Auto Sector Hits New Lows as Multiple Automakers' Stocks Plummet to Multi-Year Bottoms Amid Industry Transformation Push

Recently, the automotive sector has shown overall weakness, marked by pronounced divergence and a bottom-seeking trend. The SW Automotive Index has been in continuous decline since mid-May, falling more than 19% from its previous peak as of June 12, erasing over RMB 570 billion in total market capitalization. Shares of several traditional automakers have hit multi-year lows, with SAIC Motor and GAC Group experiencing significant declines. Meanwhile, most new-energy vehicle (NEV) startups have dropped by over 20%, suffering substantial valuation losses. Many investors heavily positioned in auto stocks have incurred sizable unrealized losses, fueling pessimistic market sentiment. Deteriorating industry fundamentals are the primary driver behind the stock underperformance. Domestic passenger vehicle retail sales declined by 19.5% year-over-year in the first five months of this year. Previous aggressive price wars have exhausted consumer demand, weakening the market’s foundational stability. Compounded by low capacity utilization and elevated dealer inventory levels, this has triggered a vicious cycle of discount-driven promotions. Additionally, rising raw material costs have further squeezed profit margins. Overseas markets also pose challenges: trade barriers and tariff restrictions are limiting export growth, while risks associated with overseas manufacturing investments remain high, offering little support to valuations. Major international investment banks have successively downgraded target prices for multiple automakers, amplifying market caution. Currently, the sector’s valuation stands at a near-five-year low, presenting some appeal for portfolio allocation. However, without clear signs of a fundamental turnaround, the sector is expected to remain range-bound and volatile in the near term. Absent policy support, the downward sales trend may persist, and combined with chronic overcapacity and unresolved price competition, earnings recovery will likely remain difficult. Some leading players, such as BYD and Geely, are seen as best positioned to emerge from the current downturn. Potential pathways forward for the industry include shifting from extensive growth to refined operational models to enhance per-vehicle profitability; advancing deeply localized global expansion strategies; strengthening independent R&D in core technologies; accelerating the implementation of software-defined vehicle architectures; and building closed-loop technological ecosystems. As industry consolidation accelerates, automakers with robust profitability, technological advantages, and mature global footprints are more likely to secure a sustainable competitive edge.