Core Insights - The article discusses the evolution of range-extended electric vehicles (REEVs) in the automotive industry, highlighting a shift from the initial focus on alleviating range anxiety to enhancing user experience through advanced technology integration [2][3][12] - The competition in the REEV market is now characterized by a deeper emphasis on technical capabilities, energy efficiency, and adaptability to various driving scenarios, rather than merely extending driving range [4][5][12] Summary by Sections First War vs. Second War - The first phase of the REEV market addressed the issue of range anxiety, providing consumers with a flexible solution that combined electric and fuel options, thus proving the viability of REEVs [3][12] - The second phase, marked by the entry of technology-driven companies, focuses on optimizing user experience and integrating advanced technologies into REEV systems [5][12] Technological Advancements - Companies like Xiaopeng and Leap Motor are now competing on the basis of their ability to balance integration, energy consumption, and spatial efficiency, moving beyond simple functionality [4][5] - The introduction of advanced materials and AI in control systems signifies a shift towards higher technical barriers in the REEV market, emphasizing the importance of R&D capabilities [5][12] Market Strategies - There is a notable divergence in technical strategies, with some companies opting for "large battery + small fuel tank" configurations aimed at urban users, while others prefer "large battery + large fuel tank" setups to cater to long-distance travel needs [6][7] - The strategic choice of configurations reflects a deeper understanding of user scenarios and market demands, particularly in international markets where charging infrastructure may be lacking [8][9] Global Expansion - Several Chinese brands view REEVs as a gateway to international markets, leveraging their unique features to address the challenges posed by inadequate charging facilities in many regions [9][12] - The article notes that while REEVs are perceived as a transitional technology in China, they offer a practical solution in diverse global markets, providing users with a "zero-anxiety" electric driving experience [9][12] Challenges Ahead - The article highlights potential challenges in the global expansion of REEVs, including consumer understanding, regulatory risks, and the need for localization in different markets [10][11] - Despite these challenges, the rise of REEVs represents a victory for practical solutions that meet the immediate needs of consumers, balancing the benefits of electric vehicles with the realities of current infrastructure [11][12]

Investment Rating - The report maintains an investment rating of "Outperform" for the automotive sector [2]. Core Insights - The report indicates that some car purchase demand was released ahead of the Spring Festival, and the "trade-in" policy will continue to support sales in 2025 [11]. - In January 2025, the retail sales of narrow-sense passenger vehicles in China were approximately 1.79 million units, a year-on-year decrease of 12.1% and a month-on-month decrease of 31.9% [11]. - The penetration rate of new energy vehicles (NEVs) reached 41.5% in January 2025, up 8.7 percentage points year-on-year [11]. - The report highlights that the domestic market for NEVs is expected to capture a larger share of the fuel vehicle market, with a projected penetration rate of 50%-55% by 2025 [14]. Summary by Sections Overall Market Performance - In January 2025, the dealer inventory warning index reached 62.3, the highest level in nearly seven years, indicating a decline in market activity [15]. - The wholesale sales of NEVs in January 2025 were approximately 890,000 units, a year-on-year increase of 25.8% [11]. Key Players and Recommendations - The report recommends several leading companies in the automotive sector, including Great Wall Motors (02333 HK), Geely Automobile (00175 HK), BYD (01211 HK), Li Auto (02015 HK), Xpeng Motors (09868 HK), and Leapmotor (09863 HK) for their strong performance and rapid transition to new energy [16]. - For the heavy truck segment, it recommends China National Heavy Duty Truck Group (03808 HK) and Weichai Power (02338 HK) [22]. Export Trends - NEV exports accounted for 36.6% of total exports in January 2025, with a year-on-year increase of 9.8 percentage points [11]. - The total export volume in January 2025 was 380,000 units, a year-on-year increase of 3.0% [11]. Component Sector - The report continues to recommend companies like Nidec (01316 HK) and Minth Group (00425 HK) in the components sector, highlighting their potential growth driven by the recovery of the domestic automotive industry and gradual improvement in overseas sales [24][25].