Shenwan Hongyuan Group: Decrease in Q1 passenger car sales puts pressure on performance, continues to be optimistic about new energy growth and going global.

Shenwan Hongyuan Group released a research report stating that based on the main themes of AI spillover, anti-intensification, and demand recovery, the following points are observed: In the vehicle sector, the focus is on the direction of intelligent and high-end AI spillover; profitability is supported by overseas business, and breakthrough changes brought by central SOE reforms. Siasun Robot & Automation and data center liquid cooling are expected to shift from themes to industrial trends, focusing on companies with performance support and valuation potential, with core tier1 companies in intelligent focus; large and medium market cap blue-chip stocks to watch; and small and medium market cap stocks with growth potential. Additionally, the profit repair of the second-hand car market is favored in the anti-intensification pricing cycle. Key points from Shenwan Hongyuan Group: According to data from the China Association of Automobile Manufacturers, the automobile production and sales in Q1 2026 were completed at 703.9/704.8 million vehicles, with y-o-y decreases of -6.9%/-5.6% respectively. Passenger cars: Production and sales in Q1 2026 were completed at 590.9/593.4 million vehicles, with y-o-y decreases of -9.3%/-7.6%. Commercial vehicles: Production and sales in Q1 2026 were completed at 113.0/111.4 million vehicles, with y-o-y increases of +7.9% / +6%. Overseas: Car exports in Q1 2026 were 2.26 million vehicles, with a y-o-y increase of +56.7%, with new energy vehicles performing well at 0.54 million units, with a y-o-y increase of +120%. Passenger car sales decreased y-o-y, but new energy penetration was excellent. The industry discount rate decreased m-o-m, reducing end-customer benefits. According to the industry-discount data from credible sources, the average industry discount rate in January and February 2026 decreased by -0.31pct to 13.48%. The discount rate for domestic brands increased by +1.26pct to 7.41%, while the discount rate for joint venture brands increased by 1.99pct to 18.59%, and the discount rate for luxury brands decreased by -8.52pct to 21.86%. The price index of traditional raw materials rose in Q1 2026, driving up the prices of traditional and new energy vehicle raw materials, while ocean freight prices declined. In Q1 2026, the prices of bulk raw materials such as steel, aluminum, plastics, rubber, and glass changed as follows: -0.1%, +11.9%, +8.8%, +7.6%, and +1.5% respectively. Among battery materials, nickel, cobalt, and lithium carbonate prices increased by +15.7%, +8.6%, and +74.8% respectively. According to the calculated price index model, the traditional car price index increased m-o-m by +6.0%, and the new energy car price index increased m-o-m by +18.2%. The ocean freight price index decreased by -8.9% in Q1 2026. Q1 passenger car sales were under pressure, while rising raw material prices increased enterprise costs, putting pressure on supply chain profitability. However, blue-chip companies with globalization and downstream customer support still have room for growth. Specifically: (1) Vehicles: Downstream sales slowed down, with net profits mainly decreasing y-o-y in Q1 2026, Zhejiang Taotao Vehicles (+80%~+126%), LI AUTO-W (-300%~-269%). (2) Components: Net profits in Q1 2026 showed growth of 0-50% y-o-y for Wuxi Longsheng Technology (+12%~+26%), Zhejiang Yinlun Machinery (+6%~+11%), Ningbo Jifeng Auto Parts (+5%~+24%), Wuxi Zhenhua Auto Parts (+5%~+15%), Guilin Fuda Co., Ltd. (+3%~+12%), Jee Technology (+2%~+25%); Others: Zhejiang Shuanghuan Driveline (-6%~+1%), Shanghai Baolong Automotive Corporation (-10%~-1%), Sichuan Chuanhuan Technology (-14%~10%), Gsp Automotive Group Wenzhou (-19%~-14%), Feilong Auto Components (-59%~-43%). Key risks: fluctuations in raw material prices, geopolitical risks, industry recovery falling short of expectations.