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G Sachs: China Auto Industry Consolidation Unlikely in Near Term; Earnings Downgrade Trend Accelerates
2026-06-24 11:33:13 G Sachs published a research report revisiting the cyclical framework of China癒礎s automobile OEM industry. The bank believes industry consolidation requires three conditions to be met simultaneously: (1) OEMs operating at cash cost levels; (2) management compromising on profitability and expansion; and (3) OEM balance sheets shifting to net debt positions. As of 1Q26, 10 out of 14 OEMs remain above cash cost levels; management teams hold divergent views on sales volume/margins/capacity; and only one OEM is in a net debt position. G Sachs believes industry consolidation will be difficult to achieve in the near term. The bank noted that market consensus forecasts for EBITD in FY2026 and FY2027 for China癒礎s OEM industry have undergone four rounds of downward revisions over the past year, with the pace of cuts accelerating. The most recent revision, following 1Q results, was a 4% reduction, equivalent to a total industry downgrade of approximately RMB1.7 billion to RMB1.8 billion. G Sachs lowered its 2026 China passenger vehicle sales forecast by 5% to reflect weak domestic retail demand, projecting domestic retail passenger vehicle sales to decline 9% YoY in 2026, while exports are expected to rise 30% YoY. New energy vehicle penetration is forecast to reach 60%. Within its coverage, the bank sees BYD COMPANY (01211.HK), LEAPMOTOR (09863.HK), and XPENG-W (09868.HK) as better positioned in terms of accelerating domestic sales growth and overseas expansion, benefiting from an expanding pipeline of new export models and sales networks. All are rated Buy. (ad/da)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |