Overview of China’s Automobile Sector

The Chinese automobile sector is gearing up for ambitious growth in 2025, with several original equipment manufacturers (OEMs) setting high sales targets. Amidst evolving market dynamics, retail sales of passenger vehicles (PVs) and electric vehicles (EVs) are expected to grow modestly by 2% and 21% year-on-year (yoy), respectively. The EV market’s share is projected to reach 57% in 2025, as both traditional and emerging automakers compete aggressively. December 2024 saw robust sales due to seasonal trends and expiring subsidies, but sales tapered off in the first week of January 2025.

BYD Company (1211 HK)

Performance and Targets

BYD recorded a stellar 2024 with EV sales totaling 4.27 million units, marking a 41.3% yoy growth. This included 3.85 million units in domestic sales (+38.6% yoy) and 417,204 units in overseas markets (+71.9% yoy). The company’s market share in China’s EV sector, however, dipped from 35.6% in 2023 to 34% in 2024, reflecting intensified competition. For 2025, BYD is targeting over 5 million units, aligning with UOB Kay Hian’s estimate of 5 million units, but growth is expected to slow to 17% due to its high base and increasing competition domestically and overseas.

Challenges

Overseas markets like Europe, Thailand, and Australia are witnessing slower sales growth due to subsidy rollbacks and inventory pile-ups. Despite these challenges, BYD remains a strong player in the global EV battery segment, with installations of 134.4 GWh in 11M24, reflecting a 35.9% yoy growth.

Recommendation

UOB Kay Hian maintains a HOLD recommendation for BYD with a target price of HK\$275.00, implying a 17x 2025F price-to-earnings (PE) ratio based on a 10-year discounted cash flow (DCF) model.

Geely Automobile (175 HK)

Performance and Targets

Geely achieved record sales of 2.17 million units in 2024, surpassing its target of 2 million units. This marks a 32% yoy growth driven by a 92% surge in EV sales to 880,000 units. Its EV share of total sales rose to 40.8% from 29.2% in 2023, fueled by brands like Galaxy, Zeekr, and Lynk & Co. For 2025, Geely targets sales of 2.71 million units (+24.5% yoy), with a specific focus on EVs, aiming for 1.5 million units (+69% yoy).

Growth Drivers

Key contributors to Geely’s growth include the ramp-up of models launched in 2024, such as Galaxy E5 and Starship 7 EM-I, and upcoming launches in 2025-27. By 2027, Geely plans to double its sales to over 5 million units.

Recommendation

UOB Kay Hian assigns a BUY rating for Geely with a target price of HK\$23.00, pegged to a 20x 2025F PE ratio, highlighting its competitive edge in the EV market and value-for-money products.

Li Auto Inc (2015 HK)

Performance and Targets

Li Auto delivered 500,508 units in 2024, reflecting a 33.1% yoy growth, slightly below the estimated 505,000 units. The growth was driven by price cuts and the ramp-up of its L6 model. For 2025, the company targets 700,000 units (+40% yoy), significantly higher than the 550,000 units estimated by UOB Kay Hian.

Challenges

Li Auto faces challenges from new entrants in the extended range electric vehicle (EREV) segment and remains cautious about the contribution of its upcoming pure electric MPV model.

Recommendation

UOB Kay Hian maintains a HOLD rating for Li Auto with a target price of HK\$100.00, based on a 10-year DCF model.

XPeng Inc (9868 HK)

Performance and Targets

XPeng delivered 190,068 units in 2024, a 34% yoy growth, slightly exceeding its target. For 2025, the company has set an ambitious target of 350,000 units (+84% yoy), driven by strong sales of its Mona sub-brand and other affordable models.

Revised Estimates

Based on the Mona sub-brand’s performance, UOB Kay Hian revised its 2024-26 delivery estimates to 190,000/350,000/400,000 units and trimmed net loss estimates significantly.

Recommendation

XPeng is upgraded to a HOLD rating with a raised target price of HK\$43.00, reflecting higher cash flows.

Guangzhou Auto (2238 HK)

Performance and Targets

GAC’s sales volume declined by 20% yoy to 2 million units in 2024. For 2025, the company targets a 15% growth to 2.3 million units, but UOB Kay Hian estimates only 1.6 million units, citing challenges in its joint ventures and proprietary EV brand Aion.

Challenges

GAC’s JVs with Toyota and Honda are losing market share to EVs, and the company faces intense price competition in the internal combustion engine (ICE) market.

Recommendation

Despite higher-than-expected 4Q24 sales, GAC is rated SELL with a target price of HK\$1.15.

CATL (300750 CH)

Performance

CATL retained its global leadership in EV battery installations with 289.3 GWh in 11M24, representing a 28.6% yoy growth and a market share of 36.8%. The company continues to dominate globally despite being added to the US “military-related” list, which is expected to have minimal impact on its business.

Sector Recommendations

UOB Kay Hian maintains a MARKET WEIGHT stance on China’s auto sector. The preferred segments are ranked as follows: OEMs > automotive part manufacturers > automobile dealers. Top BUY recommendations include Geely, Fuyao Glass, and Desay SV.