Industry Overview - The domestic automotive market is under pressure, with a projected decline of 2% in overall passenger vehicle insurance in 2026, while new energy vehicles (NEVs) are expected to see a growth of 6% [4] - The growth in passenger vehicle exports is anticipated to reach nearly 1 million units in 2026, primarily driven by NEV exports, supported by several manufacturers' quality products and channel expansions [4][12] - The penetration rate of NEVs is expected to exceed 50%, leading to a slowdown in growth as the market matures [4][18] Stock Recommendations - Focus on structural opportunities in ultra-luxury models and exports, as companies with strong product cycles may navigate the industry's weak sentiment [4] - Recommended stocks include Jianghuai Automobile (Zun Jie), Geely Automobile, Great Wall Motors, Leap Motor, and Xiaomi Group-W, which are expected to benefit from structural opportunities and product cycles [4][12] Valuation Insights - Companies with strong product cycles may experience valuation re-evaluations if there are revolutionary changes in autonomous driving technology, particularly if Tesla's Full Self-Driving (FSD) technology sees significant advancements [4] - Companies like XPeng Motors, Li Auto, and Seres are highlighted as potential beneficiaries of this valuation shift [4] Market Dynamics - The 2026 domestic market is expected to be influenced significantly by the replacement demand, which has surpassed 50% in 2025, indicating a shift in consumer behavior towards vehicle replacement rather than new purchases [12][14] - The old-for-new vehicle policy is set to decline, which may further impact the sales performance of passenger vehicles in 2026, with expectations of a weak market performance [14][16] Energy Structure Outlook - The reduction of NEV purchase tax subsidies and high penetration rates are likely to slow down the growth of NEVs in 2026, with increased costs due to rising battery material prices [18][20] - The anticipated changes in subsidy structures may lead to higher retail prices for NEVs, affecting consumer purchasing decisions [18][20]