HK Stock Market Move | Car dealers continue to decline, Porsche plans to reduce the scale of domestic dealers to 100. Institutions are optimistic about the transformation of the industry to electric car distribution.

Car dealers continue to decline, as of the time of writing, YONGDA AUTO (03669) fell 11.48% to HK$2.39; ZHENGTONGAUTO (01728) fell 8% to HK$0.069; ZHONGSHENG HLDG (00881) fell 3.6% to HK$12.84; MEIDONG AUTO (01268) fell 2.84% to HK$2.05. On the news front, it was reported that several Porsche offline stores in China suddenly closed, including Inner Mongolia ERDOS Resources, Yiwu, Tangshan, Zhengzhou, and other places. This move is the first major adjustment measure after Pan Lichi, President and CEO of Porsche China, took office. Pan Lichi stated that Porsche China plans to reduce the number of dealers to around 100 by December 31, 2026, equivalent to one-third of the current distribution channels. Galaxy Securities pointed out that the current trend of localization and high-end development of new energy vehicles has taken shape, with Huawei's automotive sales, led by Wanjie, booming, bringing opportunities for transformation to the domestic automotive distribution industry. We believe that the current automobile distribution sector still has significant upside potential, as the transition from traditional gasoline car distribution to electric vehicle distribution will lead to significant improvements in dealers' financial reports. Currently, leading domestic car dealers ZHONGSHENG HLDG and YONGDA AUTO are still at historical valuation bottoms, and with the operation and volume increase of AITO and Hongmeng Smart Store by 2025, their performance is expected to reverse.