Insights

Edison Yu's reiterated Nio as their top pick for China electric vehicles and kept Buy rating for the stock.

Yu's team maintained its Buy rating on Xpeng, saying they believe Xpeng's assisted driving technology is undervalued over the long term.

"Even if we embed some degree of conservatism, this suggests further demand deterioration in Aug/Sep on a sequential basis."

Nio will host an official launch event in Europe in September or early October with founder, chairman and CEO William Li attending in person, according to Edison Yu's team.

Li Auto's management could achieve its goal of transitioning from EREV to BEV, but the road ahead could get much rockier, said Edison Yu's team.

The growing number of models that support high-power charging will drive the adoption of EVs to a critical mass, which could double the speed of China's transition to EVs, Morgan Stanley said.

While Li Auto management continues to believe that the new flagship full-size L9 SUV will sell very well, near-term demand for the Li ONE has been grossly overestimated.

Edison Yu's team expects Xpeng deliveries to trend toward the weaker side in August, with no significant recovery until the fourth quarter when the G9 SUV is delivered.

Pricing information for the Xpeng G9 has yet to be released, and analysts at Morgan Stanley believe that will be the most important factor for the market to gauge the G9's sales prospects.

Deutsche Bank raised its forecast for Li Auto's deliveries this year to 160,000 units from 155,000, but believes the company could face some incremental headwinds in 2023.