Catl (300750 Ch) Nio (Nio Us)

Home , Aion (marque), Bestune, Century Avenue, Giga Shanghai, Haima Automobile, Hongqi (marque)

Industry Report | July 26, 2021

China EVs (Overweight) Market growth to exceed expectations

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. Contents

[Summary] 3

I. Auto market reported negative growth for three straight years 4

II. NEVs continue to see explosive demand growth 6

III. NEV sales to increase at 39% CAGR over the next five years 14

IV. Key recommendations 26

Global X China EV and Battery ETF (2845/9845 HK) BYD (002594 CH) CATL (300750 CH) NIO (NIO US)

2| China EVs Mirae Asset Securities Research Summary

China’s EV market • We expect China’s electric vehicle (EV) market to expand at a CAGR of 39% over the next five years, growth to exceed with sales volume rising from 1.37mn units in 2020 to 7mn in 2025. expectations • China’s car ownership rate remains relatively low, at 17%. Factoring in the country’s economic/income growth prospects, we forecast sales volume to increase at 2% CAGR over the coming decade. • The market share of EVs is likely to increase steadily in line with the government’s long-term goal of achieving carbon neutrality by 2060 and the milestones laid out in the latest “Technology Roadmap for Energy Saving and New Energy Vehicles (NEVs)”. EV penetration stands at just 10% in China despite surging sales over the past year. • While competition will likely intensify in the EV market, we still see some investment opportunities. • In our view, pure EV players who gained early leadership hold competitive advantages over most legacy automakers. • Pure EV makers Tesla and NIO deserve attention in light of their superior technology, mass production capabilities, and brand value. Among traditional automakers, BYD looks promising given its rapidly increasing EV sales mix. • Other factors to consider are: technological advantages (autonomous driving, battery swapping systems, etc.), vertical integration (across batteries, power control units, motors, etc.), customer base loyalty, lineup diversity, and market positioning (exposure to high-end/luxury segments). • Overall, we prefer upstream players (batteries/components/raw materials) that have secured dominant positions within the value chain to downstream names that are facing growing competition. • Key recommendations: Global X China EV and Battery ETF (2845/9845 HK), BYD (002594 CH), CATL (300750 CH), and NIO (NIO US).

3| China EVs Mirae Asset Securities Research China EVs (Overweight)

Auto market reported • In 2020, China’s auto market contracted 2% YoY, with total sales volume coming in at 25.31mn units (vs -13% YoY negative growth for to 77mn globally). • China is the world’s largest consumer of cars with a 33% market share (vs. 21% for Europe and 19% for the US) as three straight years of 2020. • China’s auto sales have decreased YoY over the past three years, due to: 1) an economic decline (China-US trade dispute); 2) tighter emissions regulations (lack of new models in compliance with new rules); and 3) depressed consumption amid the COVID-19 pandemic (Dec. 2020–Mar. 2021)

China is the world’s largest auto market China: Auto sales contracted YoY in 2018-20

China US Europe Other (mn) Total sales volume (L) YoY (R) 100% 35 40%

30 30% 80% 25 20% 60% 20 10% 15 40% -3% 0% 10 -2% 20% -10% 31% 31% 30% 29% 33% 5 25% 25% 24% 27% 28% 28% -8%

0% 0 -20% 10 11 12 13 14 15 16 17 18 19 20 10 11 12 13 14 15 16 17 18 19 20

Source: MarkLines, Mirae Asset Securities Research Source: MarkLines, Mirae Asset Securities Research

4| China EVs Mirae Asset Securities Research China EVs (Overweight)

2020 auto sales: • In 2020, car sales in China slipped just 2% YoY despite the pandemic. Solid performance • As the spread of the virus slowed, we saw sales volume expansion for 13 straight months (starting in Apr. 2020), led by: 1) robust demand for luxury cars triggered by so-called revenge consumption; and 2) strong sales of NEVs. despite the pandemic • Meanwhile, sales growth swung to negative again in May 2021 due to production disruptions caused by global chip shortages.

China: Monthly auto sales volume and growth China: Monthly NEV sales growth

Sales volume (L) YoY (R) (mn units) 400% 3.0 100% Total NEV

2.5 300% 50% 2.0 200%

1.5 0% 100% 1.0 -50% 0% 0.5

0.0 -100% -100% 7/19 11/19 3/20 7/20 11/20 3/21 7/19 11/19 3/20 7/20 11/20 3/21

Source: MarkLines, Mirae Asset Securities Research Source: MarkLines, Mirae Asset Securities Research

5| China EVs Mirae Asset Securities Research China EVs (Overweight)

NEVs continue to see • NEV sales volume has continued to grow MoM since Jul. 2020, surging 187% YoY (-9% MoM) in Apr. 2021, 166% YoY (+5% MoM) in May, and 147% YoY in June (+18% MoM). explosive demand • Growth has been driven by government policies to boost consumption: growth 1) Extension of NEV subsidies through end-2022 (introduced in Apr. 2020) 2) NEV sales promotions in rural areas; subsidies for low/mid-priced NEV models (Jul. 2020) 3) Subsidies for replacing old vehicles with new ones; looser restrictions on new car purchases; expanded license plate issuance in some major cities (Nov. 2020)

