** in 2024) [2][19] Competitive Landscape - Competition in the EV market is expected to intensify, with PHEVs from Chinese brands becoming increasingly popular among consumers traditionally interested in Internal Combustion Engine (ICE) vehicles [3] - New PHEV launches have achieved price parity with ICEs, supported by enhanced policy backing and advanced features [3] - Chinese EV brands are anticipated to continue gaining market share from German, Japanese, and U.S. joint venture brands in both premium and mass markets [3] Export Dynamics - Exports are identified as a key growth driver, with **Russia** being the top destination for Chinese cars in 2024, although growth is expected to slow. The **Middle East** and **LATAM** regions are showing strong momentum and are likely to drive growth in 2025 [4][9] - Chinese OEMs are rapidly adopting AI technologies to enhance autonomous driving features and in-cabin experiences, with L2+ ADAS penetration reaching **15%** [4] Company-Specific Insights - **Great Wall Motors** has been downgraded to **Market-Perform** with a price target of **HK$14.50**, down from **HK$15.50** due to anticipated challenges in the domestic market and slower overseas growth, particularly in Russia [5][6] - **BYD** is rated as the top **Outperform** pick, supported by a competitive cost structure and strong R&D capabilities [6] - **Li Auto** and **Geely** are also rated **Outperform**, while **XPeng**, **Great Wall**, **NIO**, **SAIC**, and **GAC** are rated **Market-Perform** [6][10] Investment Implications - A cautious outlook for the sector is maintained at the start of 2025, with expectations of a **-5% year-over-year** decline in retail sales volume due to challenges in the macro-economy and consumer confidence [9][10] - Despite the challenges, exports are expected to continue driving growth, albeit at a more moderate rate than in previous years [9][10] Additional Considerations - The long-term growth outlook for EVs remains positive, with the transition to mass adoption in China expected to continue [10] - The competitive environment is likely to exert pressure on pricing and profitability within the domestic market [10]