Stronger-than-expected China new energy vehicle sales in July, alongside rising exports and easing inventory pressures, have prompted Wall Street to upgrade its outlook for automotive stock trading recovery. Citigroup analysts believe the short covering in the auto sector still has room to continue.
According to a report by Citigroup analyst Jeff Chung on August 2, the wholesale volume of China's new energy vehicle industry in July is estimated to have risen 1% month-on-month and 23% year-on-year, exceeding market expectations. This contrasts with a 4% month-on-month decline in July of the previous year, and the shift to positive growth this July is seen as a key signal of improving demand resilience.
In a China auto industry tracker on August 3, Bank of America Merrill Lynch analyst Ming Hsun Lee highlighted that the main theme for July was strong export performance, with Leapmotor and NIO outpacing peers in year-on-year growth. BYD, Geely, Great Wall Motor, and Chery all have a high proportion of exports, with overseas markets becoming a critical pillar in the sales structure of several automakers.
For the market, the July data does not signal a full-scale acceleration of the industry but rather a position adjustment driven by a combination of exports, inventory, expectations for the peak season, and volume increases from certain brands. Profit realization still awaits verification from the second-quarter earnings season, but against the backdrop of better-than-expected sales, the pressure for short covering in previously bearish trades remains.
Sales Beat Expectations, Short Squeeze Logic Gains Support
Citigroup's core judgment is that July new energy vehicle wholesale volume grew 1% month-on-month and 23% year-on-year, exceeding market expectations, and that short covering in the auto sector will continue.
The key to this judgment is not the 1% absolute month-on-month increase but the change in the growth rate slope. The year-on-year growth rate of new energy vehicle wholesale accelerated from 8% in April, to 13% in the second quarter, to over 20% in July, indicating a significant improvement in industry momentum compared to earlier periods.
Inventory is also a critical variable in the trading recovery. Citigroup notes that industry inventory had largely decreased by June compared to April, meaning sales improvements are no longer fully offset by inventory pressure. Meanwhile, the export-to-wholesale ratio for passenger vehicles rose from 28.9% in March to 37.2% in June, with July expected to remain around 37%.
This suggests that the market is shifting from previous concerns about sales, inventory, and price pressure to reassessing the support from exports and the peak season for profit visibility in the second half of the year. Citigroup believes that automakers with a higher proportion of exports, such as BYD, Geely, Chery, and Great Wall Motor, will benefit more directly from this change.
Exports Become the Main Theme, Overseas Sales Reshape Automaker Structures
The Bank of America report shows that exports in July were no longer a marginal increment but a mainstay in the sales tables of many automakers.
BYD exported 180,500 vehicles in July, up 123.6% year-on-year, with exports accounting for 43.1% of total sales. This means that for every 10 vehicles sold by BYD in July, more than 4 came from overseas. From January to July, BYD exported 972,200 vehicles, up 78.4% year-on-year, with an export ratio of 43.6%.
Geely exported 106,700 vehicles in July, up 202.4% year-on-year and 4% month-on-month, with an export ratio of 42.6%. However, Bank of America notes that Geely's domestic wholesale was approximately 143,000 units, down 29% year-on-year, with wholesale lower than retail, indicating ongoing channel destocking.
Chery's export profile is more prominent. In July, Chery's total sales were 261,900 vehicles, of which 196,300 were exported, giving an export ratio of 75%. From January to July, Chery's cumulative sales reached 1,537,000 vehicles, up 10.3% year-on-year, achieving 52.8% of Bank of America's full-year forecast, placing it ahead of schedule among major domestic automakers.
Great Wall Motor sold 108,100 vehicles in July, up 3.5% year-on-year and roughly flat month-on-month, but exports reached 62,000 vehicles, up 50.9% year-on-year, with an export ratio of 57.4%. Without the support from overseas markets, Great Wall Motor's total volume performance for the month would have been more subdued.
BYD Returns to Monthly Growth, Overseas and Pure Electric Segments in Focus
BYD's new energy vehicle sales in July totaled 419,200 units, up 21.8% year-on-year and 4% month-on-month. Of these, new energy passenger vehicle sales were 411,100 units, up 20.5% year-on-year.
Structurally, pure electric vehicles performed stronger. BYD sold 233,100 pure electric passenger vehicles in July, up 31.0% year-on-year and 16% month-on-month, accounting for 56.7% of new energy passenger vehicle sales. Plug-in hybrid passenger vehicle sales were 178,000 units, up 9.1% year-on-year but down 9% month-on-month.
