Summary of Conference Call on China Autonomous Driving and Robotaxi Market Industry Overview - The focus is on the **China Autonomous Driving** sector, particularly the **robotaxi** market, which is expected to experience significant growth due to global competition and regulatory support [1][2]. Key Insights - A **70%+ five-year CAGR** (Compound Annual Growth Rate) is projected for robotaxi sales, with risks skewed to the upside, indicating a strong market potential [2]. - The global taxi and ride-hailing platforms currently have **10-15 million active vehicles**, generating over **70 million trips daily**. The US and China are expected to dominate **40%** of this market with home-grown robotaxi companies [3]. - Developing markets, particularly in the **Middle East**, **Europe**, and **ASEAN** regions like **Singapore**, are identified as strategic opportunities for robotaxi expansion due to high driver costs [3]. Competitive Landscape - Major robotaxi players are eager to establish a presence in both local and global markets. The first movers who can eliminate drivers from the initial **1%** of the **15 million** vehicles on taxi platforms could see their market caps increase significantly [4]. - The pursuit of cost-effective solutions and scalable operations is becoming increasingly challenging. Strategic partnerships with local firms are essential for achieving higher vehicle utilization and lower operating costs [5]. Technological Advancements - Chinese hardware manufacturers, particularly in the **LiDAR** sector, are expected to be early beneficiaries of the growing robotaxi market due to a relative scarcity of supply globally [6]. - The estimated cost for robotaxi vehicles is projected to be between **US$30,000 to US$35,000** in 2026, with potential time-to-market reductions of **40%** and cost savings of **30%** achievable through Chinese solutions [5]. Company Recommendations - **Hesai Group (HSAI.O)** and **WeRide (WRD.O)** are highlighted as companies with strong potential in the robotaxi and LiDAR markets, receiving an **Overweight (OW)** rating [6]. Risks and Challenges - Potential risks include regulatory headwinds in deploying robo-vehicles, slower adoption rates of LiDAR technology, and competition from emerging technologies that could substitute current solutions [15][18]. - The timeline for large-scale commercialization of robotaxis and related vehicles may face delays due to regulatory challenges and licensing issues for overseas operations [18]. Conclusion - The robotaxi market in China is poised for rapid growth, driven by technological advancements and strategic partnerships. However, companies must navigate regulatory landscapes and competitive pressures to capitalize on this opportunity.

Investment Rating - The report assigns a "BUY" rating to PetroChina with a target price of HK$9.62 for H shares and RMB10.92 for A shares, indicating an expected total absolute return greater than 10% over the next twelve months [6][7][8]. Core Insights - PetroChina's recent reverse roadshow in the Sichuan-Chongqing area highlighted significant potential for increasing natural gas output and plans for downstream gas utilization, which are expected to enhance the company's earnings resilience amid potential declines in oil prices [6][8]. - The growing contribution from PetroChina's gas value-chain operations is anticipated to bolster its earnings stability, providing a buffer against fluctuations in oil prices [6][8]. Summary by Sections Company Overview - PetroChina is focusing on enhancing its natural gas production capabilities and downstream utilization strategies, which are crucial for its growth trajectory [6][8]. Market Outlook - The report suggests that the increasing emphasis on natural gas operations will position PetroChina favorably in a market that may experience volatility in oil prices [6][8]. Investment Strategy - The recommendation to maintain a "BUY" rating reflects confidence in PetroChina's strategic initiatives and their potential to deliver strong returns in the near future [6][7][8].

Summary of Key Points from the Conference Call Industry Overview - The conference focused on the **Electric Mobility** sector within the **Asia Pacific** region, highlighting the competitive landscape and future trends in electric vehicle (EV) adoption and sales [9][10]. Core Insights - **Passenger Vehicle (PV) Sales Forecast**: - Estimated **28.5 million units** of PV sales in 2026, reflecting a **5% year-over-year decline** [10][12]. - Breakdown of PV wholesale volume for 2024-2027: - 2024: 27.553 million units - 2025: 29.925 million units - 2026: 28.454 million units - 2027: 29.354 million units - Domestic sales are projected to decline by **7%** in 2026, while exports are expected to grow by **4%** [13]. - **New Energy Vehicle (NEV) Sales Forecast**: - Anticipated **16.5 million units** of NEV sales in 2026, representing an **8% year-over-year increase** [17]. - Breakdown of EV wholesale volume for 2024-2027: - 2024: 12.281 million units - 2025: 15.201 million units - 2026: 16.486 million units - 2027: 18.136 million units - Battery Electric Vehicles (BEV) and Plug-in Hybrid Electric Vehicles (PHEV) are expected to see growth rates of **10%** and **6%** respectively in 2026 [18]. - **Market Dynamics**: - Retail discounts have stabilized in Q3 2025 amid an anti-involution campaign, indicating a shift in pricing strategies [14]. - The average time car owners spend in their vehicles is approximately **1.5 hours per day** [25]. Export Insights - **China's Vehicle Exports**: - Asia and Europe accounted for over **65%** of China's vehicle exports in 2025 [21]. - Breakdown of vehicle export units by region: - Asia: **28%** - Europe: **19%** - North America: **6%** [22]. OEM Market Share - Chinese OEMs hold approximately **13%** of vehicles sold outside the US and China, indicating a growing international presence [25]. Future Focus Areas for Auto OEMs - Key areas of focus for automotive OEMs include: - AI-enabled smart cockpit technologies - Development of humanoid robots - Electric Vertical Takeoff and Landing (eVTOL) vehicles - Autonomous vehicles [26]. Conclusion - The electric mobility sector in the Asia Pacific is poised for significant changes, with a mixed outlook on traditional PV sales and a robust growth trajectory for NEVs. The strategic focus on technology and international market expansion will be crucial for OEMs navigating this evolving landscape.

