Investment Rating - The report maintains a "Positive" investment rating for the automotive industry [3] Core Insights - The price gap between pure electric and hybrid vehicles is narrowing, but this does not necessarily lead to a significant decline in hybrid sales [3][21] - The requirement for the pure electric range of plug-in hybrid and extended-range vehicles to qualify for tax exemptions will increase significantly, potentially affecting around 40% of these vehicles [5][9] - Despite the reduction in tax incentives and increased technical requirements, the report anticipates continued growth in new energy vehicle sales due to the introduction of high-quality supply [5][21] Summary by Sections Section 1: Tax Exemption Requirements - The pure electric range requirement for plug-in hybrid and extended-range vehicles to enjoy tax exemptions will increase to a minimum of 100 km, up from 43 km, starting in 2026-2027 [5][9] - Approximately 40% of plug-in hybrid and extended-range vehicles may not qualify for tax exemptions, particularly affecting compact and mid-size models priced between 70,000 to 200,000 yuan [5][9] Section 2: Price and Product Strategy - Manufacturers like BYD are expected to launch new long-range versions of their vehicles that meet the new tax exemption criteria, with prices generally higher than previous low-range models [14][20] - The competition will likely split into two strategies: maintaining cost-effectiveness or focusing on high-value offerings with enhanced features [16][19] Section 3: Market Dynamics - The narrowing price gap between pure electric and hybrid vehicles does not guarantee a significant drop in hybrid sales, as consumer preferences for range and vehicle positioning play crucial roles [21] - The report highlights that consumer anxiety regarding range remains a significant factor influencing the choice between hybrid and pure electric vehicles [21]