In 2024, traditional foreign automakers faced an exit from China's car market. However, 2025 seems to be the year when local electric car companies can solidify their leadership. Nomura's 2025 global autos outlook, published on December 4, pointed out how BYD has been taking the lead. As of October 2023, BYD has captured 16% of the entire Chinese auto market, up from 12% in 2023. This is based on year-to-date unit sales. The Hong Kong-traded automaker is Nomura's top pick for the China car market, with a buy rating and a price target of 375 Hong Kong dollars ($48.20), offering just over 3% upside from Friday's close. In the third quarter, BYD's revenue surpassed Tesla's on a quarterly basis for the first time. Moreover, BYD produced more cars than Elon Musk's automaker for the second consecutive year. Although Tesla still makes more battery-only cars than BYD, whose hybrid vehicles account for at least half of sales, Tesla's cars are in a higher price range. According to CNBC calculations of China Passenger Car Association Data, Tesla's China sales fell by 4.3% in November compared to the previous year, while BYD saw a 67% surge.BYD's Dominance
BYD is far ahead of its competitors. The second-largest player by China market share, Geely, only has 8%. HSBC analysts raised their price target on Hong Kong-traded Geely Automobile to 19.30 HKD in late November, nearly 31% higher than Friday's close. They believe the company is on track to exceed its full-year target of 2 million units, with electric vehicle (EV) penetration likely to reach 40%, supported by the strong performance of newly launched models. They expect Geely to grow sales by 22% next year to 2.6 million units. Geely owns U.S.-listed electric car company Zeekr and other auto brands like Swedish brand Volvo, which it acquired from Ford in 2010.Challenges for Traditional Automakers
Other traditional automakers, both domestic and foreign, have struggled in China as the world's largest auto market has rapidly shifted to battery-only and hybrid-powered cars. General Motors announced last week that it expects to incur billions of dollars in costs as it restructures its joint venture with SAIC Motor Corp. in China, including plans to close plants. SAIC GM Wuling, a local GM joint venture, had 3% of China's auto market as of October, according to Nomura, and 6% of the new energy vehicle segment.Chinese Electric Car Startups
Chinese electric car startups still account for a small fraction of the domestic market compared to top players BYD and Geely. One of Citi analysts' buy-rated plays is Hong Kong-listed Yongda, which operates stores for several new energy vehicle brands in China, including Huawei's Aito. Although Huawei emphasizes it doesn't make cars, it has partnered with traditional automakers to sell battery-only and hybrid-powered vehicles with its in-car entertainment system, driver-assist technology, and other software. Citi analysts said that according to conversations with Yongda management on December 4, cars running Huawei's automobile system can reach 1 million unit sales next year, above the 700,000 unit sales forecast internally. Yongda expects the total number of Huawei-authorized stores to exceed 20 by early next year, up from 8 currently. The firm has a price target of 2.98 HKD on Yongda, nearly 47% above Friday's close. Yongda also operates electric car stores for Xiaomi and Xpeng.Among the publicly traded Chinese electric car startups, Citi analysts have buy ratings on Nio and Leapmotor but not Xpeng or Li Auto, both rated neutral. Citi said in a late November report that Hong Kong-listed Leapmotor is spending more efficiently on research and development than its peers, at around 7,400 yuan ($1,017) per car. In contrast, Xpeng spends 25,900 yuan, Nio spends 26,900 yuan, and Li Auto spends 21,000 yuan. The analysts raised their price target on Leapmotor from 44.20 HKD to 45.10 HKD, nearly 62% above Friday's close. Citi expects Nio's U.S.-traded shares to nearly double from current levels to $8.90. In a December 3 meeting with Nio, Citi said the company aims to reach breakeven at a group level in 2026 by limiting research and development spending increases to less than 10% a year and increasing car deliveries. The company aims to boost sales of its premium Nio brand by 10% to 20% next year and accelerate sales of its recently launched lower-priced Onvo brand to 20,000 a month in March. After two new SUVs launch in the second half of next year, the automaker expects Onvo monthly sales to reach 30,000 to 50,000 vehicles.
