China Automotive Industry 2021 Outlook: Industry recovery with potential sales explosion of Smart EV December 2020

Lou Jia [email protected] (8621) 2053 7060 Wechat:loujia66

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material. China Auto Industry Content Industry Overview (P3-P16) NEV Market (P17-38) Valuation and Stock Recommendation (P39-P44) Company Updates (P45-P56) Appendix-Southbound and Short Position Stake of Key HK-listed Auto Stocks (P57-P64)

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

2 2 China Auto Industry

Industry Overview NEV Market Valuation and Stock Recommendation Company Updates Appendix-Southbound and Short Position Stake of Key HK-listed Auto Stocks

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

3 3 pWsU9YqWlZeXkWaVgUiYbYbRbPbRpNrRsQrRjMnMoMlOrQpR8OoPsRNZrRmPvPsPrM China Auto Sales Review-Yearly

Breakdown of Sales Volume by Vehicle Type 10M20 YoY Sales (unit) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 (%) PV 13,757,794 14,472,416 15,495,240 17,927,730 19,707,677 21,210,339 24,376,902 24,718,321 23,709,782 21,444,180 15,495,098 (9.9) Sedan 9,494,269 10,122,426 10,744,740 12,009,704 12,379,769 11,745,433 12,149,861 11,848,001 11,542,077 10,307,645 7,175,698 (13.6) MPV 445,407 497,708 493,396 1,304,053 1,914,255 2,108,866 2,496,529 2,070,655 1,734,637 1,383,684 783,940 (29.5) SUV 1,326,036 1,593,991 2,000,410 2,988,758 4,081,938 6,256,912 9,047,010 10,252,673 9,980,489 9,353,313 7,233,622 (3.1) Minivans 2,492,082 2,258,291 2,256,694 1,625,215 1,331,715 1,099,128 683,502 546,992 452,579 399,538 301,838 (4.6) CV 4,304,142 4,032,698 3,811,165 4,056,349 3,791,324 3,451,263 3,651,273 4,160,583 4,370,795 4,324,497 4,204,188 20.9 Heavy-duty trucks 1,017,433 880,641 636,001 774,104 743,991 550,716 732,919 1,116,851 1,147,884 1,174,252 1,373,708 40.1 Medium-duty trucks 271,766 291,959 290,269 286,839 247,839 200,414 229,063 229,113 177,206 139,338 127,493 10.7 Light trucks 2,025,621 1,880,060 1,842,710 1,908,328 1,662,634 1,558,543 1,539,820 1,718,943 1,894,978 1,883,166 1,799,059 18.5 Mini trucks 546,271 492,176 534,812 527,019 529,942 546,208 606,058 568,444 665,557 653,402 565,736 12.5 Subtotal of trucks 3,861,091 3,544,836 3,303,792 3,496,290 3,184,406 2,855,881 3,107,860 3,633,351 3,885,625 3,850,158 3,865,996 24.1 Large-size buses 68,814 73,812 79,198 81,680 84,252 84,531 90,373 94,080 76,952 74,802 41,719 (23.7) Medium-size buses 89,882 91,577 90,521 90,077 79,612 78,854 99,408 84,899 73,625 66,933 33,565 (30.9) Light buses 284,355 322,473 337,654 388,302 443,054 431,997 353,632 348,253 334,593 332,604 262,908 1.6 Subtotal of buses 443,051 487,862 507,373 560,059 606,918 595,382 543,413 527,232 485,170 474,339 338,192 (6.6) Total 18,061,936 18,505,114 19,306,405 21,984,079 23,499,001 24,661,602 28,028,175 28,878,904 28,080,577 25,768,677 19,699,286 (4.7)

Source: CAAM, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

4 PV Sales Has Ended 7-quarter’s Consecutive YoY Decline in 2Q20 PV Sales has Turned to Positive Growth in 2Q2020 (10,000 units) (%) 3,000 50 40 2,000 30 1,000 20 10 0 0 (10) (1,000) (20) (2,000) (30) (40)

(3,000) (50)

1Q12 3Q14 1Q17 3Q19 1Q11 2Q11 3Q11 4Q11 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 4Q19 1Q20 2Q20 3Q20 Quarterly PV sales (LHS) YoY growth rate (RHS) YoY Growth Trend of GDP and PV Sales (%) (%) 100 20 75 15 50 10 25 5 0 0 (25) (5)

(50) (10)

1Q12 3Q12 1Q13 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 YoY growth-PV sales (LHS) YoY growth-GDP (RHS) Source: CAAM, National Bureau of Statistics, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

5 CV Sales Outperformed mainly Driven by HDT Sales in 2020 CV Sales Performed Better than PV since 2017 (10,000 units) (%) 600,000 60

400,000 40

200,000 20

0 0

(200,000) (20)

(400,000) (40)

(600,000) (60)

2Q12 3Q14 4Q16 1Q11 2Q11 3Q11 4Q11 1Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Series1 Series2 HDT Sales Remained Strong Sales Momentum and Hit Record High in 2020 (unit) (%) 220,000 160 200,000 140 180,000 120 160,000 100 140,000 80 120,000 60 100,000 40 80,000 20 60,000 0 40,000 (20) 20,000 (40)

0 (60)

06/12 08/16 01/07 06/07 11/07 04/08 09/08 02/09 07/09 12/09 05/10 10/10 03/11 08/11 01/12 11/12 04/13 09/13 02/14 07/14 12/14 05/15 10/15 03/16 01/17 06/17 11/17 04/18 09/18 02/19 07/19 12/19 05/20 10/20 Sales volume (LHS) YoY growth (RHS)

Source: CAAM, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

6 Premium Market: Presented Strong Resilience post Pandemic Localised Sales Volume of Major Luxury Brands in China (10M20) Brand Country Sales volume YoY (%) 2015 2016 2017 2018 2019 10M20 2015 2016 2017 2018 2019 10M20 Audi Germany 509,997 536,289 552,000 620,305 620,000 538,743 (0.6) 5.2 2.9 12.4 (0.0) 9.3 Benz Germany 250,188 317,069 422,558 485,006 567,306 494,392 72.0 26.7 33.3 14.8 17.0 5.0 BMW Germany 287,000 310,000 386,500 466,053 545,483 490,778 3.0 8.0 24.7 20.6 17.0 10.5 Cadillac US 53,086 111,532 173,524 228,043 212,506 178,178 33.0 110.1 55.6 31.4 (6.8) 0.1 Volvo Sweden 64,019 70,342 91,052 169,555 161,907 146,741 1,360.0 9.9 29.4 86.2 (4.5) 14.0 JLR UK 62,468 83,888 67,791 53,247 46,225 NA NA 34.3 (19.2) (21.5) 11.3 Infiniti Japan 25,467 26,131 27,766 28,868 35,035 18,554 943.3 2.6 6.3 4.0 21.4 (29.9) Lincoln US 252 30,883 NA NA NA NA NA NA Acura Japan 0 6,842 14,245 9,424 14,786 9,077 NA NA 108.2 (33.8) 56.9 (19.4) DS France 24,451 16,123 6,088 3,867 2,055 62 6.3 (34.1) (62.2) (36.5) (46.9) (97.0) Total 1,214,208 1,456,796 1,757,621 2,078,912 2,212,577 1,953,633 20.6 20.0 20.6 18.3 6.4 8.8

Subtotal of ABB 1,047,185 1,163,358 1,361,058 1,571,364 1,732,789 1,523,913 11.8 11.1 17.0 15.5 10.3 8.2

China Premium Market Sales Volume and Growth Penetration Rate of Major Countries’ Premium (Localised) Market (1,000 units) (%) (%) 2,500 50 30% 27% 26% 2,000 40 25% 1,500 30 20% Word average: 10.8% 1,000 20 14% 14% 15% 12% 12% 11% 500 10 10% 10% 9% 9% 10% 8% 7% 0 0 5% 5% (500) (10) 0%

(1,000) (20)

Italy

USA

Spain

China

Japan

Turkey Russia

France

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Canada

Australia

Germany

10M20 South Africa Premium market sales volume (LHS) Premium market YoY (RHS) South Korea

PV sales YoY (RHS) UnitedKingdom Source: Data of various companies, CAAM, Global Insight 11/2020, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

7 SUV Sales Breakdown by Price Range

Sub-segment of SUV Market by Price Range (2010-10M20)

SUV sales volume (units) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 Below 100,000 366,692 355,949 492,175 717,179 1,115,749 2,091,169 3,141,239 3,460,492 3,084,448 2,437,867 1,434,631 100,000-150,000 340,562 453,437 564,788 939,713 1,399,933 2,251,071 3,127,431 3,183,687 3,146,991 3,155,277 2,536,913 150,000-200,000 470,233 585,353 661,794 904,528 1,053,246 1,102,842 1,451,201 1,825,769 1,914,188 1,929,148 1,661,535 Above 200,000 148,547 199,252 281,653 427,338 513,010 811,830 1,327,531 1,782,725 1,834,862 1,831,021 1,600,543 Total 1,326,034 1,593,991 2,000,410 2,988,758 4,081,938 6,256,912 9,047,402 10,252,673 9,980,489 9,353,313 7,233,622

YoY (%) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 Below 100,000 134.0 (2.9) 38.3 45.7 55.6 87.4 50.2 10.2 (10.9) (21.0) (25.8) 100,000-150,000 83.4 33.1 24.6 66.4 49.0 60.8 38.9 1.8 (1.2) 0.3 (2.9) 150,000-200,000 83.5 24.5 13.1 36.7 16.4 4.7 31.6 25.8 4.8 0.8 18.0 Above 200,000 152.1 34.1 41.4 51.7 20.0 58.2 63.5 34.3 2.9 (0.2) 6.3 Total 101.7 20.2 25.5 49.4 36.6 53.3 44.6 13.3 (2.7) (6.3) (3.1)

Market share (%) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 Below 100,000 27.7 22.3 24.6 24.0 27.3 33.4 34.7 33.8 31.5 26.1 19.8 100,000-150,000 25.7 28.4 28.2 31.4 34.3 36.0 34.6 31.1 31.5 33.7 35.1 150,000-200,000 35.5 36.7 33.1 30.3 25.8 17.6 16.0 17.8 19.2 20.6 23.0 Above 200,000 11.2 12.5 14.1 14.3 12.6 13.0 14.7 17.4 18.4 19.6 22.1 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: CAAM, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

8 Despite Downturn at Present, SUV Market in China Still Has Upside Room in Future SUV Sales Penetration in China Sales Structure of Light Vehicle Market in the US 100% 4% 4% 4% 4% 3% 2% 2% (1,000 units) (%) 8% 8% 8% 6% 6% 5% 5% 5% 4% 4% 12,000 50 90% 15% 14% 14% 14% 13% 14% 14% 15% 15% 16% 17% 18%20% 17% 17% 45 80% 19% 19% 10,000 40 70% 26% 28% 30% 30% 31% 35 28% 32% 33% 36% 8,000 60% 27% 26% 26% 39% 42% 30 46% 48% 51% 6,000 25 50% 20 40% 4,000 15 30% 49% 49% 53% 53% 51% 50% 52% 50% 48% 10 46% 47% 45% 42% 2,000 20% 38% 34% 32%27% 5 10%

0 0 0%

2005 2006 2019 2004 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2018 2019 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2020E 10M20 SUV sales (LHS) Sales proportion of SUV in PV (RHS) Sedan and others SUVs Pickup trucks MPVs Source: CAAM, BOCI Research Source: MarkLines, BOCI Research Although SUV market experienced continuous sales declines along with the overall industry during this round of downturn, the segment continues to outperform with market shares never stopping improving and reached 46.7% in 10M20.

Looking ahead, with more families and customers pursuing pleasant driving experiences, we still see room for SUV penetration rate to increase in China, as the market share of SUV coupled with pick-up trucks have grown to more than 70% in the US.