NEV subsidy scheme extended through end-2022 (Apr. 2020) Subsidy policy revisions in 2020 (CNY10,000)

• Boosting NEV sales, which had been falling amid Before After Purpose concerns over subsidy cuts and COVID-19 Electric range 2018 2019 2020 2018 2019 2020 Effective • Apr. 23, 2020 (three month grace period until Jul. 22, date 2020) 150≤R∠200 1.500000

Eligibility • EVs costing less than CNY300,000 200≤R∠250 2.400000

BEV 250≤R∠300 3.41.80000 • Subsidies—which were set to expire at end-2020—are phased out over three years (cut by 10%, 20%, and ∠ 30%, respectively) 300≤R 400 4.5 1.8 0 1.62 1.296 0.9072 Details • PHEV subsidies are reduced by 15%, 20%, and 30% over three-year period 400≤R 5 2.5 0 2.25 1.8 1.26 • Subsidies on public transport NEVs (taxis, buses, parcel delivery, etc.) to remain PHEV 50≤R 2 1 0 0.85 0.68 0.476

Source: Ministry of Finance, Ministry of Industry and Information Technology, Ministry of Science Source: Ministry of Finance, Ministry of Industry and Information Technology, Ministry of Science and Technology, National Development and Reform Commission, Mirae Asset Securities Research and Technology, National Development and Reform Commission, Mirae Asset Securities Research

6| China EVs Mirae Asset Securities Research China EVs (Overweight)

Improving consumer perceptions  Higher demand for NEVs

Chinese consumers feel overwhelmingly positive about EVs Chinese consumers are highly aware of NEVs

US US China UK Norway Japan Germany (California)

Next car to 19% 26% 55% 25% 29% 23% 22% be EV

To buy EV once price 61% 72% 81% 67% 53% 76% 59% parity is achieved Willing to pay 17% 19% 21% 13% 14% 18% 13% US$10,000 premium

Source: AlixPartners EV Consumer Survey 2019, Mirae Asset Securities Research Source: McKinsey

Profiles of potential NEV buyers in China Chinese consumers’ reasons for purchasing NEV

Source: McKinsey Source: McKinsey

7| China EVs Mirae Asset Securities Research China EVs (Overweight)

Supply increasing in • Consumption-boosting policies and improving awareness among potential buyers have spurred NEV demand. response to rising • New model releases by traditional automakers as well as pure EV brands have led to an increase in NEV supply. demand • Furthermore, Tesla started to sell Model 3 (2020) and the Model Y (2021) units built at its Giga Shanghai. • As of Jun. 2021, 225 NEV models were available on the market in China (vs. 166 BEV and 59 PHEV models).

No. of NEV models available in China (monthly) No. of BEV/PHEV models available in China (monthly)

200 BEV PHEV 250 225 Wuling 166 Hongguang Mini 160 200 & BYD Han (7/20)

Model Y 120 150 (1/21)

100 Model 3 80 (1/20) 59 Ora R1 (1/19) 50 40

0 0 1/17 9/17 5/18 1/19 9/19 5/20 1/21 1/17 7/17 1/18 7/18 1/19 7/19 1/20 7/20 1/21

Source: MarkLines, Mirae Asset Securities Research Source: MarkLines, Mirae Asset Securities Research

8| China EVs Mirae Asset Securities Research China EVs (Overweight)

NEV penetration is rising • Car shipments decreased in May and June amid global chip shortages. rapidly • However, NEV sales surged 166% YoY (217,000 units) in May and 147% YoY (257,000 units) in June. • In 1H21, 1.2mn NEV units were sold (vs. 370,000 units in 1H20 and 1.37mn in 2020). • NEVs’ penetration is increasing rapidly, from 5% in 2020 to 7% in Jan. 2021 and 13% in June.

China: Monthly NEV sales volume China: Monthly NEV penetration trends

('000 units) 2020 2021 300 2020 2021 14% 256.0 250 226.0 12% 217.0 206.0 200 10% 179.0

8% 150

110.0 6% 100 4%

50 2%

0 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: CAAM, Mirae Asset Securities Research Source: CAAM, Mirae Asset Securities Research

9| China EVs Mirae Asset Securities Research China EVs (Overweight)

Best-selling NEVs in • No. 1: Wuling Hongguang Mini (compact BEV with monthly average sales volume of 30,000) China - Priced at CNY29,000 (around W5mn); 9.2-13.8kWh battery capacity;120-170km range - 2,917mm x 1,493mm x 1,621mm (1,940mm wheelbase) • No. 2: Tesla Model 3 (high-end BEV with monthly average sales volume of 20,000 - Priced at CNY259-339,000 (W44-58mn); 55-75kWh battery capacity; 468-605km range - 4,694mm x 1,849mm x 1,443mm (2,875mm wheelbase)

China: Top 10 NEV models by sales volume (2020) China: Top 10 NEV models by sales volume (YTD as of Jun. 2021)

Wuling Hongguang Mini 182,767 Tesla Model 3 137,459

Wuling Hongguang Mini 127,651 Tesla Model 3 115,563

Ora R1 46,774 Tesla Model Y 46,180

GAC Aion S 46,091 BYD Han 38,679

BYD Qin Pro 41,621 Ora R1 31,994

Chery eQ1 Chery eQ1 Li One Li One BYD Han GAC AionS NIO ES6 Changan/Chana Benni MG ZS SUV BYD Qin Plus DM-i

0 50,000 100,000 150,000 200,000

Source: MarkLines, Mirae Asset Securities Research Source: MarkLines, Mirae Asset Securities Research

10 | China EVs Mirae Asset Securities Research China EVs (Overweight)

China: Top 10 NEV models by sales volume (YTD as of Jun. 2021)

Wuling Hongguang Mini (1st) Great Wall Ora R1 (5th) Chery eQ1 (6th) Changan/Chana Benni (9th)

Tesla Model 3 (2nd) BYD Han (4th) GAC Aion S (8th)

Tesla Model Y (3rd ) Li One (7th) BYD Qin Plus DM-i (10th)

Source: Press materials, Mirae Asset Securities Research

11 | China EVs Mirae Asset Securities Research China EVs (Overweight)

Subsidized price Battery Automaker Model Segment Type Electric range (CNY) capacity (kWh)

Hongguang Mini Car-A BEV 38,000-44,000 9/14 120/170km

Model 3 Car-D BEV 251,000-340,000 55/77 468-605km

Model Y SUV-D BEV 276,000-378,000 60/77 525-594km

Han Car-E BEV 230,000-280,000 77 550/605km

29/31/ Ora R1 Car-A BEV 70,000-85,000 301-405km 33/36

eQ1 Car-A BEV 60,000-84,000 31/41 301-408km

ONE SUV-E PHEV 338,000 41 188km

Aion S Car-D BEV 140,000-173,000 51/59/70 410-602km

Benni Car-B BEV 30,000-40,000 24/32 150/301km

Qin Plus Dm-i Car-D PHEV 106,000-146,000 8/18 55/120km

Source: MarkLines, Autohome, Mirae Asset Securities Research

12 | China EVs Mirae Asset Securities Research China EVs (Overweight)

Sustainability of growth • China’s car ownership rate remains relatively low at 17%. • Going forward, we forecast car sales volume to increase at 2% CAGR, although sales could be affected by global macroeconomic conditions. • We expect NEV sales volume to grow in line with the government’s long-term goal of achieving carbon neutrality by 2060 and the milestones laid out in the latest ”Technology Roadmap for Energy Saving and NEVs”. • In Jul. 2021, the China Association of Automobile Manufacturers (CAAM) raised its NEV sales volume forecasts for 2021 from 1.8mn units to 2.4mn units, and also revised up its sales volume growth estimate over the next five years from 35% to over 40%.

“Technology Roadmap for Energy Saving and NEVs” version 2.0 China: Car ownership rate (unveiled in Oct. 2020)

837 (Per '000 people) Share of 747 total car 2020 2025 2030 2035 sales (%) 695 670

591 589 579 569

ICE 40% 15% Exit 433 373 95%

Hybrids 40% 45% 50% 173

NEVs 5% 20% 40% 50%

Source: World Bank, McKinsey, Mirae Asset Securities Research Source: China Society of Automotive Engineers, Mirae Asset Securities Research

13 | China EVs Mirae Asset Securities Research China EVs (Overweight)

NEV sales to increase at • NEV sales in China are forecast to expand at 39% CAGR over the next five years (1.37mn in 2020  7mn in 2025). 39% CAGR over the next • We expect China to meet the 20% NEV penetration target initially set for 2025 in 2024, in light of: 1) the continuous robust growth of EV start-ups; 2) EV lineup expansion by conventional automakers; 3) tech firms’ five years move into the EV market; and 4) increasing adoption of dedicated EV platforms. • Notably, China’s NEV penetration already reached the 10% mark in 1H21.

China NEV sales outlook China NEV penetration outlook (mn) 16 Sales volume (L) YoY (R) 100% 50%

14 40% 80% 40% 12

10 60% 30%

8 20% 40% 6 20%

4 20% 10% 2 5% 0 0% 2020 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 0% 2020 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F

Source: CAAM, Mirae Asset Securities Research Source: CAAM, Mirae Asset Securities Research

14 | China EVs Mirae Asset Securities Research China EVs (Overweight)

China NEV sales forecasts

(10,000 units) 2020 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F

Total cars 2,531 2,696 2,750 2,805 2,861 2,918 2,976 3,036 3,096 3,158 3,222

NEVs 137 260 385 477 572 700 833 971 1,115 1,263 1,417

% of total 5% 10% 14% 17% 20% 24% 28% 32% 36% 40% 44%

NEV PVs 125 247 372 463 558 685 817 955 1,097 1,245 1,398

BEVs 100 198 297 380 457 575 695 821 954 1,095 1,244

PHEVs 25 49 74 83 100 110 123 134 143 149 154

NEV CVs 12 13 13 14 15 15 16 17 18 19 20

BEVs 12 12 13 13 14 15 16 16 17 18 19

PHEVs 0 0 0 0 0 1 1 1 1 1 1

(YoY) 2020 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F

Total cars 6.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%

NEVs 90.2% 48.1% 23.9% 20.0% 22.4% 19.0% 16.6% 14.8% 13.3% 12.2%

NEV PVs 98.6% 50.2% 24.5% 20.5% 22.9% 19.3% 16.8% 14.9% 13.5% 12.3%

BEVs 97.9% 50.2% 27.6% 20.5% 25.9% 20.7% 18.2% 16.3% 14.8% 13.6%

PHEVs 100.3% 50.2% 12.1% 20.5% 9.2% 11.9% 9.0% 6.7% 4.7% 2.9%

NEV CVs 4.1% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

BEVs 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

PHEVs 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Notes: PV = passenger vehicle; CV = commercial vehicle Source: CAAM, Mirae Asset Securities Research

15 | China EVs Mirae Asset Securities Research China EVs (Overweight)

EV market competition: • Tesla has dominated China’s EV market with the release of the Model 3 (2020) and the Model Y (2021); both 1) Pure EV makers models are assembled at Giga Shanghai. • Local players, such as NIO, Li Auto, and XPeng, have also delivered dramatic top-line growth, on the back of: 1) timely rollouts of compelling EV models; 2) successful fundraising; 3) the resolution of issues related to battery sourcing and volume production; and 4) competent management/board (customer-oriented management philosophy and focus on influencer marketing).

Sales volume and M/S trends of major EV makers Overview of China’s three major EV makers

('000 units) Tesla NIO XPeng Li Auto 180

150 Founder Li Bin He Xiaopeng Li Xiang 120 Founder and Co-founder of Founder and CEO of Experience CEO of Yiche UC Browser Autohome 90

Ownership 11.5% 25% 19.8% 60

30 Voting power 41.3% 57.4% 71.2%

Tech firms with Alibaba, Meituan, 0 Tencent 2018 2019 2020 1H21 sizable stakes Xiaomi ByteDance

Tesla 11.1% 12.1% OEM partner JAC Haima MotorChongqing Lifan

NIO 1.2% 1.9% 3.6% 3.3% Premium brand; Mass-market Differentiating service models, Family cars, EREV, Xpeng 1.6% 2.2% 2.3% factors ecosystem; BaaS; autonomous cost efficiency Li Auto 2.6% 2.2% ADAS driving, NGP

Source: MarkLines, Mirae Asset Securities Research Source: Industry data, Mirae Asset Securities Research

16 | China EVs Mirae Asset Securities Research China EVs (Overweight)

Subsidized price Battery Company Model Segment Type Electric range (CNY) capacity

Model 3 Car-D BEV 250,000-340,000 55/77kWh 468-605km

Model Y SUV-D BEV 276,000-378,000 60/77kWh 525-594km

EC6 SUV-E BEV 368,000-526,000 70/100kWh 430-615km

ES6 SUV-E BEV 358,000-526,000 70/100kWh 420-610km

ES8 SUV-E BEV 468,000–624,000 70/100kWh 415-580km

70/100kWh 500-700km ET7 (expected) Car-E BEV 448,000-526,000 (150kWh) (1,000km)

P7 SUV-C BEV 229,000-410,000 60/71/81kWh 480-706km

G3 Car-E BEV 150,000-200,000 55/56/57/66/67kWh 460-520km

P5 (expected) Car-D BEV 160,000-230,000 56/66/71kWh 460-600km

One SUV-E PHEV 338,000 41kWh 180km

Note: Ex-subsidy prices for NIO Source: MarkLines, Mirae Asset Securities Research

17 | China EVs Mirae Asset Securities Research China EVs (Overweight)

EV lineups of major local players

NIO EC6 XPeng G3 Li One

NIO ES6

XPeng P7 Tesla Model 3

NIO ES8

XPeng P5 Tesla Model Y (coming soon) NIO ET7 (coming soon)

Source: Press materials, Mirae Asset Securities Research

18 | China EVs Mirae Asset Securities Research China EVs (Overweight)

EV market competition: • Major Chinese automakers’ EV development projects have been gaining momentum since their announcement of 2) Traditional automakers plans to expand into the EV market.

2025F sales 2025F NEV % in 2021-25 plans (units) revenue 2025 - Planning to offer nearly 100 NEV models, with almost 60 of them to be sold under in-house CNY1tr brands - Aiming to export 1.5mn vehicles (30mn to Europe) in 2025, 70-80% of which will be NEVs - Planning to roll out a total of 26 smart NEV models by 2025 - Currently working to launch five premium EV models in partnership with Huawei and CATL, 5mn with the first model expected to debut in 2021 (2030) - Targeting volume production of Level 4 self-driving ICVs by 2022 - Aiming to sell at least 5mn vehicles, including 3.5mn vehicles under in-house marques

- Planning to launch 50 NEV models by 2025 4mn CNY60bn 80% - Aiming to launch nine NEV models targeting Thailand by 2024 - EV model manufactured for Toyota will likely be launched before 2025 - Planning to develop pure electric bus and related parts under JV with Japan’s Hino Motors - Targeting 2025 launch for Hino Motors-branded pure electric bus model

3.5mn CNY60bn 20% - Cooperating with Huawei to develop/commercially produce Level 4 self-driving SUV by 2024

- Aiming to produce over 50 NEV models, with more than 30 being in-house models 6.5mn CNY1tr 20% - 2025 sales target: 1mn units for Hongqi and 600,000 units for Bestune; steady growth for Jiefang - Planning to unveil sedan EV (ET7) in 2H22 after launching SUV (ES8) on Sep. 2021 - Aiming to deploy 4,000 battery swapping stations (including 1,000 outside China) by 2025 100% - Working to ensure that 90% of NIO owners are always within 3km of a battery swap station by 2025 - Working to develop next-gen EV model using Nvidia DRIVE AGX Orin platform 1.6mn 100% - Planning to launch a premium full-sized electric SUV model in 2022 - Aiming to sell more than 1.6mn units (with NEV M/S of 20%) by 2025 - Planning to unveil an SUV model employing advanced self-driving and enhanced core auto 1.05mn 100% systems in 2022 - Targeting NEV M/S of 10% in 2025 Source: Company data, Mirae Asset Securities Research

19 | China EVs Mirae Asset Securities Research China EVs (Overweight)

EV market competition: • EVs from global automakers were front and center at the 2021 Shanghai Motor Show held in April. 2) Traditional automakers

Mercedes-Benz unveiled four new EV models Audi unveiled four new EV models

New EQB New Q5L

New EQA A6 e-tron concept

New EQS A7L

Audi Concept Shanghai New EQE

Source: Press materials, Mirae Asset Securities Research Source: Press materials, Mirae Asset Securities Research

20 | China EVs Mirae Asset Securities Research China EVs (Overweight)

EV market competition: • EVs from global automakers were front and center at the 2021 Shanghai Motor Show held in April. 2) Traditional automakers

VW, GM, Ford, BMW, Toyota, and Hyundai Motor also unveiled new EV models

Micro GV80e IX convertible

Mustang Mach-E Ioniq 5

bZ4x

ID.6 Crozz ID.6

Source: Press materials, Mirae Asset Securities Research

21 | China EVs Mirae Asset Securities Research China EVs (Overweight)

Market competition: • With cars increasingly resembling computers on wheels, Chinese tech firms have announced plans to enter the 3) Big Chinese tech firms EV market. • Tech firms are approaching the EV market in different ways: 1) Alibaba and Baidu: Partnerships with conventional automakers 2) Xiaomi: Focus on design/development/branding with outsourced production 3) Huawei and ZTE: Supply of EV parts and systems

Chinese internet/IT firms investing in smart car businesses (e.g., autonomous driving, EVs)

- Established JV with SAIC (Zhiji Motor) - Leader within China’s autonomous driving ecosystem: self-driving platform (AliOS), internet car start-up (BanMa Network), semiconductor business entity (Pintouge), mapping technology (Amap), big data analysis (Damo Academy) - Pre-orders for the Zhiji L7 (electric sports sedan) began at the Shanghai Auto Show (deliveries slated for 1Q22)

- Established a JV with Geely (Jidu Auto) - Apollo, China’s no. 1 open-source self-driving platform (developed by Baidu), installed in roughly 600 models (more than 70 brands) - Scheduled to unveil its first EV model at Beijing International Automotive Exhibition 2022

- Entered auto market via partnerships with conventional automakers - Focusing on building autonomous driving ecosystem, with no plans for actual car production - Offers a wide range of solutions (in-car internet, automobile cloud, and big data/autonomous driving solutions) under partnerships with more than 20 automakers - Planning to enter EV market without automaker partnership - Likely to focus on design/development/branding, while outsourcing production

- Unveiled Arcfox Alpha S HBT, a self-driving EV co-developed with BluePark (subsidiary of BAIC), with deliveries expected within 2021 - Will supply parts and systems for “Huawei Inside” models

- Set up new automotive electronics unit - Will manufacture parts and systems - Jointly developed ride-hailing EV model (D1) with BYD - Joined forces with Nezha to enter eco-friendly car business - JD.com’s voice recognition and onboard payment tools installed in Enovate’s EVs

Source: Press reports, Mirae Asset Securities Research

22 | China EVs Mirae Asset Securities Research China EVs (Overweight)

Zhiji Motor (Alibaba-SAIC JV): L7 electric sports sedan SERES/Huawei: SF5 EREV

Huawei/BAIC affiliate BluePark: Arcfox Alpha S EV Didi/BYD: D1 ride-hailing EV

Source: Press materials, Mirae Asset Securities Research

23 | China EVs Mirae Asset Securities Research China EVs (Overweight)

Importance of platforms • Dedicated EV platforms play an important role in enhancing margins and accelerating revenue growth. • Benefit 1: Cost savings ← production efficiency, parts sharing, and R&D cost reductions • Benefit 2: Improved performance ← enhanced power/battery efficiency (improved range/self-driving capabilities) and more efficient space utilization • Benefit 3: Shorter development cycle (accelerated revenue growth)

EV platforms by automaker

Volkswagen Geely BYD MEB SEA e-platform 3.0

Hyundai GM Toyota e-GMP BEV3 e-TNGA

Source: Press materials, Mirae Asset Securities Research

24 | China EVs Mirae Asset Securities Research China EVs (Overweight)

