Periodic/Sector reports
Automobile - Weekly: 2Q26 Results Review And 2H26 Outlook
Highlights
- BYD and Geely far outperformed peers in 2Q26 due to new models and exports. For 2H26, their earnings will be continuously driven by premiumisation, globalisation, and flattening lithium carbonate prices.
- 2Q26 results of auto parts companies diverged, with ADAS and AI plays outperforming conventional ones. We prefer the former, eg Minth.
- Battery materials producers’ 2Q26 earnings surged along with lithium prices, but the flattening of lithium carbonate prices reduces their upside in 2H26.
- Maintain MARKET WEIGHT. We are changing the order of our segmental preference to: OEMs > auto parts > battery > battery materials. Top BUYs: BYD, Geely, and Minth. Top SELL: Li Auto.
Analysis
- Auto OEMs: Overseas sales and premiumisation drive growth amid domestic softness, cost hikes and renminbi appreciation; R&D in robotics/AI remains a drag on profitability.
- BYD and Geely ride on premiumisation and globalisation. BYD and Geely far outperformed peers, with adjusted net profit (stripping out forex loss and other one-off items) surging 141%/61% yoy respectively on ASP gain and margin expansion, as premium product sales scaled up and overseas sales as a proportion of total sales volume rose to 43%/38% in 2Q26 from 23%/13% in 2Q25. Looking ahead, BYD and Geely’s earnings will further pick up in 2H26, with accelerating sales momentum, ASP hikes, and flattening lithium carbonate prices offsetting chip price hikes.
- The rest suffer from domestic sales declines and cost hikes. Great Wall Motor’s (GWM) adjusted net profit plunged 67% yoy; XPeng and Li Auto registered an adjusted net loss of Rmb1,237m and Rmb1,978m respectively, worse than expected. 3Q26 sales momentum and margins remain lukewarm, due to competition.
Highlights
- BYD and Geely far outperformed peers in 2Q26 due to new models and exports. For 2H26, their earnings will be continuously driven by premiumisation, globalisation, and flattening lithium carbonate prices.
- 2Q26 results of auto parts companies diverged, with ADAS and AI plays outperforming conventional ones. We prefer the former, eg Minth.
- Battery materials producers’ 2Q26 earnings surged along with lithium prices, but the flattening of lithium carbonate prices reduces their upside in 2H26.
- Maintain MARKET WEIGHT. We are changing the order of our segmental preference to: OEMs > auto parts > battery > battery materials. Top BUYs: BYD, Geely, and Minth. Top SELL: Li Auto.
Analysis
- Auto OEMs: Overseas sales and premiumisation drive growth amid domestic softness, cost hikes and renminbi appreciation; R&D in robotics/AI remains a drag on profitability.
- BYD and Geely ride on premiumisation and globalisation. BYD and Geely far outperformed peers, with adjusted net profit (stripping out forex loss and other one-off items) surging 141%/61% yoy respectively on ASP gain and margin expansion, as premium product sales scaled up and overseas sales as a proportion of total sales volume rose to 43%/38% in 2Q26 from 23%/13% in 2Q25. Looking ahead, BYD and Geely’s earnings will further pick up in 2H26, with accelerating sales momentum, ASP hikes, and flattening lithium carbonate prices offsetting chip price hikes.
- The rest suffer from domestic sales declines and cost hikes. Great Wall Motor’s (GWM) adjusted net profit plunged 67% yoy; XPeng and Li Auto registered an adjusted net loss of Rmb1,237m and Rmb1,978m respectively, worse than expected. 3Q26 sales momentum and margins remain lukewarm, due to competition.
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