Summary of the Automotive Industry Conference Call Industry Overview - The automotive industry in China is projected to experience a decline in retail sales by 1% in 2026, with sales expected to drop from 24.54 million units in 2025 to 24.31 million units due to overconsumption in 2025 and reduced vehicle purchase tax incentives [1][2][3] - Market demand is anticipated to shift towards mid to low-priced models, particularly in the 50,000 to 100,000 yuan price range, which is expected to grow by 4% [1][2][3] Key Policy Changes - Significant policy changes are expected in 2026, particularly regarding the scrappage and trade-in subsidies, with 21 cities suspending trade-in subsidies and 16 provinces halting scrappage subsidies [2][4] - Recommendations include maintaining the trade-in and scrappage policies but controlling the subsidy budget between 140 billion to 150 billion yuan, while keeping the vehicle purchase tax reduction at 5% to stabilize the market [5][6] Market Dynamics - The automotive sales structure is expected to adjust, with a longer pre-festival sales period due to the late Spring Festival, typically resulting in 40% higher sales compared to post-festival [3] - The export of Chinese automobiles continues to grow, with passenger car exports accounting for 20% of total exports, despite a decline in the Russian market [3][14] Price Segment Performance - In 2025, the 50,000 to 100,000 yuan and 100,000 to 150,000 yuan price segments performed well, with the former growing from 16% to 20% [6][7] - The market for vehicles priced below 400,000 yuan is experiencing a downward trend, with the segment below 400,000 yuan declining by 3 percentage points [7][8] New Energy Vehicles (NEVs) - NEVs are becoming increasingly competitive in the 100,000 to 150,000 yuan market, with penetration rates rising [9][20] - The high-end electric vehicle segment faces challenges due to new energy consumption standards and tax pressures, while high-end fuel vehicles are seeing significant declines in sales [9][10] Regional Sales Trends - Northern and central-western regions are experiencing faster sales growth, with the northeastern region achieving a 15% growth rate [11][12] - Automotive manufacturers are focusing on lower-tier cities for expansion, as first-tier cities show slower growth [12] Export and International Strategy - Chinese automotive exports are expected to continue growing, with a projected increase of 30-40% in NEV exports [20][21] - Companies are adopting diverse strategies for overseas markets, including establishing CKD factories to mitigate trade barriers [15] Competitive Landscape - The competitive landscape is shifting, with leading private enterprises like BYD gaining strength, while traditional state-owned enterprises are expected to play a significant role in mergers and acquisitions [17][18] - New entrants and established brands are expected to intensify competition, particularly in the NEV sector, with companies like Xiaomi and Huawei increasing their market presence [24][25] Future Outlook - The automotive industry is expected to face challenges from policy changes, market dynamics, and competitive pressures, but opportunities for growth remain, particularly in the NEV segment and lower-tier markets [22][23]

Core Insights - The new round of the vehicle trade-in policy aims to stimulate consumer demand in the automotive industry by providing higher subsidies and faster processing times [1][4][6] Subsidy Details - The subsidy standards have doubled compared to the first round released in April, with new subsidies set at 20,000 yuan for purchasing new energy vehicles and 15,000 yuan for fuel vehicles [2][11] - The policy also allows for retroactive subsidies for eligible applications submitted between April 24 and January 10 of the following year, ensuring that previous applicants can receive the updated subsidy amounts [6][11] Market Impact - Industry experts believe that the new policy will provide strong support for the automotive market in the second half of the year, particularly boosting the growth rate of the new energy vehicle market [4][11] - The policy is expected to significantly increase the number of vehicle trade-ins, with estimates suggesting it could drive an additional 1 million vehicle updates nationwide [11] Consumer Behavior - There has been a noticeable increase in customer inquiries at dealerships, with reports indicating a 30% rise in foot traffic due to the new trade-in policy [7][10] - Consumers are particularly interested in understanding which vehicle types qualify for subsidies and the process for trade-ins [12] Regional Initiatives - In addition to national policies, local governments, such as Shanghai, are implementing their own subsidies, offering an additional 10,000 yuan for personal users purchasing electric vehicles [9] Industry Response - Automakers are enhancing their trade-in incentives, with companies like Buick and BYD offering additional subsidies on top of government incentives [10] - The automotive industry is adapting to the new policy by training staff to assist customers with the trade-in process and ensuring a smoother experience [10] Recycling and Sustainability - The policy is expected to enhance the recycling market for old vehicles, promoting the recovery of materials like steel, rubber, and lithium batteries, which aligns with environmental sustainability goals [12]

