Morgan Stanley recommended investors monitor new vehicle launches from Nio, BYD, and Li Auto in the second quarter of 2026 as potential opportunities amid lowered expectations.
BYD will release the Next-Gen Seal 08 sedan and the SUV Sealion 08 in the first half of the year, while Li Auto has been road testing its 2026 extended-range L9 flagship SUV.
Nio will be launching three new SUVs in 2026, including a large five seat SUV L80 under the Onvo sub-brand, the new flagship SUV ES9 and the new five seat SUV under the main Nio marque.
“We would recommend investors to keep a close watch on Li Auto, Nio and BYD‘s new launches in 2Q for potential alpha generation against meaningfully reduced expectations,” analyst Tim Hsiao wrote in a research note Monday.
For the first half of 2026, the firm named XPeng, Geely Automobile Holdings, and SAIC Motor. as its preferred stocks among Chinese automakers.
“For OEMs, XPeng, Geely and SAIC are our preferred stocks in 1H26 for their resilient domestic and growing overseas sales as well as re-rating opportunities from a non-auto ‘second act,'” Hsiao wrote.
The firm reiterated on Monday its Overweight rating and $34 price target on XPeng, days before the automaker reports December delivery figures.
Stock Performance
XPeng shares have surged 76% year-to-date, outperforming rivals Nio and Li Auto.
Nio has gained 17% this year, while Li Auto has fallen 27%.
US-listed shares of the Shanghai-headquartered EV maker were rising 2.6% as of press time at $5.24 after closing up 3.9% on Friday.
In November, Morgan Stanley maintained its bullish outlook on Nio after the company reported narrowing losses and widening margins for the third quarter.
“Nio reported a narrowing net loss of Rmb3.7bn in 3Q25 (vs. Rmb5.1bn in 2Q25), better than MSe of an Rmb4.3bn loss thanks to better GpM,” Hsiao wrote back then.
Morgan Stanley maintained an Overweight rating and $9 price target on Nio.
XPeng fell 2.1% in premarket to $20.34 following a 6.2% gain in the prior session. Li Auto dropped 2.5% on early Monday to $17.00 after rising 3.9% on Friday.
BYD, which is listed in Shenzhen and Hong Kong but not in the United States, has gained 11% year-to-date. Shares closed at 100.21 yuan on Monday.
Auto Parts and Dealers
Morgan Stanley named Hesai Group, Minth Group, and Xingyu Automotive Lighting Systems. as its preferred stocks in the auto parts sector.
Among dealers, the firm prefers Zhongsheng Group Holdings Ltd. “in view of its profit resurgence thanks to China’s stricter scrutiny on unfair auto price competition,” Hsiao wrote.