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

9 German Brand and Japanese Brand Outperformed, while Own-brand lost Market shares PV Sales Growth Comparison by Sedan Sales Growth Comparison SUV Sales Growth Comparison by Brand Series by Brand Series Brand Series (%) (%) (%) 20 20 60 10 10 40 0 0 20 (10) (10) (20) (20) 0 (30) (30) (40) (20) (40) (50) (40) (50) (60) (60) (60) (70) (70) (80) (80) PV Domestic Japanese German US Korean French Sedan Domestic Japanese German US Korean French SUV Domestic Japanese German US Korean French market brands brands brands brands brands brands market brands brands brands brands brands brands market brands brands brands brands brands brands 2017 2018 2019 10M20 2017 2018 2019 10M20 2017 2018 2019 10M20 PV Market Share Changes by Sedan Market Share Changes by SUV Market Share Changes by

Brand Series Brand Series Brand Series

%

%

%

%

% %

50% 40% 70% %

%

%

%

%

60.6

43.9

34.0

42.1 33.7

33.6

58.0 %

35% 32.5% %

39.2 60%

52.6 29.7

40% 37.1

48.6 %

30% 27.1 %

% 50%

%

%

%

% %

25% 22.8

%

%

% 21.1

30% 20.8

%

19.9

19.9 24.8

19.6% 40%

24.2

23.6

%

%

21.4 21.3

20% 17.0

%

%

%

%

19.6

18.8%

%

14.4

% %

30% % 17.0

20% % 11.6

15% 11.5

20.1

%

19.2

%

18.0

17.6

%

12.3

16.7

%

15.3%

% 10.5

20% %

%

9.4

%

8.9%

%

6.9 %

% 10%

11.3

%

%

6.1%

6.0

%

%

%

9.3

%

% 8.5

10% %

4.4 %

%

%

%

6.9

5.0

%

4.7

%

4.6

%

6.2%

5.5

3.6 4.8

10% 4.2

1.9 3.2

5% 3.2

1.8

1.3

2.2

1.3

1.5

0.6

0.8%

0.6

0.2 0.3% 0% 0% 0% Domestic Japanese German US brands Korean French Domestic Japanese German US brands Korean French Domestic Japanese German US brands Korean French brands brands brands brands brands brands brands brands brands brands brands brands brands brands brands

2017 2018 2019 10M20 2017 2018 2019 10M20 2017 2018 2019 10M20 Source: China Automotive Industry Newsletter, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

10 Intensified Divergence among Own-brand OEM Led to Further Consolidation Ahead Sales Volume and YoY Growth of Major Own-brand Automakers (2010-10M20)

Sales volume (units) YoY growth (%) Domestic OEM 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 Geely 416,168 432,752 491,444 549,393 432,881 561,853 767,151 1,248,004 1,500,838 1,361,560 1,015,498 4.0 13.6 11.8 (21.2) 29.8 36.5 62.7 20.3 (9.3) (6.7) Changan Auto 709,968 543,128 750,579 822,244 973,337 1,113,317 1,219,609 1,128,345 881,699 814,565 782,663 (23.5) 38.2 9.5 18.4 14.4 9.5 (7.5) (21.9) (7.6) 22.4 SAIC GM-Wuling 1,135,604 1,217,882 1,322,585 1,425,566 1,586,384 1,797,608 1,878,196 1,894,781 1,662,536 1,241,966 767,472 7.2 8.6 7.8 11.3 13.3 4.5 0.9 (12.3) (25.3) (19.9) Great Wall 294,181 365,075 487,370 627,434 612,486 753,230 968,850 950,315 915,039 911,468 635,493 24.1 33.5 28.7 (2.4) 23.0 28.6 (1.9) (3.7) (0.4) (12.3) SAIC Motor 109,783 95,920 109,312 94,454 180,018 170,017 321,717 522,036 701,885 673,255 473,649 (12.6) 14.0 (13.6) 90.6 (5.6) 89.2 62.3 34.5 (4.1) (11.0) Chery 674,774 634,311 550,203 453,918 461,225 484,329 587,073 562,663 549,479 610,697 435,717 (6.0) (13.3) (17.5) 1.6 5.0 21.2 (4.2) (2.3) 11.1 (7.3) BYD 519,806 448,484 456,056 506,190 437,857 444,888 496,648 409,689 502,002 453,335 311,688 (13.7) 1.7 11.0 (13.5) 1.6 11.6 (17.5) 22.5 (9.7) (16.2) GAC Trumpchi 0 17,006 38,780 109,000 134,716 198,574 371,171 508,586 535,168 384,578 274,632 NA 128.0 181.1 23.6 47.4 86.9 37.0 5.2 (28.1) (10.5) Market Share Trends of Top-8 Own-brand OEMs in PV Market

25%

20%

15%

10%

5%

0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 Geely Great Wall SAIC Motor SAIC GM-Wuling GAC Trumpchi BYD Changan Auto Chery

Source: Data of various companies, CAAM, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

11 Intensified Divergence among Own-brand OEM Led to Further Consolidation Ahead (Cont’d) YoY Growth Trend Comparison Between Total Own- Own-brand PV Sales Volume and Market Share brand and Top Own-brand (1,000 unit) (%) (%) 12,000 48 25 46 10,000 20 44 15 8,000 42 10 40 6,000 38 5 4,000 36 0 34 2,000 (5) 32 (10) 0 30

(15)

2008 2018 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015 2016 2017 2019

2004 (20) 10M20 2011 2012 2013 2014 2015 2016 2017 2018 2019 10M20 Own-brand PV sales volume (LHS) Own-brand market share (RHS) YoY growth (total own-brand) YoY growth (Top own-brand) Own-brand Sedan Sales Volume and Market Share Own-brand SUV Sales Volume and Market Share (1,000 unit) (%) (1,000 unit) (%) 3,500 35 7,000 70 3,000 6,000 30 60 2,500 5,000 50 2,000 25 4,000 40 1,500 20 3,000 30 1,000 2,000 15 500 1,000 20

0 10 0 10

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2007 2015 2004 2005 2006 2008 2009 2010 2011 2012 2013 2014 2016 2017 2018 2019

10M20 10M20

Own-brand sedan sales volume (LHS) Own-brand market share (RHS) Own-brand SUV sales volume (LHS) Own-brand market share (RHS) Source: Data of various companies, CAAM, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

12 Industry Inventory Level Remained at Above Warning Line Monthly Inventory Coefficient at Dealer Level

3.0 2.68 2.68

2.5 2.10 2.10

2.00 2.00 Warning line

2.0 1.91

1.93 1.93

1.92 1.92

1.82 1.82

1.80 1.80

1.88 1.88

1.76 1.76

1.75 1.75

1.74 1.74

1.73 1.73

1.72 1.72

1.79 1.79

1.66 1.66

1.65 1.65

1.63 1.63

1.57 1.57

1.56 1.56

1.66 1.66

1.59 1.59

1.59 1.59

1.55 1.55 1.55

1.51

1.50 1.50 1.50 1.50

1.40 1.40

1.49 1.49 1.39 1.39

1.5 1.38 1.33 1.33

1.0

0.5

0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 2020 Source: China Automobile Dealers Association (CADA), BOCI Research Note: Due to the COVID-19 impact, the inventory coefficient in February-20 is abnormal at extremely high of 14.8. Monthly Inventory Coefficient at Dealer Level by Brand Category 3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

01/15 03/15 05/15 07/15 09/15 11/15 01/16 03/16 05/16 07/16 09/16 11/16 01/17 03/17 05/17 07/17 09/17 11/17 01/18 03/18 05/18 07/18 09/18 11/18 01/19 03/19 05/19 07/19 09/19 11/19 01/20 03/20 05/20 07/20 09/20 11/20

JV-brand own-brand imports & luxury Source: China Automobile Dealers Association (CADA), BOCI Research Note: Statistic calibre for imports inventory coefficient was changed from imports to high-end luxury & imports since April 2018

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

13 Sales Forecasts

Vehicle Sales Volume Growth and Forecasts (2006-21E)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E CV 14.2 22.2 3.5 28.4 29.9 (6.3) (5.5) 6.4 (6.5) (9.0) 5.8 13.9 5.1 (1.1) 19.9 (11.4) Trucks sub-total 13.6 18.6 6.3 34.3 30.5 (8.2) (6.8) 5.8 (8.9) (10.3) 8.8 16.9 6.9 (0.9) 22.6 (13.0) Heavy trucks (incl. chassis) 20.0 44.3 11.8 22.8 55.9 (6.0) (28.5) 14.7 (9.0) (35.4) 14.8 54.7 24.6 (8.3) 30.0 (15.0) Semi-trailers 64.2 91.9 9.2 8.7 68.0 (27.4) (26.0) 38.2 5.9 (10.3) 55.1 50.3 (17.2) 16.9 46.5 (18.0) Medium-sized trucks 3.9 17.2 (12.5) 24.6 5.4 7.4 (0.6) (1.2) (13.6) (19.1) 14.3 0.0 (22.7) (21.4) 15.0 (10.0) Light trucks 11.4 16.2 5.3 30.0 25.7 (7.2) (2.0) 3.6 (12.9) (6.3) (1.2) 11.6 10.2 (0.6) 18.0 (10.0) Mini-trucks 24.7 8.4 18.9 72.8 21.0 (9.9) 8.7 (1.5) 0.6 3.1 11.0 (6.2) 17.1 (1.8) 10.0 (15.0) Buses sub-total 7.3 21.0 (2.5) 4.0 25.1 10.1 4.0 10.2 8.6 (1.9) (8.7) (3.0) (8.0) (2.2) (2.3) 5.1 Large buses 9.4 26.6 9.6 7.2 45.9 7.3 7.3 3.1 3.1 0.3 6.9 4.1 (18.2) (2.8) (10.0) 10.0 Medium-sized buses 4.3 13.6 0.6 3.6 9.7 1.9 (1.2) (1.2) (11.0) (1.0) 26.1 (14.6) (13.3) (9.1) (15.0) 0.0 Light buses 8.1 22.7 (5.7) 3.4 26.4 13.4 4.7 14.9 14.2 (2.5) (18.1) (1.5) (3.9) (0.6) 2.0 5.0 PV 30.3 21.7 7.3 52.9 33.2 5.2 7.1 15.7 9.9 7.6 14.9 1.4 (4.1) (9.6) (6.2) 13.1 Sedans 37.3 23.5 6.8 48.1 27.0 6.6 6.1 11.8 3.1 (5.1) 3.4 (2.5) (2.7) (10.6) (10.5) 10.0 MPV 22.6 18.1 (12.6) 26.1 78.9 11.7 (0.9) 164.3 46.8 10.2 18.4 (17.1) (16.2) (20.2) (24.5) 0.0 SUV 21.2 50.1 25.3 47.1 101.3 20.2 25.5 49.4 36.6 53.3 44.6 13.3 (2.5) (6.4) 1.0 18.0 Minivans 10.4 7.6 7.7 83.4 27.8 (9.4) (0.1) (28.0) (18.1) (17.5) (37.8) (20.0) (17.3) (11.7) (2.0) 3.0 Total 25.1 21.8 6.7 46.4 32.4 2.5 4.3 13.9 6.9 4.7 13.7 3.0 (2.8) (8.2) (1.8) 8.1

Source: China Automotive Industry Newsletter, BOCI Research estimates

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

14 China Auto Penetration Still Below World Average Comparison of Vehicle Penetration among Major Soaring Number of China’s Total Vehicles in Use Countries (2019) (10,000 units) 26,000 100% (unit/1000 24,000 inh.) 22,000 90% 20,000 900 18,000 80% 16,000 14,000 70% 800 12,000 60% 10,000 700 8,000 50% 6,000 4,000 40% 600 2,000

0 30% 500

2011 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 Total vehicle in use (LHS) Proportion of private vehicles (RHS) 400 China’s Total Vehicles in Use by Region (2019) 300 (unit per thousand people) 280 260 200 240 220 200 100 180 160 140 0 120

100

US Iran

80 Italy

India

Brazil China

60 Japan

Russia Turkey

France Nigeria

40 Mexico

Canada

Australia Malaysia

20 Germany

0 Indonesia

South Africa

SaudiArabia

Jilin

Anhui

Hebei Hubei

Fujian

UnitedKingdom

Hunan Henan Gansu

Beijing

Shanxi Xizang

Jiangxi

Hainan

Ningxia

Jiangsu Yunnan Qinghai

Tianjing

Xinjiang

Sichuan

Guangxi Guizhou

Liaoning

Zhejiang

Shananxi

Shanghai

Shandong

Chongqing

Nationwide

Neimenggu

Guangdong Heilongjiang Source: National Bureau of Statistics, BOCI Research Source: World Bank, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

15 Industry Profit/Margin Plunged in 1H20 but has been Improving Gradually since 2Q20 Total Pre-tax Profit and Pre-tax Profit Margin of 17 Total revenue of 17 key OEM enterprises turned positive to Key OEM Enterprises 3.0% YoY in 9M20, better than overall auto sales volume (RMB bn) (%) 450 11.3 10.9 12.0 decline of 6.9% YoY, thanks to (i) rising sales proportion of 10.3 400 9.8 10.0 9.8 CV, especially heavy-duty trucks, and (ii) consumption 9.2 10.0 350 7.7 7.8 upgrade trend towards premium vehicles within PV 300 8.0 segment. 250 6.0 200 150 4.0 Thanks to the strong sales recovery of PV in 2H20, the YoY 100 2.0 decline of combined pre-tax profit narrowed sharply from 50 32.5% in 1H20 to 2.7% in 9M20, indicating pre-tax margin 0 0.0

improved to 7.8% against 6.4% in 1H20.