Core Viewpoint - The article discusses the impending end of the tax exemption policy for new energy vehicles (NEVs) in China, which has been a significant driver for the industry since its inception in 2014. The transition from a policy-driven market to a market-driven one is expected to bring challenges and necessitate a shift in focus for automotive companies [2][4][8]. Group 1: Policy Changes and Market Impact - The exemption from vehicle purchase tax for NEVs will end on December 31, 2025, with a temporary reduction in tax for purchases made between January 1, 2026, and December 31, 2027 [2][3]. - The NEV industry has grown significantly, with market penetration rising from less than 1% to over 30%, and exceeding 50% in some first-tier cities, driven by strong government policies [4][7]. - The article highlights the shift from a policy-driven growth phase to a market-driven phase, indicating that the industry is at a crossroads where competition will intensify and only the strongest players will survive [8][17]. Group 2: Challenges Facing the NEV Industry - The reliance on subsidies has led to a "subsidy dependency syndrome" among some companies, resulting in market distortions and overcapacity issues [7][17]. - As the market growth slows and competition intensifies, a price war has emerged, leading to a situation where companies are sacrificing profits for market share, which is unsustainable [7][14]. - The article emphasizes that the NEV sector must now compete on the same level as traditional fuel vehicles, focusing on technology investment and cost management to maintain profitability [14][16]. Group 3: The Future of Fuel and Electric Vehicles - Despite the rapid growth of NEVs, the article argues that the end of fuel vehicles is not imminent, as the debate has shifted from replacement to coexistence [10][13]. - The inherent challenges of NEVs, such as charging infrastructure and battery costs, continue to pose significant barriers to widespread adoption [11][12]. - The emergence of plug-in hybrid and range-extended vehicles indicates a market preference for solutions that combine both fuel and electric power, reflecting consumer demand for versatility [13][14]. Group 4: Industry Restructuring - The article predicts that the withdrawal of subsidies will accelerate industry consolidation, with resources concentrating among leading companies [17]. - Companies lacking scale, technological barriers, and cost control will likely be eliminated in the post-subsidy era, emphasizing the need for a focus on quality and brand building [14][17]. - The ongoing technological challenges, such as the development of solid-state batteries and advanced autonomous driving, remain critical for the future competitiveness of NEVs [16][17].

Investment Rating - The industry investment rating is "Outperform" [1] Core Insights - The report highlights the robust performance of China's automotive exports, particularly in the electric vehicle (EV) segment, with a significant year-on-year growth of 107% in Q3 2025 [2][15] - The Spanish automotive market is recovering, with new car registrations increasing by 14.6% year-on-year in the first eight months of 2025, although still below pre-pandemic levels [2][22] - Chinese brands are gaining market share in Spain, with SAIC MG ranking among the top ten brands in terms of sales [2][29] Summary by Sections 1. Domestic Passenger Car Market Tracking (Q1-Q3 2025) - The wholesale sales of passenger cars in China reached 20.801 million units from January to September 2025, marking a 13.3% increase year-on-year [2][9] - New energy vehicle (NEV) wholesale sales totaled 10.375 million units, up 32.3% year-on-year, indicating strong market performance [2][12] - The export volume of passenger cars in Q3 2025 was 1.512 million units, reflecting a 23.3% increase year-on-year [2][15] 2. Characteristics of the Spanish Automotive Market - In the first eight months of 2025, Spain's new car registrations totaled 769,452 units, a 14.6% increase compared to the previous year [2][22] - NEVs accounted for 18% of total vehicle sales in Spain during the same period, supported by the "MOVES III" subsidy program [2][26] - The number of charging stations in Spain reached 52,107 by Q3 2025, with a total of 13,382 new stations added [2][41] 3. Beneficiaries of Local Manufacturing in Spain - Chery has established a joint venture with Ebro in Spain, marking it as the first Chinese automaker to have a production base in Europe, with the first model, EBRO S700, launched in November 2024 [2][50] - Leap Motor is set to utilize Stellantis' factory in Zaragoza for local production, with plans to start manufacturing in Q3 2026 [2][53] - Leap Motor's sales in Europe reached 13,443 units in the first nine months of 2025, ranking fourth among Chinese brands [2][60]

