In "The Big Banks," Citigroup: Rising costs further squeeze automaker profits, BYD and Leapmotor can better absorb the pressure

Citi published a research report stating that, in addition to slowing demand and weakened policy support, the recent rise in commodity prices will add another headwind for automakers and may accelerate industry consolidation and pricing strategy adjustments. Based on the first quarter spot price estimates (including the impact of hedging operations), compared to the second half of 2025, raw material costs will lead to an average cost increase of approximately RMB 3,000 per vehicle (the same below), primarily due to lithium carbonate (approximately RMB 1,700), memory chips (approximately RMB 800), and non-ferrous metals (approximately RMB 2,000). Citi believes that automakers with a higher degree of vertical integration (such as BYD (01211.HK)) or those with a larger proportion of external component sales (such as Leapmotor (09863.HK)) will be better able to absorb this wave of cost pressure.

In addition, Citi believes that with strong electric vehicle model launches and continuously improving profitability, Geely (00175.HK) is expected to become the next candidate brand to grow into a dominant player in the electric vehicle sector. The Chinese automotive industry is entering a consolidation phase, with more market share concentrating among leading automakers