2026 mgmt outlook call series: Aggressive on volume growth while cautious on margins We hosted 10 virtual company meetings at our China Autos 2026 Management Outlook Call Series with six OEM companies, two suppliers and one dealer during Jan 5-6, including SAIC, GAC, Xiaomi Corp. (covered by Timothy Zhao), Leapmotor (Not Covered, 9863.HK), Great Wall (Not Covered, 2333.HK/601633.SS), Seres (Not Covered, 9927.HK/601127.SS). What surprised us and what to do about it Overall, we observed four key themes in Chi ...

n OEM net cash increase from US$15.6bn (Rmb111bn) equity fundraising (Exhibit 6) despite shortening payable days. During 2025, we estimate a total of US$15.6bn (Rmb111bn) was raised by China auto OEMs through equity issuance, which has enabled sustained new product investment and market competition. Meanwhile, loss-making OEMs were also provided more capacity to manage the cash burn, making industry consolidation difficult to occur, in our view. For 2026, we expect another year of intense competition with 1 ...

December 29, 2025 08:15 AM GMT China Autos & Shared Mobility | Asia Pacific 2026 Outlook – A Year of Recession and Reinvention China's auto industry will face cyclical and policy challenges in '26, but these could prove territorially and technologically beneficial. Capturing AI lift-off and global growth prospects will be key to re-rating and idiosyncratic return. Volume risk is anticipated; margin risk less so. Could "bad news" be "good news"? Concurring with autos' cyclical laws, we expect China auto sale ...

Summary of Key Points from the Conference Call on China Auto Manufacturers Industry Overview - The conference call focused on the **China Auto Manufacturers** industry, particularly the performance of **New Energy Vehicles (NEVs)** and traditional internal combustion engine (ICE) vehicles in October 2025. Core Insights and Arguments 1. **NEV Market Performance**: - October 2025 saw a **-8% month-over-month (MoM)** decline in domestically produced NEV passenger vehicle (NEV-PV) sales, although there was a **+1% year-over-year (YoY)** increase, which missed expectations [1][9]. - Local Chinese brands maintained a high NEV market share of **84.3%**, increasing by **+1.2 percentage points (ppt) MoM** [6]. 2. **ICE Vehicle Sales**: - The penetration of ICE vehicles increased to **42.4%**, up **+0.8 ppt MoM** [2]. - Chinese brands' ICE market share rose by **+1.7 ppt MoM** to **35.4%**, while foreign brands (German, Japanese, US) experienced declines [3]. 3. **Market Share Changes**: - **Xiaomi, Nio, and Seres** gained BEV market shares with increases of **+1.3 ppt, +1.0 ppt, and +0.8 ppt** respectively, while **Tesla and BYD** lost market shares of **-4.9 ppt and -2.6 ppt** [2]. - **Geely and Chery** gained PHEV market shares by **+1.2 ppt and +0.3 ppt** respectively, while **GWM and BYD** lost shares [2]. 4. **Tesla's Performance**: - Tesla's domestic insurance retail sales dropped **-61% MoM** and **-34% YoY** to **27,367 units**. Wholesales were **61,497 units**, down **-32% MoM** and **-10% YoY** [4][19]. - Tesla's inventory levels increased, indicating potential overstock issues [5]. 5. **Inventory Levels**: - Overall inventory for major OEMs rose from **2.3 months** at the end of September to **2.7 months** at the end of October [5]. - NEV inventory also increased by **0.3 months MoM** to **1.7 months** [5]. Additional Important Insights 1. **Export Performance**: - The export volume of NEVs reached **35,491 units**, reflecting a **+84% MoM** and **+28% YoY** increase, indicating strong international demand [4]. 2. **Sales Data**: - Total domestically produced NEV PV sales for October 2025 were **1,189,321 units**, with a **1% YoY increase** but an **8% MoM decrease** [9]. 3. **Market Dynamics**: - The competitive landscape is shifting, with local brands gaining ground against established players like Tesla and BYD, suggesting a potential long-term trend favoring domestic manufacturers [2][3]. 4. **Analyst Certification and Disclosures**: - The report includes important disclosures regarding potential conflicts of interest and the analysts' certifications, emphasizing the need for investors to consider these factors in their decision-making [7][26]. This summary encapsulates the key points discussed in the conference call, highlighting the current state and trends within the Chinese auto manufacturing industry, particularly focusing on NEVs and ICE vehicles.