Core Insights - J.D. Power has released the 2025 China Automotive Brand Reputation Index NPS, marking its first study in China, covering 72 brands in both fuel and new energy vehicle markets with a total sample size of 97,695 [1][2] Group 1: NPS Methodology - The fuel vehicle brand NPS is calculated based on New Vehicle Quality Study (IQS), Automotive Performance, Execution and Layout Study (APEAL), Technology Experience Index (TXI), Sales Satisfaction Index (SSI), and Customer Satisfaction Index (CSI) [2] - The new energy vehicle brand NPS is derived from New Energy Vehicle New Car Quality Study (NEV-IQS), NEV-APEAL, TXI, NEV-SSI, and NEV-CSI [2] - The study includes a comprehensive analysis of user experience across three dimensions: product strength NPS, sales strength NPS, and service strength NPS, providing a detailed user experience competitive landscape [5] Group 2: Brand Performance - In 2025, luxury fuel vehicle brands scored an average of 51.8, while mainstream brands scored 46.3; new energy luxury brands averaged 44.7, and mainstream brands scored 40.2 [6] - Only 8 out of 72 brands achieved a healthy balance across product, sales, and service dimensions, indicating that 89% of brands are in a state of imbalance [6] Group 3: User Experience Dynamics - The study reveals a "dual-track" user experience in the fuel vehicle market, where 42% of experience indicators are "threshold" indicators, while in the new energy vehicle market, 58% are "charm" indicators [7] - The research indicates a shift in competition rules, where user loyalty is now determined by balanced performance across product, sales, and service dimensions, rather than relying on a single strength [8] Group 4: Sales and Trust Issues - The sales process is identified as the largest negative contributor to brand NPS, with 38% of fuel vehicle sales strength NPS being weak due to traditional dealership practices that conflict with consumer expectations for transparency and trust [9] - In the new energy vehicle sector, 42% of sales strength NPS is weak, stemming from an immature sales system that fails to build trust with consumers [9] Group 5: Service Experience - Fuel vehicle service strength NPS shows that 38% are in a healthy state, but struggle to create emotional value, while new energy vehicle service strength NPS indicates 32% are weak, facing issues like long wait times and lack of brand identity [10] - Future service competition will focus on emotional resonance rather than just speed of service, with brands needing to enhance customer loyalty through meaningful experiences [10] Group 6: Product Performance Challenges - The report highlights that nearly 30% of products fall into a "mediocre" or "polarized" dilemma, where fuel vehicle brands show a 35% middle-ground performance, lacking standout features that drive recommendations [11] - New energy vehicle brands exhibit a 26% polarization, where some brands attract early adopters but risk alienating conservative consumers due to aggressive innovations [11]