2018 2012 2013 2014 2015 2016 2017 2019 9M20 Total profit (LHS) Profit margin (RHS) Total Revenue Growth of 17 Key OEM Enterprises Total Pre-tax Profit Growth of 17 Key OEM (2017-9M20) Enterprises (2017-9M20) (%) (%) 20 40 15 30 10 20 10 5 0 0 (10) (5) (20) (10) (30) (15) (40) (20) (50) (60) (25) (70) (30) (80) (35) (90)

(40) (100)

Jan-Jul

Jan-Jul

Jan-Apr Jan-Oct

Jan-Apr Jan-Oct

Jan-Jun

Jan-Jun

Jan-Mar

Jan-Feb

Jan-Feb Jan-Mar

Jan-Aug Jan-Sep Jan-Nov Jan-Dec

Jan-Aug Jan-Sep Jan-Nov Jan-Dec

Jan-May Jan-May 2017 2018 2019 2020 2017 2018 2019 2020 Source: China Automotive Industry Newsletter, BOCI Research Source: China Automotive Industry Newsletter, BOCI Research Dongfeng Group, Changan Auto, BAIC Motor, GAC Group, Brilliance Group, Geely Holdings, Southeast Motor, Sinotruk, King Long Motor, Yutong Bus, Qingling Motors, BYD, Jianghuai Auto, Chery Auto and Shanxi Auto

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

16 China Auto Industry

Industry Overview NEV Market Valuation and Stock Recommendation Company Updates Appendix-Southbound and Short Position Stake of Key HK-listed Auto Stocks

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

17 17 NEV Sales by Region & YoY Growth Rates & NEV Market Share & NEV Penetration NEV sales breakdown by region (units) 2015 2016 2017 2018 2019 9M20 Europe 188,262 207,068 289,072 385,293 558,649 768,914 China 207,382 336,313 578,483 1,052,951 1,060,303 662,520 US 115,335 158,223 196,876 358,055 322,201 214,868 Others 37,231 72,780 159,672 221,948 268,678 137,991 Global 548,210 774,384 1,224,103 2,018,247 2,209,831 1,784,293

YoY (%) Europe 9.8 39.5 34.1 45.1 102.7 China 62.2 72.0 82.0 0.7 (18.4) US 37.2 24.4 81.9 (10.0) (33.2) Others 97.3 119.7 37.5 20.7 43.1 Global 41.3 58.1 64.9 9.5 10.9

NEV market share (%) Europe 34.4 26.7 23.6 19.2 25.4 43.1 China 37.8 43.4 47.3 52.2 48.0 37.1 US 21.0 20.4 16.1 17.7 14.6 12.0

NEV sales penetration by region (%) Europe 1.3 1.4 1.8 2.5 3.6 9.0 China 1.0 1.4 2.3 4.4 4.9 5.0 US 0.7 0.9 1.1 2.1 1.9 2.1

Source: EV Sales, ACEA, CAAM, Marklines, BOCI Research Note: All figures are based on PV segment

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

18 Tesla is the Absolute Market Dominator in the US NEV Market Total NEV Sales in US and YoY Growth Rate Sales Structure of US NEV Market (units) (%) 100% 400,000 100 90% 360,000 80% 320,000 80 280,000 70% 240,000 60 60% 200,000 50% 160,000 40 120,000 40% 80,000 20 30% 40,000 20% 0 0 10% (40,000) (80,000) (20) 0% 2014 2015 2016 2017 2018 2019 11M20 2014 2015 2016 2017 2018 2019 11M20 Total NEV sales (LHS) YoY growth rate (RHS) EV PHEV FCV Market Share Trends of Major OEM in US NEV NEV Sales Penetration in the US Market excludes Tesla (%) 100% 3.0 80% 2.5 60% 2.0 40% 1.5 20% 1.0 0% 0.5 2014 2015 2016 2017 2018 2019 11M20 GM Volkswagen Toyota Renault-Nissan Alliance BMW Daimler 0.0 Ford FCA Honda 2014 2015 2016 2017 2018 2019 11M20 Others Source: Marklines, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

19 Tesla is the Absolute Market Dominator in the US NEV Market (Cont’d) Tesla’s Total Sales Volume and YoY Growth in US Tesla’s Market Share in US NEV Market

(units) (%) 70 300,000 300

250,000 250 60

200,000 200 50

150,000 150 40 100,000 100 30 50,000 50 20 0 0 10 (50,000) (50) 2014 2015 2016 2017 2018 2019 11M20 0 Total sales volume (LHS) YoY growth rate (RHS) 2014 2015 2016 2017 2018 2019 11M20 Monthly Sales Volume of Model 3 in US Market Monthly Sales Volume of Model Y in US Market (units) (units) 30,000 14,000

25,000 12,000

10,000 20,000 8,000 15,000 6,000 10,000 4,000

5,000 2,000

0 0

Jul-18 Jul-19 Jul-20

Jul-20

Jan-19 Jan-18 Jan-20

Apr-20 Oct-20

Jun-20

Mar-20 Mar-18 Mar-19

Sep-18 Nov-18 Sep-19 Nov-19 Sep-20 Nov-20

Mar-20

Aug-20 Sep-20 Nov-20

May-18 May-19 May-20 May-20 Source: Marklines, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

20 Booming NEV Sales in Europe

Total NEV Sales in Europe Sales Structure of European NEV Market

(units) (%) 100% 900,000 120 90% 800,000 100 80% 700,000 70% 600,000 80 60% 500,000 60 50% 400,000 40% 300,000 40 30% 200,000 20% 20 100,000 10% 0 0 0% 2016 2017 2018 2019 9M20 2016 2017 2018 2019 9M20 Total NEV sales (LHS) YoY growth rate (RHS) BEV PHEV Market Share Trends of Major OEM in European NEV Market (%) 30

25

20

15

10

5

0 2015 2016 2017 2018 2019 10M20 VOW Hyundai-Kia Renault-Nissan Alliance Daimler BMW Group PSA Volvo Tesla

Source: ACEA, Marklines, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

21 Booming NEV Sales in Europe (Cont’d)

Top-10 Bestselling NEV Models in Europe (10M20)

(units) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000

0

Zoe

Golf

Leaf

Kona

NIRO

Model3

3 Series 3

Outlander

Audie-tron Peugeot208

Source: Marklines, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

22 European Union Has the World’s Most Stringent CO2 Emission Target 2020 Target for CO2 Emission/Fuel Consumption by Region (g/km) (L/100km) 140 6.0 5.2L/100km 5.0L/100km 120 4.5L/100km 5.0 Historical Average CO2 Emission Values/Targets of New Passenger 4.1L/100km 100 Cars in the EU 4.0 80 (g/km) 3.0 Stage III 60 121g/km 117g/km 200.0 105g/km Regulation with most 95g/km 2.0 40 stringent CO2 emission 20 1.0 160.0 target imposed great 130 pressure for 0 0.0 manufacturers US China Japan European Union 120.0 140 g/km L/100km Source: Regulation (EU) 2019/631, Regulation (EU) 443/2009, BOCI Research Stage I Stage II Comparison of Excess Premium 80.0 Voluntary commitment with less First regulation with punishment 95 effective in reducing CO2 emissions system turned out to be effective in 81 between Previous and New Regulation reducing CO2 emission Penalties per 59 vehicle (€) 475 40.0 500 450 380 400 0.0 350 285

300 235

…… …… …… ……

2003 2014 2001 2002 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015 2016 2017 2018 2019

250 190 2000

2025E 2030E 200 140 2020E 150 95 Historial average CO2 emissions CO2 emission target (1998 standard) 100 45 20 50 5 CO2 emission target (2009 standard) CO2 emission target (2019 standard) 0 Source: EEA, Regulation (EU) 443/2009, Regulation (EU) 2019/631, BOCI Research 0 1 2 3 4 5 Excess CO2 emissions (g) Premium set by previous regulation Premium set by new regulation Source: EEA, Regulation (EU) 2019/631, Regulation (EU) 443/2009, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

23 NEV Incentives of Major Countries in Europe

Country Major EV Incentives Execution period Notes VAT is to be reduced from 19% to 16%. 1/7/2020-31/12/2020 / A total subsidy of 9,000 euros for an electric vehicle Netlist price of fewer than 40,000 euros. A total subsidy of 7,500 euros for an electric vehicle. Netlist price of 40,000-65,000 euros. 1/7/2020-31/12/2021 A total subsidy of 6,750 euros for a PHEV. Netlist price of fewer than 40,000 euros. Germany A total subsidy of 5,625 euros for a PHEV. Netlist price of 40,000-65,000 euros. Vehicle tax for purely EVs will be exempted by the end of 2030 1/7/2020-2030 Now this incentive has been limited until 2025. Will invest 2.5 billion euros in charging points and battery cell production, including associated research / All petrol stations in Germany also offer charge points. Will invest 1.2 billion euros to electrify public transport. 1/7/2020-31/12/2021 / Carmakers and suppliers will receive 2 billion euros to aid research and development. / /

The subsidy would be available for the first 200,000 vehicles bought under the scheme

1/6/2020-31/12/2020 All electric range of at least 50 km and do not cost more than 50,000 euros France Consumers to scrap old, polluting vehicles and to purchase a new all-electric vehicle should receive a subsidy of Include 5,000 euros scrapping subsidy and 7,000 euro purchase subsidy 12,000 euros per vehicle. Bringing output to more than 1 million electric and hybrid cars per year over the next five years. Next 5 years / • Netlist price should be less than 50,000 pounds Consumers to purchase a new electric vehicle will be granted a subsidy of 3,000 pounds per vehicle. 2011-2023 • The grant was scheduled to come to an end in March 2020, and the government announced UK that it would be extended to 2023. Drivers could be given up to £ 6,000 towards a new electric vehicle if they scrap their old combustion engine motor. / Anticipated to be announced on 6/7/2020.

Purchase tax exemption for EV and PHEV. / PHEV has to pay additional fees based on CO2 emissions. Ownership tax exemption for EV while PHEV has a 50% discount. / / • 4% for full electric vehicles; Company car tax deduction. / Netherlands • 22% for PHEV. • Netlist price of 120,000-45,000 euros Consumers to purchase an electric vehicle will receive a subsidy of 4,000 euros. Planned to start from • A minimum range of 120km 1/7/2020 Consumers to purchase a used electric vehicle will receive a subsidy of 2,000 euros. / For a pure EV and hydrogen car, the bonus is SEK60,000; Sweden From 1/1/2020 Climate bonus which is capable for cars emit a maximum of 70g CO2/km. For a PHEV, the bonus will be decreased by SEK714 for 1g/km from SEK60,000; No purchase / import taxes 1990-2021 The first incentive policy of EV introduced by Norwegian government. Non annual road tax 1996-2021 / Exemption from 25% VAT on purchase 2001-2020 After 2021 the incentives will be revised and adjusted parallel with the market development. Norway Maximum 50% of the total amount on ferry fares 2018-2021 / Parking fee for EVs was introduced locally with an upper limit of a maximum 50% of the full price 2018-2021 / This incentive was firstly introduced in 2000 with a 50% cut of company car tax, which has been 40% reduced company car tax 2018-2021 revised in 2018. Source: Government websites from multiple countries, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

24 China NEV Market: Brief Introduction of two “Roadmap 2.0”

Brief Summary of "Energy-saving Vehicle and NEV Technology Roadmap 2.0" and "Intelligent Connected Vehicle Technology Roadmap 2.0"

Major milestones By 2025 By 2030 By 2035 Fuel consumption of PV will decrease to 4.6L/100km Fuel consumption of PV will decrease to Fuel consumption of PV will decrease to Fuel consumption of PV (WLTC) 3.2L/100km (WLTC) 2.0L/100km (WLTC)  Fuel consumption of traditional energy-  Fuel consumption of traditional energy-  Fuel consumption of traditional energy-driven (ICE) PV driven (ICE) PV will decrease to driven (ICE) PV will decrease to Energy-saving vehicles will decrease to 5.6L/100km (WLTC). 4.8L/100km (WLTC). 4L/100km (WLTC)  HEV will account for >50% in new car sales of ICE PV.  HEV will account for >75% in new car  HEV will account for 100% of new car sales of ICE PV. sales of ICE PV.  NEV (EV>90%) will account for c.20% of total sales  NEV (EV>93%) will account for c.40% of  NEV (>95%) will account for >50% of total NEV volume. total sales volume. sales volume.  Ownership of FCV will reach c.100,000 units.  Ownership of FCV will reach c.1m units.  PA/CA vehicles (L2) will account for c.70% of total new car sales volume.  PA/CA vehicles (L2/L3) will account for >50% of total  HA connected vehicles will be popularised  HA vehicles (L4) will account for >20% of new car sales volume. in China. Intelligent connected total new car sales volume, and to be  HA vehicles (L4) will start entering into market.  Intelligent connected vehicles will be vehicles widely used in expressway and used in  50% of new vehicles will be installed with C-V2X deeply integrated with intelligent energy, large scale in part of urban roads. terminals. intelligent traffic and intelligent cities.  Almost all of new vehicles will be installed with C-V2X terminals.

