2025-12-30 14:41Summary of the Conference Call on China's Auto Industry Outlook for 2026 Industry Overview - The conference call focuses on the China auto industry and its outlook for 2026, highlighting cyclical and policy challenges that may lead to both risks and opportunities for technological advancements and market growth [1][2]. Key Forecasts and Trends - Sales Decline: Anticipated 7% year-over-year (YoY) decline in auto sales for 2026, ending a three-year growth streak. This decline is attributed to market pessimism, which may lead to a relief rally if marginal improvements occur [2][3]. - Subsidy Expectations: Continued nationwide and local subsidies are expected to mitigate the impact of a 5% purchase tax hike. The average subsidy per car is projected to decrease due to updated stimulus measures [3]. - Quarterly Sales Projections: - 1Q26: Sales expected to fall 5-7% YoY (or down 30%+ quarter-over-quarter (QoQ)). - 2Q26: Anticipated 3% YoY decline. - 2H26: Expected to see a 0-1% YoY decline, with March/April potentially marking the fundamental trough for investors [3]. Volume and Market Share - Wholesale Volume: Forecasted 3% YoY decline in 2026 for passenger vehicle (PV) wholesale volume, with a 7% YoY decline in domestic sales [4][11]. - New Energy Vehicles (NEV): NEV sales growth is expected to decelerate to 11%, achieving 59% sales penetration. Plug-in hybrid electric vehicles (PHEVs) are projected to grow 14%, outpacing battery electric vehicles (BEVs) at 9% growth [4][15]. - Export Growth: Exports are expected to grow by 16% YoY, with significant growth in sales to Europe, ASEAN, and Latin America, each projected to grow 20-25% YoY [4][12]. Investment Recommendations - Preferred Stocks: - For OEMs: XPeng, Geely, and SAIC are recommended for their resilient domestic and growing overseas sales, along with potential re-rating opportunities from non-auto initiatives. - Investors are advised to monitor Li Auto, NIO, and BYD for new launches in 2Q26 that may generate alpha against reduced expectations [6]. - Auto Parts: Preferred stocks include Hesai, Minth, and Xingyu. Among dealers, Zhongsheng is favored due to profit resurgence from stricter scrutiny on unfair auto price competition [6]. Additional Insights - Technological Development: The need for progressive development of non-auto initiatives, such as AI and humanoids, is emphasized for a potential re-rating of multiples in the capital market [5]. - Market Sentiment: The current market sentiment is characterized by a pessimistic bias, which may create opportunities for recovery if conditions improve [2]. Conclusion - The China auto industry is poised for a challenging year in 2026, with expected declines in sales and volume. However, strategic investments in resilient companies and emerging technologies may provide opportunities for recovery and growth in the long term [1][2][6].