Investment Rating - The report maintains a positive investment rating for the automotive and automotive parts industry, highlighting potential growth opportunities in the sector [6]. Core Insights - The automotive industry is experiencing a sequential increase in sales and favorable cost conditions, with a notable rise in both total and new energy vehicle sales in Q3 2025 [2][3]. - The report emphasizes the importance of intelligent and globalized breakthroughs in the automotive sector, recommending key players such as Geely, Xpeng, Li Auto, BYD, and Xiaomi Group [4][5]. Summary by Sections 0.1 Passenger Vehicles - Total passenger vehicle sales in Q3 2025 reached 7.686 million units, representing a year-on-year increase of 14.7% and a quarter-on-quarter increase of 8.1% [11][24]. - New energy passenger vehicle sales were particularly strong, with 4.024 million units sold, up 24.2% year-on-year and 10.9% quarter-on-quarter, achieving a penetration rate of 52.4% [11][24]. - The report notes a stable pricing environment, with discounts remaining consistent compared to previous months [25]. 0.2 Auto Parts - The auto parts sector is benefiting from a decrease in raw material costs and shipping fees, which is expected to alleviate cost pressures for companies [3][45]. - Key raw materials such as polypropylene and hot-rolled coil prices have seen significant declines, contributing to improved margins for auto parts manufacturers [45]. 0.3 Heavy Trucks - The heavy truck market is experiencing a boost due to the implementation of trade-in subsidy policies, with wholesale sales reaching 282,000 units in Q3 2025, a year-on-year increase of 58.1% [3]. - New energy heavy truck sales surged by 181.5% year-on-year, indicating strong demand in this segment [3]. 0.4 Motorcycles - The report forecasts a total of 258,000 units for mid-to-large displacement motorcycles in Q3 2025, reflecting an 18.9% year-on-year increase [4]. - Export sales for motorcycles are also strong, with a 50.5% year-on-year increase, driven by growth in the 500-800cc segment [4]. 1.1 Weekly Insights - The automotive sector's performance has been weaker than the overall market, with a 6.1% decline in the A-share automotive sector during the week of October 13-17, 2025 [2]. - The report suggests focusing on key companies such as Geely, Xpeng, and BYD for potential investment opportunities [2][4]. 1.2 Intelligent Electric Vehicles - The report highlights the accelerating growth of intelligent electric vehicles, recommending companies involved in smart driving and smart cockpit technologies [4]. 1.3 Robotics - The report notes the entry of leading companies into the robotics sector, indicating a new era of embodied intelligence [4]. 1.4 Liquid Cooling - The demand for AI is driving the need for higher power density in liquid cooling solutions, positioning it as a necessary choice for high-density applications [4]. 1.5 Motorcycles - The report identifies a trend towards consumer upgrades in the motorcycle segment, recommending leading companies in the mid-to-large displacement category [4]. 1.6 Heavy Trucks - The expansion of trade-in subsidy policies is expected to stimulate demand for medium and heavy trucks, contributing to market recovery [4]. 1.7 Tires - The report emphasizes the ongoing acceleration of globalization in the tire industry, recommending leading and high-growth companies [4].

Core Insights - The user satisfaction index for China's fuel vehicle industry in 2025 is 81 points, maintaining the historical high level and unchanged from the previous year [1] - The complaint rate has decreased to 9%, and loyalty score has reached 79 points, both achieving the best results in nearly a decade [1] Group 1: Product Quality - Product reliability has improved, scoring 80.5 points, an increase of 2 points year-on-year, marking the best level in the last ten years [2] - The number of faults per hundred new vehicles has decreased to 179, down by 9 from the previous year [2] - Faults are increasingly concentrated in three major systems: smart cockpit, intelligent driving assistance, and interior, which account for 72% of total faults, rising by 16 and 25 percentage points compared to 2024 and 2023 respectively [2] Group 2: Service Quality - Sales service satisfaction score is 80 points, a decrease of 1 point year-on-year, with the most significant declines in delivery process, online services, and test drives [3] - After-sales service satisfaction score is 79 points, down by 2 points, indicating a significant decline [3] - Among the five factors of after-sales service, users rated service attitude, maintenance, and repair service quality relatively high, while satisfaction with service charges remains low [3]

Core Insights - The 2025 China Automotive Customer Satisfaction Index (CACSI) score is 81, maintaining the historical high level achieved in 2024 [1] - Brand recognition and perceived value are key factors supporting the satisfaction index [1] - User complaint rate has decreased to 9%, and loyalty score has reached 79, both marking the best performance in nearly a decade [1] Group 1: Product Quality - The reliability score reached 80.5, the highest in the last ten years, with the number of faults per 100 new vehicles decreasing to 179, a reduction of 9 from the previous year [3] - Faults are increasingly concentrated in three major systems: intelligent cockpit, intelligent driving assistance, and interior, which account for 72% of total faults, an increase of 16 and 25 percentage points compared to 2024 and 2023 respectively [3][4] - The top ten faults include issues such as "gesture control failure" and "fingerprint recognition failure" [4] Group 2: Service Quality - Sales service satisfaction score is 80, down 1 point year-on-year, with the most significant declines in delivery process, online services, and test drives [5] - After-sales service satisfaction score is 79, down 2 points, with service attitude and maintenance quality rated relatively high, while service charge satisfaction remains low [5] - The industry needs to focus on ensuring reasonable service charges and improving after-sales service efficiency [5] Group 3: User Experience and Preferences - User experience with intelligent connected features shows strengths and weaknesses, with driving assistance features being more positively received than intelligent cockpit features [6] - The importance of "quality reliability" in purchasing decisions has risen, moving from third to second place, while "brand recognition" has decreased by 6 percentage points compared to 2023 [8] - The proportion of new car buyers in 2025 has decreased by 3 percentage points year-on-year, with a growing preference for German brands and a heightened focus on quality reliability [8]