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: China Autos & Shared Mobility, specifically the Electric Vehicle (EV) sector in China [1][5] - **Market Sentiment**: The industry view is currently rated as "In-Line" by Morgan Stanley, indicating expectations of performance in line with the broader market [5][7] Core Insights - **Earnings Expectations**: - EV start-ups are anticipated to report 3Q results that align with market expectations, focusing on vehicle margins and operational expense control [7][10] - Investors are particularly interested in the operational turnaround of Original Equipment Manufacturers (OEMs) in 4Q and their strategies for model pipeline and pricing to counter cyclical challenges in 2026 [1][7] - **Performance Metrics**: - **XPeng Inc. (XPEV)**: Expected 3Q vehicle margin and 4Q volume outlook to be in line with previous guidance [10] - **Li Auto Inc. (LI)**: 3Q deliveries grew 12% QoQ to 116k units, with revenue projected at Rmb20.4 billion, indicating steady average selling price (ASP) [10] - **NIO Inc. (NIO)**: 3Q deliveries of 87k units (+21% QoQ) were at the low end of guidance, with revenue expected at Rmb21.9 billion [10] - **Future Projections**: - For 4Q, Li Auto is expected to deliver between 130-135k units, while NIO anticipates a significant increase to 150k units, driven by new model contributions [10][10] Financial Metrics - **Gross Profit Margins**: - Li Auto's vehicle gross profit margin is expected to grow to 14.5% in 3Q, while NIO's is projected to be flat at 12.5% [10] - **Operating Losses**: - Li Auto's net loss is expected to be around Rmb500 million in 3Q, similar to the previous quarter [10] - NIO's net loss is projected to narrow to approximately Rmb4.3 billion in 3Q [10] Valuation Methodology - **Li Auto Inc.**: Utilizes a probability-weighted Discounted Cash Flow (DCF) methodology with a WACC of 15.9% and a long-term growth rate of 3% [11] - **NIO Inc.**: Also employs a probability-weighted valuation methodology, expecting to break even by 2028 with a WACC of 17.8% [12] - **XPeng Inc.**: Similar DCF methodology with a terminal growth rate of 3% and a WACC of 12.8% [13] Risks and Opportunities - **Upside Risks**: - Rapid sales volume ramp-up and better-than-expected margins could enhance profitability [14][15] - **Downside Risks**: - Increased competition and moderating auto sales growth could pressure overall industry valuations [15][17] Additional Insights - **Investor Focus**: There is a growing emphasis on non-vehicle initiatives, including AI and software services, which may significantly impact stock valuations [7] - **Market Dynamics**: The cyclical nature of the automotive industry and the potential for macroeconomic shifts are critical factors influencing future performance [1][11] This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and future outlook of the EV sector in China.

Core Insights - BYD Company Limited reported earnings that fell short of expectations, indicating challenges in maintaining its market position amid intense competition and shifting market dynamics [1][3] Financial Performance - Earnings per share were reported at $0.11, missing the estimated $0.19 [3][7] - Actual revenue was approximately $27.41 billion, significantly below the estimated $40.05 billion [3][7] - The company experienced a 12% year-over-year decline in sales in October, with total sales reaching 441,706 vehicles [4][7] Market Position and Competition - BYD is a leading producer in the global electric vehicle market but faces stiff competition from other Chinese automakers such as NIO Inc., XPeng Inc., and Li Auto Inc. [2][4] - Despite being the world's leading EV volume producer, BYD's sales have been impacted by competitive pressures in the Chinese market [4] Valuation Metrics - The price-to-earnings (P/E) ratio is approximately 36.60, indicating the price investors are willing to pay for each dollar of earnings [5][7] - The price-to-sales ratio stands at about 0.93, suggesting that the market values the company at nearly 93 cents for every dollar of sales [5][7] - The enterprise value to sales ratio is around 0.84, reflecting its valuation relative to sales [6] - The enterprise value to operating cash flow ratio is approximately 22.24, providing insight into cash flow generation relative to valuation [6] Financial Health - The earnings yield is about 2.73%, and the debt-to-equity ratio is approximately 0.13, indicating a relatively low level of debt compared to equity [6] - The current ratio of around 0.76 suggests challenges in covering short-term liabilities with short-term assets [6]

