Guosen: Optimistic about the automotive sector entering a period of bullish trends. In the medium to long term, optimistic about opportunities for going global and upgrading the industry.

Guosen released a research report stating that March is expected to enter a period of month-on-month improvement and new technology/product cycle, combined with the April auto show, the industry is entering a period of intensive catalysis, optimistic about the window of opportunity for long positions in the automotive sector. In the medium to long term, under the trend of autonomous rise and electric intelligence, investment opportunities in going global and industry upgrading (Siasun Robot & Automation, smart driving, AI, etc.) are favored. Against the backdrop of geopolitical tensions, automobiles as a domestic consumption item, stimulus policies are expected to be strengthened, optimistic about passenger cars and domestically produced alternative components. Guosen's main points are as follows: Monthly Production and Sales According to data from the China Association of Automobile Manufacturers, in February, nationwide retail sales of passenger cars were 1.034 million units, a year-on-year decrease of 25.4% and a month-on-month decrease of 33.1%. Cumulative retail sales for January-February were 2.578 million units, a year-on-year decrease of 18.9%. In February, wholesale sales of passenger cars were 1.518 million units, a year-on-year decrease of 14.3% and a month-on-month decrease of 23.0%. Cumulative wholesale sales for January-February were 3.494 million units, a year-on-year decrease of 9.8%. In February, retail sales of new energy passenger cars were 464,000 units, a year-on-year decrease of 32.0%, with a market penetration rate of 44.9%, a year-on-year decrease of 4 percentage points. Cumulative retail sales for new energy passenger cars in January-February were 1.060 million units, a year-on-year decrease of 25.7%. According to the China Association of Automobile Manufacturers, in February, total automobile sales were 1.805 million units, a month-on-month decrease of 23.1% and a year-on-year decrease of 15.2%. In February, passenger car sales were 1.536 million units, a month-on-month decrease of 22.7% and a year-on-year decrease of 15.4%. In February 2026, sales of new energy vehicles were 765,000 units, a year-on-year decrease of 14.2%. Cumulative sales for new energy vehicles in January-February were 1.71 million units, a year-on-year decrease of 6.9%. Overall, sales in February gradually reached a low point, and the sector's fundamentals are slowing down. It is expected that in March, there will be an upward trend and a new technology/product cycle, combined with the April auto show, the industry will enter a period of intensive catalysis. It is a good time to be optimistic about the sector entering a bullish window. Market Trends this Month In February, the CSI auto sector rose by 2.82%. Among them, CSI passenger cars fell by 0.21%, CSI commercial vehicles rose by 9.22%, CSI auto parts rose by 2.88%, CSI auto sales and services rose by 2.17%, CSI motorcycles and other rose by 2.99%. During the same period, the Shanghai and Shenzhen 300 Index rose by 0.09%, the Shanghai Composite Index rose by 1.09%. The CSI auto sector outperformed the Shanghai and Shenzhen 300 Index by 2.73 percentage points and the Shanghai Composite Index by 1.73 percentage points. Since the beginning of 2026, the auto sector has risen by 3.16%, the Shanghai and Shenzhen 300 Index has risen by 1.74%, and the Shanghai Composite Index has risen by 4.89%. The CSI auto sector outperformed the Shanghai and Shenzhen 300 Index by 1.42 percentage points and underperformed the Shanghai Composite Index by 1.73 percentage points. Cost Tracking As of February 28, 2026, the prices of float glass, aluminum ingots, and zinc ingots decreased by 16.7%, 14%, and 2.9% respectively compared to the same period last year, and increased by 2.8%, 3%, and 0.2% respectively compared to the previous month. Inventory In February 2026, the inventory alert index for Chinese auto dealers was 56.2%, a year-on-year decrease of 0.7 percentage points and a month-on-month decrease of 3.2 percentage points. The inventory alert index is above the boom-bust line. Market Focus 1) Whole vehicle (intelligence & electrification): Xiaopeng released the second generation VLA model; BYD released the second generation blade battery and flash charging technology, focusing on the acceleration of intelligent and electrified technology iterations and the boost to industry sales; 2) Siasun Robot & Automation: Tesla's Optimus update is imminent; Xiaopeng plans to establish a full chain production base for Siasun Robot & Automation; Xiaomi's Siasun Robot & Automation is already in factory operation; 3) Other: Focus on the industry chain of diesel and gas engines in North America under power shortage background, the issuance of national subsidy policies, and industry annual reports and first quarter market trends. Risk Warning: Risks include tightness in the automobile supply chain, economic recovery falling short of expectations, and lower-than-expected sales.