Core Insights - The 2025 China Fuel Vehicle Industry Customer Satisfaction Index (CACSI) remains at a historical high of 81 points, unchanged from the previous year, supported by high brand recognition and perceived value [1][3] Group 1: Customer Satisfaction Metrics - The complaint rate among users has decreased to 9%, and loyalty score has reached 79 points, both marking the best performance in nearly a decade [1][3] - Product quality reliability has improved, scoring 80.5 points, a 2-point increase year-on-year, with the number of faults per 100 new vehicles dropping to 179, a reduction of 9 faults [3] - Sales service satisfaction has decreased to 80 points, down 1 point year-on-year, with the most significant declines in delivery process, online services, and test drives [3][5] Group 2: Fault Distribution and User Experience - Faults are increasingly concentrated in three systems: intelligent cockpit, intelligent driving assistance, and interior, which account for 72% of issues, an increase of 16 and 25 percentage points compared to 2024 and 2023 respectively [3][4] - The top ten faults reported include issues with gesture control, fingerprint recognition, and excessive interior odor, indicating areas needing improvement [3] Group 3: User Preferences and Market Trends - User preferences have shifted, with "good performance," "high reliability," and "high comfort" being the top three considerations for purchasing vehicles, while the importance of "high brand recognition" has declined by 6 percentage points since 2023 [5][6] - The influence of brand image on customer satisfaction has weakened, with perceived quality now being the primary driver of satisfaction for the first time since 2017, indicating a stabilization in the fuel vehicle market [5] Group 4: Survey Methodology and Coverage - The CACSI survey, conducted by the China Quality Association since 2002, covered 149 leading brands and models, with a sample size of 23,489 collected from 101 major cities across five regions from May 1 to August 30, 2025 [6]

Core Insights - The 2025 China Automotive Industry User Satisfaction Index (CACSI) for fuel vehicles is 81 points, maintaining the highest historical level and unchanged from the previous year [1] - Brand recognition and perceived value are key factors supporting the satisfaction index [1] - User complaint rate has decreased to 9%, and loyalty score has reached 79 points, both achieving the best results in nearly a decade [1] Product and Service Quality - Product reliability has improved, scoring 80.5 points, an increase of 2 points year-on-year, marking the best level in the last ten years [2] - The number of faults per 100 new vehicles has decreased to 179, down by 9 from the previous year [2] - Faults are increasingly concentrated in three major systems: intelligent cockpit, intelligent driving assistance, and interior, which account for 72% of total faults, up 16 and 25 percentage points from 2024 and 2023 respectively [2] Sales and Service Satisfaction - Sales service satisfaction score is 80 points, down 1 point year-on-year, with the most significant declines in delivery process, online services, and test drives [3] - After-sales service satisfaction score is 79 points, down 2 points, with high evaluations for service attitude, maintenance, and repair quality [3] - Service fee satisfaction remains low, and service efficiency satisfaction has dropped from third to fourth place [3] User Experience with Intelligent Connectivity - User experience with driving assistance features is better than that of intelligent cockpits, with 78% and 75% satisfaction rates respectively [4] - Key driving assistance features like adaptive cruise control and collision warning have high configuration rates and user recognition [4] - Remote upgrade (OTA) features need significant improvement due to mismatches with user needs [4] Changes in Consumer Preferences - Key purchase considerations include performance, reliability, and comfort, with reliability rising to the second position [5] - The importance of brand reputation has decreased, with a 6 percentage point drop from 2023 to 2025 [5] - The proportion of new car buyers has decreased by 3 percentage points year-on-year, with 56% considering multiple models [5] Survey Methodology - The CACSI survey has been conducted for 24 consecutive years, covering 149 leading brands and models across 35 manufacturers [6] - The survey collected 23,489 valid samples from 101 major cities between May 1 and August 30, 2025 [6] - The evaluation framework includes overall satisfaction, reliability, performance design, after-sales service, and sales service [6]