Asia mobility technology call notes that industry beta is expected to improve around September and 2Q26 may be the margin trough for most companies

Overview

This report summarizes Goldman Sachs' Asia mobility tech company calls held on July 2-3, with participants including automakers, new energy vehicle companies, auto parts, lidar, and recreational vehicle-related firms. The core conclusion is that domestic passenger vehicle demand in 1H26 was significantly weaker than expected at the start of the year, but management teams broadly expect 2H26 to improve versus the prior quarter; on the profitability side, most think the margin trough is near 2Q26, with subsequent improvement dependent on recovery in sales, higher overseas mix, pricing power, and cost control.

Core views

The report's core views include four points: first, domestic passenger vehicle industry beta may improve around September, with the possibility of month-over-month year-on-year turn positive before year-end; second, most companies see the main margin pressure concentrated in 2Q26, with expected quarter-by-quarter recovery afterward; third, Europe is the core offshore expansion focus for Chinese automakers, but tariffs, IAA, localization capacity, and JV structure are key variables; fourth, automakers are keeping capex relatively restrained but will continue to increase intelligent-driving R&D spend.

Analysis framework

The report uses a summarized management-feedback approach from conference calls, comparing cross-company views on demand outlook, volume guidance, earnings inflection points, overseas strategy, cost pressure, and R&D spend, and distills industry trends in combination with company-level orders, capacity, product pipeline, and regional market strategy.

Methodology notes

• industry cyclemanagement expectation cross-verification

  Assess industry beta and the earnings-cycle position through multiple companies' management commentary on demand, volumes, and margins.

  The report is not a single-company financial model refresh; it aggregates feedback from nine management teams and uses highly consistent signals to identify 2H26 demand improvement and a 2Q26 margin trough.

• profitability analysismargin trough and recovery path

  Treat vehicle volume scale, cost inflation, FX, product price increases, and overseas revenue mix as the primary drivers of margin changes.

  Most companies view 2Q26 as the margin trough, with recovery paths including higher volumes, higher overseas gross profits, price increases, and supply-chain cost reductions.

Asset mapping & comparison

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

• BYD (002594.SZ/1211.HK)

  The report notes it delivered over 400k units in June and exported over 170k units, and has a strong product matrix and cost advantage.

  Strengths

  Strong exports, vertical integration, ultra-fast charging technology, upgraded premium-model configurations.

  Weaknesses

  Facing pressure from lithium carbonate, storage costs, and European tariffs.

  Comparison

  Management emphasized that even if European BEV tariffs rise, the company is still gaining share in Europe.

  Risks

  Overseas trade barriers, cost inflation, and slower domestic demand recovery than expected.

• Chery Automobile Co. (9973.HK)

  Not covered; overseas sales and profit contribution are key focuses of the report.

  Strengths

  Strong export growth, higher overseas gross margin, and a European goal of 400k+ units.

  Weaknesses

  Domestic sales declined sharply year-on-year, and 2Q26-3Q26 may be a profitability trough.

  Comparison

  Compared with the domestic market, the company is more dependent on high-margin overseas business and new-model cycles.

  Risks

  Europe localization, tariffs, overseas channel execution, and weak domestic demand.

• Great Wall Motor (601633.SS/2333.HK)

  Not covered; the report focuses on its domestic demand, product pipeline, and overseas local manufacturing.

  Strengths

  Rich product lines with Haval, Wey, Tank, and Ora, with local production in Brazil, Thailand, and Russia.

  Weaknesses

  Domestic targets are more challenged, with passenger car market down about 20% from Jan to May.

  Comparison

  Local production saves several thousand yuan per vehicle versus CBU imports.

  Risks

  Domestic recovery slower than expected, raw material and storage chip costs, and overseas capacity ramp-up.

• Fuyao Glass Industry Group (600660.SS/3606.HK)

  Buy; the report expects 2Q26 to stabilize and improvement in 2H26.

  Strengths

  Rising overseas market share, higher share of higher-value products, and relatively strong cost and expense control.

  Weaknesses

  FX loss, depreciation/amortization pressure, and labor cost pressure remain.

  Comparison

  Market share increased from 25% in 2020 to 37% in 2025, and is expected to rise by 2-3 percentage points annually over the next three to four years.

