Broker: UOB Kay Hian
Date of Report: 18 July 2025

China Auto Sector Weekly: Electric Vehicle Growth Slows, Key Players Face Mixed Fortunes and Policy Shifts

Executive Summary: Chinese Auto Sector Sees Slower Growth Amid Rising Competition and Policy Intervention

The 28th week of 2025 brought a noticeable deceleration in China’s passenger vehicle (PV) sales, with insurance registrations barely nudging up 0.8% year-over-year and falling 8.8% week-over-week. The pullback comes as promotional discounts were rolled back, consumers await deeper deals, and the sector braces for regulatory pivots designed to curb destructive price wars. Although short-term risks are rising, long-term prospects remain robust for select leaders. This comprehensive update breaks down sector trends, company-level performance, and strategic shifts shaping China’s auto landscape.

Market Overview: Sales Slowdown and Seasonal Weakness

• PV insurance registrations: 362,000 units (+0.8% yoy, -19.6% mom, -8.8% wow).
• Passenger electric vehicles (PEV): 204,000 units (+10.3% yoy); Internal combustion engine (ICE) cars: 158,000 units (-9.2% yoy).
• PEV market share: 56.4% (+4.8ppt yoy).
• Factors: July’s traditional off-season, consumer purchase delays for deeper discounts, local subsidy anticipation, and new model launches ahead.

Sector Rating and Top Picks

• Sector rating: MARKET WEIGHT (maintained).
• Top BUYs: CATL, Geely, Tuopu.

BYD Company: Facing Short-Term Headwinds, Poised for Long-Term Transformation

• Insurance registrations: 53,400 units (-16.6% yoy, -30.6% mom, -12.3% wow).
• Breakdown:
  • BYD brand: 48,630 units (-21.3% yoy).
  • Denza: 1,880 units (+0.3% yoy).
  • Fangchengbao (FCB): 2,840 units (+869.3% yoy).
  • Yangwang (YW): 50 units (-51.5% yoy).
• Inventory days surged to 90 after promotions ended, with consumers now resisting purchases unless discounts return.
• High debt and overcapacity mean BYD needs 15% wholesale and 18% retail growth to break even.
• Recent L4 autonomous parking features failed to spark sales due to buyers waiting for newer models.
• 2025-27 net profit forecasts: Rmb45.35b/Rmb51.13b/Rmb57.66b; DCF-derived target price: HK\$142.00 (26x 2025F PE).

Geely Automobile: Strategic Synergy Through Zeekr Privatization

• EV insurance registrations: 26,130 units (+99.5% yoy, -8.1% mom, +1.4% wow).
• Brand breakdown:
  • Geely + Galaxy: 19,670 units.
  • Zeekr: 3,100 units (-7.3% yoy).
  • Lynk & Co: 3,160 units.
• Zeekr privatization: US\$2.4bn cash or 1.23 Geely shares/Zeekr share (up to 10.9% dilution), straining cash reserves but enabling deeper EV/R&D integration and cost savings.
• 2025-27 net profit forecasts: Rmb16.19b/Rmb16.56b/Rmb20.35b; Target price: HK\$35.00 (23x 2025F PE).

XPeng: Model Pipeline and Flying Car Ambitions

• Insurance registrations: 5,820 units (+242.4% yoy, -8.9% mom, -9.9% wow), boosted by Mona M03.
• G7 mid-sized SUV launched, with 490 units registered (up 1,125% wow).
• Upcoming models: next-gen P7 sports coupe (3Q25, Rmb300,000 segment), G01 EREV (4Q25).
• Aeroht (flying car unit): Raised US\$250m, factory completion by 4Q25, deliveries targeted for 2026 (under Rmb2m).
• 2025-27 delivery estimates: 400,000/500,000/650,000 units; 2025 net loss: Rmb1,591m; 2026-27 net profit: Rmb1,098m/Rmb5,273m.
• Target price: HK\$150.00 (10-year DCF, WACC 14%).

