Morgan Stanley: New year's electric vehicle subsidy policy will be unveiled, uncertainties in the battery industry eliminated.

Morgan Stanley released a research report stating that mainland China's subsidy policy will be introduced in 2026. Although the new policy will link subsidy amounts to the selling price of cars, unlike the fixed amount subsidies in 2025, the subsidy cap and coverage of models will remain largely unchanged. The market had previously been concerned about the sustainability of subsidies, fearing a significant decline in sales of electric passenger cars in the first quarter of 2026, but this uncertainty has now been eliminated. The bank believes that the continuation of subsidies for electric passenger cars will ensure high single-digit growth in the electric vehicle battery industry in 2026, and the strong performance of electric trucks and energy storage systems will further increase industry profits. If strong demand leads to continued increases in battery material prices, the bank believes that Contemporary Amperex Technology (03750) will be able to pass on the cost pressure through pricing strategies. The bank now has a target price of 490 RMB for Contemporary Amperex Technology's A shares (300750.SZ) and a "buy" rating, listing it as the industry's top pick.