Goldman Sachs expects divergent 1Q26 results for China auto ADRs, with new model cycles as the core variable for sales, ASP, and margins

Overview

This report is Goldman Sachs' 1Q26 earnings preview for its covered China auto ADR names, focusing on changes in sales, ASP, gross margin, operating margin, and earnings forecasts for XPeng, Li Auto, NIO, and Hesai. The core conclusion is that the launch and ramp-up pace of new models are creating significant divergence among the covered companies: XPeng, lacking all-new models, faces short-term sales pressure but improved product mix; Li Auto gains volume contribution from the i6 but suffers margin pressure from pricing and costs; NIO sees a recovery in sales and margins driven by the ES8 facelift; and Hesai benefits from LiDAR penetration and robotics use cases driving high shipment growth, but lower prices and product mix changes suppress margins.

Core views

Goldman Sachs believes 1Q26 is not driven by a single industry beta but by structural divergence driven by company-specific product cycles. XPeng remains supported over the long term by domestic share gains and overseas expansion; Li Auto faces greater near-term margin pressure and needs monitoring on the pace of high-margin facelifts and expense control; NIO is improving due to a higher mix of the high-margin ES8 and expense optimization; Hesai has the characteristics of LiDAR infrastructure and a new robotics product narrative, but needs to absorb ASP pressure from annual price cuts and product mix changes.

Analysis framework

The report uses 1Q26 deliveries, model mix, ASP, vehicle gross margin, operating expenses, and operating margin as the main analytical framework to preview quarterly results for the covered companies. It also recalibrates 2026E-2030E earnings forecasts and 12-month target prices based on 2025 annual reports, 1Q26 model delivery data, management guidance, order momentum, and Goldman Sachs model updates.

Methodology notes

• Valuation methodDCF

  12-month DCF target price

  Target prices for XPeng, Li Auto, and NIO are based on a 12-month DCF methodology, with key parameters including WACC and terminal growth rate; the report discloses WACC of 11.8% and TGR of 3.0% for XPeng, WACC of 11.3% and TGR of 3.5% for Li Auto, and WACC of 11.8% and TGR of 3.5% for NIO.

• Valuation methodP/E multiple

  Discounted forward P/E valuation

  Hesai's target price is based on 20x 2030E non-GAAP EPS, discounted back to 2026E at an 11% cost of equity.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factors

  Goldman Sachs' factor framework compares individual stocks with the market and industry peers across growth, financial returns, valuation multiples, and composite percentiles. Growth is based on forward sales, EBITDA, and EPS growth; financial returns are based on ROE, ROCE, and CROCI; and multiples are based on metrics such as P/E, P/B, and EV/EBITDA.

Asset mapping & comparison

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

• XPeng Inc. (XPEV/9868.HK)

  Covered company; NEV manufacturer; Buy rating

  Strengths

  The upcoming GX and two MONA SUVs are planned for launch in 2Q26 and 2H26, targeting the mass market and likely to drive sales growth and share gains; the company is also supported over the long term by domestic share gains and overseas expansion.

  Weaknesses

  The lack of all-new models in 1Q26 is expected to lead to a 33% YoY sales decline; continued AI-related R&D investment weighs on operating margin.

  Comparison

  Compared with Li Auto, XPeng faces greater sales pressure in 1Q26, but ASP and vehicle gross margin improve year over year; compared with NIO, the near-term boost from new models is weaker.

  Risks

  Sales below expectations, worsening price competition, and weaker-than-expected market demand.

• Li Auto Inc. (LI/2015.HK)

  Covered company; NEV manufacturer; Neutral rating

  Strengths

  The ramp-up of the i6 drives slight sales growth in 1Q26, with market share improving both year over year and quarter over quarter.

  Weaknesses

  Declining ASP, raw material cost inflation, and a slower pace of high-margin facelifts are expected to drive a sharp drop in vehicle gross margin.

  Comparison

  Compared with XPeng and NIO, Li Auto's sales are more stable, but margin pressure is more pronounced; compared with NIO, product mix improvement is insufficient.

  Risks

  Industry demand below expectations, intensified competition, and raw material cost inflation; upside risks include better-than-expected sales, improved expense control, and faster progress in embodied intelligence.

