Orient: Overall profitability in the automotive industry is under pressure, while commercial vehicles and some high-quality component companies have improved profitability against the market trend.

Orient released a research report stating that in Q2, weak domestic auto demand, intensified market competition, rising raw material prices, exchange rate fluctuations, and other external factors led to overall weak profitability and gross margins for auto companies. However, after excluding the impact of foreign exchange, some companies with strong comprehensive competitiveness and high operational management efficiency still achieved year-on-year improvement in net profit attributable to parent and gross margins. It is expected that continued export growth in the second half of the year and the marginal weakening of foreign exchange effects will help promote marginal improvement in the performance of some highly competitive companies. It is recommended to continue paying attention to companies in the overseas vehicle export sector, liquid cooling industry chain, gas generator/diesel generator industry chain, and humanoid Siasun Robot&Automation chain with strong competitiveness. Orient's main views are as follows: Q2 industry revenue grew slightly, while profit side came under year-on-year pressure In the first half of 2026, the automotive industry (data scope includes listed and non-listed companies) achieved operating revenue of 5.19 trillion yuan, a year-on-year increase of 1.9%; total profit was 195.35 billion yuan, a year-on-year decrease of 20.1%. In Q2, the automotive industry (data scope includes listed and non-listed companies) achieved revenue of 2.78 trillion yuan, a year-on-year increase of 3.2% and a quarter-on-quarter increase of 15.1%; total profit was 117.00 billion yuan, a year-on-year decrease of 21.9% and a quarter-on-quarter increase of 49.3%. It is expected that high oil prices and weak macroeconomic prosperity will still suppress domestic fuel vehicle demand in the second half of the year, but the high export growth trend is expected to continue, and the impact of foreign exchange is also expected to weaken marginally. It is expected that the automotive industry's revenue and profitability will remain stable in the second half of the year. Profitability Overall industry profitability came under pressure in Q2, with significant divergence among companies. After excluding foreign exchange effects, some highly competitive companies performed better than average. In Q2, the vehicle industry (data scope is SW passenger vehicles and SW commercial vehicles) total revenue was 613.525 billion yuan, a year-on-year increase of 0.5% and a quarter-on-quarter increase of 19.2%. In Q2, the parts industry (data scope is SW auto parts) revenue was 412.155 billion yuan, a year-on-year increase of 9.7% and a quarter-on-quarter increase of 9.5%. In Q2, vehicle company revenue performance diverged, while most parts companies achieved year-on-year revenue growth in Q2. In Q2, the year-on-year decline in net profit attributable to parent for the parts industry was smaller than that of the vehicle industry. In Q2, passenger vehicle company gross margin performance was generally divergent, commercial vehicle company gross margins improved overall, and parts company gross margins came under overall year-on-year pressure; in Q2, passenger vehicle company profitability came under overall year-on-year pressure, while commercial vehicle company profitability improved overall; in Q2, under the impact of external factors such as exchange rate fluctuations and rising raw material prices, profit growth for most parts companies slowed. If the impact of foreign exchange is excluded, it is expected that the year-on-year profit growth of some parts companies in Q2 will improve significantly, outperforming the average level of the auto parts industry. Inventory In Q2, the inventory proportion of vehicle companies increased, and industry inventory turnover came under overall year-on-year pressure. In Q2, vehicle inventories increased significantly, while parts manufacturers' inventories continued to rise slightly, with the proportion of current assets remaining relatively stable. Vehicle inventories increased, mainly due to inventory growth at some automakers; the proportion of parts industry inventory in current assets was 22.1%, with relatively stable year-on-year and quarter-on-quarter performance. At the end of Q2, the average inventory turnover days of vehicle enterprises increased year-on-year, while parts companies' inventory turnover came under overall pressure, with internal divergence. Cash flow In Q2, vehicle cash flow diverged, while parts companies improved overall. In Q2, vehicle cash flow declined slightly year-on-year, while parts companies improved overall; passenger vehicle and parts company cash flow performance diverged, with commercial vehicle companies performing better than passenger vehicle companies. Risk warnings Macroeconomic downturn affecting auto demand, upstream raw material price fluctuation impact, and pressure from automakers' price wars.