Sinolink: Optimistic about the automotive sector's recovery in the second half of the year, intelligent driving is expected to reach a turning point.

Sinolink released a research report stating that the subsidy funds for the second half of the year will be ample and evenly paced, leading into a peak season for car purchases. Various automakers will still launch significant new models. Overall, there will be an increase in pure electric vehicles and improvements in charging efficiency, along with diverse categories and innovative use scenarios, which is expected to create demand for car purchases. The automotive sector is likely to recover in the second half of the year: sustained high growth in exports + improved domestic demand + a tipping point in smart technology. 2026H2 Passenger Vehicle Industry Outlook: Domestic sales expected to recover, sustained high growth in exports, acceleration in high-end models 1) Domestic Sales: With ample subsidy funds in the second half of the year and a balanced pace, the market will enter a purchasing peak, and automakers will continue to launch numerous significant new models. Overall, there is an increase in pure electric vehicles, improvements in charging efficiency, a wider range of categories, and innovative use scenarios. The diversification of supply is expected to create demand for car purchases. Sinolink estimates that overall retail sales/new energy retail sales will be -12%/+4% year-on-year in the second half, corresponding to total annual retail/sales of 19.34 million/11.92 million units, with year-on-year declines of -15%/-4%; 2) High-end Cars: The market for vehicles priced over 400,000 Yuan significantly outperformed the overall market in the first half of the year, with many new models expected in the second half. In the long term, the upgrading consumption trend on the demand side combined with the supply of quality domestic new cars is expected to resonate, indicating significant potential in the high-end car market. Domestic new models are likely to accelerate their replacement of joint venture market shares by leveraging their differentiated advantages; 3) Exports: Exports continued to exceed expectations in the first half of the year, with a significant improvement in structurean increase in the proportion of new energy vehicles, an enhanced share of exports to high-potential markets such as Europe, and an acceleration in high-end car exports. Looking ahead to the second half, with a resonance among products, production capacity, and channels, exports are expected to continue high growth. We estimate total export/new energy export volumes for the year to be 9.6 million/5.12 million units, with year-on-year increases of +68%/+117%. Structural optimization, scale effects, and the launch of localized production capacities are expected to enhance export profitability; 4) Wholesale: Continuous improvement in domestic sales and high growth in exports. Sinolink forecasts that overall wholesale/new energy wholesale in the second half will be -1%/+18% year-on-year, yielding total annual wholesale/new energy wholesale of 28.58 million/17.16 million units, with a year-on-year decrease of -3%/+13%. Smart driving is expected to reach a tipping point, and smart cockpits are entering an era of proactive service. 1) Technological Advancement: Smart driving technology continues to advance, with accelerated optimization of models and ongoing iterations of paradigms. High-performance self-developed chips are gradually being installed in vehicles, and collaborative design of chip architecture, model algorithms, and compilers is expected to enhance the smart driving experience; 2) Smart Driving Expected to Reach a Tipping Point: Leading automakers are nearing 50% of driving mileage from smart driving, and top manufacturers are expected to achieve a thousand-kilometer level in MPI this year; 3) Smart Driving Business Models Gradually Becoming Viable: The number of FSD subscriptions is accelerating, with over 55% of vehicles delivered in North America in Q2 utilizing FSD subscriptions. Consumers show a high willingness to pay for smart driving, making the business model increasingly viable; 4) FSD Entering China: This is expected to create a breakout effect and a catfish effect, enhancing consumer awareness and accelerating industry advancement; 5) Smart Cockpit: Agents are being installed in vehicles, evolving into intelligent systems that provide a more proactive, smarter, and actionable cockpit experience. Leading manufacturers are rolling out vehicle-end agent solutions, and capabilities for understanding ambiguous intentions and performing multi-task planning are gradually becoming standard features in high-end smart cockpits by major manufacturers.