Huachuang Securities released a research report indicating that March domestic demand recovery exceeded expectations, while rising oil and gas prices accelerated the early rebound of China's electric vehicle market. Overseas EV demand also increased significantly, leading to a repricing of vehicle exports. Looking ahead, domestic sales growth is expected to turn positive, and expanded lithium carbonate production is likely to drive future cost reductions. The first quarter of 2026 is seen as the low point in fundamentals over the past two years, while overseas expansion could usher in a new growth cycle lasting more than three years for Chinese EV makers.
Entering April, retail sales are projected to continue improving with annual model updates and new vehicle launches, particularly as the Beijing Auto Show this year features many new models, which should significantly boost industry demand and automaker momentum. Key points from Huachuang Securities include:
New automakers reported strong March deliveries: LEAPMOTOR delivered 50,000 units, up 34.9% year-on-year and 78.2% month-on-month; LI Auto delivered 41,000 units, up 11.9% year-on-year and 55.4% month-on-month; NIO delivered 35,000 units, up 136.0% year-on-year and 70.6% month-on-month; XPeng delivered 27,000 units, down 17.4% year-on-year but up 79.7% month-on-month; GAC Aion delivered 41,000 units, up 65.2% year-on-year and 246.9% month-on-month.
Traditional automakers also showed notable growth in March: Chery sold 228,000 units, up 15.0% year-on-year; Seres sold 27,000 units, up 11.7% year-on-year. Among March sales leaders, SAIC Motor ranked first with 376,000 units, down 2.6% year-on-year but up 39.5% month-on-month; Changan Automobile ranked second with 271,000 units, up 1.1% year-on-year and 78.3% month-on-month; GEELY AUTO ranked third with 233,000 units, up 0.4% year-on-year and 13.0% month-on-month.
In February, wholesale and retail sales of passenger vehicles declined both year-on-year and month-on-month: wholesale sales reached 1.54 million units, down 15.4% year-on-year and 22.7% month-on-month; narrow-sense passenger vehicle wholesale sales were 1.52 million units, down 14.9% year-on-year and 22.9% month-on-month. Domestic passenger vehicle retail sales totaled 1.12 million units, down 14.1% year-on-year and 26.1% month-on-month. Passenger vehicle exports reached 590,000 units, up 58.0% year-on-year but down 0.6% month-on-month. Estimated inventory changes showed a decrease of 173,000 units, down 309,000 year-on-year and 52,000 month-on-month.
Investment recommendations suggest that passenger vehicle sales, profitability, and exports in March-April may exceed expectations. The sector's future performance hinges on overseas expansion and market sentiment, with valuations likely to rise alongside growth expectations. Key recommendations include GEELY AUTO, LEAPMOTOR, BYD COMPANY, and Anhui Jianghuai Automobile Group Corp., Ltd. GEELY AUTO is positioned for both fundamental and valuation improvements, LEAPMOTOR offers sector volatility upside, and BYD COMPANY leads in overseas expansion logic. Although Anhui Jianghuai Automobile has adjusted significantly and lacks near-term catalysts, its solid structure, high ROE, and long-term potential remain intact, presenting a favorable investment opportunity.
Risks include weaker-than-expected macroeconomic conditions, geopolitical fluctuations, lower-than-anticipated auto sales, disappointing new model launches, and raw material price volatility.
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