Summary of Key Points from Morgan Stanley Asia's Thematic Opportunities (3Q25) Industry Overview - **Industry**: Various sectors within the Asia Pacific region, focusing on emerging investment themes and opportunities identified by Morgan Stanley's research department. Core Themes and Investment Opportunities 1. **Future of Energy** - Global solar market expected to see gross margins for integrated module players turn positive by 2026-27 due to anti-involution reforms [3][3] - Japan's natural gas demand projected to grow at a CAGR of +0.8% from 2023-2031, with LNG imports from the US expected to rise by +14% [3][3] - Global new nuclear capacity anticipated to reach 587GW by 2050, with significant growth in Asia, particularly China and India [3][3] 2. **Tech Diffusion** - AI data centers projected to consume up to 1,068 billion liters of water annually by 2028, an 11x increase from 2024, driven by cooling and electricity generation needs [3][3] - AI NAND market expected to account for 34% of the global NAND market by 2029, adding an incremental US$29 billion to the total addressable market [3][3] 3. **Multipolar World** - Defense spending in Asia (South Korea, Japan, Singapore, India) projected to expand at a 12% CAGR to US$354 billion by 2029, matching China's defense budget [3][3] - Vehicles with Level 2+ all-scenario smart driving expected to reach 28% of unit sales by 2030, up from 8% in 2024, with a global ADAS/AD market size estimated at US$200 billion by 2030 [3][3] 4. **Capital Market Reform** - MSCI China's ROE expected to rise to 13.3% by 2030, supported by policy execution and structural reforms [3][3] - Singapore's equity market reforms could drive ROE to 14% from 12%, potentially doubling market cap by 2030 [3][3] 5. **Longevity** - Innovative drug sales projected to comprise 53% of China's pharmaceutical market by 2030, up from 29% in 2023, with a CAGR of 21% from 2024 to 2030 [3][3] Additional Insights - **Water Consumption Risks**: AI's water consumption poses high local risks, especially in data center hubs facing water scarcity, highlighting the need for strategic investments in water-efficient technologies [27][27] - **Supply Chain Dynamics**: The report discusses the ongoing reorientation of supply chains due to geopolitical tensions, particularly between the US and China, and the shift towards onshoring production in the US for high-end products [56][56] - **Defense Industry Outlook**: The report emphasizes the expected super-cycle in Korea's defense industry, driven by rising global defense budgets and the need for modernization [64][64] Key Stock Implications - **Top Picks**: The report identifies several companies across various themes, including: - **Tech Diffusion**: KIOXIA, Samsung Electronics, and Hanwha Aerospace [12][12] - **Future of Energy**: Reliance Industries and Gulf Development PCL [12][12] - **Longevity**: Jiangsu Hengrui and Hansoh Pharmaceutical Group [12][12] This summary encapsulates the key themes and insights from Morgan Stanley's thematic opportunities report, highlighting potential investment avenues and risks within the Asia Pacific region.

Industry Overview - The Chinese domestic market is rapidly transitioning towards all-electric mobility, leading to challenges for dealership groups in maintaining profitability amid a fierce price war [1][2] - The growth of new energy vehicles has resulted in overcapacity and intense competition within the market [2] Dealer Challenges - Dealers are experiencing pressure from sluggish consumption and high wholesale volumes, forcing them to maintain high inventories and sell at low prices to survive [4] - The need for financial flexibility and support from authorities and financial institutions has been emphasized to help dealers cope with the current market conditions [3] Government Actions - The Chinese government has initiated a three-month campaign to combat fraudulent activities and false marketing in the auto sector, targeting behaviors such as false advertising and illegal profit-making [5] - Changes in dealership policies by automakers have led to significant impacts on cash flow, exemplified by Qiancheng Holdings closing 20 BYD dealerships in Shandong province [6]

