China Mobility Tech: 3Q26 ADRs Preview: Weaker domestic demand, lower government support, higher R&D

We preview 3Q26 results for our covered China mobility tech ADR companies. Overall, we see volume pressure from worsening domestic demand for both OEMs and suppliers, coupled with higher costs from the battery consumption tax starting September 2026 and the EV export tax rebate reduction from April 2027; we therefore revise down our earnings estimates and lower our 12-month target prices. For 3Q26, most OEMs and suppliers are under pressure from continuously weakening domestic demand, with only selective companies able to grow volumes and expand share through new technology and product launches. ASP, gross margin, EBIT and net profit trends diverge, with higher R&D spending and product mix shifts weighing on some companies' profitability. We also revise our industry model to factor in weaker domestic retail demand and stronger export trends, adjusting wholesale volume forecasts accordingly. At the stock level, we expect BYD and Nio to deliver profit growth on volume gains and margin im