The current automotive sector is experiencing weak seasonal performance; however, recent market feedback on pessimistic sales expectations appears to be gradually desensitized, suggesting bearish sentiment may have bottomed out. Structurally, expectations are improving for reduced internal competition and overseas expansion, alongside the implementation of autonomous driving policy catalysts and the approaching launch milestone for Tesla's (TSLA.US) humanoid robot, V3. The 2026 vehicle trade-in policy is expected to support domestic demand, with commercial vehicles likely benefiting more significantly. A structural bullish view is maintained on the valuation elasticity brought by the 0-to-1 breakthrough in commercialization of edge AI, encompassing autonomous driving and robotics.
The passenger vehicle segment continues to reflect a state of "weak expectations and weak reality," while efforts to curb internal competition persist and export expectations improve. Although recent sales are under pressure due to the off-season, market expectations may have already become numb, showing little sensitivity to February sales figures; subsequent stock price inflection points will be determined by the actual weak performance. Tesla's recently released annual report showed a year-on-year return to positive gross profit growth in Q4 2025, with gross margin reaching a near two-year high. The improvement in automotive business gross margin was primarily driven by higher average selling prices in China led by the Model Y (Asia-Pacific sales hit a record high) and increased FSD subscription uptake, among other factors. Capital expenditure for 2026 is projected to exceed $20 billion, primarily targeting computing infrastructure and new factory capacity expansion. The company announced the permanent discontinuation of its flagship Model S and Model X models, with focus shifting to the mass production of new models like the Semi and Cybercab in North America during the first half of 2026.
The year 2026 is poised to potentially become the inaugural year for the commercialization of autonomous driving. Tesla's FSD subscription rate continues to rise with the rollout of V14, with subscription volumes for Q1-Q4 2025 approximately 800,000, 900,000, 1 million, and 1.1 million respectively. Starting in 2026, the FSD one-time purchase option will be eliminated, transitioning entirely to a monthly subscription model, currently priced at $99 per month. By the end of 2025, cumulative FSD miles driven exceeded 7 billion miles (approximately 11.5 billion km), though continued deployment in China and Europe still awaits regulatory approval from the respective authorities. The strategic focus is accelerating from hardware sales towards physical AI, including FSD iteration, Robotaxi services, Cybercab mass production, Optimus design finalization and production, alongside sustained heavy investment in AI cloud computing capabilities.
The robotics sector experienced adjustments this week, influenced by significantly reduced trading volume and irrational market rumors. In the early stages of emerging industries, sectors often exhibit sharp fluctuations, yet long-term significant excess returns remain evident. Upcoming catalysts within the Tesla supply chain include the finalization and release of Gen3 in Q1 2025, followed by overseas capacity construction and scaled mass production in the second half of the year. Furthermore, Unitree's IPO filing could also serve as a significant catalyst. Three types of investment targets are favored: high-probability winners in the Tesla supply chain, incremental segments aligned with technological iteration and upgrades, and high-quality, undervalued companies with potential for positive expectation gaps; alongside other domestic supply chains like Unitree with demonstrated volume capability.
For commercial vehicles, both the heavy-duty truck and bus segments in 2026 are expected to benefit from policy-supported domestic demand and sustained strong overseas market conditions. Focus is recommended on leading companies with strong fundamentals and low valuations. For heavy-duty trucks, Weichai Power remains favored, as the resumption of tenders by domestic major manufacturers, coupled with prominent power shortages in North America, boosts market expectations for volume expansion of Weichai's large-bore engines and SOFC production capacity. The company's ability to deliver on earnings and achieve valuation re-rating is viewed positively. For buses, attention is drawn to the left-side layout opportunities for Yutong Bus and King Long Motor. The medium-term trend of export-driven volume and profit growth is clear; considering the certainty of earnings growth (Yutong) and the realization of a turnaround thesis (King Long), alongside valuations that already offer sufficient margin of safety, the current configuration window is deemed important.
The recommended portfolio includes: Jianghuai Automobile (600418.SH), Hengbo Co., Ltd. (301225.SZ), Longsheng Technology (300680.SZ), Weichai Power (000338.SZ), Yutong Bus (600066.SH), King Long Bus (600686.SH), and CaoCao出行 (02643).
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