Shenwan Hongyuan Group Co., Ltd. released a research report stating that, based on the main themes of AI spillover effects, anti-involution, and demand recovery, for vehicle manufacturers, it is primarily optimistic about the intelligent and high-end directions driven by AI spillover; overseas business supports total profit levels; and breakthrough changes brought about by reforms in state-owned and central enterprises. Areas such as robotics and data center liquid cooling are expected to transition from thematic trends to industrial trends. Companies with solid alpha-supported earnings certainty and potential for valuation re-rating are worth attention. For intelligentization, focus on core Tier-1 suppliers; for large and mid-cap blue chips, maintain attention; and for small and mid-cap stocks, watch for elasticity. Additionally, under the industry's anti-involution and price increase cycle, the used car sector benefits from profit recovery. The main views of Shenwan Hongyuan are as follows:

According to data from the China Association of Automobile Manufacturers, automobile production and sales in the first quarter of 2026 reached 7.039 million and 7.048 million units, respectively, representing year-on-year decreases of 6.9% and 5.6%. ① Passenger vehicles: Production and sales in the first quarter of 2026 were 5.909 million and 5.934 million units, respectively, down 9.3% and 7.6% year-on-year. ② Commercial vehicles: Production and sales in the first quarter of 2026 were 1.130 million and 1.114 million units, respectively, up 7.9% and 6% year-on-year. ③ Overseas: Automobile exports in the first quarter of 2026 reached 2.226 million units, a year-on-year increase of 56.7%, with new energy vehicles performing notably well—exports were 954,000 units, up 120% year-on-year.

While passenger vehicle sales declined year-on-year, new energy penetration performed excellently. ① In the first quarter of 2026, domestic brands accounted for 38.8% of the domestic retail market share, an increase of 4.2 percentage points year-on-year. Domestic brand retail sales were 2.54 million units, down 21.1% year-on-year; joint venture brand retail sales were 1.15 million units, down 11.5% year-on-year; luxury brand retail sales were 520,000 units, down 14.8% year-on-year. ② Policy support is accelerating the expansion of new energy penetration. Wholesale sales of new energy passenger vehicles in the first quarter of 2026 were 2.73 million units, down 4.1% year-on-year. In March, the wholesale penetration rate of new energy vehicles for domestic brands reached 61.7%.

Industry discount rates declined sequentially, with reduced terminal concessions. Based on compiled and weighted calculations from Dongchedi's pricing data, the average industry discount rate for January-February 2026 decreased by 0.31 percentage points sequentially to 13.48%. Specifically, discount rates for domestic brands increased by 1.26 percentage points to 7.41%; for joint venture brands, they decreased by 1.99 percentage points to 18.59%; and for luxury brands, they fell by 8.52 percentage points to 21.86%.

Rising prices of traditional raw materials in the first quarter of 2026 drove increases in raw material cost indices for both conventional and new energy vehicles, while sea freight prices declined. Among traditional bulk raw materials, prices for steel, aluminum, plastics, rubber, and glass changed by -0.1%, +11.9%, +8.8%, +7.6%, and +1.5%, respectively. For battery raw materials, prices for nickel, cobalt, and lithium carbonate increased by 15.7%, 8.6%, and 74.8%, respectively. Using a proprietary raw material price index model—weighting prices of steel, aluminum, plastics, natural rubber, and glass for conventional vehicles, and additionally weighting nickel, cobalt, and lithium carbonate for new energy vehicles—the calculated raw material price index for conventional vehicles increased by 6.0% sequentially in the first quarter of 2026, while the index for new energy vehicles rose by 18.2% sequentially. The sea freight price index fell by 8.9% sequentially in the first quarter of 2026.

Overall passenger vehicle sales faced pressure in the first quarter, while rising raw material costs increased corporate expenses, putting pressure on supply chain profitability. However, blue-chip companies continue to see growth due to globalization and their own downstream customer alpha. Specifically: (1) Vehicle manufacturers: With slowing downstream sales, net profit attributable to shareholders in the first quarter of 2026 was predominantly down year-on-year. Examples include Taotao Vehicles (+80% to +126%) and Li Auto Inc. (-300% to -269%). (2) Components: First-quarter 2026 net profit: ① Year-on-year growth of 0–50%: Longsheng Technology (+12% to +26%), Yinlun Co., Ltd. (+6% to +11%), Jifeng Auto Parts Co., Ltd. (+5% to +24%), Wuxi Zhenhua Auto Parts Co., Ltd. (+5% to +15%), Fuda Co., Ltd. (+3% to +12%), Jee Technology Co., Ltd. (+2% to +25%); ② Others: Shuanghuan Drivetrain Co., Ltd. (-6% to +1%), Baolong Automotive Corporation (-10% to -1%), Chuanhuan Technology Co., Ltd. (-14% to 10%), Guansheng Co., Ltd. (-19% to -14%), Feilong Auto Parts Co., Ltd. (-59% to -43%).

Key risks: Fluctuations in raw material prices, geopolitical risks, and slower-than-expected industry recovery.