2025年中国汽车零部件：拓展海外市场-零部件供应商走向全球化报告（英文版）-Morgan Stanley

Morganstanley

RESEARCHAsiaPacificInsight

November11,202509:01PMGMT

ChinaAutoParts

GrowingBeyondBorders—

PartsSuppliersGoingGlobal

ImprovingproductqualityyetdeterioratingdomesticmarginsarecausingChinapartssupplierstoseekglobalopportunities.Weprefersupplierswithlowbutexpanding(Xingyu)Desay))sizableandimproving(Minth)Keboda)overseasexposure.

DowngradeSanhuaandTuopuonslowingEVpartsoutlook.

Acceleratingglobalexpansion:ChinaIsautocompanieshavebeenexploring

offshoreopportunitiesforthepastdecade.Despitetariffuncertaintiesinrecentyears,autopartssuppliershaveacceleratedoverseasexpansion,movingfroma

focusonexportstooffshoring,amidde-globalization.WeexpectChinaautopartssupplierstoseizeaUS$240bnopportunityandsecure10%overseasmarketshare(+3.5ppt)by2030,with12%CAGRover2025-30.

Push-pulldynamicbehindglobalexpansion:Escalatingdomesticautoprice

competition,intensifyingmarginpressure,andunprofitablenewprojects,have

pushedsupplierstolimitdomesticexposure.Meanwhile,ChinaIssuppliershavebeenadvancingproductqualityandtechspecsinrecentyears,spurredonbyChinaIsearlyadoptionofsmartEVs.SupplierscannowoffercompetitivecomponentstoglobalOEMsfornewgenerationcars.NewprojectsfromChinaOEMsIoffshoreplantscanalsohelpsuppliersimprovecapacityutilization.

Fromexportstooverseasplants:Forautopartssuppliers,M&Abringsnew

customersandexportoffershighermargins.However,weexpectsuppliersto

ultimatelysetupoffshoreplantsamidstlocalcompetition.Popularsitesinclude

Mexico(forUSOEMs),EasternEuropeandNorthAfrica(forEuropeOEMs),aswellasSoutheastAsia.Wethinknetmarginsforoverseasplantscouldbe10-15pptlowerthanforexportsand0-5pptlowerthanforChinadomesticplants,duetohigher

costsfromlabor,land,regulation,etc.However,webelievemarginsshouldimproveovertime,andpartssupplierssuchasXingyu,Desay,Kebodaarealreadymakingthetransitionfromexportstooffshoring.

Stockimplications:Wethinktraditionalpartssuppliersarebetterpositionedtogoglobal,followedbysmarthardware,whileautonomoussoftwaremayfacehiccupsamidgeopoliticaltensions.XingyuandDesaycanaccelerateoverseasrevenue

backedbyprojectwins,despite<10%overseasexposuresofar.Minth,KebodaandFuyaocancontinuetogrowearningsamidtariffdisruptionsbackedbyincreasing

operationalefficiency.WedowngradebothSanhuaandTuoputoEW,asoptimismonhumanoidpotentialandoverseasexpansionarelargelypricedin,whileweseeEVpartsgrowthslowingintheUSfrom4Q25,andinChinafrom2026.

Withthisreport,ShelleyWangassumescoverageofMinth(0425.HK),Nexteer(1316.HK)andFuyao(600660.SS/3606.HK).

MorganStanleyAsiaLimited+

ShelleyWang,CFA

EquityAnalyst

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TimHsiao

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MorganStanleyEuropeS.E.,MadridBranch+

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EquityAnalyst

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Shinji.Kakiuchi@

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PeggyWang

ResearchAssociate

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Peggy.Pc.Wang@

MorganStanleyappreciatesyoursupportinthe2026Extel(ex-InstitutionalInvestor)

AsiaResearchSurvey.Requestyourballot

here.

ChinaAutos&SharedMobility

AsiaPacific

IndustryView

In-Line

Exhibit1:Rating

andPTchanges

CompanyTicker

RatingPricetarget

NewOld$NewOld

Xingyu601799.SS

OWOWRMB176173

Desay002920.SZ

OWOWRMB156160

Keboda603786.SS

OWOWRMB8971

Minth0425.HK

OWOWHKD4326

Sanhua002050.SZ

EWOWRMB4234

Tuopu601689.SS

EWOWRMB6267

Recodeal688800.SS

UWUWRMB5930

Hirain688326.SS

UWUWRMB7647

Source:MorganStanleyResearch

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthis

report.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

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AsiaPacificInsight

AdditionalAuthors

Exhibit2:Additionalauthors

MorganStanley&Co.Internationalplc+CindyHuang

EquityAnalyst

Cindy.Huang@

+44207425-2915

MorganStanley&Co.LLC

AndrewSPercoco

EquityAnalyst

Andrew.Percoco@

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MorganStanleyMUFGSecuritiesCo.,Ltd.+HirotoSegawa

