CITIC Construction Investment: Automotive sector is in the off-season with weak performance; pessimistic sales expectations have bottomed out

China Securities Journal Research Report points out that the current automotive sector is in a low season with weak performance, but recently, market pessimism about sales expectations has gradually dulled, with pessimistic outlooks bottoming out. Structurally, there is an improvement in anti-inflation and overseas expansion expectations, autonomous driving policies are being implemented with catalytic effects, and Tesla V3 humanoid robots are approaching launch. We maintain our previous view that in 2026, the car replacement policy will support domestic demand, benefiting commercial vehicles even more; structurally, the commercialization of AI on the demand side (autonomous driving and robots) achieving a 0-1 breakthrough will bring valuation elasticity.

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CITIC Construction | Business Cycle Expectations May Have Bottomed Out, Tesla Annual Report Reinforces Physical AI Turning Point

The current automotive sector is in a low season with weak performance, but recently, market pessimism about sales expectations has gradually dulled, with pessimistic outlooks bottoming out. Structurally, there is an improvement in anti-inflation and overseas expansion expectations, autonomous driving policies are being implemented with catalytic effects, and Tesla V3 humanoid robots are approaching launch. We maintain our previous view that in 2026, the car replacement policy will support domestic demand, benefiting commercial vehicles even more; structurally, the commercialization of AI on the demand side (autonomous driving and robots) achieving a 0-1 breakthrough will bring valuation elasticity.

The whole vehicle sector: The prosperity continues with “weak expectations, weak reality,” anti-inflation efforts continue, and export expectations improve. Recently, sales are in a low season, which puts pressure on prosperity, but market expectations may have dulled, making the February sales less sensitive. The future stock price turning point will depend on the weak reality. This week, Tesla released its annual report, showing that Q4 2025 gross profit achieved year-over-year growth, with the gross margin reaching a two-year high. The improvement in automotive gross margin is mainly due to Model YL boosting the average selling price in China (with record sales in Asia-Pacific) and increased FSD subscriptions; capital expenditure in 2026 will exceed $20 billion, mainly focusing on computing infrastructure and new factory capacity expansion. The company announced the permanent discontinuation of flagship models Model S and Model X. In the first half of 2026, key focus will be on mass production of North American Semi and Cybertruck models.

Autonomous Driving: 2026 is expected to become the year of commercialized autonomous driving. Tesla’s FSD subscription rate has continued to increase with the V14 rollout. In Q1-Q4 2025, subscriptions were approximately 800,000, 900,000, 1 million, and 1.1 million units respectively. Starting in 2026, FSD subscriptions will switch from outright purchase to monthly subscriptions, currently priced at $99/month. By the end of 2025, FSD has accumulated over 7 billion miles (about 11.5 billion km) driven, and local deployment in China and Europe will require regulatory approval. The strategic focus is accelerating from hardware sales to physical AI, including FSD iterations, Robotaxi services, mass production of Cybertruck, and the finalization and mass production of Optimus, with continued investment in AI cloud computing power.

Humanoid Robots: The latest progress of T Chain’s core suppliers has gradually been implemented. This week, the robot sector experienced adjustments, with significantly reduced trading volume and interference from irrational rumors. In the early stages of emerging industries, sectors often experience rapid rises and falls, but long-term, they still offer significant excess returns. Future catalysts on T Chain include: the release of Gen3 finalization in Q1 2025, overseas capacity building and mass production in the second half of the year, and the listing application of Yushu, which could also serve as an important event catalyst. We favor three types of targets for allocation: high-probability Tesla-linked assets, incremental segments with technological iteration upgrades, and high-performing undervalued stocks with expected divergence; other domestically produced chains with capacity expansion potential like Yushu.

Commercial Vehicles: In 2026, heavy trucks and buses are expected to benefit from policy support for domestic demand and sustained overseas expansion. It is recommended to focus on undervalued leading stocks with strong performance.

(Source: Jiemian News)