Investment Rating - The report maintains a "Buy" rating for the company, with a target price adjusted from 140 HKD to 125 HKD, corresponding to a projected P/E ratio of 22.9 times for 2026 [1][3][6]. Core Insights - The company's August sales were 29,000 units, representing a year-on-year decline of 39.7% and a month-on-month decrease of 7.2%. Cumulatively, sales for the first eight months reached 263,000 units, down 8.6% year-on-year. The management expects third-quarter deliveries to be between 90,000 and 95,000 units, with September sales projected at 31,000 to 36,000 units, driven by the new i8 model [2][3]. - The second-quarter performance met expectations, with revenue of 30.2 billion RMB, a year-on-year decrease of 5% but a quarter-on-quarter increase of 17%. The gross margin was 20.1%, with automotive sales gross margin at 19.4%, showing a year-on-year increase of 0.7 percentage points [2][3]. - The company is set to launch the i6 model, with several strategic adjustments aimed at boosting sales, including optimizing product SKUs, adjusting channel strategies, and increasing investment in AI technology, with an expected expenditure of over 6 billion RMB in 2025 [3][4]. Summary by Sections Sales Performance - August sales were 29,000 units, down 39.7% year-on-year and 7.2% month-on-month. Cumulative sales for the first eight months were 263,000 units, down 8.6% year-on-year. The management anticipates third-quarter deliveries of 90,000 to 95,000 units, with September sales expected to be between 31,000 and 36,000 units, primarily driven by the i8 model [2][3]. Financial Performance - The second-quarter revenue was 30.2 billion RMB, a 5% decline year-on-year but a 17% increase quarter-on-quarter. The gross margin was 20.1%, with automotive sales gross margin at 19.4%, reflecting a year-on-year increase of 0.7 percentage points [2][3]. Strategic Initiatives - The company plans to launch the i6 model and has made several strategic adjustments to enhance sales, including optimizing product SKUs, adjusting channel strategies, and increasing AI investment, with a projected expenditure of over 6 billion RMB in 2025 [3][4].

Core Viewpoint - The importance of Electrical/Electronic Architecture (EEA) in the automotive industry has significantly increased due to the advancements in vehicle intelligence, connectivity, and electrification. The evolution of EEA is moving from distributed to regional control and then to centralized integrated architecture, which has garnered attention from major automotive companies like Volkswagen, BMW, and Toyota [1][3]. Group 1: EEA Development and Collaboration - Volkswagen Group (China) and Xpeng Motors announced an expansion of their joint development of the Centralized Electronic Architecture (CEA), which will be applied to fuel and hybrid models produced in China starting in 2027 [1][5]. - The CEA architecture is designed specifically for the Chinese market, featuring a robust central computing platform that supports advanced driver assistance systems (ADAS) and AI-powered in-car assistants, while simplifying system complexity by reducing the number of existing ECUs [6][7]. - The collaboration between Volkswagen and Xpeng began in July 2024, aiming to enhance their competitive edge against rivals like Tesla and Li Auto [5]. Group 2: Market Position and Financial Insights - In 2024, Volkswagen plans to deliver over 2 million vehicles in China, with nearly 90% being fuel models, which remain a significant profit source for the company [8]. - Volkswagen's local investments are primarily funded by profits generated in China, with a reported €4.4 billion profit from its joint ventures last year, supporting the transformation without requiring additional funding from the group [8]. - The implementation of the standardized CEA architecture across all models is expected to accelerate digital service deployment and optimize cost structures, enhancing market competitiveness [8]. Group 3: Future Plans and Innovations - Starting in 2026, Volkswagen will accelerate its smart connected vehicle initiatives in China, with the first locally developed models set to debut at the 2025 Shanghai Auto Show [8]. - By 2027, Volkswagen aims to launch approximately 30 electrified models in China, with around 30 pure electric models expected by 2030 [8].