EquityAnalyst

Hiroto.Segawa@

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MorganStanleyAsiaLimited+

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EquityAnalyst

Joey.Xu@

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StanleyWang

ResearchAssociate

Stanley.Wang@

+8522848-7382

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KeyCharts

Exhibit3:Chinaautoparts'averagenetmarginfellin2023-24

Chinaautopartsnetmargintrend

12.5%

12.0%

12.0%

11.6%

11.5%

11.0%

10.5%

10.0%

9.5%

10.6%10.6%

10.3%

9.9%

9.0%

201920202021202220232024

Source:Companydata,MorganStanleyResearch

Exhibit5:Chinaautopartsexportvaluegrowthacceleratedin2019-24

USDbnChinaautopartsexportvalue

140

120

100

80

60

40

20

0

2019-24CAGR

106

+10%

99

2014-19CAGR

+1%

91

84

67

63

6562616470

20142015201620172018201920202021202220232024

Source:ChinaCustomers,MorganStanleyResearch

Exhibit7:Traditionalpartsandsmarthardwaresuppliers(ingreen)arebetterpositionedtogoglobal

Readinessto

maketheproduct

Autoglass

Lightweightcasting

Autolighting

Thermalmodule

Autonomoussoftware

X-by-wirechassis

Autonomoushardware

Autonomouschip

Readinesstogooverseas

Auto-gradeMCU

Source:MorganStanleyResearch

Exhibit4:AutopartssuppliersinChinafinditdifficulttogetbothvolumeandmarginfromOEMcustomers

OEMcustomerpros&cons

Margin

innon-Chinavolume(+),margin(+)

GlobalOEMs

ChineseOEMs

inChina

volume(+),margin(-)

GlobalJVOEMsinChina

volume(-),margin(+)

Volume

Source:MorganStanleyResearch

Exhibit6:Chinaautosuppliershavehadloweroverseasexposurethangloballeaderssofar

Autosuppliersoverseasexposure(2024)

74%

JoysonDenso ZFMagnaBoschSanhua FuyaoKebodaTuopuDesayXingyu

59%53%

52%

51%45%

45%

32%

23%

6%

4%

0%20%40%60%80%

Source:Companydata,MorganStanleyResearch

Exhibit8:Offshoring(buildingoverseasplants)usuallyhaslowermarginsthanexport

Exportvsoffshoringmargincomps

30%

25%

15-20%

20%

15%

10%

10%

5-10%

5%

0%

ChinaplantExportOffshoringOperatingmarginNetmargin

Source:Companydata,MorganStanleyResearch

MorganStanleyResearch3

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4

InvestmentSummary

Acceleratingoverseasexpansionforpartssuppliers

Exportssize:China'sautocompanieshavebeenexploringoverseasopportunitiesforthepastdecade.China'svehicleexportsvalueroseat24%CAGRin2014-24toUS$117bn,anditsautopartsexportsvalueroseat5%CAGRoverthesameperiodtoUS$106bn.

Exportsgrowth:Forautopartssuppliers,overseasexpansionhasacceleratedinrecentyears,seenfrom:1)acceleratingexports,asChinaautopartsexportsvalueroseat10%CAGRin2019-24,upfrom1%CAGRin2014-19;2)increasingoffshoring(i.e.building

overseasplants)amid"de-globalization",inordertomitigatetariffrisks.

Exhibit9:Chinaautoexportsgrowthacceleratedin2019-24

USDbn

120

100

65

80

60

40

20

14

0

62

12

61

11

Chinaautoexportsvalue

64

14

70

16

67

16

63

16

99

91

84

90

54

33

106

117

20142015201620172018201920202021202220232024

——ChinaautopartsChinavehicles

Source:ChinaCustomers,MorganStanleyResearch

Wesee"push-pull"asthetwodriversbehindsuppliers'overseasexpansion

Thedilemma:TherehasbeenadilemmaintheChinamarket,asJVOEMcustomersofferdecentmarginsbutdecliningvolumes,whileChinaOEMcustomersoffervolumeupsidebutmargindownside.

Thepush:Ontheonehand,theescalatingautopricecompetitionintheChinadomesticmarket,andthusintensifyingmarginpressure,haspushedsupplierstolimittheirdomesticexposure,wherebiddingpricesfornewprojectscouldbetoolowtobeprofitable.GiventhisdeterioratingprofitabilityintheChinamarket,partssuppliershavebeenincentivisedtoseekopportunitieselsewhere.

Thepull:Ontheotherhand,China'ssuppliershavebeenadvancingproductqualityandtechspecsinrecentyears,thankstoChina'searlyadoptionofsmartEVs.Therefore,

supplierscanoffercompetitivecomponentstoglobalOEMsfortheirnewgenerationcars.NewprojectsfromChinaOEMs'overseasplantscanalsohelpsuppliersimprovetheir

capacityutilization.Givenhighervisibilityinoffshorecapacityutilization,partssuppliers

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havebeenencouragedbyglobalandChinaOEMstogoglobal.

Exhibit10:AutopartssuppliersinChinafinditdifficulttogetbothvolumeandmarginfromOEMcustomers

Margin

OEMcustomerpros&cons

GlobalOEMs

innon-Chinavolume(+),margin(+)

GlobalJVOEMsinChina

volume(-),margin(+)

ChineseOEMs

inChina

volume(+),margin(-)

Volume

Source:MorganStanleyResearch

Fromexportstooverseasplants

Overseasmargins:M&Abringsnewcustomersandexporthashighermargins.However,weexpectautopartssupplierstoultimatelysetupoffshoreplants.Weestimatenet

marginsofoffshoreplantscouldbe10-15pptlowerthanforexportsand0-5pptlowerthanforChinaIsdomesticplants,duetohighercostsassociatedwithlabor,land,

regulation,etc.However,thisshouldimproveovertime,andweseepartssupplierslikeXingyu,Desay,Kebodaarealreadymakingthetransitionfromexportstooffshoring.

Overseassites:PopularsitesincludeMexico(forUSOEMs),EasternEuropeorNorth

Africa(forEuropeOEMs),andSoutheastAsia.InMexico,laborandenergycostsare

similarorlowerthaninChina,buttherearechallengesinutilities,infrastructureand

regulations.ForEasternEuropeincountriessuchasSerbia,Poland,HungaryandCzechia,energycostsaremuchhigherthaninChina,butlaborcostsarelowerthanWestern

Europe.ForSoutheastAsiaincountriessuchasThailand,partssuppliershavemultipleopportunities,toserveJapanOEMs,orChinaOEMsIoverseasplants,orexporttoUSOEMs.

6

Exhibit11:Chinesesuppliers'offshoreplantsites

Source:Companydata,MorganStanleyResearch

Stockimplications

OWXingyu,Desay,Minth,Keboda:Welikesupplierswithtwotypesofoverseasexposure:

•Lowbutexpanding:Xingyu(601799.SS,OW)andDesay(002920.SZ,OW)canaccelerateoverseasrevenueonthebackofprojectwins,despite<10%overseasexposuresofar.

•Sizableandimproving:Minth(0425.HK,OW)andKeboda(603786.SS,OW)cancontinuetogrowearningsamidtariffdisruptionsonthebackofincreasing

operationalefficiency.

DowngradeSanhuaandTuopu:WedowngradeSanhua(002050.SZ)andTuopu

(601689.SS)toEW,asoptimismonhumanoidpotentialandoverseasexpansionhave

beenintheshareprices,butEVpartsgrowthisslowingdownintheUSfrom4Q25andinChinafrom2026.

EWFuyaoandXusheng:Fuyao(600660.SS/3606.HK)cancontinuetoimprove

profitabilityonitsUSplantandFYSAMbusiness,butthereislimitedmarketshareupsideinChina.Xusheng(603305.SS)transitionsfromexportstooffshoring,bysettingupplantsinMexicoandThailand.However,pricecompetitionforEVcastingpartsremainstough,

suppressingitsmarginrecovery.

UWRecodealandHirain:SharepricesofRecodeal(688800.SS)andHirain(688326.SS)ralliedonAIandsmartdriving-relatedbusinesspotential,butweseechallengestogainshareinthenewmarkets.

