中国汽车China AutosAPPENDIX 1SummaryEventOn July 6,at the 2023 China Automotive Forum held in Jiading,Shanghai,in order to maintain a good order in the auto market,jointly create a good consumption environment,and actively stabilize and promote auto consumption,the China Association ofAutomobile Manufacturers (CAAM),and 16 mainstream automakers including Tesla,BYD,NIO,XPeng,and Li Auto etc.jointlysigned the "Letter of Commitment To Maintain a Fair Market Order in The Automobile Industry".CommentThe commitment letter contains four principles:1.Persist in abiding by industry regulations and agreements,standardizemarketing activities,maintain fair competition order,and not disrupt market fair competition order with abnormal prices;2.Payattention to the methods of marketing and publicity,do not exaggerate publicity,do not make false publicity,and do not conductmisleading publicity to consumers in order to attract attention and increase customer acquisition;3.Carry forward the craft smanspirit of quality first and quality-oriented,and meet people's needs for a better life with high-quality products and high-qualityservices;4.Carry forward the core values of socialism,actively fulfill social responsibilities,take an active role in stabilizing growth,strengthening confidence and preventing risks,shoulder heavy responsibilities bravely,and work together to make importantcontributions to national economic growth.Open and transparent competition to shift the market from a "price war"to a "value war."Since the beginning of this year,thecompetition for market share between ICE and NEV,as well as between domestic brands and joint venture/imported brands,hasintensified.Coupled with subsidy reduction and weakening demand,the domestic automotive industry has witnessed anunprecedented "price war."While short-term price and configuration comparisons are beneficial for consumers and thecompetitiveness of car manufacturers,the strategy of competing solely on price has imposed significant cost pressures on theindustry chain.This has led to issues such as false and misleading advertising to attract customers,and long-term excessive costcontrol exacerbating the risk of product quality,which is not conducive to sustainable brand growth.We believe that establishingan open and transparent industry competition order plays a crucial role in improving product and service quality and enhancingthe global competitiveness of Chinese brands.With quality as fundamental,intelligence and safety improve coordinatively.In the wave of "electrification and intelligence"inthe automotive industry,China's automobile industry has encountered an unprecedented development opportunity.Chinesebrands have gained a certain leading advantage in the development of new energy vehicles.According to data from the ChinaPassenger Car Association,in May 2023,the penetration rate of NEVs in China reached 33.3%,with the rate of domestic brandsreaching 57.1%,while that of mainstream joint venture brands was only 4.0%.Domestic brands accounted for 86.2%of the newenergy vehicle market.In addition to traditional safety requirements such as body materials and structure,the safety of batteriesand intelligent technology has become a new basic quality requirement for intelligent electric vehicles.Only through the gradualestablishment and improvement of industry standards and continuous enhancement of technological innovation in the industrychain,as well as increased investment in safety technology,can product and service quality be truly improved,driving sustainabletransformation in the automotive industry ecosystem.The "price war"may come to an end,and a rebound in demand is expected in 2H23.Under the content of the "price war,"consumers have shown a strong wait-and-see sentiment,and the overall industry sentiment has been low.According to data fromthe China Automobile Dealers Association,the inventory warning index for Chinese automobile dealers in June was 54.0%,whichwas +4.5pcts YoY and-1.4pcts MoM.Although the inventory warning index has been declining since March,it still remains abovethe boom-bust line,indicating that inventory pressure in the industry persists.The joint signing of this commitment may signaltheend of the "price war"in the first half of the year and is expected to reverse consumer hesitancy.Furthermore,on June 8,theMinistry of Commerce issued a notice to expand automobile consumption,announcing promotional activities in "hundreds ofcities,thousands of counties,and tens of thousands of towns"across the country.This is expected to further boost the industry'sperformance in the second half of the year.RiskNew energy vehicle sales falls short of expectations;macroeconomic downturn risk;the development of intelligent connectedtechnologies does not meet expectations.7Jul20232