Investment Rating - Industry View: In-Line [5] Core Insights - Li Auto's May market share increased by 0.6 percentage points month-over-month (MoM) to 4.6%, but year-to-date (YTD) share decreased by 0.4 percentage points year-over-year (YoY) to 4.1% [5][8] - XPeng's market share fell by 0.7 percentage points MoM to 2.8%, while YTD share rose by 2.3 percentage points YoY to 3.5% [8] - NIO's market share decreased by 0.2 percentage points MoM to 2.6%, with a YTD increase of 0.2 percentage points YoY to 2.3% [8] - ZEEKR's market share rose by 0.3 percentage points MoM to 1.7%, but YTD share fell by 0.4 percentage points YoY to 1.6% [8] - BYD's market share dropped by 0.6 percentage points MoM to 26.5%, with a significant YTD decline of 5.0 percentage points YoY to 26.9% [8] Summary by Company Li Auto - May market share: up 0.6 percentage points MoM to 4.6%; YTD share down 0.4 percentage points YoY to 4.1% [5][8] XPeng - May market share: down 0.7 percentage points MoM to 2.8%; YTD share up 2.3 percentage points YoY to 3.5% [8] NIO - May market share: down 0.2 percentage points MoM to 2.6%; YTD share up 0.2 percentage points YoY to 2.3% [8] ZEEKR - May market share: up 0.3 percentage points MoM to 1.7%; YTD share down 0.4 percentage points YoY to 1.6% [8] BYD - May market share: down 0.6 percentage points MoM to 26.5%; YTD share down 5.0 percentage points YoY to 26.9% [8] Tesla - EV market share rose by 0.7 percentage points MoM in May to 4.0%; YTD share down 2.0 percentage points YoY to 4.9% [3]

Investment Rating - The stock rating for Li Auto Inc. is Overweight [4] Core Viewpoints - The report indicates that June sales for Li Auto were slower than expected, tracking behind the company's 2Q volume guidance of 123-128k units, with a June target of 48-53k units, resulting in a hit rate of 34-38% in the first half of June [2][3] - Despite the current sales weakness, the report maintains a positive outlook for the second half of the year, anticipating a resurgence in operations supported by a new model cycle and improved execution from the Li Auto team [2][4] - The report suggests that the recent adjustments in Li Auto's channel strategy and increased price competition may temporarily affect sales momentum, but these impacts are expected to be transient [2] Summary by Sections Sales Performance - Li Auto's ADR/H shares fell by 4%, underperforming against the HSI which declined by 1%, primarily due to slower month-to-date sales [1][3] - Concerns were raised regarding a 0.3% reduction in holdings by major shareholder Meituan's Wang Xing during June 10-13 [1][3] Market Outlook - The report emphasizes that the lukewarm sales in June do not disrupt the thesis of a second-half operational resurgence, which is expected to be driven by the introduction of new models [2] - The anticipated recovery in order momentum is supported by lessons learned from previous product launches and potentially more competitive pricing strategies [2] Valuation and Market Data - The price target for Li Auto Inc. is set at US$36.00, with the stock closing at US$26.94 on June 17, 2025 [4] - The market capitalization of Li Auto is approximately Rmb192,891.6 million, with an enterprise value of Rmb87,595.7 million [4]

Investment Rating - The report assigns an "In-Line" investment rating for the China Autos & Shared Mobility industry [2]. Core Insights - The report discusses the potential of robotaxis, highlighting the expected growth in Level 4+ autonomous driving vehicles, which are projected to reach over 20% penetration by 2035 [5]. - China is positioned as a leader in robotaxi development, with strong policy support and a significant existing taxi fleet that could facilitate the deployment of robotaxis [11][14]. - The report emphasizes the cost advantages of robotaxis over human-driven taxis, particularly in terms of operational costs, where robotaxis could become more profitable as the Bill of Materials (BOM) costs decline [18][19]. Summary by Sections Industry Overview - The global passenger vehicle market is projected to reach 94.7 million units by 2030, with 1.6 million units expected to be Level 4+ autonomous vehicles [8]. - China is expected to account for 25% of the global passenger vehicle market and 73% of the Level 4+ vehicles by 2030 [8]. Robotaxi Market Potential - China's taxi fleet consists of approximately 4 million units, with over 50% being online ride-sharing services, providing a substantial base for robotaxi deployment [12]. - The report forecasts that robotaxi penetration could increase significantly as ride-sharing continues to gain market share [12]. Competitive Landscape - Key players in the robotaxi space in China include WeRide, Pony AI, and Apollo Go, with varying fleet sizes and operational strategies [21]. - The report notes that early movers in the robotaxi market are likely to achieve breakeven sooner due to operational leverage and cost reductions [24]. Future Expectations - The report anticipates a decline in BOM costs as technology improves, which will enhance the economic viability of robotaxis [22]. - Scaling the fleet is expected to accelerate data accumulation, further improving algorithms and reducing costs [23].