Since May of last year, valuations in the Hong Kong stock automotive sector have continued to decline, with the sector's drop exceeding 40% so far, and some individual stocks have been halved. However, this significant valuation pullback has revealed a "golden opportunity."
The core logic behind this correction is twofold. On one hand, it involves a de-rating of valuations; after benefiting from the new energy development over the past few years, individual stocks generally saw their prices double, pushing valuations to high points. On the other hand, as penetration gradually increased to 50%, upward space became constrained, leading to a slowdown in the growth rate of new energy vehicles.
The year 2026 confirmed the logic of the industry slowdown. Influenced by factors such as the adjustment and switch in the new energy vehicle purchase tax policy and the phase-out of policy subsidies, new energy vehicle sales declined in January and February. Growth resumed in March, but at only a single-digit rate, indicating the industry's growth trend remains in a deceleration phase.
It is worth highlighting that exports have become the core growth engine for the industry. According to data from the China Association of Automobile Manufacturers, new energy vehicle exports from January to June reached 2.355 million units, a year-on-year increase of 1.2 times. The industry maintains a pattern where the strong get stronger, with major automakers competing for a larger share of the export market.
Simultaneously, through strategic layouts in areas such as embodied AI and robotics, the industry is creating new growth opportunities. In the most recent two weeks, the new energy vehicle sector has seen a broad-based rise, with valuations continuing to recover. The question arises: has the new energy vehicle industry reached an inflection point in its valuation?
Dominant Leaders Hold Strong, Exports Bloom in Diversity
Data from the China Passenger Car Association for June shows a continued divergence in the performance of new energy vehicles and traditional fuel vehicles, yet the overall industry trend remains weak. Retail sales of passenger vehicles reached 1.602 million units, a year-on-year decrease of 23.2%. Fuel vehicle sales dropped by nearly 40%, while new energy vehicle retail sales declined by only 9%, with penetration rising to 62.8%.
However, the production and wholesale volumes of new energy passenger vehicles in June grew by 21.4% and 19.2%, respectively. The top seven companies by monthly wholesale volume were all domestic brands, ranked in order as BYD Company Limited (SEHK: 01211), Chery, Geely, SAIC Motor Passenger Vehicle, Changan Automobile, Great Wall Motor, and Leapmotor (SEHK: 09863). Their combined wholesale volume was 1.294 million units, accounting for 54.9% of the total.
Within the new energy passenger vehicle segment, the top four positions were also held by domestic brands: BYD, Geely, Chery, and Leapmotor, with a combined total of 756,400 units, representing 51.1% of the segment. Clearly, domestic brands have comprehensively outperformed joint venture brands, both overall and in the new energy sector.
Looking at the sales data released by major automakers for June, a summary would be: domestic brands are rising, joint venture brand sales are dismal, leading new forces are strong, and export demand is surging.
BYD firmly holds the industry leader position, with sales of 403,500 units far ahead of its peers. Other domestic brands also performed well, with Great Wall Motor achieving 2.48% growth against the trend. In contrast, joint venture brands fared worse; for example, GAC Honda saw a 53% sales decline in June and a 55.82% drop in the first half of the year.
Most new force brands maintained sales growth. Among them, Leapmotor, with sales of 93,400 units, led the second-place new force brand by 1.3 times, showing a commanding lead. Its 95% growth rate also leads the industry. Sales performance varied among other brands, with slight shifts in market share.
New energy brand exports are flourishing, with most brands maintaining a trend of doubling their monthly export sales. For the first half of the year, among traditional brands, Chery was the top export brand with 944,000 units exported, a year-on-year increase of 71.5%. BYD followed with 789,000 units exported, up 70.5% year-on-year. Geely showed the strongest growth, exporting 474,000 units, a surge of 158% year-on-year.
Among new force brands, Leapmotor continues to lead, exporting nearly 100,000 units, topping the new force list and surpassing its total exports for the previous year. It holds leading market shares in multiple countries, with over one-third share in Italy's pure electric vehicle market, consistently ranking first in sales there.
Three Major Growth Drivers Create Industry Opportunities
From a long-term perspective, the new energy vehicle industry has developed three distinct major growth drivers: first, the export market discussed above; second, intelligent driving and embodied AI are transforming transportation models, creating new commercial opportunities; and third, automakers are venturing into robotics, opening a second growth curve for the automotive industry.
Looking at exports first, data shows that from January to May 2026, new energy vehicle exports reached 4.059 million units, a year-on-year increase of 63%, accounting for 33.3% of total sales, an increase of 12.7 percentage points year-on-year. As seen above, traditional automakers represented by BYD and Geely, as well as new forces represented by Leapmotor, have performed impressively in exports with rapid sales growth. Other automakers are also making overseas markets a core growth strategy.