Li Auto: Challenges in EV Transition and New Launches

• Insurance registrations: 7,330 units (-35.1% yoy, -6.9% mom, +2.4% wow).
• Issues: Intensifying EREV competition, L8/L9 sales fatigue, L6 underperformance, slow EV transition (MEGA flop, sparse 5C charging).
• New launches:
  • Li i8: 6-seat pure EV SUV, Rmb350,000–400,000, 97.8 kWh/720km CLTC range, deliveries from late-August.
  • Li i6: 5-seat SUV, September launch, 720km range, targets luxury segment, produced in Beijing and Changzhou.
• 2025-27 net profit forecasts: Rmb6.62b/Rmb8.27b/Rmb10.13b; Deliveries: 500,000/600,000/700,000 units; Target price: HK\$100.00 (24x 2026F PE).

Other Auto Brands: Weekly Registration Highlights

EV Battery Market: CATL and BYD Retain Dominance, Sector Grows 36% YoY

• June 2025 installations: 58.20 GWh (+36% yoy, +1.9% mom).
• Market leaders:
  • CATL: 25.41 GWh (43.7% share, +0.8ppt mom).
  • BYD: 12.49 GWh (21.5% share, -1.0ppt mom).
  • CALB: 4.39 GWh (7.5% share).
  • Gotion: 1.92 GWh (3.3% share).
  • EVE Energy: 2.53 GWh (4.3% share).
• 1H25 cumulative: 299.7 GWh (+47.5% yoy); CATL: 128.6 GWh (42.9% share), BYD: 70.4 GWh (23.5% share).
• BYD and CATL recently signed MOUs with BHP to electrify mining operations, supporting BHP’s 2050 net-zero emissions goal.

Tesla: New Model Y L and Market Momentum

• Launching 6-seat Model Y L in China at ~Rmb400,000 (dual motors, LG batteries).
• Insurance registrations surged 145% week-over-week (12,260 units), making Tesla the third-best-selling EV brand in China.
• Expected to boost average selling price (ASP) and margins; positive sentiment as new models address product evolution concerns.

Policy Update: State Council Moves to End Destructive EV Price Wars

• China’s State Council introduced measures against “irrational competition” in the EV sector.
• Initiatives: Cost investigations, price monitoring, checks on product configuration and safety, and a 60-day supplier payment cap.
• Policy goal: Shift from volume-driven to value-driven competition, emphasizing innovation, quality, and core competitiveness.
• 1H25 EV sales: 6.94m units (+40.3% yoy, 44.3% penetration); Full-year forecast: >16m units.

Ganfeng Lithium: Downgraded on Weaker-than-Expected Results

• 1H25 net loss guidance: Rmb300m-550m (down 28-61% yoy); Full-year 2025 net loss forecast: Rmb384m (cut from previous profit estimate of Rmb388m).
• 2Q25: Loss of Rmb194m to a slim profit of Rmb6m, improved from a Rmb356m net loss in 1Q25.
• Drivers: Lithium price declines and inventory write-downs; recent lithium carbonate rebound (+10% since June low) offers margin recovery prospects.
• Target price cut to HK\$25.00 (from HK\$30.00), based on 1.1x 2025F P/B; Rating downgraded from BUY to HOLD.

Investment Strategy and Sector Preferences

• Maintain MARKET WEIGHT on China’s auto sector.
• Preferred order: auto parts manufacturers > OEMs > automobile dealers.
• Reason: 60-day payment regulation favors auto parts suppliers, while dealers face continued electrification headwinds.
• Top BUYs reaffirmed: CATL, Geely, Tuopu.

Conclusion: Navigating the Shifting Landscape of China’s Auto Sector

As China’s auto industry transitions from aggressive price competition to a more stable, innovation-driven environment, investors should focus on companies best positioned for value-based growth and supply chain resilience. Despite near-term volatility and regulatory shifts, leading players in batteries, EVs, and auto parts remain well-placed to benefit from sector transformation and long-term secular growth.