New Energy Vehicle Industry to See Turning Point in 2026: Morgan Stanley Upgrades Rating for Guangzhou Automobile Group and Zhongsheng

Morgan Stanley has released a research report stating that China's government has recently rolled out a series of "anti-cyclical" policies to curb irrational competition in the new energy vehicle industry, which is facing oversupply and price competition. The firm believes that these policies and structural reforms at the enterprise level will drive the industry towards a turning point in 2026, with related stocks expected to reflect this expectation from the second half of 2025 onwards.

Morgan Stanley has upgraded its investment rating for Guangzhou Automobile Group (02238, 601238.SH) from "reduce" to "buy", targeting a price of HKD 5.0; and for A-shares, the target price is raised from CNY 3.5 to CNY 11. Zhongsheng (00881) has also been upgraded to "buy", with a target price of HKD 20. Both companies have the potential for self-improvement: Guangzhou Automobile Group will benefit from the improvement in product cycles and structural adjustments in 2026, while Zhongsheng will benefit from optimization of its dealership network. The firm's new targets imply an upside potential of 40% to 60%. Market exchange shows that most investors have shifted their focus to undervalued targets expected to be low-estimated in the second half of 2025, with the current competitive environment and weak profits leading to a lack of attention, making Guangzhou Automobile Group and Zhongsheng compatible with this investment logic.