  Risks

  Aluminum trim business challenges, lengthened capacity expansion cycle, and overseas demand volatility.

• Leapmotor (9863.HK)

  Buy; the report expects margin improvement in 2Q.

  Strengths

  Sales guidance held, European channels supported by Stellantis, ADAS capability approaching top-tier peers.

  Weaknesses

  Raw material price volatility and weak demand are creating pressure.

  Comparison

  Europe accounted for about 80% of overseas sales, and may decline to roughly two-thirds as other markets expand.

  Risks

  Overseas partnership execution, European regulation, localized manufacturing, and cost pressure.

• Robosense (2498.HK)

  Not covered; the report focuses on its lidar, proprietary chips, and physical AI innovation.

  Strengths

  ADAS shipments are expected to grow 2-3x year-on-year, robotics gross margin is expected at 30%-40%, and in-house SPAD-SoC helps reduce costs.

  Weaknesses

  1H26 had stronger profitability pressure, with Q2 robotics contribution relatively low.

  Comparison

  ADAS component gross margins are expected to remain stable at 20% over the long term, while robotics margins are higher.

  Risks

  Customer demand volatility, ASP declines, and risks in scaling technology and converting design wins.

Key data

• Domestic passenger car retail demand1H26 yoy approximately -20%Management said this was weaker than the 2026 expectation of +5% to +1% year-on-year growth.
• Industry recovery timingaround SeptemberMultiple companies expect the year-on-year decline to narrow from September and potentially turn positive before year-end.
• Chery 1H26 production and sales1.28mn units, +8% yoyExports 910k units, +79% yoy; domestic sales 360k units, -41% yoy.
• Chery overseas per-vehicle profitRmb 10k-11kManagement stated that 1Q26 overseas sales gross margins are usually above 20%.
• Great Wall full-year sales target1.8mn unitsThe internal split of 1.2mn domestic and 0.6mn overseas is expected to be adjusted, with the actual overseas target projected above 0.6mn.
• Leapmotor 2026 sales guidance1mn unitsOverseas sales guidance remains 150k-200k units, with a long-term target of 3-5mn units annually.
• Voyah full-year sales guidance200k-250k unitsManagement says the full-year target is under pressure, and Europe remains the most critical overseas market.
• Taotao 2Q26 profit forecastRmb520mn-560mn, +52%-64% yoyU.S. market revenue share is about 80%, and LSEV and ATV are strategic products.
• Robosense ADAS delivery guidance1.2mn-1.8mn unitsThis is about 2-3 times higher than 600k units last year; robotics business shipment guidance is 800k-1mn units.

Impact & implications

The report's implications for the Asian auto and mobility tech sector are constructive but still need to be viewed selectively. If the anticipated domestic passenger vehicle demand recovery after September materializes and the 2Q26 margin trough is confirmed, automakers and core parts names could benefit from profitability-forecast normalization. Overseas expansion, European localization, and intelligent-driving R&D are likely to become key drivers of medium- to long-term competitive differentiation, but near-term uncertainty remains from cost inflation, FX, tariffs, and demand.

Risks

• Domestic passenger vehicle demand recovers slower than management expects.
• The 2Q26 margin trough assumption proves invalid, with cost or pricing pressure continuing.
• European tariffs, IAA, or tighter localization requirements increase the cost of overseas expansion.
• Volatility in raw materials, storage chips, FX, and logistics costs impacts gross margins.
• Increases in intelligent driving and lidar R&D spend but uncertain commercialization returns.
• Execution progress on overseas JVs, local production, and channel buildout falls behind expectations.

What to watch

• Domestic passenger vehicle retail year-on-year change during the traditional high season of September to October.
• Whether each company's gross margin in 2Q26 and 3Q26 actually bottoms or improves as management suggests.
• The implementation pace of European PHEV tariffs, IAA, and localization production requirements.
• Overseas sales and localization progress at Chery, Great Wall, Leapmotor, and Voyah.
• Fuyao Glass overseas share gains and recovery in the aluminum trim business.
• Robosense ADAS and robotics business shipments, and volume ramp for proprietary chips such as Phoenix and Peacock.