• NIO Inc. (NIO/9866.HK)

  Covered company; NEV manufacturer; Neutral rating

  Strengths

  The ES8 facelift ramp-up drives simultaneous improvement in sales, ASP, and vehicle gross margin; the company is integrating R&D and marketing resources across its three brands, and expense optimization helps repair operating margin.

  Weaknesses

  The rating remains Neutral, indicating that the market still needs to verify the sustainability of continued order momentum, price stability, and earnings recovery.

  Comparison

  Compared with XPeng and Li Auto, NIO shows the most obvious improvement in 1Q26 sales and margins; however, target price upside is relatively limited.

  Risks

  Sales below expectations and greater-than-expected price cuts; upside risks include stronger policy support and better-than-expected order momentum.

• Hesai Group (HSAI/2525.HK)

  Covered company; LiDAR supplier; Buy rating

  Strengths

  LiDAR penetration is accelerating in mass-market vehicle models and robotics scenarios, with 1Q26 sales expected to grow 118% YoY; the company launched the Picasso chip platform and Kosmo spatial intelligence AI hardware, reinforcing its positioning as robotics infrastructure.

  Weaknesses

  Annual price cuts and product mix changes are expected to lead to a 41% YoY decline in blended ASP and a 2.2 percentage point YoY drop in gross margin.

  Comparison

  Compared with automakers, Hesai's growth is more driven by LiDAR penetration and robotics applications, but pricing pressure is also more direct.

  Risks

  Slower-than-expected LiDAR adoption, intensified competition, customer pricing pressure, and policy risk.

Key data

• XPeng 1Q26 salesYoY -33%No all-new model launch, while 1Q25 had a high MONA M03 sales base.
• XPeng 1Q26 vehicle gross margin11.7%, YoY +1.3 percentage pointsA lower mix of the low-priced, low-margin MONA M03 drove ASP up 7% YoY.
• Li Auto 1Q26 salesYoY +2%Contribution from the i6 ramp-up was partly offset by the lack of facelifts in the L series.
• Li Auto 1Q26 vehicle gross margin7.0%, YoY -12.8 percentage pointsASP down 13% YoY combined with raw material cost inflation.
• NIO 1Q26 salesYoY +98%The ES8 facelift ramped up from a low base.
• NIO 1Q26 vehicle gross margin18.2%, YoY +8.0 percentage pointsA higher mix of the high-margin ES8, while the impact of raw material cost inflation was not yet obvious in the first quarter.
• Hesai 1Q26 salesYoY +118%Automotive LiDAR is penetrating mass-market models, while robotics applications are scaling up.
• Hesai 1Q26 gross margin39.5%, YoY -2.2 percentage pointsAnnual price cuts and product mix changes led to ASP down 41% YoY.
• XPeng target priceUS$22/HK$85Maintain Buy rating, with the 12-month DCF target price unchanged.
• Hesai target priceUS$35/HK$273Maintain Buy rating, with the target price unchanged.

Impact & implications

The investment implication is that the market needs to differentiate more between product cycles and model mix when pricing China's NEV value chain, rather than looking only at total industry sales. Goldman Sachs continues to rate XPeng and Hesai Buy, reflecting their upcoming model cycle and LiDAR/robotics application expansion, respectively; Li Auto and NIO are rated Neutral, reflecting that their near-term margin, competition, and execution risks still need to be validated.

Risks

• Demand in the new energy vehicle industry is weaker than expected.
• Price competition worsens or price cuts exceed expectations.
• Raw material cost inflation compresses vehicle gross margins.
• New model launches, delivery ramp-up, or order conversion fall short of expectations.
• LiDAR adoption is slower than expected, or customer annual price-cut pressure exceeds expectations.
• Expense control and the pace of R&D investment affect operating margin recovery.

What to watch

• The launch and order performance of XPeng's GX in 2Q26 and two MONA SUVs in 2H26.
• Li Auto's continued i6 ramp-up and whether the drag from the lack of facelifts in the L series on sales and margins persists.
• The sustainability of NIO ES8 facelift orders, the mix of high-margin models, and the effectiveness of three-brand resource integration.
• The penetration rate of Hesai's automotive LiDAR in mass-market vehicle models, and the impact of the robotics business on sales and ASP.
• 1Q26 earnings release dates: Hesai on May 19, XPeng on May 21, Li Auto on May 29, and NIO on June 3.
• Deviation of ASP, vehicle gross margin, operating expense ratio, and non-GAAP net profit versus Goldman Sachs expectations.