China Securities Co., Ltd.: In July, the cumulative sales in nine European countries reached a new high, and we are optimistic about the domestic mid-stream lithium battery and material overseas supply chain.

China Securities Co., Ltd. published a research report stating that in 2026, Germany and Sweden will resume electric vehicle subsidies, while Spain will replace the "MOVES III plan" with a brand new "Auto+" plan. Additionally, countries like the UK and France will continue to strengthen their policies to support sales in 2026, with the sales volumes in the UK, France, and Germany significantly increasing under policy stimulation. The sales volumes in these countries have exceeded expectations year-on-year. Considering that from January to July 2026, the sales of electric vehicles in the nine European countries amounted to 2.1826 million units, a year-on-year increase of 37.0%, the firm expects that the sales of electric vehicles in Europe will exceed 5.4 million units in 2026, a year-on-year increase of 35%. The firm is optimistic about the overseas supply chain of domestic midstream lithium batteries and materials. Key points from China Securities Co., Ltd.: Core Views In July, the sales of electric vehicles in the nine European countries reached 315,600 units, with a year-on-year increase of 41% and a month-on-month decrease of 22%. The penetration rate was 37.6%, reflecting a year-on-year increase of 9.6 percentage points and a month-on-month decrease of 0.1 percentage points. The high year-on-year growth in July is mainly attributed to the subsidies in the UK, France, and Germany for 2026, which maintained a year-on-year growth of over 40%, contributing more than 80% to the year-on-year increase. France's resumption of the third phase of the ecological vehicle purchase subsidy saw an 85% year-on-year increase, achieving a historical high. By country, France saw a year-on-year sales increase of 85%, driven by the resumption of the third phase of the ecological vehicle purchase subsidy in July, resulting in a strong year-on-year increase in battery electric vehicles (BEVs) by 127%. In Germany, the subsidies resuming in 2026 led to a 44% year-on-year increase in sales in July. In the UK, continued support from subsidy policies led to a 40% year-on-year increase in sales. In Portugal, the resumption of the second phase of purchase subsidies in July resulted in a significant month-on-month increase of 5.7 percentage points in penetration rate to 48.5%. Italy experienced a year-on-year sales increase of 37%, but the growth rate slowed down after the super subsidy plan expired in June. From January to July 2026, the cumulative sales of electric vehicles in the nine European countries reached 2.1826 million units, representing a year-on-year increase of 37%. The firm anticipates that in 2026, European electric vehicle sales will exceed 5.4 million units, with a year-on-year increase of 35%. In July 2026, the nine countries saw electric vehicle sales of 315,600 units, a year-on-year increase of 41% and a month-on-month decrease of 22%. The penetration rate stood at 37.6%, with a year-on-year increase of 9.6 percentage points and a minor month-on-month decrease of 0.1 percentage points. The persistent high year-on-year growth of over 40% in sales across these nine countries was primarily driven by the subsidies from the UK, France, and Germany in 2026. Together, these three countries contributed over 80% to the year-on-year growth. France's initiation of the third phase of the ecological vehicle purchase subsidy reflected an impressive year-on-year increase of 85%, representing a historic high. By country: 1) France: In July, sales reached 51,900 units, a year-on-year increase of 85% and a month-on-month decrease of 25%. The penetration rate was 40.9%, with a month-on-month increase of 4.5 percentage points. The strong year-on-year growth was mainly due to a relatively low base last year plus the resumption of the ecological vehicle purchase subsidy in July, leading to a remarkable year-on-year increase in BEV sales by 127%. 2) Germany: In July, sales amounted to 109,200 units, a year-on-year increase of 44% and a month-on-month decrease of 6%. The penetration rate was 40.7%, with a month-on-month increase of 1.5 percentage points. The significant year-on-year growth was mainly due to the resumption of purchase subsidies in 2026, alongside a low base last year. 3) The UK: In July, sales reached 66,500 units, a year-on-year increase of 40% and a month-on-month decrease of 27%. The penetration rate was 42.5%, with a month-on-month decrease of 0.1 percentage points. The subsidy policy continued to push sales, with the government expanding the direct purchase subsidy budget in December 2025, gradually leading to increased sales since 2026. 