Summary of Geely Automobile Holdings Conference Call Company Overview - **Company**: Geely Automobile Holdings - **Industry**: China Autos & Shared Mobility - **Stock Rating**: Overweight - **Current Price**: HK$17.00 (as of November 18, 2025) - **Price Target**: HK$24.00, representing a 41% upside potential Key Points Financial Performance and Projections - Geely aims for a **30% unit profit growth** in 2026, supported by a favorable overseas sales mix, scale benefits, and cost savings following the privatization of ZEEKR [1][2] - The company targets a **20% market share growth** in China by 2026, compared to approximately **9% year-to-date in 2025** [1] - Geely anticipates **50-80% growth in overseas sales** in 2026, with **300,000 units of NEV exports** expected, up from **110,000 in 2025** [1] Gross Profit Margin (GPM) Insights - Management expects **GPM expansion in Q4 2025** after a decline in Q3 due to product transitions and higher discounts from inventory destocking [3] - Lynk & Co's GPM is projected to return to **15-16%** in Q4, up from **11% in Q3 2025** [3] - ZEEKR's GPM is expected to improve with a higher sales mix of models 009 and 9X [3] Operational Efficiency - Geely has reduced its payable cycle by **24 days to 87 days** in Q3 2025, with most suppliers now on a **60-day payment cycle** and small-to-mid suppliers on a **30-day cycle** [4] - The management indicated that the impact on operating cash flow (OCF) from this change is manageable [4] Market Capitalization and Valuation Metrics - Current market capitalization stands at **Rmb156,470 million** [7] - Projected revenue for 2026 is **Rmb383,001 million**, with an EBITDA of **Rmb28,816 million** [7] - The company’s P/E ratio is projected to decrease from **8.4 in 2024** to **6.3 in 2027** [7] Risks and Considerations - Upside risks include potential vehicle purchasing stimulus extensions and stronger-than-expected profitability from key products [13] - Downside risks involve a notable slowdown in domestic vehicle demand and expanding losses in NEV businesses due to price competition [13] Conclusion Geely Automobile Holdings is positioning itself for significant growth in both domestic and international markets, with a strong focus on profitability and operational efficiency. The company's strategic initiatives and favorable market conditions could provide substantial investment opportunities moving forward.

Summary of BYD Co. (002594.SZ/1211.HK) 2Q25 Earnings Review Company Overview - **Company**: BYD Co. (002594.SZ/1211.HK) - **Industry**: New Energy Vehicles (NEV) Key Financial Results - **Revenue**: Rmb200.9 billion, missing expectations by 6% [1] - **Gross Margin**: 16.3%, down 1.8 percentage points from expectations [1] - **Operating Cash Flow**: Rmb23 billion, up 171% quarter-over-quarter and 489% year-over-year [3] - **Net Income**: Rmb6.36 billion, down 38.2% year-over-year [9] Core Insights - **Revenue Decline**: The revenue miss was attributed to lower-than-expected sales in mobile handset components and assembly services, with significant internal eliminations between BYD and BYDE [1][7] - **Unit Profit Analysis**: Domestic unit profit fell to Rmb523 in 2Q25 from Rmb5.8k in 1Q25, primarily due to increased costs from autopilot models and promotional expenses [2][10] - **Cost Factors**: Higher costs included Rmb4.4k for BOM of autopilot models, Rmb2.9k for a one-month promotion, and Rmb666 in dealer incentives [2][10] Market Position and Outlook - **Market Share**: BYD's NEV retail market share declined to 29% in the first seven months of 2025 from 34% in 2024, facing competition from over 50 new model launches by competitors [12] - **Volume Estimates**: Revised 2025-2027 volume estimates lowered to 5.0-6.0 million units from 5.5-6.8 million due to declining domestic market share [4][12] - **Future Projections**: Expected recovery in unit profit to Rmb4.4k in 3Q25 and Rmb5.0k in 4Q25 as prices stabilize under government guidance [2][10] Investment Thesis - **Growth Potential**: BYD is positioned to capture mass-market demand and expand in overseas markets, with expectations of total vehicle sales volume growing from 4.3 million in 2024 to 8.9 million by 2030 [18][20] - **Price Target**: 12-month DCF-based price targets adjusted to Rmb133 for A shares and HK$130 for H shares, implying upside potential of 21% and 20% respectively [4][21] Risks and Considerations - **Downside Risks**: Include intensifying competition in the electric vehicle market, slower-than-expected overseas expansion, and lower-than-expected external battery sales [20][21] Additional Insights - **Cash Flow Improvement**: Shortening payment periods to suppliers, with payable days reduced to 128 in 2Q25 from 169 in 1Q25 [3] - **Operating Expenses**: Total operating expenses decreased by 3.5% quarter-over-quarter, indicating cost management efforts [9] This summary encapsulates the key financial results, market position, and future outlook for BYD Co. based on the 2Q25 earnings review.

