Citi: China-EU consensus on plug-in hybrid vehicle exports helps ease short-term risks. EU-based capacity suppliers such as Contemporary Amperex Technology (03750) have competitive advantages.

Citi released a research report stating that China and the EU are reported to have reached a consensus on Chinese hybrid and plug-in hybrid vehicle exports, planning to roughly halve export volumes within a few years, with policy implementation details still subject to further negotiation. The bank views this as risk mitigation rather than a strong valuation re-rating catalyst, as the consensus between the two sides helps eliminate in the short term the tail risk of the EU launching anti-subsidy investigations and possible tariffs on hybrid vehicles. This is short-term positive for automakers with plug-in hybrid electric vehicle (PHEV) exposure such as BYD Company Limited (01211), CHERY AUTO (09973), and SAIC, but at the same time implies a soft cap on sales volumes. Citi pointed out that, calculated by the ratio of EU local capacity to potential export reductions for FY2026, BYD Company Limited and CHERY AUTO have stronger defensiveness. Supply chain companies with EU capacity, such as Contemporary Amperex Technology (03750), Fuyao Glass Industry Group (03606), MINTH GROUP (00425), Zhejiang Sanhua Intelligent Controls (02050), Ningbo Tuopu Group (601689.SH), and Changzhou Xingyu Automotive Lighting Systems (601799.SH), also have competitive advantages. The bank noted that the above consensus is a political agreement, with specific quotas, monitoring, and enforcement rules still under negotiation. The EU retains the right to review and initiate investigations if export volumes surge, while anti-subsidy and price undertaking negotiations for battery electric vehicles remain independent and unresolved. The bank believes that battery electric vehicle exporters still face uncertain risk factors.