1、MAsia Pacific InsightChina Auto DealersFewer Stores+More Models=2026 RecoveryMorgan Stanley Asia Limited+Shelley Wang,CFAEquity Analyst Shelley.W +852 3963-0047 Morgan Stanley Europe S.E.,Madrid Branch+Javier Martinez de Olcoz CerdanEquity Analyst Javier.Martinez.O +34 9141-81289 Morgan Stanley Asia

2、 Limited+Tim HsiaoEquity Analyst Tim.H +852 2848-1982 Peggy WangResearch Associate Peggy.Pc.W +852 3963-3934 Joey Xu,CFAEquity Analyst Joey.X +852 3963-0337 Stanley WangResearch Associate Stanley.W +852 2848-7382 China Autos&Shared MobilityAsia PacificIndustry ViewIn-Line Whats Changed Zhongsheng Gr

3、oup Holdings(0881.HK)FromToPrice TargetHK$15.00HK$21.00TUHU Car Inc(9690.HK)FromToPrice TargetHK$20.00HK$23.00China Yongda Automobiles Services(3669.HK)FromToPrice TargetHK$2.40HK$2.30China MeiDong Auto Holdings Ltd(1268.HK)FromToPrice TargetHK$2.20HK$2.10We look for China auto dealers to recover in

4、 2026,after four years of earnings decline.Zhongsheng(OW)is set to benefit from cuts to dealer store capacity and the Mercedes/Aito model upcycle,while its car repair service should deliver stronger-than-peer growth thanks to centralized functions.Fewer dealer stores to benefit the survivors:We beli

5、eve Chinas luxury car dealers will be the first sub-sector within the China auto industry to benefit from capacity-cut-driven industry consolidation.Luxury car demand remains weak in China,with Mercedes-Benz/BMW/Audi(BBA)China sales volume in 1H25 only 68%that of the 1H21 level,but the luxury dealer

6、 network hasnt shrunk much in recent years,leading to dealer oversupply.We look for accelerated dealer store closures in 2025-26 because:1)aggregate new car margins have fallen to 1%in 1H25,which is no longer attractive to smaller dealers;and 2)OEMs plan to cut the China dealer network by 10-30%by e