Investment analysts are rallying around several potential winners in China’s auto market after the 10-day Beijing auto show put cutthroat competition on full display. The morning of the opening of China’s biggest auto show of the year—in this case, April 25—is usually a frantic rush. But this time, due to the large number of people and passing cars, traffic between stands often slowed to a crawl. I found that the second day wasn’t much better, unlike the devastation of previous years. “The number of visitors this year has been absolutely stunning,” Nick Lai, head of China equity and Asia-Pacific auto market research at JPMorgan, said in a late April report, noting an increase in the number of livestream participants and overseas dealers attending the show. “This year we notice[d] a significant number of foreign visitors who are overseas dealers or importers of Chinese brands,” JPMorgan analysts said. They expect overseas markets could account for about one-quarter of top car maker BYD’s revenue this year. Tesla, which gets more than a fifth of its sales from China, has not exhibited at the main auto show since protesters destroyed its stand in 2021. But just as CEO Elon Musk made a surprise visit to Beijing last weekend, the company cleared a data security hurdle for local car sales. and moved closer to approval of its driver assistance software for use in China. “Despite the fact that the Chinese car market is about 50% larger than the European one, there are about 170 brands in it versus 80 in Europe, which clearly indicates oversaturation. The market, with poor economies of scale, sells about 150,000 vehicles per brand, compared with about 200,000 in the EU,” European auto analysts at JPMorgan said in a separate report last month. “This is leading to irrational competition in the transition period,” from internal combustion engines to battery electric vehicles, the report said, raising the question of whether international OEMs, including Premium, should compete in the entry-level and compact car segments respectively over the next 5 years. Open to the public After two days of restricting access to business and media only, the Beijing Auto Show has opened to the general public. Car companies then competed to attract consumers beyond offering coffee and prizes. Porsche and Zeekr, backed by Geely, demonstrated the capabilities of Apple Vision Pro. The device is not yet available in China. Brands ranging from Japanese automaker Mazda to Chinese electric vehicle startup Nezha hired musicians and dancers for performances as well as a brief car-themed fashion show. Often seconds before the end of the show, organizers would remove barriers, allowing the crowd to rush toward the cars and performers. Self-driving systems provider Asensing attended the auto show to learn about the latest industry trends while showcasing its own sensors and chips in an attempt to support global expansion, said senior director of brand and public relations Zhang Haizhou, noting that “the next car for most people, it will be a lot smarter.” According to organizers, more than 110 new car models debuted at the Beijing auto show. “Car showrooms have become a marketing tool for leading brands to gain popularity not only through their products, but also through voice control,” auto industry analysts Morgan Stanley Asia Pacific said in a report last week. “Founders of electric vehicle manufacturers, especially brands like Xiaomi and BYD, stole the show,” they said. Xiaomi founder Lei Jun was rumored to be 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 emerged as one of the standout companies, with SU7 and its chairman Lei Jun receiving the most mentions on social media,” auto market analysts Jefferies said in a May 1 report. “We realized that marketing matters and that it is rich [Xiaomi’s] DNA as the Powerhouse of Consumer Electronics.” The smartphone and home appliance company said it shipped 7,058 units of the SU7 in April when deliveries began. Nio and Zhejiang province-based Leapmotor reported better-than-expected April shipments, according to Bank of America. Merrill Lynch analysts said Nio shares are up more than 50% from their mid-April lows: “We believe orders will increase. [month-over-month] in May thanks [a] stimulus policy announced on April 26,” BofA analysts said in a separate report. Trade-in Policy As part of China’s efforts this year to encourage trade-in, the Commerce Ministry said that through the end of this year, some New Energy Vehicles and some fuel-powered vehicles may be eligible for subsidies of about $1,000 or more. Jeffries analysts estimate the policy could boost passenger car sales in China by 1 million units, split evenly between electric and gas models. The new forecast suggests penetration of new energy vehicles will be 45%, up from 44% previously, the report said. Analysts highlighted Chinese auto stocks such as Leapmotor, Geely and BYD, which have buy ratings and are listed on the Hong Kong Stock Exchange. Leapmotor had the largest upside to Jeffries’ target price, implying a potential gain of 20%. JPMorgan’s favorites also include BYD and Leapmotor, eyeing them as potential beneficiaries of government stimulus. Meanwhile, analysts expect that Geely and Xpeng could “benefit from the near-expected positive market sentiment.” The focus on Chinese automakers indicates that foreign companies are losing money. “During the investor day in Beijing in front of the auto show, [ Volkswagen ] “Management made an honest assessment of how VW, along with most foreign OEMs, misjudged changing consumer demand and missed the emergence of a competitive domestic Chinese industry better in sync with consumer trends,” Jeffries’ report said. “Losing the market Jeffries also has buy ratings on Volkswagen and its local EV partner Xpeng, but rates only Tesla and Toyota Motor as hold. — CNBC’s Michael Bloom contributed to this report.