Source: Chinese Society of Automotive Engineering, China Industry Innovation Alliance of the Intelligent and Connected Vehicles, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

25 Sales Targets of NEV and Intelligent Connected Vehicles by “Roadmap 2.0” Sales proportion Targets of NEV and HEV for 2025/30/35 Indicated by Roadmap 2.0 1% 2% 3% 3% 100% 4% 18% 80% 37% 48%

60% 40% 95% 40% 45% 50% 20% 40% 15% 0% 0% 10M20 2025E 2030E 2035E Pure ICE HEV EV PHEV Sales Proportion Targets of Intelligent Connected Vehicles for 2025/30/35 Indicated by Roadmap 2.0 100% 100% 20% 80% 80% 50%

60% 60% 90% 70% 40% 40%

50% 20% 20%

10% 10% 0% 0% 2025E 2030E 2035E Below L2 (LHS) PA/CA (L2/L3) (LHS) HA (L4) (LHS) C-V2X (RHS)

Source: Chinese Society of Automotive Engineering, China Industry Innovation Alliance of the Intelligent and Connected Vehicles, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

26 China Posted Stronger-than-expected NEV Sales in 2H20 NEV Sales Volume and Growth (2015-10M20) Sales volume (units) YoY growth (%) 2015 2016 2017 2018 2019 10M20 2015 2016 2017 2018 2019 10M20 PV-EV 146,719 256,905 467,784 787,732 834,197 640,066 303.4 75.1 82.1 68.4 5.9 (7.1) PV-PHEV 60,663 79,408 110,699 265,219 226,106 177,635 245.5 30.9 39.4 139.6 (14.7) (7.6) CV-EV 100,763 151,850 184,451 196,008 137,481 79,292 1,061.1 50.7 21.5 6.3 (29.9) (6.1) CV-PHEV 22,947 18,518 13,593 5,709 5,440 3,530 88.8 (19.3) (26.6) (58.0) (4.7) 2.7 CV-Fuel cell 143 1,527 2,737 658 967.8 79.2 (50.4) Total 331,092 506,681 776,670 1,256,195 1,205,961 901,181 342.9 53.0 53.3 61.7 (4.0) (7.1) PV subtotal 207,382 336,313 578,483 1,052,951 1,060,303 817,701 284.5 62.2 72.0 82.0 0.7 (7.2) CV subtotal 123,710 170,368 198,187 203,244 145,658 83,480 493.8 37.7 16.3 2.6 (28.3) (6.4)

Source: CAAM, BOCI Research Monthly Sales Volume and Growth of New Energy Monthly Sales Volume and Growth of New Energy Passenger Vehicle Commercial Vehicle (units) (%) (units) (%) 180,000 150 47,000 200 37,000 130,000 100 150 27,000 80,000 100 50 17,000 30,000 50 0 7,000 (20,000) 0 (3,000) (50) (70,000) (13,000) (50)

(120,000) (100) (23,000) (100)

03/19 10/19 04/20 01/19 02/19 04/19 05/19 06/19 07/19 08/19 09/19 11/19 12/19 01/20 02/20 03/20 05/20 06/20 07/20 08/20 09/20 10/20

05/19 06/19 07/19 01/19 02/19 03/19 04/19 08/19 09/19 10/19 11/19 12/19 01/20 02/20 03/20 04/20 05/20 06/20 07/20 08/20 09/20 10/20 Sales volume of NEPV (LHS) YoY growth (RHS) Sales volume of NECV (LHS) YoY growth (RHS) Source: CAAM, BOCI Research Source: CAAM, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

27 China NEV Market Sales Breakdown

New Energy Passenger Vehicle Sales Volume Breakdown by Segment Sales volume (units) YoY growth (%) Market share (%) NEV Type Segment 2017 2018 2019 11M20 2017 2018 2019 11M20 2017 2018 2019 11M20 A00 202,155 230,692 179,815 230,598 136.9 14.1 (22.1) 43.2 45.4 29.2 21.1 29.2 A0 132,873 276,218 200,399 84,970 293.1 107.9 (27.4) (50.5) 29.9 34.9 23.5 10.8 EV A 104,132 265,846 438,066 280,147 22.0 155.3 64.8 (23.7) 23.4 33.6 51.3 35.5 B 5,604 9,011 26,552 164,971 120.0 60.8 194.7 610.0 1.3 1.1 3.1 20.9 C 103 9,431 9,132 28,618 NA 9,056.3 (3.2) 236.7 0.0 1.2 1.1 3.6 A 90,260 177,599 99,427 48,674 122.0 96.8 (44.0) (47.4) 82.4 69.5 48.5 27.0 PHEV B 19,225 61,745 76,658 65,166 (50.1) 221.2 24.2 (8.4) 17.6 24.2 37.4 36.2 C 3 16,126 28,981 66,357 (99.3) 537,433.3 79.7 149.9 0.0 6.3 14.1 36.8

Source: CPCA, BOCI Research PHEV Sales Breakdown between “to Consumer” and EV Sales Breakdown between “to Consumer” and “to “to Business” Business”

100% 6% 6% 5% 6% 100% 7% 7% 7% 9% 14% 22% 16% 19% 17% 32% 80% 80%

60% 60% 94% 94% 95% 94% 93% 93% 93% 91% 86% 40% 40% 78% 84% 81% 83% 68% 20% 20%

0% 0% 2017 2018 2019 1Q20 2Q20 3Q20 10M20 2017 2018 2019 1Q20 2Q20 3Q20 10M20 For individual consumer For operation purpose For individual consumer For operation purpose Source: CPCA, BOCI Research Source: CPCA, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

28 Narrowly-defined Passenger EV Sales Performance by OEM in China Sales volume (units) YoY (%) Market share (%) OEM (EV) 2018 2019 11M20 2018 2019 11M20 2018 2019 11M20 Domestic own-brand SAIC GM-Wuling 25,888 60,050 124,264 126.7 132.0 140.4 3.3 7.0 15.7 BYD 105,237 149,274 111,948 121.9 41.8 (20.8) 13.3 17.5 14.2 GAC New Energy 8,865 40,837 53,499 403.1 360.7 70.5 1.1 4.8 6.8 Great Wall Motor 5,245 38,865 43,516 64.7 641.0 20.2 0.7 4.6 5.5 SAIC Roewe/MG 33,925 50,432 40,985 225.1 48.7 1.8 4.3 5.9 5.2 Chery Auto 66,472 47,086 35,044 119.5 (28.8) (14.5) 8.4 5.5 4.4 BAIC Group (incl. BAIC BJEV) 198,524 150,600 24,877 78.9 (19.3) (78.2) 25.1 17.7 3.2 Geely Automobile 38,910 51,918 18,533 66.8 33.4 (64.2) 4.9 6.1 2.3 Changan Auto 25,503 28,235 13,609 (12.2) 10.7 (47.3) 3.2 3.3 1.7

NEV Startups Nio 9,431 20,565 36,721 NA 107.2 111.1 1.2 2.4 4.7 Xiaopeng Motors 371 16,608 20,586 NA 4,367.5 36.1 0.0 1.9 2.6 Weltmeister 3,304 16,876 19,907 NA 410.8 29.6 0.4 2.0 2.5 Hozon Auto 1,206 10,006 13,424 NA 729.7 43.7 0.2 1.2 1.7

JV brand SAIC GM 5,000 3,342 13,747 NA (33.2) 488.2 0.6 0.4 1.7 FAW VW 0 3,643 12,866 NA NA 465.8 0.0 0.4 1.6 GAC Toyota 0 2,043 7,030 NA NA 712.7 0.0 0.2 0.9

Foreign brand Tesla (China) 0 0 113,655 NA NA NA 0.0 0.0 14.5 Source: CPCA, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

29 China NEV Sales Forecasts and Potential Increments for 2021 Narrowly-defined Passenger PHEV Sales Performance by OEM Sales volume (units) YoY (%) Market share (%) OEM (PHEV) 2018 2019 11M20 2018 2019 11M20 2018 2019 11M20 Domestic own-brand BYD 123,889 72,168 43,206 87.0 (41.7) (37.7) 48.5 35.0 23.8 SAIC Roewe/MG 63,064 25,459 17,663 86.6 (59.6) (25.2) 24.7 12.3 9.7 Geely 15,433 17,690 5,830 900.8 14.6 (63.8) 6.0 8.6 3.2

JV brand Brilliance BMW 20,780 32,157 27,064 983.4 54.7 (8.8) 8.1 15.6 14.9 SAIC VW 4,174 31,726 24,486 NA 660.1 (11.9) 1.6 15.4 13.5 FAW VW 2,632 554 17,163 NA (79.0) 3,037.7 1.0 0.3 9.4 FAW Toyota 0 8,958 6,390 NA NA (18.3) 0.0 4.3 3.5 GAC Toyota 0 7,723 4,111 NA NA (40.8) 0.0 3.7 2.3

NEV startups Li Auto 0 0 26,498 NA NA NA 0.0 0.0 14.6 Source: CPCA, BOCI Research NEV Sales Forecasts of 2020-25 Potential NEV Sales Volume Increments for 2021 (units) )units( 150,000- 6,000,000 200,000 200,000 150,000 5,000,000 160,000 80,000- 120,000 100,000 4,000,000 100,000 50,000- 100,000 3,000,000 80,000

2,000,000 40,000 0 1,000,000 Tesla Low-end JV brands NEV Other market (mainly VW) start-ups traditional 0 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E led by own-brands Wuling and NEPV NECV ORA Source: BOCI Research estimates Source: CAAM, BOCI Research estimates

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

30 New NEV Models in China

Geely Lynk&Co ZERO GWM ORA Hao Mao SAIC Marvel-R EV, GAC Aion Y EV, BAIC ACRFOX αT EV, DMG Voyah i-FREE EV, B-class sedan, EV, A0-class sedan, mid-to large-size SUV, compact SUV, 1H21 mid-size SUV, EREV, mid-to large- 700km, 2H21 RMB103,900-143,900, RMB220,000↑, RMB241,900-319,900, size SUV, 2021 Traditional 401-501km, Nov-2020 700km, 1H21 480-653km, Oct-2020 own-brands

Tesla Model Y EV, mid- NIO EE7 EV, Xpeng, new sedan EV, WeltMister Evolve EV, WeltMister Maven EV, size SUV, first sedan model, may < RMB200,000, SUV, 520-620km, L4, sedan, 800km, L3-4, RMB480,000-535,000, 1Q21 2021 1H21 2021 594km, 1H21 NEV start-ups

VW ID.4X/CROZZ EV, Brilliance BMW iX3 EV, FAW-Audi e-tron EV, Nissan Ariya EV, compact SUV, mid-size SUV, mid-to large-size SUV, Crossover SUV, RMB250,000, 555km, RMB469,900-509,900, may 600km, 2021 1H21 500km, Nov-2020 470km, 1Q21 JV brands

Source: Data of various companies, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

31 Comparison of NEV Start-ups: Basic Information Li Auto (LI US) NIO (NIO US) Xpeng (XPEV US) Tesla (TSLA US) Li Auto (LI US) NIO (NIO US) Xpeng (XPEV US) Tesla (TSLA US) Establishment time Jul 2015 Nov 2014 Jan 2015 Jul 2003 Financials: IPO time Jul 2020 Sep 2018 Aug 2020 Jun 2010 Revenue (RMB m) 2019 284 7,825 2,321 160,826 Product: 2020E 8,903 15,822 5,323 203,766 First delivery time Dec 2019 (Li ONE) Jun 2018 (ES8) Dec 2018 (G3) Oct 2008 (Roadster) 2021E 18,270 29,860 13,682 301,627 Highperformance SUV segment priced Premium EV priced Mid-to high-end PV EV priced over Gross magin (%) Target market RMB150,000- RMB250,000- priced RMB150,000- RMB250,000 in 2019 (0.0) (15.3) (24.0) 16.6 500,000 550,000 300,000 China 2020E 16.1 8.2 2.9 19.6 Model S, Model X, 2021E 19.0 12.3 12.1 19.5 Models on the market Li ONE ES8, ES6, EC6 G3, P7 Model 3 Operating profit (RMB Technology: m) Technical route of 2019 (1,039) (11,079) (3,781) (452) EREV EV EV EV electrification 2020E (537) (5,284) (3,300) 12,957 Hardware: Mobileye NIO Pilot: 2021E 348 (3,675) (2,505) 26,707 (now), NVIDIA Hardware: Mobileye Xpilot: Autopilot Technical route of (future) Software: self- Hardware: NVIDIA Net loss (RMB m) Hardware/software: intelligence Software: Yihang AI developed (now), Software: self- 2019 (3,282) (11,296) (3,692) (5,640) self-developed (now), self- cooperation with developed 2020E (770) (5,577) (3,180) 6,894 developed (future) Mobileye (future) 2021E (319) (4,212) (2,337) 20,697 Number of employees/R&D staff 2,628/1,005 (38.2%) 7,442/2,668 (35.9%) 3,676/1,569 (42.7%) 48,016/ (percentage)

Production & Sales: Self-built factory + Foundry production Production mode Self-built factory Foundry production Self-built factory (JAC) (Haima) Production capacity in 100,000 (now), 60,000 100,000 + 150,000 200,000 China (units per year) 200,000 (future) Direct sales + Sales mode Direct sales Direct sales Direct sales dealership Sales network in China 44 197 116 141 Source: Data of various companies, Bloomberg, BOCI Research estimates Notes: Forecasts of Li Auto is based on our estimates, while others are based on Bloomberg consensus. Financial figures of Tesla are translated based on the present exchange rate of USD/RMB.

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

32 Comparison of NEV Start-ups: Quarterly Sales and Single Store Sales

Quarterly Sales Volume Single Store Sales Volume per Month (units) (units) 40,000 220

Li Auto NIO Xpeng Tesla (China) 200 35,000

180 30,000 160

25,000 140

120 20,000 100 15,000 80

10,000 60

40 5,000 20

0 1Q20 2Q20 3Q20 1Q20 2Q20 3Q20 1Q20 2Q20 3Q20 1Q20 2Q20 3Q20 0 Li Auto NIO Xpeng Tesla China Tesla global

Source: Data of various companies, CPCA, BOCI Research Source: Data of various companies, CPCA, BOCI Research estimates Note: Single store sales volume per month of Li Auto, NIO and Xpeng is calculated based on sales volume of September 2020 and store number as of end-September 2020 while that of Tesla China and Tesla global is based on sales volume of Important disclosures and certifications are located at the back of this material. The disclosuresAugust and 2020 disclaimer and 2Q20, sectionrespectively. forms part of this material.

33 Comparison of NEV Start-ups: Gross Margin

(%) Quarterly Gross Margin of Li Auto, NIO, and Xpeng 25 20 Li Auto NIO Xpeng 15 10 5 0 (5) (10) (15) 4Q19 1Q20 2Q20 3Q20 4Q19 1Q20 2Q20 3Q20 4Q19 1Q20 2Q20 3Q20

Source: Data of various companies, BOCI Research Gross Margin Trend of Tesla (%) 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 9M20 Source: Company data, BOCI Research Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

34 Comparison of NEV Start-ups: Expenses and Revenue/COGS per Vehicle R&D and SG&A Expenses of Li Auto, NIO, and Xpeng (RMB m) 6,000 Li Auto NIO Xpeng 5,000

4,000

3,000

2,000

1,000

0 2018 2019 9M20 2018 2019 9M20 2018 2019 9M20 R&D expense SG&A expense Source: Data of various companies, BOCI Research (RMB) Revenue and Cost per Vehicle of Li Auto, NIO and Xpeng 500,000 Li Auto NIO Xpeng 400,000

300,000

200,000

100,000

0 2019 1Q20 2Q20 3Q20 2018 2019 1Q20 2Q20 3Q20 2019 1Q20 2Q20 3Q20 Revenue per vehicle COGS per vehicle

Source: Company data, BOCI Research Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

35 Comparison of NEV Start-ups: Development and Plan in Intelligence Field (Mainly AD)

Additional price for Computing Autonomous ADAS functions Software power of Electronic electrical Further development plan of Model driving system (RMB) supplier Chips chips (TOPS) AD level architecture the company Will adopt NVIDIA’s next- Yihang AI generation product Orin in its Mobileye Integration (merge of Li ONE ADAS 0 (Li Auto as an 2.5 L2+ large-size SUV model (X01) to EyeQ4 ECUs) investor ) be launched in 2022, which will meet L3. Working with Mobileye to co- Full package: L2.5 develop L4, and lately it is 39,000; Mobileye Updated Domain oriented NIO ES6 NIO Pilot Proprietary 2.5 considering doing it on its own. Selected package: EyeQ4 NOP in Oct centralisation (DCUs) May self-produce ADAS chip, 15,000 2020. but no decision now. Xpilot 3.0 L2.5 Will OTA NGP to P7 in early- For the software (hardware) NVIDIA Drive Will update Domain oriented 2021, then will introduce more Xpeng P7 of Xpilot 3.0: Proprietary 30 Xpilot 2.5 Xaiver NGP in centralisation (DCUs) functions based on Xpilot 3.0 20,000/36,000 (software) early-2021 hardware. FSD HW3.0 L2.5 Will introduce monthly (self- Tesla Updated subscription of FSD in 2021. Autopilot 3.0 FSD: 64,000 Proprietary developed, 72 Vehicle computer Model 3 NOA in mid- The present function cannot produced by 2019 achieve the so-called ADAS L4. Samsung)

Source: Data of various companies, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

36 Current Development and Plan in Intelligence Field of Traditional Own-brands

OEM Current or upcoming models New brand / Smart platform Note New brand :  Lynk&Co ZERO will be the first model based on SEA. Lynk&Co ZERO (will launch in 2H21): \ ADAS level: L4  In structural road, to achieve highly automated driving (L4) in 2021 ADAS system: CoPilot and fully automated driving (L5) in 2022. Geely ADAS chip: Mobileye EyeQ5H *2, computing Smart platform: power of 25TOPS *2. (Qualcomm Snapdragon  Vehicles will be installed with self-developed chips (SoC) from SEA (PMA) (浩瀚架构) now on Lynk&Co 05) 2023. Sensor: 29 (12 vision +17 radar)  AI chip for speech processing will be volume produced in 2021. New brand :  Working on self-development of ADAS L3+ based on redundant 3rd-generation H6: Internal name “SL project” system of vision, millimeter, and Lidar. ADAS level: L2+ Great Wall ADAS chip: Mobileye EQ4, computing power of  Will commercialise L3 in 2021 and L4 in 2022. Smart platform: 2.5TOPS. Coffee Platform (咖啡智能) Sensor number: 20  EEA will evolve from 4 domain controllers to 2 domain controllers in 2022-23, and vehicle computer in 2025. New brand :  "Ark" is Changan's brand-new vehicle development concept (4.0 Will release all-new smart premium era), which can cover A0-C class models and support intelligent brand, based on cooperation with driving configurations. UNI-T: Huawei and CATL. ADAS level: L3  UNI-T is its first model based on "Ark". Changan ADAS chip: Horizon Journey 2, computing power

of 4TOPS (Horizon Robotics). Smart platform:  Will introduce 105 new models (23 NEV) based on "Ark" in the Sensor number: 23 Ark Architecture (方舟架构) following 5 years.

 Huawei has solutions for intelligent cabin, ADAS and cloud.

Source: Data of various companies, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

37 Current Development and Plan in Intelligence Field of Traditional Own-brands (Cont’d)

OEM Current or upcoming models New brand / Smart platform Note New brand :  The operating system of central console in cabin is "Banma Zhi Ji (智己) premium EV brand, Venus", powered by AliOS. Marvel R (presales): cooperating with Pudong ADAS level: L3 government and Ali.  SIGMA can cover A-B class models and various power types ADAS system: R Pilot SAIC Own-brand of ICE, HEV, PHEV, BEV. The first model based on SIGMA is Cabin chip: Huawei Baron 5000, support 5G Roewe iMAX8. ADAS chip: Mobileye EyeQ4H Smart platform:

Sensor:28 (11 vision + 17 radar) SIGMA  The first sedan model of Zhi Ji will be introduced in early- 2021. Aion V: New brand : ADAS level: L3 Aion  To achieve regional demonstration operation of ADAS L4 in ADAS system: ADiGO 3.0 2023. GAC Own-brand Cabin chip: Huawei Baron 5000, support 5G Smart platform: Sensor: 18 GEP 2.0 EV Platform  The volume production of L4/L5 may need 10-year more time. HD map: Baidu New brand :  Work with VisionICs to co-develop next-generation ADAS ARCFOX αT: ARCFOX (premium EV brand) system. ADAS level: L2.5 BAIC Own-brand ADAS system: α-Pilot  Deep cooperation with Huawei in ADAS development. Smart platform: Cabin chip: Huawei MH5000 5G (352TOPS) ARCFOX IMC Sensor: 22  Will introduce 3 new models of ARCFOX during end-2020 to 2021 (next sedan model (N61AB) targets Model 3).

Source: Data of various companies, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

38 China Auto Industry

Industry Overview NEV Market Valuation and Stock Recommendation Company Updates Appendix-Southbound and Short Position Stake of Key HK-listed Auto Stocks

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

39 39 Stock Price Performance of Major HK-listed Auto Stocks Price changes YTD Price changes from Price changes YTD Price changes from Stock Code Stock Code (%) 30-Jun to 11-Dec (%) (%) 30-Jun to 11-Dec (%) Heng Seng Index (6.0) 8.5 NEV Startups* SSE Composite Index 9.7 12.1 Li Auto* LI.US 182.5 182.5 SZSE Component Index 30.0 13.0 NIO NIO.US 1,024.9 485.8 OEM XPENG* XPEV.US 198.7 198.7 Geely Automobile 0175.HK 44.4 80.3 NEV Startups average 468.7 289.0 Great Wall Motor 2333.HK 161.5 211.2 Dealership Great Wall Motor-A 601633.CH 181.7 222.9 Zhongsheng Group 0881.HK 64.6 22.4 GAC Group 2238.HK (17.6) 43.7 Yongda Auto 3669.HK 80.3 41.5 GAC Group-A 601238.CH 12.1 46.1 Meidong Auto 1268.HK 202.0 60.4 Brilliance China 1114.HK (22.8) (5.3) Dealership average 115.6 41.4 BAIC Motor 1958.HK (36.2) (20.0) Auto parts Dongfeng Motor 0489.HK 15.9 73.5 Fuyao Glass 3606.HK 45.5 95.2 BYD Company 1211.HK 348.1 190.9 Fuyao Glass-A 600660.CH 58.4 87.5 BYD Company-A 002594.CH 250.3 132.8 Minth Group 0425.HK 30.9 63.3 SAIC Motor 600104.CH 4.9 40.1 Nexteer Automotive 1316.HK 20.4 67.4 Changan Auto 000625.CH 129.8 109.5 Auto-part average 38.8 78.3 Changan Auto-B 200625.CH 73.2 100.5 Average of auto sector 132.8 110.0 OEM average 88.1 94.3

Source: WIND database, BOCI Research Note: Closing prices as of 8 December 2020; * Share price changes of Li Auto are from 30 July 2020 to 11 December 2020, while share price changes of XPENG are from 27 August 2020 to 11 December 2020

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

40 Valuation of Major Listed Companies

EPS* EPS growth P/E P/B ROE*** (RMB) (%) (x) (x) (%) Company Price Mkt cap 2019 2020E 2021E 2019 2020E 2021E 2020E 2021E 2020E 2021E 2020E 2021E HK/H shares (HK$) (HK$ m) Dongfeng Motor 7.86 67,723 1.49 0.97 1.28 (0.9) (34.8) 32.1 6.8 5.2 0.4 0.4 6.3 7.8 Great Wall Motor 15.06 138,190 0.49 0.52 0.82 (13.6) 5.8 57.8 24.5 15.5 2.0 1.8 8.3 11.9 Geely Automobile 22.00 215,947 0.83 0.71 0.96 (34.8) (15.4) 36.1 26.3 19.3 2.8 2.5 10.5 12.8 Brilliance China 6.24 31,482 1.34 1.47 1.59 16.2 9.5 8.3 3.6 3.3 0.7 0.6 18.2 16.7 GAC Group 7.99 81,801 0.65 0.51 0.71 (39.3) (20.5) 38.3 13.1 9.5 0.8 0.8 6.5 8.4 BAIC Motor 2.68 21,481 0.51 0.40 0.46 (7.8) (21.3) 13.6 5.6 5.0 0.3 0.3 6.1 6.7 BYD 174.10 474,970 0.59 1.41 1.68 (41.9) 137.6 19.6 104.5 87.4 6.6 6.2 6.3 7.1 Fuyao Glass 34.70 87,049 1.16 1.07 1.55 (29.7) (7.6) 44.7 27.4 19.0 3.3 3.0 12.1 15.9 Nexteer Automotive** 8.50 21,314 0.09 0.04 0.09 (38.8) (53.6) 106.6 25.5 12.3 1.4 1.2 5.5 9.8 Minth Group 36.00 41,689 1.46 1.13 1.55 1.8 (22.9) 37.4 27.0 19.7 2.3 2.2 8.7 11.0 Zhongsheng Group 52.50 119,694 1.97 2.42 3.04 23.8 22.6 25.5 18.3 14.6 3.8 3.1 20.9 21.4 Yongda Auto 12.80 25,258 0.75 0.78 0.97 17.5 4.6 24.4 13.8 11.1 1.9 1.7 13.5 14.9 Meidong Auto 30.30 37,709 0.44 0.62 0.89 51.8 39.7 44.5 41.4 28.6 9.2 7.5 22.2 26.3 H-share avg (4.5) (7.8) 39.1 19.5 13.6 2.4 2.1 11.6 13.6 OEM avg* (13.4) (12.8) 31.0 13.3 9.6 1.2 1.1 9.3 10.7 Auto parts avg (22.2) (28.0) 62.9 26.6 17.0 2.4 2.1 8.7 12.2 Dealer avg 31.0 22.3 31.5 24.5 18.1 5.0 4.1 18.8 20.9

A shares (RMB) (RMB) Great Wall Motor 24.93 228,757 0.49 0.52 0.82 (13.6) 5.8 57.8 48.1 30.5 4.0 3.6 8.3 11.9 GAC Group 13.11 134,219 0.65 0.71 0.96 (39.3) 9.3 36.1 18.6 13.6 1.6 1.5 8.9 11.3 Fuyao Glass 38 95,327 1.16 1.07 1.55 (29.7) (7.6) 44.7 35.6 24.6 4.3 3.9 12.1 15.9 SAIC Motor 23.8 278,066 2.19 2.01 2.42 (28.9) (8.4) 20.7 11.9 9.8 1.1 1.0 8.9 9.9 Changan Auto 23.05 123,626 (0.49) 0.90 0.93 (488.8) (282.9) 2.8 25.5 24.8 2.4 2.2 9.5 8.9 BYD 167 455,600 0.59 1.41 1.68 (41.9) 137.6 19.6 118.8 99.3 7.5 7.1 6.3 7.1 Jiangling Motor 18.08 15,607 0.17 0.45 0.63 61.0 162.8 40.5 40.2 28.6 1.4 1.4 3.6 4.9 Yutong Bus 17.08 37,814 0.88 0.51 0.86 (15.7) (41.4) 67.1 33.3 19.9 2.2 2.1 6.7 10.5 Huayu Auto 29.44 92,816 2.05 1.60 2.12 (19.5) (21.8) 32.2 18.4 13.9 1.8 1.6 9.6 11.8 A-share avg (71.8) (23.0) 37.8 28.9 20.7 2.4 2.2 8.4 10.6

Source: Data of various companies, Bloomberg, WIND Database, BOCI Research estimates. Prices as of closing on 11 December 2020. Notes: *OEM average excludes BYD; **EPS of Nexteer in US$; the rest in RMB; ***ROE is calculated using equity at year-end

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

41 Valuation of Global OEM and NEV Start-ups

Valuation of Global OEM

Company Code Mkt cap Earnings growth (%) P/E (x) P/B (x) ROE (%) (US$ m) 2019 2020E 2021E 2020E 2021E 2020E 2021E 2019 2020E 2021E US OEM General Motors GM US 60,000 (7.1) 40.8 3.9 8.9 7.1 1.3 1.2 16.3 15.3 17.7 Ford Motor F US 35,885 608.0 959.0 47.9 NA 8.7 1.1 1.0 0.1 (3.9) 9.0 FCA FCAU US 26,188 (96.5) 1,418.4 27.1 27.6 5.8 1.2 1.0 24.9 1.0 10.9 European OEM Daimler AG DAI GR 73,225 (67.2) 1.3 171.6 21.6 9.4 0.9 0.8 3.8 4.8 9.2 BMW BMW GR 56,235 (29.5) (25.4) 48.2 13.1 8.7 0.9 0.9 8.4 6.4 8.5 Volkswagen AG VOW GR 90,937 12.8 (68.8) 154.8 17.0 7.1 0.8 0.7 12.5 3.9 8.5 Renault SA RNO FP 12,978 (104.3) NA NA NA 19.9 0.3 0.4 (0.4) (22.9) 1.8 Peugeot SA UG FP 23,058 13.2 (42.9) 81.3 10.5 6.0 0.9 0.8 17.7 9.4 14.4 Japanese OEM 7203 JP 250,023 10.2 (27.6) 31.6 15.1 11.3 1.2 1.1 10.4 7.2 8.9 Nissan Motor 7201 JP 22,747 (310.3) NA NA NA 24.8 0.6 0.5 (14.3) (12.7) 2.1 Honda Motor 7267 JP 53,027 (25.3) (14.1) 53.5 14.1 8.8 0.6 0.6 5.6 4.6 6.9 Korean OEM Hyundai Motor 005380 KS 36,997 97.9 (18.3) 188.7 26.1 8.8 0.6 0.5 3.3 2.7 7.2 Kia Motors 000270 KS 23,470 58.0 (20.1) 120.4 17.5 8.0 0.9 0.8 6.5 4.9 10.2

Average 12.3 200.2 84.5 17.1 10.3 0.9 0.8 7.3 1.6 8.9 Valuation of NEV Start-ups

Market cap Revenue growth (%) P/S P/B EV/Sales Company Stock code (USD m) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E Global player: Tesla Inc. TSLA US 578,210 25.9 49.4 30.0 18.7 12.5 9.6 37.1 30.0 23.4 18.8 12.6 9.7 Chinese players: NIO Inc. NIO US 57,184 103.0 91.1 61.7 23.6 12.3 7.6 285.1 NA NA 23.2 12.1 7.5 Li Auto Inc. LI US 28,149 3,031.0 105.2 42.7 21.5 10.5 7.3 13.4 13.7 13.2 17.4 8.5 5.9 Xpeng Inc. XPEV US 35,001 134.4 154.3 93.3 42.1 16.6 8.6 20.7 24.6 26.1 39.1 15.4 8.0

Average 823.6 100.0 55.3 26.5 13.0 8.3 89.1 22.7 20.9 24.6 12.1 7.8

Source: Data of various companies, Bloomberg, BOCI Research estimates, Prices as of closing on 11 December 2020 Notes: Forecasts of Li Auto is based on our estimates, while others are based on Bloomberg consensus.

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

42 Days to Cover of HK-listed Auto Stocks

Aggregated Aggregate short Average daily Days to Days to short positions interest proportion of Average daily turnover turnover over the cover based cover based as of 4 December 2020 HK outstanding over the past 7 days past on past on past Stock code Company （shares) shares* (%) (shares) one month (shares) 7 days one month OEM 2333 HK Great Wall Motor 293,665,221 9.5 54,240,278 55,739,381 5.4 5.3 1114 HK Brilliance 102,528,199 3.5 15,070,700 20,493,048 6.8 5.0 1211 HK BYD 72,624,654 10.5 8,842,993 14,384,185 8.2 5.0 1958 HK BAIC Motor 30,405,061 1.7 25,090,484 34,965,171 1.2 0.9 2238 HK GAC Group 128,046,694 4.6 36,364,793 45,168,703 3.5 2.8 0489 HK DMG 46,062,099 1.6 18,839,719 32,735,522 2.4 1.4 0175 HK Geely Automobile 74,869,381 1.3 73,984,412 92,019,025 1.0 0.8

Auto Parts 1316 HK Nexteer Automotive 70,095,195 8.5 9,117,313 12,056,286 7.7 5.8 425 HK Minth 26,637,478 3.8 3,358,328 7,222,963 7.9 3.7 3606 HK Fuyao Glass 11,805,085 2.3 3,814,560 4,369,732 3.1 2.7

Dealerships 0881 HK Zhongsheng Group 231,362,802 44.6 3,994,137 4,126,574 57.9 56.1 1728 HK Zhengtong Auto 141,208,952 10.7 20,126,287 6,125,392 7.0 23.1 3669 HK Yongda Auto 32,410,925 2.8 9,852,625 10,676,652 3.3 3.0 1268 HK Meidong Auto 16,336,800 3.0 3,191,230 5,975,075 5.1 2.7 1293 HK Baoxin Auto 3,366,867 0.5 1,408,031 1,308,137 2.4 2.6

Heavy-duty Trucks 3808 HK Sinotruk 52,400,263 7.9 3,472,701 4,819,929 15.1 10.9 2338 HK Weichai Power 60,956,026 3.1 8,084,957 9,523,000 7.5 6.4

Source: SFC, Wind Database, BOCI Research estimates Note: *Outstanding shares exclude primary shareholders (actual controller) and key strategic shareholders (like BYD’s Berkshire Hathaway and Sinotruks’ MAN Finance)

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

43 Stock Recommendations

Within OEM, our top pick is GWM as we favor its new model cycle, particularly in off-road vehicle segment which opens up a new market with high profitability and difficult to be imitated by peers. We reckon the better-than-expected market feedback on Dagou and Tanker 300 will drive the street to revise up earnings forecasts. For Geely, we believe its sales/earnings performance may lag behind that of GWM in 2021 as Geely brand may still be going through adjustment. Other than listing on STAR Board and potential restructuring with Volvo, we expect more fundamental catalysts (like new model launches) to come from 2H21 when investors could revisit the stock. We believe auto parts will benefit the potential recovery of overseas market in 2021. Our pecking order within auto parts is Nexteer>Fuyao>Minth. In our view, with the fundamental recovery, Nexteer’s valuation discount to Fuyao and Minth will narrow. For dealership, given the robust demand for premium market, coupled with incremental contributions from new stores, earnings of major dealers will post strong earnings growth or even better than expected. However, from the long-term horizon, the irreversible trend of electrification may weigh on the valuation of dealership as after-sales services may be hurt to some extent when EV becomes popular.

Source: WIND database, BOCI Research Note: theImportant stock prices disclosures of HK-listed stocksand certifications are dominated arein HK$; located while othersat the are back in RMB of this material. The disclosures and disclaimer section forms part of this material.

44 China Auto Industry

Industry Overview NEV Market Valuation and Stock Recommendation Company Updates Appendix-Southbound and Short Position Stake of Key HK-listed Auto Stocks

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

45 45 Great Wall Motor (2333 HK)-BUY

November sales volume performance. In November, GWM’s sales volume rose 26.1% YoY and 7.1% MoM to 145,240 units, stronger than overall industry and major peers. Looking ahead, we reckon the market’s next focus should be sales ramp-up of new off-road vehicles, including Haval Dagou and Wey Tank 300. According to the company, more than 10,000 consumers have paid deposits for Tank 300 through Wey APP in only two weeks after its presales stated from 20 November. Sales outlook. Considering better-than-expected market feedback on the latest new models, we expect the next series of new products to be worthy of looking forward to in 2021. We expect the company to reach a new record high of quarterly sales volume in 4Q20, resulting in a sales volume breakthrough from the last sales peak in 2016, and we anticipate the fast sales volume growth could be sustainable in 2021. Now, we retain our sales volume estimate of 1.10m/1.35munits for 2020/21. Valuation. Considering its strong model cycle, coupled with higher visibility of sales and earnings growth in the following two years, we maintain our target price of HK$18.00, based on 15x 2022E P/E. Reiterate BUY.

Forward PE Band-GWM Forward PE Range-GWM (HK$) (x) 22 22 20 18 17 16 Avg+2SD 14 15x 12 12 Avg+1SD 12x 10 Avg 7 8 8x 6 Avg-1SD 4 5x 2 Avg-2SD 2 3x

0 (3)

10/10 10/13 10/16 01/04 10/04 07/05 04/06 01/07 10/07 07/08 04/09 01/10 07/11 04/12 01/13 07/14 04/15 01/16 07/17 04/18 01/19 10/19 07/20

10/04 10/10 10/16 01/04 07/05 04/06 01/07 10/07 07/08 04/09 01/10 07/11 04/12 01/13 10/13 07/14 04/15 01/16 07/17 04/18 01/19 10/19 07/20

Source: Company data, BOCI Research estimates Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

46 Great Wall Motor (2333 HK)-BUY

GWM’s November Sales Volume GWM’s Model Pipeline for 2021 Launch Nov Nov 11M20 Model Vehicle type Note (units) Nov-20 Oct-20 11M20 schedule YoY (%) MoM (%) YoY (%) Haval brand Haval Chulian ORA-R1 (Heimao) 9,463 372.9 6,269 50.9 36,764 40.3 Small-size SUV 1Q21 Based on Lemon Platform. (upgraded H2) ORA subtotal 11,592 414.7 6,360 44.7 43,516 20.2 Upgraded F5 Compact SUV 1Q21 Based on Lemon Platform. H6 series 55,001 32.0 52,734 4.3 321,232 (6.8) Upgraded H5/F7… Compact SUV 2H21 Based on Lemon Platform. F7 12,087 (13.8) 13,090 (7.7) 103,048 (21.0) Wey brand Haval Dagou 8,555 NA 7,013 22.0 18,613 NA First model (off-road vehicle) SUV subtotal 110,934 17.9 107,117 3.6 713,957 (9.8) based on Tank Platform. Will be Tank 300 (P01) Compact SUV Dec 2020 assembled with technologies of -Haval subtotal 101,812 22.1 97,950 3.9 644,743 (6.7) Coffee Platform for the first time. -Wey subtotal 9,122 (12.7) 9,076 0.5 68,469 (24.5) Upgraded VV7 Compact SUV 1Q21 Based on Lemon Platform NEV subtotal 11,649 417.3 6,360 43.6 44,609 21.0

Pick-up subtotal 22,610 18.6 20,405 10.8 203,366 52.5 Upgraded VV5/6 Compact SUV 2H21 Based on Lemon Platform

-Wingle 10,530 (17.8) 9,114 15.5 100,688 (17.5) ORA brand First pure electric SUV. Based -Pao 12,080 93.0 11,291 7.0 102,678 810.3 Hao Mao (ES11 EV) Small-size SUV Nov 2020 on Lemon Platform (A30). Total 145,240 26.1 135,559 7.1 961,489 0.8 Brand-new EV 2021 Based on Lemon Platform Exports 9,302 94.3 10,804 (13.9) 61,563 2.8 Produced by Spotlight Auto (a MINI EV A0-class sedan 2022 Domestic sales 135,938 23.2 124,755 9.0 899,926 0.6 JV with BMW).

Source: Company data, BOCI Research Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

47 Great Wall Motor (2333 HK)-BUY

GWM’s Yearly Sales Volume and Forecasts Year 2015 2016 2017 2018 2019 2020E 2021E H3/5 23,208 23,299 16,333 7,705 2,822 2,500 10,000 H6 series 373,229 580,683 506,418 452,552 386,405 380,000 470,000 M6 35,473 73,018 118,811 150,000 120,000 H4 43,017 27,341 15,000 15,000 F5 23,463 26,893 18,000 20,000 F7 17,109 140,770 120,000 120,000 H8 8,985 7,471 7,698 1,114 H2 (incl. H2S) 168,467 196,926 215,100 106,120 37,893 15,000 10,000 Dagou 25,000 70,000 H7 48,903 38,193 21,391 12,451 10,000 10,000 H9 14,011 11,504 13,855 14,635 13,434 20,000 20,000 M2/M4 36,577 H1 74,571 69,232 18,785 5,938 2,634 2,000 2,000 VV7+VV7X 52,769 54,671 19,678 17,000 20,000 VV5 33,658 62,968 21,997 18,000 20,000 VV6 18,460 57,724 40,000 40,000 P8 3,387 644 0 0 Tank 300 20,000 New models 50,000 SUV Subtotal 699,048 938,018 938,282 905,548 869,497 832,500 1,017,000 C30 34,005 27,407 12,033 5,976 3,106 1,200 1,500 ORA brand 3,515 38,865 50,000 80,000 Sedan Subtotal 54,178 27,407 12,033 9,491 41,971 51,200 81,500 Pickup Subtotal 99,463 105,621 119,846 138,000 148,830 220,000 250,000 Total 852,693 1,074,471 1,070,161 1,053,039 1,060,298 1,103,700 1,348,500 Haval brand 699,048 938,018 851,855 766,062 769,454 757,500 867,000 Wey brand 86,427 139,486 100,043 75,000 100,000

Source: Company data, BOCI Research estimates Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

48 Geely Automobile (175 HK)-BUY

November sales volume performance. In November, Geely’s sales volume increased 5.1% YoY and 7.5% MoM to 150,517 units. Regarding sales structure, Lynk&Co brand maintained strong sales momentum in November. Next time, the market may pay more attention to its potential sales volume increase of single models, such as newly launched mid-cycle facelift Lynk&Co 01. In contrast, we reckon Geely brand is still going through the product structural adjustment, which may take more time until new-generation models of main products Emgrand and Boyue hit the market.

Sales outlook. For 2020, we reckon Geely’s full-year sales volume may have limited upside room compared with its sales target at 1.32m units. Looking into 2021, Lynk&Co brand will introduce first mid-size SUV based on SPA platform EX11 and first EV based on SEA platform ZERO in 2H21, thus we reckon Lynk&Co brand could maintain fast sales volume growth in 2021, which may go over 50% YoY. For Geely brand, we expect its sales volume to recover, yet considering it will continue to go through adjustment in 2021, we forecast its sales volume cannot go back to the peak level of 1.38m units in 2018.

Valuation. We maintain our earnings forecasts of RMB6.9bn/9.4bn for 2020/21, respectively. We maintain our target price at HK$22.00, based on 19.5x 2021E P/E. Other than listing on STAR Board and potential restructuring with Volvo, we expect more catalysts (like new model launches) to come in from 2H21. Forward PE band-Geely Forward PE range-Geely (HK$) (x) 30 30

25 25 Avg+2SD 20 20 18x Avg+1SD 15 15x 15 12x Avg 10 10 9x Avg-1SD 6x 5 5 Avg-2SD 3x

0 0

01/14 01/16 01/17 01/19 01/10 01/11 01/12 01/13 01/15 01/18 01/20

05/11 01/18 01/20 01/10 09/10 01/12 09/12 05/13 01/14 09/14 05/15 01/16 09/16 05/17 09/18 05/19 09/20 Source: Company data, BOCI Research estimates Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

49 Geely Automobile (175 HK)-BUY

Geely’s November Sales Volume Geely’s Model Pipeline for 2021 Nov Nov 11M20 Launch (units) Nov-20 Oct-20 11M20 Model Segment Notes YoY (%) MoM (%) YoY (%) schedule Vision 4,651 (46.1) 6,322 (26.4) 48,784 (39.9) Geely brand Emgrand EC7 23,407 26.1 22,059 6.1 208,703 12.0 Borui (GC9) 3,096 35.5 2,679 15.6 18,727 21.9 Based on CMA platform. The A+ class Boyue (NL-3) 26,136 17.9 25,062 4.3 210,745 5.7 Xing Rui Nov-2020 body is much wider than sedan Emgrand GS 9,324 (31.3) 9,308 0.2 87,336 (12.8) peers. Geometry A-GE11 948 (61.4) 725 30.8 4,458 (61.5) Geometry C 1,059 NA 1,189 (10.9) 4,453 NA Mid-cycle facelift Compact 2Q-3Q21 Based on original platform. Vision SUV (NL-4) 9,061 (14.9) 8,938 1.4 77,084 5.2 Boyue SUV Vision X3 6,353 (50.8) 6,819 (6.8) 63,738 (37.8) Bin Rui 8,563 3.3 7,088 20.8 65,238 (2.9) Mid-cycle facelift A-class Bin Yue (SX11) 15,556 20.8 15,026 3.5 111,417 (12.5) 2Q-3Q21 Based on original platform. Xing Yue (FY11) 2,202 (42.2) 2,005 9.8 23,216 (2.7) Emgrand sedan ICON 2,169 NA 2,027 7.0 29,299 NA Hao Yue 5,592 NA 5,355 4.4 29,499 NA New-generation A-class 2H21 Xing Rui 7,017 NA 0 NA 7,017 NA Vision sedan Jiaji (VF11) 2,585 (18.7) 3,556 (27.3) 25,698 (17.6) Geely brand Lynk&Co brand 127,719 (1.1) 118,158 8.1 1,015,412 (8.9) subtotal Lynk&Co 01 3,258 (28.1) 3,041 7.1 26,943 (40.3) Compact Will be launched in European Mid-cycle facelift 01 End-2020 Lynk&Co 02 1,983 (15.9) 1,963 1.0 19,788 (17.5) SUV market at the same time Lynk&Co 03 7,258 0.2 7,167 1.3 62,322 29.5 Lynk&Co 05 4,761 NA 4,621 3.0 27,928 NA Lynk&Co brand's first model Lynk&Co 06 5,538 NA 5,076 9.1 13,622 NA based on SPA platform. Will Lynk & Co subtotal 22,798 61.3 21,868 4.3 150,603 28.4 EX11 Mid-size SUV 2H21 have 5-seater version and 7- Sedan subtotal 54,940 1.1 46,040 19.3 415,249 (13.2) seater version SUV subtotal 92,992 8.5 90,430 2.8 725,068 0.4 MPV subtotal 2,585 (18.7) 3,556 (27.3) 25,698 (17.6) First EV model based on SEA Total 150,517 5.1 140,026 7.5 1,166,015 (5.3) B-class ZERO 2H21 platform. Will enable highly NEEV subtotal 6,829 (51.7) 5,826 17.2 60,971 (40.9) sedan Exports 11,769 270.9 10,531 11.8 60,786 11.3 automated driving. Domestic sales 138,748 (0.9) 129,495 7.1 1,105,229 (6.1) Source: Company data, BOCI Research estimates Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

50 Nexteer Automotive (1316 HK)-BUY

North America. Thanks to the recovery of US auto market, Nexteer’s North American business improved substantially in 2H20 from 1H20. But on a YoY basis, the North America segment is still temporarily negatively impacted by order loss of GM’s CIS product line and platform transition of Ford’s F-150. Asia Pacific. Nexteer’s Asia Pacific business in 2H20 has outperformed the industry thanks to better-than-expected sales of key customers and launch of new programmes & customer acquisition. Looking ahead, we expect its revenue in this region will continue to outperform in coming years by the launch of new orders from new customers. Europe. Nexteer’s European revenue has outperformed the industry significantly thanks to revenue contribution of new programs from Renault and PSA. Given the initial operation stage for Morocco plant, we expect its operating margin will not turn positive until mid-2021. Valuation. Based on our 2020-22E earnings forecast of US$108m/223m/274m, its shares are now trading at 12.3x 2021 P/E, much lower than 19.0x/19.7x for Fuyao/Minth. We reckon Nexteer’s industry position and technological edge in the steering field are not weaker than that of Fuyao and Minth. Coupled with fundamentals recovery, we expect Nexteer’s valuation gap with other two peers will narrow in the future. Maintain BUY. Forward P/E Band-Nexteer Forward P/E Range-Nexteer (HK$) (x) 24 22 22 20 20 18 Avg+2SD 18 16 16 Avg+1SD 14 14 12 Avg 12 17x 10 15x 10 13x 8 Avg-1SD 8 11x 6 9x 6 Avg-2SD 4 7x 4

2 2

07/15 01/18 10/13 01/14 04/14 07/14 10/14 01/15 04/15 10/15 01/16 04/16 07/16 10/16 01/17 04/17 07/17 10/17 04/18 07/18 10/18 01/19 04/19 07/19 10/19 01/20 04/20 07/20 10/20

10/14 04/15 01/16 07/16 10/13 01/14 04/14 07/14 01/15 07/15 10/15 04/16 10/16 01/17 04/17 07/17 10/17 01/18 04/18 07/18 10/18 01/19 04/19 07/19 10/19 01/20 04/20 07/20 10/20 Source: Company data, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

51 Fuyao Glass (3606 HK/BUY; 600660 CH/HOLD)

Auto glass business. Thanks to the improvement of product mix and market share, Fuyao’s auto glass revenue outperformed auto industry by c.10ppts this year. Looking ahead, we expect Fuyao will continue to outperform auto industry mainly due to: (i) additional revenue contribution from fixed panorama roof glass. According to the management, fixed panorama roof glass has very high application in electric vehicles, which will grow fast in the future. As a result, we expect this new product will contribute 1%/2%/5% of total revenue in 2020/21/22. (ii) additional revenue contribution from new products related to autonomous driving, like HUD glass. Aluminum trims. With an expected breakeven in November, we forecast FYSAM to book a loss of

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

52 Fuyao Glass (3606 HK/BUY; 600660 CH/HOLD)

Forward P/E Band-Fuyao (H-shares) Forward P/E Range-Fuyao (H-shares) (HK$) (x) 24 48 22 Avg+2SD 43 20 38 22x 18 Avg+1SD 20x 33 16 18x Avg 28 16x 14 23 12 Avg-1SD 12x 18 10 13 8x 8 Avg-2SD

8 6

06/15 03/15 09/15 12/15 03/16 06/16 09/16 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20

09/16 09/20 03/15 06/15 09/15 12/15 03/16 06/16 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18 03/19 06/19 09/19 12/19 03/20 06/20 Forward P/E Band-Fuyao (A-shares) Forward P/E Range-Fuyao (A-shares) (RMB) (x) 47 24 42 22 Avg+2SD 20 37 18 22x Avg+1SD 32 16 20x 27 18x 14 Avg 16x 12 22 10 12x Avg-1SD 17 8 12 8x 6 4 Avg-2SD 7 2

2 0

01/10 07/14 01/16 07/16 01/18 07/10 01/11 07/11 01/12 07/12 01/13 07/13 01/14 01/15 07/15 01/17 07/17 07/18 01/19 07/19 01/20 07/20

01/11 07/16 01/20 01/10 07/10 07/11 01/12 07/12 01/13 07/13 01/14 07/14 01/15 07/15 01/16 01/17 07/17 01/18 07/18 01/19 07/19 07/20 Source: Company data, Bloomberg, Wind Database, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

53 Yongda (3669 HK)-BUY

Recent acquisitions will bring decent earnings increment for 2021. The company acquired six BMW 4S stores in Yunnan and Sichuan at an aggregate consideration of RMB459m, which is largely equivalent to c.7x 2020E P/E. Besides supplementing its area coverage, we reckon this acquisition will strengthen its leading position in BMW. Coupled with the acquisition of minority interests in Wuxi (25%) and Nantong (40%) Porsche 4S stores recently, we reckon these acquisitions will bring additional net profit of at least RMB100m for 2021. 4Q20 updates. Considering tightened luxury brands supply, we expect new car sales volume growth to be 15-20% YoY in 4Q20, and reckon new car sales growth margin could remain relatively stable in 4Q20. In 4Q20, despite the higher base, we consider the earnings growth may grow over 30% YoY. As such, the overall fundamentals could improve substantially in 2H20 from 1H20 when earnings dropped over 25% YoY. Valuation. We maintain our net profit forecasts of RMB1.54bn/RMB1.92bn/RMB2.25bn for 2020-22E. This year, management has enhanced operational. As such, we reckon the valuation discount to peers will likely narrow next year. Reiterate BUY with TP of HK$17.00, based on 15x 2021E P/E.

(x) Valuation Comparison of Yongda, Zhongsheng and Meidong 35 30 25 20 15 10 5

0

11/20 01/17 03/17 05/17 07/17 09/17 11/17 01/18 03/18 05/18 07/18 09/18 11/18 01/19 03/19 05/19 07/19 09/19 11/19 01/20 03/20 05/20 07/20 09/20 Zhongsheng Yongda Meidong

Source: Company data, Bloomberg, WIND Database, BOCI Research estimates Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

54 Zhongsheng (881 HK)-BUY

New car sales. For 2020, we estimate sales volume growth of luxury brands could reach c.20% YoY, while sales volume of mid-to high-end brands may drop by low-single-digit YoY, dragged by tepid sales and reduced procurement of Nissan brand, and the overall new car sales volume may approach 500,000 units in 2020. Looking into 2021, we expect overall market of luxury brands to grow at 15- 20% YoY, and Zhongsheng could achieve even better sales growth, driven by new stores and superior brand structure. Thus, we expect total new car sales growth to further pick up in 2021 from c.9% YoY in 2020, with higher sales proportion of luxury brands. Regarding margins, considering recovering user-end price and tightening supply, we consider gross margin could retain largely stable HoH in 2H20, stronger than expected.

After-sales business. We expect service volume to grow at 20-25% YoY with ASP improvement in 2H20, driven by higher customer retain rate ensured by “double carefree insurance (双保无忧)” and higher service proportion of luxury brands. Thus, we forecast after-sales revenue could represent even better YoY growth than that of service volume in 2H20. And gross margin of after-sales business could recover HoH, along with business of damaged cars gradually restored since 2H20.

