Broker: UOB Kay Hian
Date of Report: 25 July 2025

China Auto Sector Weekly: EV Sales Growth Stalls, ICE Cars Rebound, and Market Leaders Face New Challenges

Overview: A Mixed Week for China’s Auto Market

China’s automobile sector experienced a nuanced week, with overall passenger vehicle (PV) insurance registrations rebounding 7% week-over-week (wow), yet declining 0.5% year-over-year (yoy) to 388,000 units in the 29th week of 2025. Passenger electric vehicles (PEVs) maintained a 55.2% market share but saw growth slow to just 9.7% yoy—the lowest pace in recent years. Internal combustion engine (ICE) cars rebounded 10% wow but remained 11% below last year’s levels.
Key trends included:

• Promotional discounts ended on 30 June, and many local subsidies were paused due to exhausted H1 budgets.
• Consumers are delaying purchases, awaiting deeper discounts, subsidy resumptions, and new model launches later in the year.
• Mass-market EV brands like Geely, XPeng, and Leapmotor outperformed premium peers, reflecting a consumption downgrade trend.

Market Weight & Top Picks

UOB Kay Hian maintains a Market Weight view on China’s auto sector. Segment preferences are:

1. Automotive part manufacturers
2. OEMs
3. Automobile dealers

Top BUYs: CATL, Geely Automobile, and Ningbo Tuopu.

Sector Performance Snapshot

PEV and ICE Sales: Divergent Trajectories

• PEV sales growth of 9.7% yoy (214,000 units) marked a significant slowing, with premium EV players like BYD (-18.8%), Tesla China (-5.4%), Li Auto (-35.4%), and Nio (-6.1%) all reporting declines.
• Geely (+65%), XPeng (+253%), and Leapmotor (+67%) stood out as outperformers, reflecting the ongoing preference for mass-market vehicles.
• ICE car sales, although rebounding 10% wow, remain 11% down yoy. Major brands like Toyota, Honda, Audi, and BMW saw a +20% wow sales spike from a low base.

Peer Comparison: Key Financial Metrics

Company Analysis

BYD Company (1211 HK)

• June insurance registrations: 336,900 units (+21.9% yoy, +20% mom).
• 29th week: 56,240 units (-18.8% yoy, +5.3% wow); third consecutive week of yoy decline.
• PEV market share: 26.3% (-9.2ppt yoy), PV share: 14.5% (-3.3ppt yoy).
• Inventory days up to 90-100 from 73 at end-June, due to sales drop and end of promotions.
• Facing online backlash over a five-year RMB 75m sponsorship of the China National Men’s Football Team (CNMFT). Negative sentiment is expected to impact sales in the near term.
• BYD is shifting from price cuts to product innovation, launching the Seal 06 SUV with advanced ADAS and damping systems.
• Overseas sales surged 128% yoy in H1 2025 to 464,000 units. Full-year overseas sales are forecast to spike 140%/50%/33% yoy to 1m/1.5m/2m in 2025/26/27.
• 2025-27 net profit forecasts: RMB 45.35b / RMB 51.13b / RMB 57.66b, based on total sales of 5.2m / 6.0m / 7.0m units.
• DCF-derived target price: HK\$142.00 (26x 2025F PE).

Geely Automobile (175 HK)

• June insurance registrations: 211,910 units (+61.1% yoy, +13.7% mom).
• 29th week: 43,442 units (+64.9% yoy, +8.3% wow).
• Strong sales from Geely brand (incl. Galaxy) and Lynk & Co, offsetting weaker Zeekr performance.
• New models (Xingyuan, E5, Starry 8, Lynk & Co 900, 08 EM-P) are driving growth.
• Upcoming launches: 2025 Galaxy E5 (July), Galaxy A7 (August), Zeekr 9X (Q3), Galaxy Starship 9 (Q4).
• 2025-27 net profit forecasts: RMB 16.19b / RMB 16.56b / RMB 20.35b, on sales of 3.0m / 3.6m / 4.3m units.
• Target price: HK\$35.00 (23x 2025F PE).

