CICC: Profit in the automotive sector is bottoming out and needs to be repaired. Seize the opportunity for overseas expansion and AI-driven growth.

CICC released a research report stating that as of mid-2026, the automotive sector has already reflected the pressures of weakening domestic demand, rising costs, and profit downgrades in the first half of the year, with increasing signs of marginal improvement in the second half. Passenger cars are focusing on high-end, overseas expansion, and the cycle of intelligent driving products; commercial vehicles are focused on the global mining and infrastructure construction cycle, exports to Asia, Africa, and Latin America, and the transition to new energy; the industry chain is focusing on advanced intelligent driving, AIDC power generation and liquid cooling, humanoid Siasun Robot & Automation, and commercial aerospace, among other AI-related growth areas. Passenger cars: Profit downgrades are gradually in place, with overseas and high-end still being the core hedge. Domestic demand for passenger cars in the first half of 2026 was weaker than expected, and we expect total sales to remain under pressure in the third quarter, with month-on-month growth turning positive either in the fourth quarter or delayed to the fourth quarter; with the release of new car supplies, sales of new energy vehicles are expected to recover first. In terms of profitability, the second quarter of 2026 may be the low point of single-car profitability for most car companies, with the speed of recovery in the third and fourth quarters depending on orders for high-end models, stability of terminal prices, and contribution of export profits, with exports still being an important hedge for overall vehicle profitability and valuation in the second half. Commercial vehicles: The global mining and infrastructure construction cycle is on the rise, and the transition to new energy opens up new opportunities. We believe that the policies of scrappage and replacement, along with the demand for infrastructure construction and mining capital expenditures in Asia, Africa, and Latin America, will collectively support the industry. Emerging markets such as Africa, Southeast Asia, Latin America, and Central Asia still have high growth potential, and the global mining and infrastructure investment cycle is on the rise, which is expected to continue to drive Chinese heavy trucks and engineering machinery for export. At the same time, commercial vehicle electrification and intelligence are accelerating, with electric commercial vehicles in Europe still in the early stages, opening up new export opportunities for Chinese commercial vehicles. Industry chain: Breaking through the growth bottleneck with AI expansion, focusing on realization pace. The traditional growth rate of the automotive industry chain is slowing down, but AI expansion is opening up new opportunities. In terms of intelligent driving, focus on the entry of fully self-driving vehicles into China and the implementation of L2 level intelligent driving standards, which are expected to drive popularization and testing demand. In terms of AIDC, the automotive industry chain, leveraging advantages in engines, thermal management, and liquid cooling technologies, is entering the data center power generation and liquid cooling segments, with some suppliers expected to contribute profit elasticity in the second half of the year. In terms of Siasun Robot & Automation, observation points include the climbing capabilities of Tesla's Optimus, the listing of independent whole machines, and the realization of orders. In terms of commercial aerospace, automotive companies have industrial production and supply chain management capabilities, and it is recommended to focus on the realization of genuine orders and performance first.