Orient Securities: Domestic automobile demand is expected to improve marginally, and some companies will face valuation repairs

The Zhitong Finance App learned that Orient Securities released a research report saying that the automobile industry is currently at a low level, and the allocation ratio for the 2026Q2 single quarter is falling rapidly. It is expected that with the marginal improvement in domestic demand for passenger cars in the second half of the year, the automobile sector allocation is expected to increase. In terms of investment strategies, the automobile sector has fully reflected the market's expectations of weakening domestic demand and declining profits in the automobile industry after a long period of adjustment. It is expected that domestic automobile sales will experience marginal improvements in the second half of the year, and exports are expected to continue to improve. Some companies will usher in valuation repairs. It is recommended to focus on overseas chain vehicles, auto parts companies, and some vehicle brands that have overfallen.

Orient Securities's main views are as follows:

In 2026Q2, the proportion of active funds heavy in the automotive industry was drastically reduced

Among the top ten active fund stocks in 2026Q2, the allocation ratio of the automobile industry fell to 1.9%, down 2.2 percentage points from month to month, a new low in the past five years; since 2015 Q1, the average active fund holdings in the automotive industry were 3.6%, and 2026Q2 holdings were lower than the average 1.7%; the 2026Q2 automobile market capitalization/total A market value ratio was 3.3%, down 1.4 percentage points from month to month. The bank believes that the automobile industry is currently underrated, and that the allocation ratio for the 2026Q2 single quarter is falling rapidly. It is expected that with the marginal improvement in domestic demand for passenger cars in the second half of the year, the allocation of the automotive sector is expected to increase.

In 2026Q2, the proportion of active funds in the passenger car sector fell to the bottom of history, and the proportion of heavy holdings in the auto parts sector also declined month-on-month

Affected by factors such as declining energy subsidies, increased industry competition, and the increase in upstream raw material prices, active funds drastically reduced their share in the passenger car sector starting in 2025Q3. The 2025Q2 to 2026Q2 holdings were 1.1%, 0.3%, 0.2%, 0.4%, and 0.1%, respectively. The 2026Q2 active fund allocation ratio for the passenger car sector has dropped to a record low; the 2026Q2 auto zero sector active fund's heavy position ratio was 1.3%, down 1.4 percentage points from month to month. The bank believes that the current market has fully reflected pessimistic expectations for the passenger car sector. It is expected that passenger car fundamentals will experience marginal improvements in the second half of the year. Currently, the passenger car sector is at an inflection point where expectations of the industry's fundamentals have bottomed out and rebounded, and has allocation value.

Domestic sales are not expected to get worse in the second half of the year. Marginal improvement is expected, and exports will continue to grow at a relatively rapid pace

According to data from the China Automobile Association, domestic passenger car sales in the first half of the year were 8.287 million units, down 24.3% from the previous year. Factors such as overdrafted demand, weakening consumption momentum, and marginal increases in international oil prices under the policy switch led to weak domestic demand for domestic passenger cars and pressure on domestic sales. Domestic passenger car export sales in the first half of the year were 4.4324 million units, an increase of 72.0% over the previous year. Car companies made every effort to lay out overseas markets, and rising fuel prices led to an increase in overseas NEV replacement demand, and jointly promoted strong growth in passenger car exports. The bank believes that, supported by factors such as a relatively low base, weakening policy overdrafts, and the volume of new car launches, domestic demand for passenger cars is expected to experience marginal improvement in the second half of the year, and the year-on-year decline in domestic sales is expected to gradually narrow; at the same time, with the gradual improvement of the diversified layout of car companies' export regions and the implementation of localized production capacity, passenger car export sales are still expected to maintain relatively rapid growth in the second half of the year.

Automobile-related targets: BYD, Geely, SAIC Motor, JAC, etc.; Auto Zero related targets: Yinwheel, Xinquan, Tuopu Group, Zhongyuan Internal Distribution, Daimei, Xingyu, Feilong, Chuanhuan Technology, Weichai Power, Kodali, Sanhua Intelligent Control, Huayu Automobile, Molding Technology, Rongtai, Fuyao Glass, Aikodi, Jingwei, etc.

Risk Alerts

The macroeconomic downturn affects automobile demand, the impact of fluctuations in upstream raw material prices, and the price war pressure on car companies.