XPeng (9868 HK)

• June insurance registrations: 32,470 units (+232% yoy, +20% mom).
• 28th week: 6,820 units (+253% yoy, +15% wow); driven by Mona M03 and new G7 SUV.
• G7 deliveries began in July with insurance registration up 69% wow.
• Upcoming launches: next-gen P7 sports coupe (Q3, RMB 300,000 segment), G01 EREV (Q4).
• 2025-27 delivery estimates: 400,000 / 500,000 / 650,000 units.
• 2025 net loss forecast: RMB 1,591m; 2026/27 net profit: RMB 1,098m / RMB 5,273m.
• Target price: HK\$150.00 (10-year DCF, WACC 14%, terminal growth 3%).

Li Auto (2015 HK)

• 29th week: 7,040 units (-35% yoy, -4% wow); underperformed amid intensifying competition from Aito.
• New BEV models (Li i8, Li i6) are critical for growth. The i8 (6-seat all-electric SUV, 97.8 kWh, 720km CLTC, 5C fast charging) started pre-orders on 17 July; deliveries begin late August. The i6 (5-seat SUV, 87.3kWh, 720km range) debuts in September.
• 2025-27 net profit forecasts: RMB 6.62b / RMB 8.27b / RMB 10.13b, on deliveries of 500,000 / 600,000 / 700,000 units.
• Target price: HK\$100.00 (10-year DCF, WACC 14%, terminal growth 4%).

Tesla China

• 29th week: 9,930 units (-5.4% yoy, -19% wow), below expectations.
• Potential buyers are delaying purchases in anticipation of the Model Y L launch (longer wheelbase, RMB 400,000, dual motors, LG batteries) expected in fall 2025.

Great Wall Motors (GWM, 2333 HK)

• Q2 2025 reported net profit: RMB 4,586m (+18.8% yoy, +161.9% qoq), boosted by exceptional items and government grants. Core net profit: RMB 2,113m (-41.7% yoy, +43.8% qoq), in line with expectations.
• 2025 reported net profit forecast increased by 26%. 2025-27 core net profit forecasts unchanged.
• Target price: HK\$10.00. Recommendation: SELL.

Regulatory Changes: Crackdown on “Zero-Mileage Used Cars”

• China is targeting fraudulent sales practices where new vehicles are misrepresented as used to bypass regulations and inflate sales figures.
• New measures include a six-month resale ban, stricter oversight, and penalties by both industry regulators and automakers (e.g., BYD, Chery).
• Short-term: Could reduce reported sales volumes. Long-term: Expected to enhance market transparency, brand integrity, and consumer trust.

Automotive Parts and Material Suppliers: Strong Segment Preference

UOB Kay Hian maintains a preference for auto parts suppliers and battery manufacturers over OEMs and dealers, citing the new 60-day payment regulation and continued electrification headwinds for dealers.
Top picks among suppliers:

• CATL (300750 CH): BUY, Target HK\$390.00, 2025F PE 19.6x, ROE 23.6%.
• Ningbo Tuopu (601689 CH): BUY, Target HK\$80.00, 2025F PE 26.3x, ROE 17.8%.
• Desay SV (002920 CH): BUY, Target HK\$190.00, 2025F PE 22.0x, ROE 24.8%.

Monthly and Weekly Insurance Registrations by Brand (Selected, June 2025)

Conclusion: Strategic Positioning Amid Market Uncertainty

China’s auto sector is at a crossroads, with mass-market players and suppliers gaining ground while premium EV brands and dealers face mounting pressure from regulatory shifts and a changing consumer landscape. UOB Kay Hian’s sector strategy prioritizes automotive parts manufacturers and battery leaders such as CATL and Tuopu, as well as mass-market-focused OEMs like Geely, while maintaining a cautious stance on premium EV makers and auto dealers.
Investors should monitor developments in subsidy policies, upcoming model launches, and regulatory enforcement on sales practices as the market navigates through short-term volatility toward more sustainable long-term growth.