Revisiting cyclical framework: industry consolidation unlikely in near term, momentum of earnings cuts accelerating

Research evidence excerpt

Revisiting cyclical framework: industry consolidation unlikely in near term, momentum of earnings cuts accelerating

Equity Research

24 June 2026 | 7:00AM CST

CHINA MOBILITY TECH

Revisiting cyclical framework: industry consolidation unlikely in near

term, momentum of earnings cuts accelerating

We revisit our cyclical framework for the China OEM space amid a sharply declining Tina Hou

+86(21)2401-8694 |

domestic market (volumes -19% YTD), partially offset by a strong acceleration in tina.hou@goldmansachs.cn

Goldman Sachs (China) Securities

exports (+70% YTD). Our framework requires three parameters to be hit for industry Company Limited

consolidation to happen: (1) OEMs at cash cost level; (2) management Jenny Du

capitulating on profitability & expansion; (3) OEMs’ balance sheets turning to +86(21)2401-8978jenny.x.du@goldmansachs.cn|

net debt. GoldmanCompany SachsLimited(China) Securities

Our assessment shows:

n Industry consolidation unlikely in the near term. As shown in Exhibit 1, as of

1Q26: (1) The majority (10 out of 14) of OEMs are above cash cost level; (2)

Management outlooks are mixed on volume/margin/capacity; (3) Only 1 out of

14 OEMs are in a net debt position. Looking ahead, consensus estimates assume

more OEMs will turn EBITDA positive in 2027, likely driven by overseas expansion

(which offsets domestic decline) and internal organizational restructuring

exercises to cut operating expenses, implying no industry consolidation in the

near term.

n Momentum of earnings cuts accelerating. As illustrated in Exhibit 2, aggregate

2026E/2027E EBITDA consensus estimates for China OEMs have undergone four

consecutive rounds of cuts over the last year, but the majority are still above cash

cost levels. The momentum of cuts has been accelerating, with the last coming in