Investment analysts are rallying around a few potential winners in the Chinese auto market after the 10-day auto show in Beijing put the fierce competition on full display. The opening morning of China's biggest auto show of the year – April 25 in this case – is usually a mad rush. But this time, the sheer number of people and the launch of cars slowed the movement between the stalls to a crawl. I found that the second day wasn't much better, unlike previous years' unloading. “The number of visitors this year was overwhelming,” Nick Lai, head of China equity and Asia-Pacific auto research at JPMorgan, said in a late April report, noting an uptick in the number of live streamers and foreign dealers attending the show. “This year, we notice a large number of foreign visitors who are traders or importers of Chinese brands abroad,” JPMorgan analysts said. They expect overseas markets to contribute about a quarter of the profits of BYD's leading production vehicles this year. Tesla, which gets more than a fifth of its sales in China, has not participated in the major auto show since protesters disrupted its booth in 2021. But more recently, CEO Elon Musk made a surprise visit to Beijing last weekend, and the company overcame Data security hurdle for domestic car sales and is close to getting its driver assistance software approved for use in China. “Although the Chinese car market is approximately 50% larger than Europe, it has about 170 brands operating in the market compared to 80 brands in Europe, clearly indicating market saturation with weak economies of scale with about 150,000 sales. A car for each brand for around 200k.” “In the European Union,” European auto analysts at JPMorgan said in a separate report last month. “This leads to irrational competition in the transition” from internal combustion engines to battery electric vehicles, the report said, raising the question of whether international OEMs, including Premium, should compete in entry-level or compact cars. After two days of restricting access to business and media only, the Beijing Auto Show opened to the general public. Car companies then competed to attract consumers — beyond offering coffee and prizes. Geely-backed Zeekr has all showcased Apple Vision Pro experiences, with brands from Japanese automaker Mazda to electric car startup Nezha hiring musicians and dancers to perform, along with a short fashion show themed around the cars. Often, a few seconds before the show ends, organizers remove the barriers, allowing the audience to rush toward the cars and performers. Self-driving supplier Asensing participated in the auto show to learn about the latest industry trends while showcasing its products. Zhang Haizhou, senior brand and public relations manager, said the company has its own sensors and chips in an effort to support global expansion, noting that “the next car for most people is… “Destined to be much smarter.” , according to the organizers. “Auto shows have become a marketing tool for major brands to attract more not only with their products but also through voice management,” Morgan Stanley Asia Pacific auto analysts said in a report last week. “The founders of electric car makers, especially brands like Xiaomi and BYD, have stolen the show,” they said. Word was that Xiaomi's founder, Lei Jun, was walking around the exhibition center after giving a speech on the morning of April 25 to promote his company's new SU7 electric sedan. “Xiaomi was one of the surprising standouts, generating the most social media traffic for SU7 and its president Lei Jun,” auto stock analysts at Jefferies said in a May 1 report. “We have learned that marketing is important and this is rich in (Xiaomi's) DNA as a consumer electronics juggernaut.” The smartphone and home appliances company said it delivered 7,058 SU7 units in April, when deliveries began. New, Zhejiang-based Leap Motor Co. reported better-than-expected deliveries in April, according to Bank of America Merrill Lynch analysts. Nio shares have risen more than 50% since their lows in mid-April. “We believe orders will improve (on a monthly basis) in May, thanks to the stimulus policy announced on April 26,” Bank of America analysts said in a separate report. Trade Policy As part of China's push this year to encourage domestic trade, the Commerce Ministry said that until the end of this year, some purchases of new energy vehicles and some gas-powered cars may be eligible for subsidies of about $1,000. Or more. Jefferies analysts estimate that the policy could boost passenger car sales in China by 1 million units this year, split evenly between electric and gas-powered models. The report said that new forecasts indicate the penetration of new energy vehicles at 45%, up from 44% previously. Analysts highlighted their picks for Chinese auto stocks such as Leapmotor, Geely and BYD, all of which are rated buy and listed in Hong Kong. As of Friday's close, Leapmotor had the biggest upside to Jefferies' price target — implying a potential gain of 20%. JPMorgan's top picks also include BYD and Leapmotor, as it sees them as potential beneficiaries of government stimulus. Meanwhile, analysts expect Geely and Xpeng to benefit from positive market sentiment in the near term. The focus on Chinese automakers suggests that foreign companies are losing out. During an investor day in Beijing ahead of the auto show, Volkswagen management provided an honest assessment of how VW, along with most foreign OEMs, misjudged the change in consumer demand and missed the emergence of a cost-competitive domestic Chinese industry in 2018. “. “Better in sync with consumer trends,” the Jefferies report said. “Having lost market leadership, VW aims to retain its top spot among foreign OEMs” Jefferies also has buy ratings for VW and its local EV partner, Xpeng, but rates only Tesla and Toyota Motor as hold. — CNBC's Michael Bloom contributed to this report.
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Auto analysts are picking who can survive in China's strong electric vehicle market