Who will survive? • While the EV market is set to continue growing, market players should face intensifying competition going forward. • In our view, pure EV players who gained early leadership hold competitive advantages over most legacy automakers. - Pure EV makers Tesla and NIO deserve attention in light of their superior technology, mass production capabilities, and brand value. - Among traditional OEMs, companies seeing rapid EV sales mix expansion (BYD, etc.) look promising. • Brands with exposure to high-priced/luxury segments appear to have more upside than those positioned in the hotly contested low/mid-priced segments. • Other factors to consider are: technological advantages (autonomous driving, battery swapping systems, etc.), vertical integration (across batteries, power control units, motors, etc.), customer base loyalty, lineup diversity, and market positioning (exposure to high-end/luxury segments). • We prefer upstream players (batteries/components/raw materials) that have secured dominant positions within the value chain to downstream names that are facing growing competition. • Key recommendations: Global X China EV and Battery ETF (2845/9845 HK), BYD (002594 CH), CATL (300750 CH), and NIO (NIO US).

Three major constituents of the Global X China EV and Battery ETF

Market cap P/E (x) P/B (x) EPS growth (%) ETF/company Ticker Rating (US$mn) 2022F 2023F 2022F 2023F 2022F 2023F

Global X China EV and Battery ETF 2845/9845 HK - 970------

BYD 002594 CH Buy 103,009 90.4 69.7 9.3 8.2 20.4 29.6

CATL 300750 CH Buy 196,561 104.1 83.9 13.4 11.6 39.2 24.2

NIO NIO US Buy 56,848 - 201.1 12.4 10.1 RN TB

Source: Mirae Asset Securities Research

25 | China EVs Mirae Asset Securities Research Global X China EV and Battery ETF (2845/9845 HK)

Strong growth of downstream market  Fast-growing upstream sectors also warrant attention

Current price Investment points HK$22.74 (7/23/21) • The Global X China EV and Battery ETF allows investors to diversify risks across 20 stocks exposed to the EV industry, which is still in the early stages of growth. 52-week low (HK$) 9.02 • With its heavy focus on battery/component/raw material stocks, the ETF provides a convenient way to gain exposure to the high growth potential of the EV market. 52-week high (HK$) 23.86 • Significantly, the Global X China EV and Battery ETF offers exposure to the world’s biggest and fastest-growing EV market. (%) 1M 6M 12M • The fund selectively invests in companies across the value chain with strong market positions and high earnings growth potential. Absolute 16.9 17.8 145.2

Risk factor Relative 25.3 26.7 121.7 • Slower-than-anticipated transition to EVs • Rapid market penetration by non-Chinese companies Company Weight (%) Company Weight (%) 350 Global X China EV ETF Ganfeng Lithium 12.04 Weihai Guangwei Composites 4.48 300 HSI EVE Energy 9.21 Qingdao Tgood Electric 3.97 250 Shenzhen Inovance 9.00 Shanghai Putailai New Energy 3.71

200 CATL 8.62 Beijing Easpring Material 3.46 Shenzhen Senior Technology 3.00 150 BYD 8.55 Wuxi Lead Intelligent 6.77 Shenzhen Yinghe Technology 1.90 100 Guangzhou Tinci Materials 6.60 Zhejiang Yongtai Technology 1.43 50 Sunwoda Electronic 5.34 NIU Technologies 1.41 0 Ningbo Xusheng Auto Technology 0.48 20.6 20.9 20.12 21.3 21.6 Gotion High-tech 5.03 Shenzhen Capchem 4.73 Guangdong Dongfang Precision 0.37

Source: Bloomberg (7/23/21), Mirae Asset Securities Research

26 | China EVs Mirae Asset Securities Research Global X China EV and Battery ETF (2845/9845 HK)

Top 10 constituents • Stocks with relatively inexpensive valuations account for around half of the Global X China EV and Battery ETF’s basket.

Global X China EV and Battery ETF: Top 10 constituents

Market cap PEG (x) EPS growth (%) P/E (x) Weight Company Segment (%) (US$mn) 2021F 2022F 2021F 2022F 2021F 2022F

12.04 Ganfeng Lithium Lithium 39,525 0.6 2.4 177.4 35.3 113.7 84.1

9.21 EVE Energy Batteries 36,488 0.9 1.2 84.3 44.2 72.8 50.6

9.00 Shenzhen Inovance Inverters/motors 32,663 1.1 1.8 57.4 27.6 63.8 50.1

8.62 CATL Batteries 196,561 1.4 1.8 90.5 47.5 126.8 85.9

8.55 BYD EVs/batteries 103,009 10.2 2.5 13.5 39.5 137.5 98.7

6.77 Wuxi Lead Intelligent Battery equipment 15,837 0.9 1.0 68.0 44.0 61.3 42.5

6.60 Guangzhou Tinci Materials Battery electrolytes 15,423 0.5 0.9 137.8 48.9 62.4 41.8

5.34 Sunwoda Electronic Battery modules 32,663 0.6 0.6 71.2 43.2 38.9 27.3

5.03 Gotion High-tech Batteries 11,829 2.4 1.5 71.0 69.8 171.7 101.2

4.73 Shenzhen Capchem Battery electrolytes 7,239 1.2 1.2 51.3 36.6 61.0 44.6

Weighted avg. 1.56 1.21

Source: Global X (7/23/21), Bloomberg Consensus, Mirae Asset Securities Research

27 | China EVs Mirae Asset Securities Research BYD (002594 CH)