In reality, success in both domestic and overseas markets hinges on product strength and high cost-effectiveness. For example, industry leader BYD has two core series, Dynasty and Ocean, covering user needs from sedans to SUVs, from plug-in hybrids to pure electric vehicles, mostly under 300,000 yuan. Its premium brands are also performing strongly, such as Fang Cheng Bao, which saw sales growth of 1.9 times in June. New force leader Leapmotor creates hit models; its C and B series consistently top their price segments, and its mid-to-high-end D series became an instant hit upon launch. Its philosophy of offering quality without high price has gained consumer recognition.
Secondly, intelligent driving technology is accelerating its iteration. On the policy front, support continues. In June 2026, China's Ministry of Industry and Information Technology announced the country's first mandatory national standard dedicated to L3/L4 autonomous driving, the "Safety Requirements for Intelligent Connected Vehicle Automated Driving Systems" (draft for approval), scheduled for official implementation on July 1, 2027. On the technological front, maturity is increasing, with companies like Tesla and XPeng promoting the pure vision solution, which is gradually becoming mainstream for intelligent driving.
The price point for equipping vehicles with intelligent assisted driving solutions continues to fall. For instance, the XPeng M03 is priced at just over 100,000 yuan. Major automakers are following suit, essentially bringing intelligent driving down to the 100,000-150,000 yuan range. Moreover, with the support of embodied AI, the application scenarios for intelligent driving are expanding from private passenger vehicles to commercial vehicles like autonomous taxis, sanitation vehicles, and logistics vehicles, creating multiple emerging market opportunities.
Finally, embodied intelligence is reshaping the automotive industry chain. Automakers including GAC, Chery, BYD, and XPeng are involved in robotics. Robotics integrates cutting-edge technologies like AI, advanced manufacturing, and new materials, representing the best practical application scenario for embodied AI, with vast prospects in manufacturing, home, and medical fields. According to the "China Development Report 2025" forecast, China's embodied intelligence market size is expected to reach 400 billion yuan by 2030.
Currently, embodied intelligence has seen some commercialization, mainly in startups like Unitree, but it remains in a nascent stage. Automakers have not yet generated significant performance from this business, but once scale is achieved, it will form a new growth curve.
Sector Approaches Valuation Inflection, Focus on Leading Stocks
From a capital market perspective, almost all new energy vehicle brands have seen synchronized valuation retracements since the fourth quarter of last year, with maximum drawdowns exceeding 60%. This wave of valuation compression appears to have bottomed out, and the three major growth drivers are catalyzing a valuation inflection point.
In the last two weeks, valuations across the automotive sector have seen a broad-based increase. BYD's H-shares rose over 15%, while stocks like XPeng, Geely, and Leapmotor also gained over 10%.
The industry is entering a revaluation cycle. Within this, BYD, as the overall industry leader, and Leapmotor, as the top new force, are positioned to benefit first from the valuation reshaping opportunities brought by the three major growth drivers.
BYD demonstrates enduring strength, with sales towering above its peers and overseas export growth surging, with full-year exports expected to exceed 1.8 million units. Large funds are also placing early bets. With a current P/E valuation of around 25 times, a Huachuang Securities research report indicates the company is driven by its flash charging and intelligentization dual-strategy, using technology leadership to solidify its domestic sales foundation. Leveraging technological iteration to build product competitiveness, domestic sales are showing a month-by-month recovery trend. The company has gradually moved past its fundamental low point, and a bottoming-out recovery in its stock price is anticipated.
Leapmotor, as a leader among new force brands, continues to lead in both sales and financial performance. It is also one of the few new force brands to achieve a comprehensive balance of growth, profitability, and cash flow. Although affected during the sector's correction cycle, its valuation has shown a spiral upward trend since listing. The company is also favored by several investment banks, with Huachuang Securities giving it a "Strong Buy" rating and a target price of HK$58.85, representing a potential upside of 56% from the current price.
In summary, the new energy vehicle industry's valuation has fallen into a golden opportunity. Sales have resumed sustained growth, and three major growth drivers have emerged: the export market, emerging technology tracks, and robotics, jointly powering new growth curves. Fundamental improvements are ushering in a valuation reshaping. The industry maintains its trend of the strong getting stronger, with BYD firmly seated as the overall leader and Leapmotor solidifying its top position among new forces, presenting a scene of "two dragons dancing." Other new energy brands, while showing some differentiation, also maintain robust growth momentum. As the industry approaches a valuation inflection point, attention can be focused on leading stocks.
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