Lyon's research report pointed out that China's policy of trading in old for new is driving the recovery of demand in the automobile industry, especially benefiting electric vehicles, mainly because consumer preferences are shifting from joint venture brands with internal combustion engine (ICE) models to new energy models. In addition, various new energy vehicle models are being launched by car manufacturers in the second half of the year, and it is expected that the penetration rate of domestically produced new energy vehicles in China will steadily increase.

Lyon has listed BYD Company Limited (01211.HK), Li Auto Inc (02015.HK)(LI.US), and Xpeng (09868.HK)(XPEV.US) as top picks in the industry, all rated as 'outperforming the market.' It is believed that leading car companies can continue to benefit from policy incentives and the momentum of electric vehicle development. In particular, they are bullish on the development of Li Auto's ADAS system to drive sales growth, improve product mix to boost new energy vehicle sales, and increase profit visibility.

In order to more accurately reflect the impact of the low-priced L6 model on the overall product average price, the bank has lowered its revenue forecast for Li Auto Inc by 9.2%, 7.9%, and 7.9% for the years 2024 to 2026. Net profit forecasts for the next two years have been revised down by 20.8% and 11.8%, respectively, while the 2026 net profit forecast has been revised up by 1.8%. The target price has been raised from 96 yuan to 109 yuan, corresponding to a forecast PE ratio of 15.5 times in 2025.