China's auto sector is poised to show divergent first-half results, according to JPMorgan's analysis. While the sector gained 9% year-to-date (underperforming the Hang Seng China Enterprises Index by 18%), individual stock performance varied significantly based on new model launches, sales volume, profitability, and policy impacts.

Key Q2 earnings insights: - **Leapmotor** (09863) emerges as a potential standout with 53% quarterly sales growth and stable gross margins. The automaker may achieve quarterly profitability one quarter earlier than market expectations, potentially boosted by carbon credit agreements with Stellantis. JPMorgan raised its 2025/26 profit forecasts by 16% and 13% respectively, lifting the target price from HK$82 to HK$90. - **Li Auto** (02015) could see slight Q2 vehicle margin compression due to promotional activities. Market focus shifts to its upcoming pure-electric models: the i8 luxury SUV (pre-sale price ~¥350k, launching July 29) and i6 mid-size SUV (~¥250k, September debut). These models are expected to drive volume and profitability growth from Q3 onward. Rated Overweight with HK$135 target. - **Great Wall Motor** (02333) anticipates 90% quarterly profit surge from sales growth and deferred tax rebates from Russia, though still down 15% year-on-year. **XPeng** (09868) may show slight margin improvement, with investor attention on whether SUV models like G7 can double sales, plus the August-launched new P7 coupe (competing with Xiaomi SU7) and its first extended-range electric vehicle due in Q4. XPeng's target price was trimmed from HK$122 to HK$100, maintaining Overweight rating.

For joint-venture brands: - **SAIC Motor** (600104.SH) upgraded from Underweight to Neutral given stabilizing profits and Volkswagen's plan to launch 18 new models through their JV during 2026-2027. Target raised from ¥11 to ¥15. - **GAC Group** (02238) may issue an H1 profit warning. - **BYD** (01211) maintains Overweight rating with HK$180 target.

Currency dynamics warrant attention: RMB depreciation against currencies of key export markets (ruble, real, peso, euro, pound) may benefit exporters including BYD, Great Wall, Geely, and SAIC. Long-term competition will likely split the industry into three segments: 1) leaders with cost/scaling advantages (BYD, Geely); 2) smart-EV focused players (Xiaomi, Huawei, XPeng, Li Auto); and 3) strategically retrenching foreign automakers (VW, Toyota).