MorganStanleyResearch7

Exhibit12:Summaryofratingandpricetargetchanges

CompanyTicker

Rating

NewOld

PricetargetCloseprice

$NewOld(10Nov2025)

Implied

upside

Xingyu601799.SSOWOWRMB176173123.343%

Desay002920.SZOWOWRMB156160117.733%

Keboda603786.SSOWOWRMB897174.220%

Minth0425.HKOWOWHKD432636.020%

Sanhua002050.SZEWOWRMB423445.5-8%

Tuopu601689.SSEWOWRMB626763.6-2%

Recodeal688800.SSUWUWRMB593069.5-15%

Hirain688326.SSUWUWRMB7647100.2-24%

Source:MorganStanleyResearch

Autostockbeneficiariesfromgoingglobal

WesummarizealistofChinaautocompanies,bothOEMsandpartssuppliers,thatwillbenefitfromoverseasbusinessexpansion.

Exhibit13:Chinaautostockbeneficiariesfromgoingglobal

MarketCapLastClosePriceChange

TickerCompany

(USDmn)(LCY)

Notes

1M3MYTD1Y

ChinaAutoOEMs

1211-HK

BYD

96,472

101.8

(6%)

(6%)

15%

10%

ExportvolumegrowthdrivenbyBrazil,Thailand,UKetc

600104-CN

SAIC

25,744

16.1

(6%)

(6%)

(23%)

20%

ExportvolumegrowthdrivenbyEuropeandSourtheastAsia

175-HK

Geely

23,586

17.9

(6%)

(6%)

21%

21%

ActivelyrollingoutnewmodelsinEasternEurope,MiddleEast,LaTAM,etc.

ChinaAutoParts

3606-HK

Fuyao

24,335

71.4

(3%)

(3%)

28%

30%

Globalleadingautoglasssupplier

002920-CN

Desay

9,739

117.7

(16%)

(16%)

7%

(13%)

Autoelectronicssupplier,withdominantmarketshareonautonomousdomaincontrollerinChina,seekingtooffersmarthardwareintheoverseas

425-HK

Minth

5,463

36.0

10%

10%

138%

158%

Autopartssupplier,specializingindecorativeparts,trim,batteryhousingwithglobalfootprint,expandingintohumanoid,eVTOL,AIDCliquidcooling

601799-CN

Xingyu

4,974

123.3

(10%)

(10%)

(8%)

(10%)

Autolightingsupplier,extendingprojectwinsfromtaillighttoheadlightintheoverseas

603786-CN

Keboda

4,075

74.2

(23%)

(23%)

20%

22%

Autolightingcontrollersupplier,wonmultiplecontrollerprojectsfromglobalOEMslikeVW,BMW,Mercedes,Renault,etc

HSAI-US

Hesai

3,128

23.1

5%

5%

67%

416%

LiDARsupplier,willbenefitfromincreasingL2+smartdrivingpenetrationandoverseasprojectwins

Source:FactSet,MorganStanleyResearch

Implicationsforglobalpartssuppliers

WealsosummarizetheimplicationsforglobalpeersfromChinapartssuppliersgoing

global.TheChinafactorisnotthekeyearningsdriverstothesenamesinthenearterm,buttheglobalmarketsharereshuffleoverthelongtermisworthmonitoring,inourview.

Koito(7276.T,EW,ShinjiKakiuchi):KoitoisagloballeadingautolightingsupplierwhousedtodominateChinamarket.KoitoIsChinabusinesshasbeenhurtbyJapaneseOEMsImarketsharelossinthepastfewyears.Lookingahead,KoitomayfacecompetitionfromXingyuwhenbiddingforprojectsfromEuropeOEMs.ShinjiKakiuchi

upgradedKoitoto

EW

inOctober2025,asthesharpdeteriorationinChinabusinesshasbeenlargelypricedin.KoitorecentlycommentedthatithassecurednewordersforsomemodelsfromBYDinChina.However,thevolumewouldbelimitedandtheshort-termimpactonitsearningsisexpectedtobeminimal.

Denso(6902.T,++,ShinjiKakiuchi):Densoprovidesawiderangeofautoelectronics

products.DesayIsrecentprojectwinsfromJapaneseOEMsmayimplyrevenuesharegain

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8

overDensointheChinaandSoutheastAsiamarketsinfuture.

Aptiv(APTV.N,UW,AdamJonas):Aptivisanautotechsupplierthatoffersvarious

productsforsmartEVs.ItmayseerisksfromUSEVgrowthslowdownfrom4Q25afterEVtaxsubsidyexpires,aswellasfromcompetitionagainstChinapeerssuchasDesay,JoysonandKebodainthenon-USmarkets.

Visteon(VC.O,EW,AdamJonas):Visteonisasmartcockpitsupplier,andmayfacecompetitionfromDesayandJoysoninthenon-USmarkets.

