Goldman Sachs previews 2Q26 China NEV OEMs: profit improvement at BYD, Leapmotor, and Nio; pressure on XPeng and Li Auto

Overview

Goldman Sachs provides a 2Q26 earnings preview for the China NEV OEMs under coverage. The report expects divergent trends within the sector: Leapmotor and Nio are expected to have the strongest sales growth, while BYD's sales decline modestly YoY but improve significantly from 1Q26; XPeng's sales are flat and Li Auto's sales decline. BYD and Nio are expected to benefit from contributions from premium models, second-generation blade battery models, and overseas sales, while Li Auto remains under pressure due to product mix.

Core views

The core view is that profit performance will diverge significantly. BYD, Leapmotor, and Nio are expected to benefit from sales recovery, improved product mix, and operating leverage, with 2Q26 net profit or non-IFRS/non-GAAP net profit expected to grow 34%, 41%, and 102% YoY, respectively. In contrast, XPeng is expected to see a significant earnings decline due to continued increases in general AI R&D investment, while Li Auto is expected to decline due to weak sales, inventory destocking, and lower vehicle gross margin.

Analysis framework

The report previews each company's 2Q26 performance based on sales volume, ASP, gross margin, operating expenses, EBIT, and net profit. It incorporates monthly sales, new-model cadence, domestic market share, overseas sales, and changes in raw material costs to fine-tune 2026E-2028E earnings forecasts, and uses a 12-month DCF valuation framework to derive target prices.

Methodology notes

• Valuation methodsDCF

  12-month DCF target price

  Target prices for BYD, Leapmotor, Nio, XPeng, and Li Auto are all based on the DCF method; the report discloses WACC and perpetual growth rate assumptions for each company.

• Factor analysisGS Factor Profile

  Growth, financial returns, valuation multiples, and composite scores

  Goldman's factor framework evaluates growth, financial returns, valuation multiples, and composite attributes using covered stocks and peer comparisons.

• Trading scenarioM&A Rank

  Probability score for potential M&A targets

  Goldman Sachs uses a score from 1 to 3 to assess the probability that a company becomes an acquisition target. Companies with high or medium probabilities may have an M&A component incorporated into their target prices.

• DatabaseQuantum

  Goldman Sachs proprietary financial database

  Quantum provides historical financial statements, forecasts, and ratios for in-depth single-company analysis and cross-company comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BYD Co. (002594.SZ / 1211.HK)

  Core covered stock, rated Buy - on CL

  Strengths

  Strong YoY overseas sales growth, with second-generation blade battery models and improved product mix supporting ASP and gross margin.

  Weaknesses

  Domestic retail sales remain down YoY, and competitive pressure persists.

  Comparison

  Compared with XPeng and Li Auto, BYD has stronger earnings growth and greater target price stability.

  Risks

  Intensifying EV competition, slower-than-expected overseas expansion, and lower-than-expected external battery sales.

• Zhejiang Leapmotor Technology (9863.HK)

  Covered stock, rated Buy

  Strengths

  Sales grew 57% YoY and overseas sales grew 479% YoY, with good operating expense control.

  Weaknesses

  A declining proportion of high-margin non-vehicle revenue may pressure overall gross margin.

  Comparison

  Sales growth is among the strongest across covered companies, with notable earnings improvement leverage.

  Risks

  Weaker-than-expected China demand, share loss due to competition, raw material cost pressure, uncertainty surrounding the Stellantis partnership, and overseas policy and tariff risks.

• NIO Inc. (NIO / 9866.HK)

  Covered stock, rated Buy

  Strengths

  ES8 and ES9 models are driving improvements in sales and ASP, while vehicle gross margin improved 7.2pp YoY.

  Weaknesses

  Operating margin remains negative, and cost inflation began to be fully reflected in the second quarter.

  Comparison

  Nio is among the leaders in YoY profit improvement across covered companies, with the target price maintained at US$7/HK$55.

  Risks

  Lower-than-expected sales, greater-than-expected price reductions, and higher-than-expected cost inflation.

• XPeng Inc. (XPEV / 9868.HK)

  Covered stock, rated Buy

  Strengths

  A strong product cycle is still expected in 2H26, with the Mona SUV and large SUV models potentially driving sales and market share.

  Weaknesses

  2Q26 sales were flat YoY, general AI R&D investment continues to increase, and non-GAAP net profit is expected to decline 137% YoY.

  Comparison

  The stock remains rated Buy, but the target price was lowered due to reduced delivery and sales forecasts.

  Risks

  Lower-than-expected sales, worsening price competition, and weaker-than-expected market demand.

• Li Auto Inc. (LI / 2015.HK)

  Covered stock, rated Neutral

  Strengths

  L-series facelifts have generated some higher transaction prices, while expense control and progress in embodied AI could represent upside risks.

  Weaknesses

  2Q26 sales declined 11% YoY, vehicle gross margin is expected to decline 9.4pp YoY, and non-GAAP net profit is expected to decline 213% YoY.

  Comparison

  Li Auto faces the most pronounced near-term earnings pressure among covered companies, with a lower rating than other Buy-rated stocks.

  Risks

  Lower-than-expected industry demand, intensifying competition, and raw material cost inflation.

Key data

• BYD 2Q26E net profitRmb8.496bn, +33.7% YoYGross margin is expected to be 18.1%, up 1.9pp YoY.
• BYD target priceRmb137/HK$134The 12-month DCF target price is unchanged.
• Leapmotor 2Q26E sales+57% YoYDriven by new models such as the A10 and D19 and overseas sales growth.
• Nio 2Q26E non-GAAP net profitRmb89mn, +102.2% YoYVehicle gross margin is expected to be 17.5%, up 7.2pp YoY.
• XPeng target priceUS$20/HK$77Lowered from US$23/HK$89.
• Li Auto target priceUS$15.7/HK$61Lowered from US$18/HK$70.

Impact & implications

The implication for portfolios is that investors should not treat the China NEV sector as a single allocation in 2Q26, but should distinguish among sales recovery, product mix, overseas expansion, and R&D investment phases. Earnings leverage is clearer at BYD, Leapmotor, and Nio; although XPeng remains rated Buy, its near-term earnings and delivery expectations have been downgraded; Li Auto is rated Neutral, with its fundamental recovery still requiring observation.

Risks

• Further intensification of NEV competition could reduce prices and gross margins.
• Weaker-than-expected demand in China could affect sales and operating leverage.
• Uncertainty surrounding overseas expansion, tariffs, and policy could affect export growth.
• Raw material cost inflation could continue to pressure vehicle gross margins.
• XPeng's general AI R&D investment and Li Auto's product transition could cause short-term earnings volatility.

What to watch

• BYD's August 28 earnings release and the sustainability of overseas sales.
• Leapmotor's August 18 earnings release and delivery performance of new models A10 and D19.
• Nio's September 2 earnings release, ES8 and ES9 orders, and gross margin performance.
• XPeng's new-model launch cadence in 2H26 and whether Mona-series orders cannibalize each other.
• Li Auto's sales recovery following L-series facelifts, i6 mix, and changes in vehicle gross margin.