Core Viewpoint - The Chinese automotive industry is at a critical juncture after three years of growth, with investor sentiment shifting from optimism to caution as competition intensifies and potential subsidy reductions loom [1] Group 1: Market Sentiment and Policy Expectations - Investors are concerned that fierce market competition and subsidy cuts will continue to pressure industry sentiment and may impact the operational performance of OEMs and suppliers in Q1 2026 [1] - Most investors believe that national "trade-in" and local "replacement subsidies" will continue to be implemented in 2024 to mitigate the impact of a 5% increase in purchase tax and cyclical headwinds [2] - Investors expect that the implementation rules for local stimulus measures will become stricter, with per-vehicle subsidy amounts potentially decreasing by 30-50% year-on-year [3] Group 2: Traditional Automakers vs. New Players - There is a slight preference for traditional automakers, driven by low expectations and potential restructuring opportunities, alongside the influence of technology giants like Huawei [4] - Huawei's involvement in the automotive sector is reshaping the industry landscape, with its smart mobility alliance and collaborations with state-owned automakers [4] - Despite ongoing discussions around new players like BYD and NIO, investor opinions are divided, particularly regarding BYD's potential market share loss in 2024 [4] Group 3: Opportunities in Automation - The fields of autonomous driving and robotaxi are attracting significant market interest, with expectations for the removal of safety drivers becoming feasible due to technological advancements [5] - Regulatory breakthroughs for high-level autonomous driving are anticipated, with L3-level regulations expected to be released in the first half of 2026, potentially igniting renewed enthusiasm for autonomous driving clusters [5] - Suppliers with core technological advantages are expected to benefit from the increased penetration of L2+ and higher-level autonomous driving in China [5]