The analyst rating from CLSA is influenced by several factors, including:
1. Slackening Demand and Weakening Policy Support: The automotive market is facing reduced consumer demand and less favorable government policies, which are creating challenges for automakers.
2. Rising Commodity Prices: An increase in commodity prices, particularly for raw materials like lithium carbonate, memory chips, and non-ferrous metals, is expected to raise the average cost per vehicle by approximately RMB3,000. This cost pressure could impact profitability and pricing strategies.
3. Industry Consolidation: The combination of these pressures may accelerate consolidation within the automotive industry, as companies may need to adjust their pricing strategies to remain competitive.
4. Vertical Integration and External Sales: Automakers with higher vertical integration or a larger share of external auto part sales, such as BYD and LEAPMOTOR, are seen as better positioned to absorb these cost pressures.
5. Strong EV Model Launches: Companies like GEELY AUTO, which are launching strong electric vehicle models and improving profitability, are viewed as potential leaders in the evolving market.
Overall, these factors contribute to a cautious outlook for the automotive sector, prompting analysts to adjust their ratings accordingly.
