China EVs – 2Q26 Preview

Research evidence excerpt

China EVs – 2Q26 Preview

IdeaMValuation Methodology and Risks

Li Auto Inc. (LI.O)

Probability-weighted DCF methodology. Weightings for our bull/base/bear case scenarios are

25%/50%/25% - the bull/bear weighting reflects the potential for the macro outlook to

improve/weaken and for sector competition to lessen/worsen. We factor in solid volume

growth over time as China's EV penetration increases. Key base case assumptions: WACC

15.9%, beta 2.1, long-term growth 3%.

Risks to Upside

n More rapid sales volume ramp-up of L series and, therefore, better-than-expected mar-

gins.

n Volume growth from BEV models.

n Faster-than-expected AD development.

Risks to Downside

n Unexpected disruption owing to component bottleneck.

n Delayed model launches.

n Moderating auto sales growth.

NIO Inc. (NIO.N)

Probability-weighted valuation methodology. We factor in solid volume growth over time and

expect net profit to break even in 2028. Key assumptions: WACC 17.8%, reflecting beta 2.4,

and long-term growth rate 3.0%. Weightings for our bull/base/bear case scenarios are

25%/50%/25% - the bull/bear weightings reflect the potential for the macro outlook to

improve/weaken and for sector competition to lessen/worsen.

n Introduction of new models

n Stronger-than-expected sales volume

n Better-than-expected improvements in operating efficiency

n Weaker-than-expected sales volume

n Lack of signs of efficiency improvement

n Moderating auto sales growth pressuring overall industry valuations

XPeng Inc. (XPEV.N)

Probability-weighted DCF methodology. Weightings for our bull (SoTP)/base/bear case sce-

narios are 30%/50%/20% - the bull/bear weighting reflects the potential for valuation

re-rating from non-vehicle business/the macro outlook to weaken and sector competition to

worsen.