Investment Rating - The report assigns a "Buy" rating to BYD (1211 HK), Desay SV (002920 CH), and Contemporary Amperex Technology (300750 CH) [54][60][65]. Core Insights - The China auto market has shown another double-digit year-on-year growth, with wholesale unit deliveries reaching 2.5 million units in June, marking a 14.5% increase year-on-year and a 7.8% increase month-on-month [1][7]. - The electric vehicle (EV) market is experiencing suboptimal growth, with EV penetration at 52.7% in June, which is below expectations and historical highs [1][7]. - Concerns are raised regarding the slowing growth of EV penetration, potentially due to aggressive pricing strategies from internal combustion engine (ICE) car manufacturers and the upcoming 50% cut to EV purchase tax exemptions starting next year [2][7]. Summary by Sections China Auto Market Performance - In 1H25, the China auto market reported a total of 13.5 million wholesale shipments, reflecting a 12.9% year-on-year growth, while retail sales (excluding minivans) reached 10.9 million units, up 10.8% year-on-year [8]. - The overall growth momentum in 1H25 was slightly above expectations, supported by government subsidies for scrapping and trade-in programs [8]. Electric Vehicle Market - Monthly retail sales of PV EVs reached 1.1 million units in June, representing a 30.2% year-on-year increase [1][9]. - The report highlights that BEVs outperformed PHEVs/EREVs in terms of growth, with BEVs showing 45% year-on-year growth in wholesale shipments during 1H25 [9]. OEM Strategies and Market Dynamics - OEMs are currently preparing their strategies for 2H25, with expectations of model launches and adjustments in response to government policies against over-competition [3]. - BYD remains a top pick due to its strategies aimed at regaining market share, including reducing SKUs and improving model features without price increases [4]. Battery Market Insights - EV battery installations grew by 35.9% year-on-year to 58.2 GWh in June, with total installations for 1H25 reaching 300 GWh, a 47.3% increase year-on-year [5]. - CATL and BYD maintained their market leadership in the battery sector, holding 43.7% and 21.5% market shares, respectively [5]. Lithium Market Trends - The price of lithium carbonate in China rebounded from a low of CNY 60,000 per tonne in late June to CNY 63,000 per tonne in early July [5][48]. - The report anticipates potential downside risks to lithium production in July due to weakened demand and government interventions [5][48].