UBS has released a research report indicating that certain Chinese automotive and new energy stocks rose in today's trading session. Geely Automobile surged 8.5% to HK$17.44, while CATL climbed 7.5% to HK$591. The current geopolitical tensions involving the US, Israel, and Iran show strong parallels to the 2022 Russia-Ukraine conflict, which triggered significant increases in both oil and lithium prices. The simultaneous rise in international oil prices and commodity costs is driving up both the operating expenses of fuel vehicles and the manufacturing costs of electric vehicles.
The report maintains "Buy" ratings on BYD COMPANY, CATL, and LI AUTO-W, citing their favorable risk-reward profiles. Based on current spot price assessments, manufacturing costs for battery electric vehicles, extended-range electric vehicles, plug-in hybrid electric vehicles, and internal combustion engine vehicles have increased by approximately 7,000 yuan, 6,000 yuan, 5,000 yuan, and 3,000 yuan respectively compared to Autumn 2025 projections. If oil prices remain at current levels, annual operating costs for fuel vehicles could rise by about 2,000 yuan. This development marginally improves the economic competitiveness of electric vehicles relative to traditional fuel vehicles, partially offsetting pressures from the phase-out of subsidies starting in 2026 and the introduction of new purchase taxes.
The analysis recalls early 2022 when oil prices surged from $80 to $130 per barrel, causing China's 95-octane gasoline retail prices to increase from 7.3 yuan to 9 yuan per liter. Current oil prices have jumped from approximately $60 per barrel in February to a March peak of $120 before settling around $90. Should prices stabilize at this level, Chinese retail gasoline prices could again rise from 7.5 yuan to about 9 yuan per liter, implying an additional annual expenditure of roughly 2,000 yuan for household fuel vehicle owners. Given that BEV manufacturing costs exceed comparable ICE vehicles by approximately 4,000 yuan, this oil price increase equates to two years of additional operating costs for conventional vehicles.
UBS highlights several distinctions from the situation four years ago: metal price increases are more moderate than during the 2022 cycle; electric vehicle product competitiveness has significantly improved; and growing overseas sales help mitigate commodity cost pressures. More importantly, from a total cost of ownership perspective, industry efficiency has dramatically improved. Lithium iron phosphate battery prices have fallen below 500 yuan per kilowatt-hour, approximately half their early-2022 levels, while charging speeds have doubled. China's public charging stations now exceed 300,000 units, about three times the number of gas stations, substantially improving convenience.
Chinese electric vehicle stocks have underperformed the Hang Seng Index by approximately 10% year-to-date. The weak first-quarter demand appears already reflected in stock prices, and profit pressures from rising commodity costs have been partially digested by investors. Current oil price volatility makes electric vehicles more attractive from a TCO standpoint. Should market expectations form regarding commodity cost transmission to vehicle pricing, demand recovery might occur faster than investors anticipate, warranting renewed attention to the sector.
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