Forvia(FRVIA.PA,EW,JavierMartinez):Forviawascreatedin2022byintegrating

FaureciaandHella.ForviaIslightingbusiness,whichcontributed14%oftotalrevenuein

2024,mayfacecompetitionfromXingyuwhohasbeenrampingupproductioncapacityinSerbia.

Opmobility(OPM.PA,UW,JavierMartinez):Opmobilitymakeslightingsolutions,

exteriorpartsandmodules.WeseesimilarproductofferingsfromXingyu(autolighting)andMinth(activegrilleshutter,front-endmodule,etc).

Valeo(VLOF.PA,OW,JavierMartinez):Valeogenerates26%ofitsrevenuefromlighting,asegmentwhereitholdsstrongpositionsinLEDandADAS-integratedsystems.ChinesesupplierXingyuisexpandinggloballyandcouldincreasecompetitioninmass-market

segments.However,weremainOWasweseeValeoasakeybeneficiaryofADASandEVadoptionasEuropeOEMsrampupnewplatformsfrom2026.

1

1.++Ratingandestimatesforthiscompanyhavebeenremovedfromconsiderationinthisreportbecause,underapplicablelawand/orMorganStanleypolicy,MorganStanleymaybeprecludedfromissuingsuchinformationwithrespecttothiscompanyatthistime.

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MorganStanleyResearch9

US$240bnMarketOpportunityby2030

Acceleratingoverseasexpansionbutstilllowmarketshare:Chinaautocompanieshavebeenexploringoverseasopportunitiesforthepastdecade.ChinaIsvehicleexportvalue

roseat24%CAGRfromUS$14bnin2014toUS$117bnin2024,whileChinaIsautoparts

exportvalueroseat5%CAGRduringthesameperiodtoUS$106bnin2024.Autoparts

exportshavespedupinrecentyears,to10%CAGRin2019-24,upfrom1%CAGRin2014-19.Meanwhile,offshoring(i.e.buildingoverseasplants)isontheriseamid"de-

globalization",inordertomitigatetariffrisks.However,weestimateChinaautoparts

supplierscapturedonlyUS$127bnworthofcomponentvalueinoverseasmarketsin2024,includingbothexportsandoffshoring,accountingfor6.6%ofoverseas(i.e.non-China)

marketshare.

Exhibit14:Chinaautoexportsgrowthacceleratedin2019-24

USDbnChinaautoexportsvalue

120

100

80

60

40

20

0

106

99

91

117

84

67

65

70

64

90

62

61

63

54

33

16

14

16

12

11

14

16

20142015201620172018201920202021202220232024

——ChinaautopartsChinavehicles

Source:ChinaCustoms,MorganStanleyResearch

Exhibit15:Chinaexports>50%ofautopartstoEuropeandtherestofAsia

Chinaautopartsexportbyregion

100%

80%

10%12%12%12%14%

24%24%23%21%20%

60%

40%

20%

22%23%22%22%23%

33%31%33%34%33%

0%

20202021202220232024AsiaEuropeNorthAmericaLatAmAfricaOthers

Source:ChinaCustoms,MorganStanleyResearch

10%marketshareby2030:WeexpectChinaIsautopartssupplierstoaccelerate

offshoringinthenextfiveyears,withproductionvalueincreasingat32%CAGRin2025-30E.Togetherwithcontinuedexports,weestimateChinaIsautopartssupplierstocaptureUS$240bnworthofcomponentvalueinoverseasmarketsin2030E,at12%CAGRover2025-30E,accountingfor10.1%ofoverseasmarketshareby2030.

10

Exhibit16:WeexpectChinaautopartstocapture10%marketshareinoverseas

marketsby2030

USDbnChinaautopartsmarketsharetrend

300

250

200

150

100

50

0

10.1%

6.6%

20242025E2026E2027E2028E2029E2030EOffshoreplantsbyChinesesuppliersExportfromChina

%Chinasupplyinnon-Chinamarkets

12%

10%

8%

6%

4%

2%

0%

Source:ChinaCustoms,MorganStanleyResearch(E)estimates

MorganStanleyResearch11

Debate#1:IstheDomesticMarketSufficienttoSupport

AutoPartsFutureGrowth?

Marketview:ChinaIsautopartssupplierscanfindsufficientgrowthopportunitiesinChina,sothereIsnourgencytogooffshore.