Summary of Key Points from the Conference Call on China Auto Manufacturers Industry Overview - The conference call focused on the **China Auto Manufacturers** industry, specifically insights from Mr. Cui Dongshu of the **China Passenger Car Association (CPCA)** regarding sales forecasts, stimulus outlook, and market trends in the automotive sector. Core Insights and Arguments 1. **August Sales Forecast**: - Mr. Cui forecasts a **6% month-over-month (MoM)** increase in domestic retail for passenger vehicles (PV) in August, translating to a **2% year-over-year (YoY)** growth. - Wholesales are expected to rise by **5% MoM** and **9% YoY**, while exports are projected to grow by **3.8% MoM** and **20% YoY**, reaching **500,000 units** [1][2]. 2. **Auto Stimulus Outlook**: - The Chinese government is expected to be conservative with auto industry stimulus in the second half of 2025, potentially reallocating some funds to 2026 due to strong GDP growth in the first half of 2025 and high sales driven by previous stimulus policies. - The available funding for the consumption replacement scheme is estimated at **Rmb138 billion** in 2H25, down from **Rmb162 billion** in 1H25 [2][10]. 3. **2025 Forecast**: - Mr. Cui anticipates a **6% YoY growth** in PV retail for 2025, with the second half likely to be flat YoY. - NEV (New Energy Vehicle) wholesales are expected to increase by **27% YoY**, with a **20% YoY growth** in 2H25 [3]. 4. **July Sales Review**: - PV production volume decreased by **7% MoM** but increased by **12% YoY**. - Wholesales fell by **11% MoM** but rose **13% YoY**, while retail sales dropped **12% MoM** but grew **6% YoY**. - The decline in retail sales is attributed to consumer hesitation [4]. 5. **NEV Performance**: - NEV wholesales grew by **24% YoY**, with retail up **12% YoY**. - Battery Electric Vehicles (BEV) showed strong performance with a **45% YoY** increase, while Plug-in Hybrid Electric Vehicles (PHEV) and Extended Range Electric Vehicles (EREV) were weaker, with growth of **3%** and a decline of **6% YoY**, respectively [4]. 6. **Market Trends**: - The average pricing of passenger vehicles has been declining, with July 2025 average pricing at **Rmb169,000**, down from **Rmb183,000** in 2023 and **Rmb177,000** in 2024. - The high-end segment is experiencing weaker sales, particularly among German luxury brands [8][9]. 7. **Lithium Carbonate Inventory**: - Mr. Cui noted that the current inventory of lithium carbonate is estimated at **140,000 tons**, with a reasonable future price around **Rmb60,000 per ton** due to low production costs and tepid global NEV demand [7]. 8. **BYD Sales Forecast**: - BYD's wholesales for 2025 are projected to be around **4.8 million units**, with a potential increase in dealer discounts if the target of **5.5 million units** is not adjusted [12]. Additional Important Insights - **Discount Levels**: - NEV discount levels remained stable at **10.2%** in July, while luxury ICE (Internal Combustion Engine) discounts increased to **27.2%** from **25.7%** in May [4][11]. - **New Model Highlights**: - Several new models were highlighted, including the **Leapmotor B01** and **BYD Seal 06 Touring**, which are competitively priced to target existing market players [5]. This summary encapsulates the key points discussed during the conference call, providing a comprehensive overview of the current state and future outlook of the China auto manufacturing industry.