UOB Kay Hian
Date of Report: Friday, 22 August 2025

China Auto Sector Turns a Corner: Price Cuts Drive Positive Sales Momentum, Top Stocks Identified

Overview: China’s Auto Sales Bounce Back on Price Cuts

China’s automotive sector is showing signs of recovery, as aggressive price cuts by original equipment manufacturers (OEMs) have propelled both passenger vehicle (PV) and passenger electric vehicle (PEV) sales growth back into positive territory. In the 33rd week of 2025, PV sales rose 6.2% year-over-year (YoY), while PEV sales climbed 13.5% YoY. This shift reverses several weeks of negative growth and highlights the fierce competition and strategic responses shaping the industry. Despite headwinds such as inventory pile-ups and the state’s anti-involution campaign, leading automakers like Geely have exceeded expectations, while others such as BYD and Li Auto continue to face challenges.
UOB Kay Hian maintains a MARKET WEIGHT stance on the sector, with a strong preference for automotive parts manufacturers over OEMs and dealers. Top BUYs include CATL, Geely, and Tuopu.

Market Trends: Sales Growth, Price Wars, and Shifting Segment Shares

• July saw a slowdown in PV retail sales growth to 1.9% YoY, as promotional discounts ended in June. PEV market share, however, hit a record 52.7% in July.
• In the second week of August, PV insurance registrations rebounded by 14.4% week-over-week (WoW) and 6.2% YoY to 429,000 units.
• PEV insurance registrations experienced a 13.5% YoY increase in the same period, with market share staying robust at 56.9%.
• Major OEMs including BYD, Geely, SAIC Wuling, XPeng, Nio, Volkswagen, Buick, Toyota, Honda, BMW, Mercedes-Benz, and Jaguar slashed prices in August to stimulate demand and clear inventories.
• BYD, Tesla China, and Li Auto continued to post YoY sales declines despite WoW rebounds.

Peer Comparison: Financial Metrics and Valuations

Company Highlights and In-Depth Analysis

BYD Company: Price Cuts Drive Rebound, but Targets Remain Challenging

BYD’s insurance registrations for the 33rd week of 2025 came in at 70,850 units, a 12.2% YoY decline but a 19.1% WoW rebound—the best weekly figure in seven months. Aggressive promotions, including price reductions of RMB 4,000–10,000 on key models and zero-down, zero-interest loans, spurred the rebound. Despite this, BYD remains in a prolonged period of YoY sales contraction (seven consecutive weeks), and must more than double weekly sales to reach its ambitious 2025 domestic target of 4.5 million units (UOBKH estimate: 4.2 million).
Key drivers moving forward include the launch of BYD’s 5th-generation DM-i hybrid technology with improved fuel efficiency (2.6L/100km, 10% better), and the rollout of 12 new models through 2025. Net profit forecasts for 2025–27 are kept at RMB 45.35bn/51.13bn/57.66bn, with a DCF-based target price of HK$142.00, implying 26x 2025F PE.

Geely Auto: New Models Spark Growth, Record-Breaking Deliveries

Geely’s EV insurance registrations surged 61.1% YoY and 23.6% WoW to a record 33,264 units in the 33rd week, largely due to the Galaxy A7’s successful launch. The A7, a mid-sized plug-in hybrid sedan priced well below competitors, set a new benchmark in the B-segment, delivering 4,195 units in its first week—making it the best-selling B-segment PHEV and a major contributor to Geely’s sales.
Looking ahead, Geely will introduce the Galaxy M9 (six-seat flagship SUV with AI capabilities), Zeekr 8X and 9X SUVs, and the Lynk & Co 10 EM-P, all scheduled before the end of 2025. Net profit forecasts for 2025–27 remain at RMB 16.19bn/16.56bn/20.35bn, with sales estimates of 3.0m/3.6m/4.3m units. The target price is HK$42.00, pegged at 23x 2026F PE, in line with historical averages.

XPeng: New Products Fuel Triple-Digit Growth

XPeng’s weekly insurance registrations held steady at 7,890 units, up 243% YoY, with new models Mona M03 and P7+ offsetting declines in older lines. The new P7, launched at RMB 200,000–300,000, garnered over 30,000 pre-orders in 48 hours, emphasizing XPeng’s appeal as a tech-forward brand. The Kunpeng Super EV X9, with advanced EV architecture (800V SiC, 740km range, L4 autonomy-ready), further demonstrates XPeng’s global ambitions.
Projected deliveries for 2025–27 are 400,000/500,000/650,000 units, with a 2025 net loss of RMB 1.59bn anticipated, turning to profit in 2026–27. The target price stands at HK$150.00 based on a 10-year DCF model.

Li Auto: Market Pressure Mounts, Sales Slump Despite Product Launches

Li Auto’s registrations fell sharply, down 47% YoY to 5,610 units in the 33rd week, making it the sector’s worst performer. Its core L6/L7/L8/L9 models experienced YoY declines of 52–67%. The weak performance is attributed to a declining EREV market in China and intensified competition from rivals like Aito, Leapmotor, and Geely.
The market response to Li Auto’s new pure electric SUV i8 was tepid, prompting the company to consolidate i8 variants and cut prices by RMB 10,000. The company aims to deliver 8,000 i8 units by end-September and is banking on the upcoming i6 SUV (up to 720km range) for a turnaround. Net profit forecasts for 2025–27 remain at RMB 5.26bn/5.87bn/6.54bn, with a SELL rating and a DCF-derived target price of HK$85.00, implying 28x 2026F PE.

Brand-by-Brand Weekly Insurance Registrations

Strategic Outlook and Sector Preferences

UOB Kay Hian maintains a MARKET WEIGHT rating for China’s auto sector, with a clear hierarchy of preference:

• Automotive part manufacturers are favored over OEMs, as the parts segment is less vulnerable to price wars and policy-driven volatility.
• OEMs remain under pressure from competition and inventory issues, while automobile dealers face ongoing headwinds from the transition to electrification.

Top Stock Picks

• CATL: Leading battery manufacturer with robust growth prospects and a BUY rating.
• Geely: Fast-rising EV player with strong new model momentum and a BUY rating.
• Tuopu: Auto parts manufacturer, also rated BUY, seen as a sector outperformer.

Conclusion: Navigating Uncertainty with Strategic Picks

China’s auto sector is in a state of flux, with price cuts driving short-term gains but underlying challenges persisting. Investors should focus on leading parts manufacturers and select OEMs with proven innovation and execution capabilities. The race for market share, especially in the electric and hybrid segments, will continue to define winners and losers in the coming quarters.
For those seeking opportunities in China’s dynamic automotive market, UOB Kay Hian’s top picks—CATL, Geely, and Tuopu—offer differentiated risk-reward profiles in a highly competitive environment.