Huatai Securities: Leading passenger car companies are making smooth progress in globalization, and domestic profitability is expected to recover.

Huatai Securities research report points out that on October 9, China and the EU reached an understanding on hybrid vehicle trade in a manner consistent with WTO rules. We believe this round of progress temporarily alleviates the risk of escalating auto trade frictions. Drawing on the history of Japan-EU auto trade negotiations, localized production helps ease export constraints. We suggest paying attention to the outcome of the European Council summit on October 15-16 regarding the review of the hybrid vehicle proposal. We believe that institutional holdings in the passenger vehicle sector are at a five-year low, leading passenger vehicle companies are making smooth progress in globalization, and domestic profitability is expected to recover.