Ourview:PartssuppliersfaceadilemmaintheChinamarket,asJVOEM

customersofferdecentmarginbutdecliningvolume,whileChineseOEM

customersoffervolumeupsidebutmargindownside.Therefore,webelieveChinaIsautosupplierswillactivelyexploreoffshoreopportunities,duetodeteriorating

profitabilityintheChinamarket,whileordervisibilityisrisinginoverseasmarkets.

Adilemmainthedomesticmarket

NoperfectcustomerintheChinamarket:ChinaIsautopartssuppliershavebecome

increasinglyinterestedinexploringoverseasopportunities,andthisroundof

determinationtogooverseasisstrongerthaneverbefore.Whyisthat?Itseemsparts

suppliersarefacingadilemmaintheChinamarket,asthereisnoperfectcustomer.JV

OEMcustomersofferdecentmarginbutnotvolume,whileChineseOEMcustomersofferdecentvolumebutnotmargin.

Exhibit17:ChineseOEMshavebeengainingmarketsharefromJVbrands

75%

70%

65%

60%

55%

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

PVmarketsharebybrandorigin-TTM

Mar/05

Sep/05

Mar/06

Sep/06

Mar/07

Sep/07

Mar/08

Sep/08

Mar/09

Sep/09

Mar/10

Sep/10

Mar/11

Sep/11

Mar/12

Sep/12

Mar/13

Sep/13

Mar/14

Sep/14

Mar/15

Sep/15

Mar/16

Sep/16

Mar/17

Sep/17

Mar/18

Sep/18

Mar/19

Sep/19

Mar/20

Sep/20

Mar/21

Sep/21

Mar/22

Sep/22

Mar/23

Sep/23

Mar/24

Sep/24

Mar/25

Sep/25

ChineseGermanyJapanUSexTeslaTeslaOtherforeignbrands

69%

13%

10%

Source:CPCA,MorganStanleyResearch

12

Exhibit18:AutopartssuppliersinChinafinditdifficulttogetbothvolumeandmarginfromOEMcustomers

Margin

OEMcustomerpros&cons

GlobalOEMs

innon-Chinavolume(+),margin(+)

GlobalJVOEMsinChina

volume(-),margin(+)

ChineseOEMs

inChina

volume(+),margin(-)

Volume

Source:MorganStanleyResearch

JVOEMsweregoodcustomersbefore2020:TakeXingyuasanexample.Before2020,~80%ofXingyuIsrevenuewasgeneratedfromJVOEMs,e.g.FAWVW/Toyota,DongfengNissan/Honda,GACToyota/Honda,SAICVWetc,withonly~20%fromChineselocal

OEMs.XingyuIsgrossmarginwasrelativelyhighat24.0-27.3%in2019-20,earningsgrowthoutperformedrevenuegrowthin2017-20,implyingmarginexpansion,andaccountsreceivablewasbelow50days.

ChallengesemergedwhenJVslostmarketshare:AsChineseOEMscontinuedtogainmarketshare,from39%in2020to65%in2024,XingyuIsrevenuegrowthslowedin2021-22,anditsearningsdeclinedYoYinbothyears,duetofallingvolumeatJVOEMcustomers.

Xingyu'sstrugglebetweenJVandChineseOEMcustomers:Xingyumanagedtoadjustcustomermix,andby2023,<50%ofitsrevenuewasgeneratedfromJVOEMs,while

ChineseOEMssuchasCheryandSeres,becameitsmajorcustomers.However,XingyuIsgrossmarginfellto19.3-20.6%in2023-24(thoughpartiallyduetoaccountingpolicy

changes),earningsgrowthunderperformedrevenuegrowthin2021-24,implyingmargin

erosion(

Exhibit19),andaccountsreceivablewentu

pto104daysby2024

(Exhibit

20).

Exhibit19:Xingyu'smarginexpandedin2017-20,buterodedin2021-24

Xingyu'srevenue/earningsYoYgrowth

60%

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

47%

34%

27%

29%

30%

29%24%

8%

4%

20%

20%

19%

28%17%

-1%

-18%

20172018201920202021202220232024

——RevenuegrowthEarningsgrowth

Source:Companydata,MorganStanleyResearch

Exhibit20:Xingyu'saccountreceivabledayshaverisennotablyinrecentyears

120

100

80

60

40

20

0

Xingyu'saccountreceivabledays

104

78

52

42

454444

37

20172018201920202021202220232024

Source:Companydata,MorganStanleyResearch

MorganStanleyResearch13

Twodriverstoheadoverseas

The“push”–marginpressureintheChinamarket:Pricecomp