4) Portugal: In July, sales were 8,800 units, representing a year-on-year increase of 31% and a month-on-month decrease of 19%. The penetration rate was 48.5%, with a month-on-month increase of 5.7 percentage points. The significant year-on-year growth was primarily driven by the resumption of the second phase of the zero-emission vehicle purchase subsidy (with a total budget of 10 million euros). 5) Spain: In July, sales reached 25,200 units, a year-on-year increase of 20% and a month-on-month decrease of 15%. The penetration rate was 24.7%, with a month-on-month increase of 1.5 percentage points. The year-on-year growth rate has declined compared to earlier this year, mainly because the government had already resumed subsidies in April 2025 (MOVES III), and the base last year was relatively high. 6) Norway: In July, sales were 9,400 units, a year-on-year increase of 0.5% and a month-on-month decrease of 51%. The penetration rate was 98.2%, remaining stable month-on-month. The year-on-year growth since 2026 has been weak, primarily due to the reduction in tax-free quotas for electric vehicles starting in 2026 and the introduction of value-added tax for some mid-range models, leading to significant month-on-month drop during the July holiday season. 7) Sweden: In July, sales reached 12,400 units, a year-on-year increase of 13% and a month-on-month decrease of 40%. The penetration rate was 66.4%, with a month-on-month decrease of 2.5 percentage points. Sales have been steadily increasing, supported by the government resuming electric vehicle purchase subsidies from 2026 to 2032, helping to maintain a high penetration rate. 8) Denmark: In July, sales totaled 11,700 units, a year-on-year increase of 21% and a month-on-month decrease of 32%. The penetration rate was 80.3%, with a month-on-month increase of 0.8 percentage points. There exists a rush effect in sales in 2026, with the current BEV tax incentive maintaining a baseline rate of 40%. The tax rate is expected to gradually increase starting in 2027. 9) Italy: In July, sales reached 20,500 units, representing a year-on-year increase of 37% and a month-on-month decrease of 33%. The penetration rate was 16.4%, with a month-on-month decrease of 4.3 percentage points. The slowdown in year-on-year growth mainly results from the expiration of the super subsidy plan in June. National Policy Aspects 1) France: The third phase of the ecological vehicle purchase subsidy was resumed in July 2026, with families with low/middle incomes/others eligible for up to 5,700 euros/4,700 euros/3,500 euros in purchase subsidies per vehicle. 2) Germany: The latest electric vehicle subsidy policy will be resumed in 2026, with a total budget of 3 billion euros, planned to last until 2029. Pure electric vehicle subsidies will be between 3,000 to 6,000 euros, while plug-in hybrid and range-extended vehicle subsidies will range from 1,500 to 4,500 euros. 3) The UK: A maximum direct purchase subsidy of 3,750 pounds will be provided for new electric vehicles priced no more than 37,000 pounds, expected to continue until the fiscal year 2029. 4) Italy: The "Super Car Subsidy Plan" for micro and small enterprises ended on June 30, and as of July, no subsidies are available. 5) Portugal: An additional 10 million euros was allocated on June 11 to resume the second phase of electric vehicle purchase subsidy, and the application window remained open in July, closing on July 27 or when the budget runs out. Tesla Impact Analysis 1) In July, Tesla's total sales across the nine countries amounted to 4,230 units, a year-on-year decline of 31.4% and a month-on-month decrease of 89.7%. The market share was 1.3%, with a year-on-year decrease of 1.4 percentage points and a month-on-month decrease of 8.8 percentage points. Excluding Tesla, other automakers sold 311,400 units in the nine countries, marking a year-on-year increase of 43.1% and a month-on-month decrease of 14.2%. 2) In July, Tesla's sales in various countries exhibited a mixed year-on-year performance; France and Denmark saw an increase, with respective gains of 85.8% and 51.6%, while Germany, the UK, Sweden, Portugal, Italy, Spain, and Norway experienced declines of -66.9%, -48.1%, -60.1%, -68.7%, -77.0%, -81.0%, and -97.1%, respectively, primarily affected by seasonal delivery fluctuations and the overstretched effect caused by the rush to meet demand at the end of Q2 2026.