Full speed ahead Investment points • Quickly transitioning to EVs Rating - The company produces and sells both BEVs and PHEVs and is looking to move beyond the low/mid-tier Buy (Maintain) segment to the premium/luxury segment (2022-23). The company also has EV core component technologies (batteries/motors/power control units) and an EV-dedicated platform. - We forecast EVs as a share of overall sales volume to rise to 69% in 2021, 75% in 2022, and 81% in 2023 (vs. Target price CNY300.0 less than 50% in 2019 and 2020). (12M) • EV battery earnings growth Current price - We see EV battery revenue showing average annual growth of 471% over the next three years CNY227.50 (7/20/21) - Management is strongly committed to external sales, and the company’s Blade Battery has been recognized for its performance and safety. BYD is already a battery supplier to FAW and Changan, while automakers like Toyota, Ford, and Daimler are also actively considering the company’s products. Expected Return 31.9% - The spin-off and IPO of the battery unit (expected in 2022) should provide upside momentum to share prices (as seen in the semiconductor unit spin-off).

EPS growth (22F, %) 20.4 Valuation: We derived our target price of CNY300 by applying 105x (average 2022F peer multiple) to our 2022F P/E (22F, x) 79.5 EPS.

Exchange Shenzhen Risk factors: 1) Sluggish sales due to intense EV market competition; 2) weaker-than-expected battery sales to Dividend yield (%) 0.1 outside parties.

Market cap (CNYbn) 592.6 FY (Dec.) 2018 2019 2020 2021F 2022F 2023F Market cap (Wtr) 104.99 600 BYD SHSZ300 Revenue (CNYmn) 130,055 127,739 156,598 199,367 236,861 293,509 Shares outstanding (mn) 500 679.2 OP (CNYmn) 4,242 2,312 7,086 11,131 13,473 17,390 400 52-week low (CNY) 78.10 OP margin (%) 3.3 1.8 4.5 5.6 5.7 5.9 300 NP (CNYmn) 2,780 1,614 4,234 6,801 8,188 10,616 52-week high(CNY) 273.37 200 EPS (CNY) 0.93 0.59 1.55 2.38 2.86 3.71

100 ROE (%) 4.6 2.6 6.6 9.5 10.3 11.7 (%) 1M 6M 12M Absolute -6.2 -3.4 158.3 0 P/E (x) 54.8 80.6 125.2 95.7 79.5 61.3 Relative -8.5 -3.7 134.8 19.7 20.1 20.7 21.1 21.7 P/B (x) 2.5 2.1 8.2 9.1 8.2 7.2 Source: Company data, Bloomberg, Mirae Asset Securities Research * The text and data on this slide were originally published in a stand-alone report on Jul. 21, 2021.

28 | China EVs Mirae Asset Securities Research CATL (300750 CH)

Still plenty of upside ahead

Investment points Rating Buy (Maintain) • CATL has made rapid advances in the global market, capturing 9.9% of the EV battery market outside of China in 1Q21 (vs. 0.4% in 2019 and 6.5% in 2020).

Target price - We expect further market share gains, fueled by: 1) exports of China-made Tesla EVs (e.g., Model 3) to CNY570.00 (12M) Europe; and 2) the operation of CATL’s Germany plant (supply to German OEMs and Gigafactory Berlin). • CATL also has a diversified customer portfolio (rather than relying on just a handful of OEMs), which translates to a stable revenue structure. Current price CNY450.23 (6/22/21) - Major customers include OEMs that are poised to gain market share (e.g., Tesla, NIO, Li Auto, XPeng, etc.). • We believe CATL is well-positioned to maintain its dominant position in China (50% market share), as its cost competitiveness, superior technology/product quality, and large production capacity should allow it to Expected Return 27.5% continue to benefit from the growth of the Chinese EV market. • CATL has achieved cost competitiveness through: 1) higher capex efficiency; 2) low labor costs; 3) economies of scale and cost savings (through supply chain management); and 4) higher utilization rates. EPS growth (22F,%) 39.2 Valuation: We maintain our DCF-derived TP of CNY570; the stock is currently trading at respective 2021F and P/E (22F,x) 85.6 2022F P/Es of 120x and 86x. Exchange Shenzhen Risk factors: 1) Potential battery quality issues; 2) delays to the operation of the German plant; 3) a lower-than- Dividend yield (%) 0.1 expected EV penetration rate Market cap (CNYbn) 1,048.8 FY (Dec.) 2018 2019 2020 2021F 2022F 2023F Market cap (Wtr) 183.84 2500 CATL CSI 300 Revenue (CNYmn) 29,611 45,788 50,319 91,582 133,550 177,662 Shares outstanding (mn) 860.2 2000 OP (CNYmn) 4,110 5,722 6,289 10,701 15,431 19,679

52-week low (CNY) 163.52 1500 OP margin (%) 13.9 12.5 12.5 11.7 11.6 11.1 NP (CNYmn) 3,387 4,560 5,583 8,624 12,243 15,493 52-week high(CNY) 457.84 1000 EPS (CNY) 1.64 2.09 2.49 3.78 5.26 6.52 500 ROE (%) 11.0 11.8 10.0 11.5 14.0 15.0 (%) 1M 6M 12M P/E (x) 44.8 50.8 140.8 119.2 85.6 69.0 Absolute 19.9 43.5 172.9 0 Relative 13.7 23.0 94.8 19.6 19.12 20.6 20.12 21.6 P/B (x) 4.3 5.5 11.4 12.8 11.1 9.5 Source: Company data, Bloomberg, Mirae Asset Securities Research * The text and data on this slide were originally published in a stand-alone report on Jun. 23, 2021.

