Investment Rating - The report maintains a "Recommended" investment rating for the automotive industry [2]. Core Viewpoints - The "anti-involution" policy in the automotive sector is expected to gradually be implemented, focusing on regulating competition in the new energy vehicle industry. Key measures may include price monitoring, inventory checks for dealers, control of new domestic production capacity, and strict monitoring of supplier payment terms. This is anticipated to ease the competitive pricing war that has been prevalent in the passenger car market over the past three years. Companies with product advantages, state-owned enterprises with strong cash flow, and flexible small suppliers are likely to benefit from these changes [5][15]. Industry Dynamics - Recent developments include the merger agreement between Geely Auto and Zeekr Technology, and adjustments to the consumption tax policy for ultra-luxury vehicles by the Ministry of Finance and the State Taxation Administration [16]. - The automotive sector outperformed the CSI 300 index, with the automotive sector index rising by 3.28% from July 14 to July 18, 2025, compared to a 1.09% increase in the CSI 300 index [5][38]. Data Tracking - In June 2025, retail sales of passenger vehicles reached 2.0851 million units, representing a year-on-year increase of 18.18% and a month-on-month increase of 7.59%. Retail sales of new energy passenger vehicles reached 1.111 million units, up 29.66% year-on-year and 8.16% month-on-month, with a retail penetration rate of 53.3% [5][61]. - The penetration rate of passenger vehicles equipped with L2.5 and above intelligent driving systems reached 24.68% in May 2025, with retail sales of 514,700 units [77]. Investment Recommendations - The report suggests focusing on leading companies in intelligent driving and electric vehicles, including BYD, Changan Automobile, Great Wall Motors, Geely, and others. It also highlights key suppliers in the intelligent core segment and commercial vehicle leaders [5][7].