CICC: Global electrification accelerating, focusing on stage rebound opportunities in the automotive and parts industry sector.

CICC released a research report stating that due to the impact of policy retreat, the domestic passenger car retail market was under pressure in January-February, with obvious inventory reduction in channels; however, new energy vehicle exports increased by 115% year-on-year, with Europe and Southeast Asia markets becoming new growth points, and the penetration rate of new energy vehicles is still optimistic in the medium to long term. It is recommended to focus on the phased rebound opportunities in the passenger car and whole vehicle sectors, and to consider thematic opportunities such as going abroad, Siasun Robot & Automation, and AIDC. Key points from CICC: Pressure on domestic demand in January-February, accelerated new energy vehicle exports Since the beginning of the year, retail sales have been under pressure, mainly due to the impact of demand overdraft caused by the reduction of purchase tax exemptions by the end of 2025 and the policy retreat of replacement subsidies. In January-February, channel inventory of passenger cars decreased by 330,000 units (compared to a decrease of 120,000 units in the same period last year), and car companies actively reduced production to cope with demand and cost pressures. In January-February, wholesale sales of new energy passenger cars decreased by 7.9% year-on-year to 1.589 million units, while retail sales decreased by 25.7% year-on-year to 1.06 million units. In January-February, exports of new energy passenger cars increased by 115% year-on-year, accounting for 48.9% of total exports. Looking ahead, the bank believes that the rise in oil prices may drive global new energy penetration as a medium- to long-term trend, and Chinese car exports to Europe, Southeast Asia, and other regions are showing high growth, with promising future growth potential. Positive catalysts since March, recommend focusing on phased rebound opportunities in the sector The bank predicts that in March, the overall volume of the passenger car industry and the sales of new energy vehicles will still be under pressure year-on-year, while recovering on a month-on-month basis, with new energy vehicles potentially turning positive year-on-year. Currently, market concerns about demand, costs, and profitability have not yet dissipated, and need to be continuously monitored into the second quarter. However, given the ongoing stock market correction and some vehicle stocks falling by more than 40%, combined with gradual downward revisions to full-year profit forecasts, along with the sector gradually entering a period of intense performance, technology, and new car releases in March-April, the bank expects individual stocks to rebound. On March 2nd, XPeng Motors unveiled the VLA2.0 model, which can be used for autonomous driving, Robotaxi, flying cars, and humanoid robots. On March 5th, BYD announced the second generation blade battery and flash charging technology, addressing the pain points of energy replenishment in pure electric vehicles. On March 10th, NIO announced its 4Q25 performance, with scale effects and structural improvements leading to the company achieving quarterly Non-GAAP profit for the first time. Valuation and recommendations Recommendations: 1) Passenger cars: NIO, JAC, Geely, etc. 2) Commercial vehicles: FAW, Yutong, CIMC Vehicles, etc. 3) Auto parts: Zhejiang Yinlun Machinery, Feilong Auto Components, Hesai, Tianrun Industry Technology, etc. 4) Siasun Robot & Automation: Zhejiang Sanhua Intelligent Controls, Ningbo Tuopu Group, Wanxiang Qianchao, etc. Risk reminders Subsidy effects may not meet expectations, overseas expansion may fall short of expectations, and industry competition may be fierce.