EB SECURITIES: Weak performance in the car market, AI shortage of electricity may drive investment opportunities in the internal combustion engine industry chain.

EB SECURITIES released a research report stating that high-level intelligent driving may usher in a commercial turning point, while humanoid Siasun Robot&Automation still needs event catalysis. The recent pressure on the passenger vehicle market is mainly due to the decline in sales in January and February caused by the Spring Festival and policy downturn, as well as the pressure on gross profit margins caused by the increase in raw material costs such as storage chips, batteries, aluminum, and copper since the beginning of the year. The demand for AI-driven electricity generation is expected to increase significantly, due to the mismatch between supply and demand, infrastructure iteration, traditional power withdrawal, and the unstable output of new energy sources such as wind power. It is expected that there will be opportunities for a corresponding increase in the sales of gas turbines/internal combustion engines, SOFC fuel cells, etc.; among them, internal combustion engines have the advantages of sufficient production capacity and fast delivery, and are optimistic about the opportunities in the internal combustion engine industry chain driven by AI power shortages. EB SECURITIES' main points are as follows: Weak performance in the automotive market in January and February In January, domestic retail sales of passenger vehicles in China decreased by 13.9% year-on-year and 31.7% month-on-month to 1.544 million units, while wholesale sales decreased by 6.2% year-on-year and 29.3% month-on-month to 1.973 million units; retail sales of new energy vehicles decreased by 20.0% year-on-year and 55.4% month-on-month to 596,000 units (new energy penetration rate of 38.6%), while wholesale sales decreased by 3.3% year-on-year and 44.7% month-on-month to 864,000 units (new energy penetration rate of 43.8%). Various automakers have successively announced their sales data for February; among them, the Ideal saw a year-on-year increase of 0.6% and a month-on-month decrease of 4.5% to 26,000 units, while Xiaopeng saw a year-on-year decrease of 49.9% and a month-on-month decrease of 23.8% to 15,000 units. Consumer stimulation and industrial upgrading remain the core direction of the automotive industry The 2026 government work report continues to focus on consumer stimulation and industrial upgrading. The bank predicts that 1) the total volume of automobiles in 2026 may still rely on policy drive; 2) the intelligentization of the automotive industry (intelligent driving, humanoid Siasun Robot&Automation) is in line with the national development orientation of new quality productivity. The entire industry chain is under pressure The bank's assessment is that the recent pressure on the passenger vehicle market is mainly due to the decline in sales in January and February caused by the Spring Festival and policy downturn, as well as the pressure on gross profit margins caused by the increase in raw material costs such as storage chips, batteries, aluminum, and copper since the beginning of the year. The bank predicts that there may still be a possibility of trading volume for price this year, and in the short term, attention will be focused on the pricing strategies of various automakers, March orders, April auto shows, and the realization of financial reports. High-level intelligent driving may usher in a commercial turning point, while humanoid Siasun Robot&Automation still awaits event catalysis Intelligent driving: 1) It is expected that intelligent driving has become one of the competitive ways to configure passenger vehicles. The expected increase in L2+ penetration rate is expected to drive related component shipments; 2) By 2026, the commercialization of Level 3 and higher-level automatic driving may land or accelerate. It is optimistic about the opportunities for incremental components such as hand-eye detection and prompts, Data Storage System for Combination Driving Assistance (DSSCDA), and related testing agencies may also benefit; 3) Focus on the application of unmanned mining trucks and unmanned logistics vehicles in commercial scenarios. Humanoid Siasun Robot&Automation: Yushu and others made a stunning appearance on the Spring Festival Gala, and Tesla and Xiaopeng are expected to achieve mass production by 2026; the bank predicts that humanoid Siasun Robot&Automation will remain an important investment theme in 2026, with short-term catalysts still awaiting the release of Tesla V3. The bank is paying attention to domestic supply chains, domestic AI chips and algorithm iterations, as well as breakthroughs in new technologies. AI power shortages may drive investment opportunities in the internal combustion engine industry chain The demand for electricity generation driven by AI power collaboration is expected to increase significantly. Considering the mismatch between supply and demand, infrastructure iteration, traditional power withdrawal, and the unstable output of new energy sources such as wind power, it is expected that there will be corresponding opportunities for the increase in sales of gas turbines/internal combustion engines, SOFC fuel cells, etc. Among them, internal combustion engines have the advantages of sufficient production capacity and fast delivery, and the bank is optimistic about the investment opportunities in the internal combustion engine industry chain driven by AI power shortages. Risk warning: Policy fluctuations; supply chain falling short of expectations; industry demand falling short of expectations; slower than expected climbing.