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<Research>Citi Favors BYD COMPANY/ PONY-W, Lists 5 Tailwinds & Challenges for CN Auto Industry
Recommend 13 Positive 21 Negative 3 |
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Citi has released a research report indicating a neutral outlook for Chinese carmakers in 1Q26. It expects BYD COMPANY (01211.HK), GEELY AUTO (00175.HK), and LEAPMOTOR (09863.HK) to potentially outpace the market from the end of 1Q26 to the beginning of 2Q26, mainly benefiting from model update cycles and strong export growth. Conversely, SERES (09927.HK), LI AUTO-W (02015.HK), SAIC MOTOR (600104.SH), CHANGAN AUTOMOBILE (000625.SZ), and GAC GROUP (02238.HK) may lag due to pressure on profit margins and weak sales prospects for fuel vehicles. In Citi's estimate, China's auto industry will face five major tailwinds and five challenges in 2026. On the positive side, the penetration rates of LiDARs, ADASs, and autonomous taxi services are rapidly increasing. Car exports are expected to grow by 19%, with new energy vehicle exports potentially increasing by 49%. Demand for commercial vehicles is in a favorable phase. The price war in passenger vehicles (PVs) is likely to end. The market share of electric vehicles (EVs) will gradually concentrate, leading to improved capacity utilization. On the negative side, rising costs may erode carmakers' net margins by 2-5 ppts. The outlook for 1Q26 and 2Q26 is becoming cautious, with retail growth for EVs potentially slowing to 4% and 0%, respectively. Citi has cut its FY26 forecasts for PV wholesale and retail, with YoY declines of 3.8% and 9.6%. High inventory levels of fuel vehicles raise concerns about inventory reduction. Although valuations have bottomed out, market consensus may soon lower earnings forecasts. Citi has listed five recommended stocks, including BYD COMPANY (01211.HK), PONY-W (02026.HK) or WERIDE-W (00800.HK), HESAI-W (02525.HK), MINTH GROUP (00425.HK), and WEICHAI POWER (02338.HK). AAStocks Financial News |
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