Citi cites CPCA expert: Expect NEV export tax rebates to decline in phases; EU market share cap may be a negotiating chip.

Citi released a research report stating that the bank held a meeting with Cui Dongshu, Secretary-General of the China Passenger Car Association (CPCA), focusing on export tax rebates, EU tariffs, industry consolidation, and September retail data updates. The bank quoted Cui Dongshu as saying that the cancellation of export tax rebates is expected to be led by new energy vehicles, with an implementation period of about two years or more, and the rebate rate may drop from 13% to 9%, then to 5%; the first step is roughly from mid-2027 to the end of 2028, and the second step will be faster and completed by mid-2029. The formal policy announcement is more likely at the end of 2026 or early 2027, tentatively implemented from July 1, 2027; the policy is expected to be unlikely to apply to fuel passenger vehicles, commercial vehicles, or construction machinery. Due to ro-ro ship capacity bottlenecks, about 70% of exports go by ro-ro ships, and a year-end export rush is also unlikely to occur. Regarding the EU's plan to impose a 15% market share cap on Chinese Shanxi Guoxin Energy Corporation vehicles, Cui Dongshu believes it is a negotiating chip and difficult to actually enforce; the EU's core goal is to push Chinese automakers to localize parts in Europe and support the local industrial base. China's pure electric vehicle share in the EU reached 21% in July 2026, up from 12% in 2025, and may rise to 25% to 30% in 2027, and they still have clear price and product competitiveness advantages over local competitors, and can absorb tariff costs by adjusting pricing. Cui Dongshu pointed out that domestic auto industry consolidation is accelerating. Toyota's two joint ventures (FAW/GAC) can serve as an example of future consolidation, and the disagreement between Huawei and Chongqing Sokon Industry Group Stock (09927) may lead to a restructuring of the HIMA model. Export-oriented leading automakers, including BYD COMPANY (01211), GEELY AUTO (00175), CHERY AUTO (09973), Chongqing Changan Automobile (000625.SZ), and SAIC Motor Corporation (600104.SH), are in a better position, while joint venture brands risk being marginalized and small automakers are losing market share. It is expected that domestic passenger vehicle retail sales will grow 7% year on year to 19.93 million units in 2027. The September 1-20 passenger vehicle insurance retail update shows that passenger vehicle retail sales fell 22% year on year and rose 8% month on month. Cui Dongshu expects full-month retail sales of about 1.7 million units, down about 25% year on year and up about 10% month on month; new energy passenger vehicle retail sales fell 9% year on year and rose 14% month on month. By brand, BYD Company Limited rose 11% month on month, LI AUTO-W (02015) and XIAOMI-W (01810) both rose 32% month on month, XPENG-W (09868) fell 17% month on month, and NIO-SW (09866) rose 1% month on month. Cui Dongshu pointed out that automakers reducing reliance on a single battery supplier, Contemporary Amperex Technology (03750), is a structural trend, and they are introducing second and third battery suppliers, for example, Xiaomi's new models use batteries from CALB (03931) and Sunwoda Electronic (300207.SZ). As for BYD Company Limited, Cui Dongshu believes its technical moat is relatively shallow, and the real barrier may lie in execution, but the company has invested heavily and has first-mover and ecosystem advantages relative to other automakers.