29 | China EVs Mirae Asset Securities Research NIO (NIO US)

Taking on Tesla with battery subscription model

Investment points Rating Buy (Maintain) • We forecast NIO’s sales volume to grow 49% annually through 2025 and its market share to reach 7.6% in 2025 (vs. 4.4% in 2020).

Target price • We believe NIO is well-positioned as a luxury BEV maker over the long run, amid: 1) the accelerating transition US$51.00 (12M) to NEVs; and 2) China’s favorable social dynamics, such as increasing demand for luxury goods. • The company will enter the electric sedan market with the launch of the ET7. Product portfolio expansion will likely help diversify the company’s revenue base. Current price US$33.46 (5/19/21) • NIO has improved the EV customer experience by providing differentiated charging convenience and a Battery-as-a-Service (BaaS) subscription program.

Expected Return 52.4% Valuation: We derived our target price by applying an EV/sales ratio of 7.6x (Tesla’s average multiple during 2014-16).

EPS growth (22F,%) -74.7% Risk factors: 1) Potential delisting of ADRs; 2) production disruptions due to the global chip shortage; 3) price P/E (22F,x) n/a cuts by Tesla

Exchange NYSE

Dividend yield (%) -

Market cap (US$bn) 54.8 FY (Dec.) 2018 2019 2020 2021F 2022F 2023F 1200 Market cap (Wtr) 62.02 NIO US SPX INDEX Revenue (CNYmn) 4,951 7,825 16,258 34,761 54,700 80,311 1000 Shares outstanding (mn) 1,361.7 OP (CNYmn) -9,596 -11,079 -4,608 -1,790 -1,492 2,553 800 52-week low (US$) 3.18 OP margin (%) -193.8 -141.6 -28.3 -5.1 -2.7 3.2 600 NP (CNYmn) -23,328 -11,413 -5,611 -7,072 -1,787 1,915 52-week (US$) 66.99 400 EPS (CNY) -22.74 -11.08 -4.74 -5.19 -1.31 1.41 ROE (%) -287.7 -685.8 -41.5 -23.5 -6.0 5.5 (%) 1M 6M 12M 200 P/E (x) n/a n/a n/a n/a n/a 153.0 Absolute -9.0 -30.9 806.8 0 Relative -8.0 -39.9 544.0 19.5 19.11 20.5 20.11 21.5 P/B (x) 1.2 n/a 2.3 10.4 9.5 7.6 Source: Company data, Bloomberg, Mirae Asset Securities Research * The text and data on this slide were originally published in a stand-alone report on May 20, 2021.

30 | China EVs Mirae Asset Securities Research APPENDIX 1

Important disclosures and disclaimers Two-year rating and TP history

TP(Local TP(Local Company Date Rating Company Date Rating currency) currency) BYD (002594 CH) NIO Inc (NIO US) 07/21/21 Buy 300 05/20/21 Buy 51 CATL (300750 CH) 06/23/21 Buy 570

(CNY) BYD (002594 CH) (CNY) CATL (300750 CH) (US$) NIO (NIO US) 350 600 70

300 500 60 250 50 400 200 40 300 150 30 200 100 20

50 100 10

0 0 0 7/19 7/20 7/21 6/19 6/20 6/21 5/19 5/20 5/21

Stock ratings Sector ratings Buy Expected 12-month performance: +20% or greater Overweight Expected to outperform the market over 12 months Trading Buy Expected 12-month performance: +10% to +20% Neutral Expected to perform in line with the market over 12 months Hold Expected 12-month performance: -10% to +10% Underweight Expected to underperform the market over 12 months Sell Expected 12-month performance: -10% or worse

Rating and TP history: Share price (─), TP (▬), Not Rated (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆) * Our investment rating is a guide to the expected return of the stock over the next 12 months. * Outside of the official ratings of Mirae Asset Daewoo Co., Ltd., analysts may call trading opportunities should technical or short-term material developments arise. * The TP was determined by the research analyst through valuation methods discussed in this report, in part based on estimates of future earnings. * TP achievement may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Ratings distribution and investment banking services Buy Trading Buy Hold Sell Ratings distribution 80.00% 10.67% 8.00% 1.33% Investment banking services 83.33% 16.67% 0.00% 0.00% * Based on recommendations in the last 12-months (as of June 30, 2021)

31 | China EVs Mirae Asset Securities Research APPENDIX 1

Disclosures As of the publication date, Mirae Asset Securities Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject compan y’s shares outstanding.

Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Securities Co., Ltd. (“Mirae Asset Securities”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisor y board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Securities, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Securities except as otherwise stated herein.

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32 | China EVs Mirae Asset Securities Research Mirae Asset Securities International Network

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33 | China EVs Mirae Asset Securities Research