Morgan Stanley: New Year's EV Subsidies Announced, Eliminating Battery Industry Uncertainty

Stock News2025-12-31

The introduction of the 2026 national subsidy policy for the mainland has been announced. While the new policy links subsidy amounts to vehicle prices, differing from the fixed-amount subsidies of 2025, the subsidy caps and the range of covered vehicle models remain largely unchanged. Recent market concerns regarding the continuity of subsidies, which feared a significant sales slump for electric passenger vehicles in the first quarter of 2026, have now been alleviated with this uncertainty removed.

The continuation of subsidies for electric passenger vehicles is expected to ensure high single-digit growth for the electric vehicle battery industry in 2026. Furthermore, robust performance in the electric commercial vehicle and energy storage system sectors is anticipated to further enhance industry profitability.

Should strong demand lead to a sustained increase in battery material prices, it is believed that CATL will pass on the cost pressure through its pricing strategy. The firm currently assigns a target price of 490 yuan and an "Overweight" rating to CATL's A-shares, listing it as the top pick in the sector.

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