Key Takeaways:
- JPMorgan downgraded GAC Group and SAIC Motor to Underweight from Neutral
- The bank's top 2H26 picks are Geely Auto, NIO-SW and BYD Company
- Overseas sales for Chinese automakers may exceed targets by 20% to 50%
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JPMorgan downgrades GAC Group, names 3 top China auto picks for 2H26
JPMorgan cut GAC Group to Underweight from Neutral and lowered its price target to HKD1.1 from HKD3.3, as the bank forecast no meaningful recovery in China's auto market for the second half of 2026.
"The defensive nature of the company's revenue insulates the consumer finance provider from the energy shock," the analysts wrote in a note dated July 13. The bank also downgraded SAIC Motor to Underweight from Neutral, citing expectations that weak performance at both automakers will persist.
China's domestic passenger vehicle demand fell 23% year-over-year in the first half, and JPMorgan expects the decline to narrow to about 10% in the second half as consumer confidence remains weak. New energy vehicle penetration hit a record 63% in June, creating a sharp divide between automakers with competitive EV lineups and those without.
The bank's top picks for the second half are Geely Auto, NIO-SW and BYD Company, all rated Overweight. JPMorgan said NIO's second-quarter results are likely to beat expectations, while Geely is also positioned for better-than-forecast performance. BYD's target price stays at HKD124.
In overseas markets, JPMorgan said sales targets set by major Chinese automakers are too conservative, with actual performance potentially exceeding targets by 20% to 50%. Overseas markets are expected to account for 30% to 50% of revenue for major Chinese auto companies in 2026, providing a buffer against weak domestic demand.
The bank lowered price targets for several other automakers to reflect weaker mainland conditions and cost pressures. XPeng-W was maintained at Overweight with a target cut to HKD108 from HKD118. Leapmotor was kept at Overweight with a target reduced to HKD60 from HKD90. Li Auto was maintained at Underweight with a target slashed to HKD38 from HKD56. Great Wall Motor was held at Neutral with a target lowered to HKD8.5 from HKD11.5. BAIC Motor stayed at Neutral with a target cut to HKD0.8 from HKD1.6. Changan Automobile remained at Underweight with a target reduced to RMB4.5 from RMB6.6.
The divergence between weak domestic demand and strong overseas growth creates a clear winner set. Investors should focus on automakers with room for earnings upgrades, strong NEV product portfolios and higher overseas revenue exposure, JPMorgan said. The bank's next sector update will likely follow second-half delivery data from major Chinese automakers.
This article is for informational purposes only and does not constitute investment advice.