Valuation. We maintain earnings forecasts of RMB5.5bn/6.9bn/8.4bn, respectively for 2020-22. We note its share price performance has lagged behind major peers recently, which we mainly attribute to technical pressure caused by the conversion of convertible bonds in these days. As an industrial leader, we reckon Zhongsheng could benefit from auto industry recovery and consolidation, as well as prosperity of premium market driven by consumption upgrade. Reiterate BUY with TP of HK$72.00 (20x 2021E P/E).

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

55 PE Band-Yongda / Zhongsheng

Forward P/E Band-Yongda Forward P/E Range-Yongda (HK$) (x) 16 13x 25 14 Avg+2SD 12 11x 20 10 9x Avg+1SD 15 8 7x Avg 10 6 5x 4 Avg-1SD 3x 5 2 Avg-2SD

0 0

01/13 09/13 09/20 05/13 01/14 05/14 09/14 01/15 05/15 09/15 01/16 05/16 09/16 01/17 05/17 09/17 01/18 05/18 09/18 01/19 05/19 09/19 01/20 05/20

01/13 05/19 05/13 09/13 01/14 05/14 09/14 01/15 05/15 09/15 01/16 05/16 09/16 01/17 05/17 09/17 01/18 05/18 09/18 01/19 09/19 01/20 05/20 09/20 Forward P/E Band-Zhongsheng Forward P/E Range-Zhongsheng (HK$) (x) 80 40 21x 70 35 18x Avg+2SD 60 30 50 15x 25 Avg+1SD 12x 20 40 Avg 15 30 9x 10 20 6x 5 Avg-1SD 10 0 Avg-2SD

0 (5)

01/11 09/12 03/15 02/18 07/18 03/20 03/10 08/10 06/11 11/11 04/12 02/13 07/13 12/13 05/14 10/14 08/15 01/16 06/16 11/16 04/17 09/17 12/18 05/19 10/19 08/20

03/10 01/11 06/11 03/15 01/16 08/10 11/11 04/12 09/12 02/13 07/13 12/13 05/14 10/14 08/15 06/16 11/16 04/17 09/17 02/18 07/18 12/18 05/19 10/19 03/20 08/20

Source: Company data, Bloomberg, WIND Database, BOCI Research estimates Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

56 China Auto Industry

Industry Overview NEV Market Valuation and Stock Recommendation Company Updates Appendix-Southbound and Short Position Stake of Key HK-listed Auto Stocks

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

57 57 Appendix-Southbound And Short Position Stake of Key HK-listed Auto Stocks Southbound Stake-GWM Short Position Stake-GWM (HK$) (HK$) (%) (%) 18 45 18 25 16 40 16 14 35 14 20 12 12 30 15 10 25 10 8 8 20 10 6 6 15 4 4 10 5 2 2 5 0 0

0 0

05/18 01/19 03/20 01/17 03/17 05/17 07/17 09/17 11/17 01/18 03/18 07/18 09/18 11/18 03/19 05/19 07/19 09/19 11/19 01/20 05/20 07/20 09/20 11/20

03/17 12/19 09/17 12/17 03/18 06/18 09/18 12/18 03/19 06/19 09/19 03/20 06/20 09/20 06/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Southbound Stake-Geely Short Position Stake-Geely (HK$) (%) (HK$) (%) 35 14 30 16 30 12 25 14 12 25 10 20 10 20 8 15 8 15 6 10 6 10 4 4 5 2 5 2 0 0

0 0

07/17 09/17 05/19 03/17 05/17 11/17 01/18 03/18 05/18 07/18 09/18 11/18 01/19 03/19 07/19 09/19 11/19 01/20 03/20 05/20 07/20 09/20 11/20

06/19 09/20 06/17 09/17 12/17 03/18 06/18 09/18 12/18 03/19 09/19 12/19 03/20 06/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Source: HKEX, WIND Database, SFC, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

58 Appendix-Southbound And Short Position Stake of Key HK-listed Auto Stocks (Cont’d) Southbound Stake-GAC Short Position Stake-GAC (HK$) (HK$) (%) (%) 16 45 14 20 14 40 12 12 35 10 15 30 10 8 25 10 8 6 20 6 15 4 5 4 10 2 2 5 0 0

0 0

11/17 01/20 03/17 05/17 07/17 09/17 01/18 03/18 05/18 07/18 09/18 11/18 01/19 03/19 05/19 07/19 09/19 11/19 03/20 05/20 07/20 09/20 11/20

12/17 09/18 03/19 09/20 06/17 09/17 03/18 06/18 12/18 06/19 09/19 12/19 03/20 06/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Southbound Stake-DMG Short Position Stake-DMG (HK$) (%) (HK$) (%) 12 9.0 12 7 8.0 10 10 6 7.0 5 8 6.0 8 4 5.0 6 6 4.0 3 4 4 3.0 2 2.0 2 1 2 1.0 0 0

0 0.0

01/17 04/17 07/17 10/17 01/18 04/18 07/18 10/18 01/19 04/19 07/19 10/19 01/20 04/20 07/20 10/20

06/18 12/18 06/17 09/17 12/17 03/18 09/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Source: HKEX, WIND Database, SFC, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

59 Appendix-Southbound And Short Position Stake of Key HK-listed Auto Stocks (Cont’d) Southbound Stake-Brilliance Short Position Stake-Brilliance (HK$) (%) (HK$) (%) 25 4.5 25 16 4.0 14 20 20 3.5 12 3.0 15 10 15 2.5 8 2.0 10 10 6 1.5 4 5 5 1.0 2 0.5 0 0

0 0.0

06/17 09/17 09/18 03/17 12/17 03/18 06/18 12/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20

09/17 03/18 12/18 06/17 12/17 06/18 09/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Southbound Stake-BAIC Short Position Stake-BAIC (HK$) (%) (HK$) (%) 14 12 12 10 12 10 10 8 10 8 8 6 8 6 6 4 6 4 4 4 2 2 2 2 0 0

0 0

07/18 09/18 01/19 03/17 05/17 07/17 09/17 11/17 01/18 03/18 05/18 11/18 03/19 05/19 07/19 09/19 11/19 01/20 03/20 05/20 07/20 09/20 11/20

12/17 12/18 06/17 09/17 03/18 06/18 09/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Source: HKEX, WIND Database, SFC, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

60 Appendix-Southbound And Short Position Stake of Key HK-listed Auto Stocks (Cont’d) Southbound Stake-BYD Short Position Stake-BYD (HK$) (HK$) (%) (%) 250 9.0 250 30 8.0 25 200 7.0 200 6.0 20 150 150 5.0 15 4.0 100 100 10 3.0 50 50 2.0 5 1.0 0 0

0 0.0

01/17 07/17 01/18 07/18 01/19 07/19 01/20 07/20 03/17 05/17 09/17 11/17 03/18 05/18 09/18 11/18 03/19 05/19 09/19 11/19 03/20 05/20 09/20 11/20

03/17 03/19 09/17 12/17 03/18 06/18 09/18 12/18 06/19 09/19 12/19 03/20 06/20 09/20 06/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Southbound Stake-Fuyao Short Position Stake-Fuyao (HK$) (%) (HK$) (%) 45 20 45 8 40 18 40 7 35 16 35 6 14 30 30 5 12 25 25 4 10 20 20 8 15 3 15 6 10 2 10 4 5 1 5 2 0 0

0 0

06/18 03/17 06/17 09/17 12/17 03/18 09/18 12/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20

08/17 08/20 11/17 02/18 05/18 08/18 11/18 02/19 05/19 08/19 11/19 02/20 05/20 11/20 05/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Source: HKEX, WIND Database, SFC, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

61 Appendix-Southbound And Short Position Stake of Key HK-listed Auto Stocks (Cont’d) Southbound Stake-Minth Short Position Stake-Minth (HK$) (%) (HK$) (%) 60 12 60 16 14 50 10 50 12 40 8 40 10 30 8 30 6 20 6 20 4 4 10 2 10 2 0 0

0 0

03/18 06/18 06/20 09/20 03/17 06/17 09/17 12/17 09/18 12/18 03/19 06/19 09/19 12/19 03/20

06/17 09/17 12/17 03/18 06/18 09/18 12/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Southbound Stake-Nexteer Short Position Stake-Nexteer (HK$) (%) (HK$) (%) 25 2.5 20 16 14 20 2.0 15 12 10 15 1.5 10 8 6 10 1.0 5 4 5 0.5 2 0 0

0 0.0

12/19 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18 03/19 06/19 09/19 03/20 06/20 09/20

06/18 12/18 06/17 09/17 12/17 03/18 09/18 03/19 06/19 09/19 12/19 03/20 06/20 09/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Source: HKEX, WIND Database, SFC, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

62 Appendix-Southbound And Short Position Stake of Key HK-listed Auto Stocks (Cont’d) Southbound Stake-Zhongsheng Short Position Stake-Zhongsheng (HK$) (%) (HK$) (%) 70 5.0 70 50 4.5 60 60 4.0 40 50 3.5 50 30 40 3.0 40 2.5 30 30 2.0 20 1.5 20 20 10 1.0 10 10 0.5 0 0

0 0.0

07/18 03/19 11/19 07/20 03/17 05/17 07/17 09/17 11/17 01/18 03/18 05/18 09/18 11/18 01/19 05/19 07/19 09/19 01/20 03/20 05/20 09/20 11/20

09/17 06/19 09/20 06/17 12/17 03/18 06/18 09/18 12/18 03/19 09/19 12/19 03/20 06/20 03/17 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Southbound Stake-Meidong Short Position Stake-Meidong (HK$) (%) (HK$) (%) 40 6.0 40 3.5 35 35 5.0 3.0 30 30 2.5 4.0 25 25 2.0 20 20 3.0 1.5 15 15 2.0 10 1.0 10 5 0.5 1.0 5 0 0.0

0 0.0

12/18 10/19 10/18 02/19 04/19 06/19 08/19 12/19 02/20 04/20 06/20 08/20 10/20

03/20 10/20 04/20 05/20 06/20 06/20 07/20 08/20 08/20 09/20 10/20 11/20 12/20 04/20 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS) Source: HKEX, WIND Database, SFC, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

63 Appendix-Southbound And Short Position Stake of Key HK-listed Auto Stocks (Cont’d) Southbound Stake-Yongda Short Position Stake-Yongda (HK$) (%) (HK$) (%) 16 8.0 16 9 14 7.0 14 8 7 12 6.0 12 10 6 10 5.0 5 8 8 4.0 4 6 6 3.0 3 4 2 4 2.0 2 1 2 1.0 0 0

0 0.0

03/19 09/19 05/20 11/20 03/17 05/17 07/17 09/17 11/17 01/18 03/18 05/18 07/18 09/18 11/18 01/19 05/19 07/19 11/19 01/20 03/20 07/20 09/20

11/18 01/19 03/19 05/19 07/19 09/19 11/19 01/20 03/20 05/20 07/20 09/20 11/20 09/18 Percentage of aggregated short position in HK free float (RHS) Southbound stake (RHS) Share price (LHS) Stock price (LHS)

Source: HKEX, WIND Database, SFC, BOCI Research

Important disclosures and certifications are located at the back of this material. The disclosures and disclaimer section forms part of this material.

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All views expressed in this material reflect the personal views of each analyst about any and all of the subject securities or issuers. In addition, no part of the analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this material. Except as disclosed herein, each analyst declares that (i) neither he/she nor his/her associate has any financial interests in relation to the issuer reviewed by the analyst, and (ii) neither he/she nor his/her associate serves as an officer of the issuer reviewed by the analyst. For the purposes of these certifications, the term “associate” includes members of the analyst’s household as defined by FINRA. Accordingly, none of the issuers reviewed or any third party has provided or agreed to provide any compensation or other benefits in connection with this material to any of the analysts, BOCI Research Limited and BOC International Holdings Limited and any of their respective subsidiaries and affiliates (collectively, the “BOCI Group”). Analysts receive compensation based upon the overall revenue and profitability of the BOCI Group, including revenues derived from its investment banking business. Member companies of the BOCI Group confirm that they, whether individually or as a group: (i) do not own 1% or more financial interests in any of the issuers reviewed; (ii) certain non-US member companies of BOCI Group are involved in making a market in the securities of Geely Automobile Holdings Ltd, Great Wall Motor Co Ltd and BYD Co Ltd; (iii) do not have any individual employed by or associated with any member companies of BOCI Group serving as an officer of any of the issuers reviewed; (iv) certain member companies of BOCI Group have managed or co-managed a public offering for XPeng Inc within the preceding 12 months; (v) certain member companies of BOCI Group have an investment banking relationship with and have received compensation or mandate for investment banking services from XPeng Inc within the preceding 12 months, or (vi) do not expect to receive nor intend to seek compensation for investment banking services from the issuers reviewed in the next three months. This disclosure statement is made pursuant to paragraph 16 of the “Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission” and is updated as of 11 December 2020. Waiver has been obtained by BOC International Holdings Limited from the Securities and Futures Commission of Hong Kong to disclose any interests the Bank of China Limited and its subsidiaries and affiliates may have in this material.

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