However, looking at the first seven months, BYD is still recovering from earlier deficits. Cumulative sales from January to July were 2,227,700 units, down 10.5% year-on-year; cumulative pure electric passenger vehicle sales were 1,100,600 units, down 8.4% year-on-year; and cumulative plug-in hybrid passenger vehicle sales were 1,087,900 units, down 13.2% year-on-year.
Performance also varied across internal brands. Denza sold 19,200 units in July, down 6% month-on-month; Fangchengbao sold 41,200 units, up 16% month-on-month; and Yangwang sold 485 units, up 3% month-on-month. For investors, the core variable in BYD's July performance is not the total volume itself, but whether the improvements in overseas sales and pure electric vehicle share can be sustained.
Divergence Among New EV Makers Intensifies, Leapmotor and NIO Outperform Peers
Divergence among new EV makers was more pronounced in July. Leapmotor delivered 101,300 vehicles, up 102% year-on-year and 8% month-on-month, significantly outperforming the industry among disclosed brands. From January to July, Leapmotor's cumulative sales were 457,800 units, up 68% year-on-year, achieving 50% of Bank of America's full-year forecast.
NIO delivered 35,900 vehicles in July, up 71% year-on-year but down about 10% month-on-month. Cumulative deliveries from January to July were 227,400 units, up 68% year-on-year, achieving 47% of Bank of America's full-year forecast. Among its sub-brands, ONVO delivered approximately 10,200 vehicles in July, and Firefly delivered about 5,800 units, already contributing visible incremental volume.
In contrast, XPeng and Li Auto had a slower pace. XPeng delivered 38,000 vehicles in July, up 4% year-on-year but down 5% month-on-month; cumulative deliveries from January to July were 204,000 units, down 13% year-on-year, achieving 39% of Bank of America's full-year forecast. Bank of America noted that L03 production is still ramping up, and M03 orders have been partially diverted by the L03.
Li Auto delivered 30,500 vehicles in July, with slight year-on-year and month-on-month declines; cumulative deliveries from January to July were 223,900 units, down 5% year-on-year, achieving 48% of Bank of America's full-year forecast. Data indicates that production of some models in July was affected by a shortage of headlights, and a fire incident at a supplier also disrupted deliveries.
Internal Stratification Among Traditional Domestic Automakers
Geely's total sales in July were 250,200 vehicles, up 5.2% year-on-year and 4% month-on-month; cumulative sales from January to July were 1,673,100 units, up 1.6% year-on-year, achieving 47.7% of Bank of America's full-year forecast.
However, internal structure within Geely is clearly diverging. Zeekr delivered 35,800 vehicles in July, up 111.1% year-on-year and 2% month-on-month; cumulative deliveries from January to July were 214,200 units, up 98.9% year-on-year, achieving 69.0% of its full-year forecast. Lynk & Co sold 16,400 vehicles in July, down 39.8% year-on-year and 14% month-on-month, becoming a drag on performance.
Great Wall Motor's total volume growth in July was mild. By brand, Haval sold 56,300 units in July, roughly flat year-on-year and down 7% month-on-month; WEY sold 7,725 units, down 23.1% year-on-year; GWM Tank sold 17,200 units, down 13.9% year-on-year; Ora sold 10,800 units, up 151.6% year-on-year; and GWM Pickup sold 16,000 units, up 16.2% year-on-year. Great Wall Motor's ability to maintain positive year-on-year growth was primarily supported by exports, the Ora brand, and pickups.
Next Steps Depend on Earnings and the Peak Season
The July data has already signaled a trading inflection point: better-than-expected sales, inventory destocking, a rising export ratio, and the industry entering the peak selling season. These factors collectively explain why Citigroup believes short covering will continue.
But the boundaries are equally clear. Profits still lag behind sales, and sequential improvement in sales does not automatically translate into simultaneous profit improvement. The second-quarter earnings season will be the first verification point, as the market needs to see whether the sales recovery can translate into profit elasticity.
Based on the progress rate against Bank of America's full-year forecasts, Chery is at 52.8%, Leapmotor at 50%, Geely at 47.7%, Li Auto at 48%, NIO at 47%, Great Wall Motor at 46%, BYD at 45%, and XPeng at 37%. This ranking shows that pressure is not distributed by sales scale but depends on completion rates and structural quality.
If the second-half peak season continues to provide support and the export ratio remains high, the profit visibility of automakers with a higher export weighting will further improve. Conversely, if July represents only a single-month recovery for some brands, the divergence within the industry will continue to widen, and capital will be unlikely to continue buying the "automotive sector" as a single block.
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