CITIC SEC released a research report stating that in 2025, domestic automotive demand continued to grow, and export performance was strong, significantly enhancing the operational quality of automakers. In the first quarter of 2026, domestic demand faced short-term pressure due to the phase-out of subsidy policies; however, following the onset of conflict in the Middle East, rising oil prices significantly boosted overseas demand for new energy vehicles. For the upcoming quarters of 2026, passenger vehicle exports are expected to continue exceeding expectations, and domestic demand sentiment is also anticipated to gradually recover; leading companies in the sector are expected to demonstrate strong alpha in terms of market share and profitability, and industry concentration is likely to further increase.
Key recommendations include: 1) Passenger vehicle sector companies leading in overseas expansion and making smooth progress in premiumization; 2) Leading commercial vehicle companies benefiting from an upward cycle and expanding long-term profit potential; 3) Automotive parts companies positioned in growth segments and accelerating global expansion; 4) Leading two-wheeler companies undergoing product upgrades and accelerating their overseas expansion. The main views of CITIC SEC are as follows:
Passenger Vehicles: High export growth offsets domestic demand pressure, leading to profit divergence among major OEMs. According to Marklines data, wholesale sales of passenger vehicles (excluding microvans) reached 29.554 million units in 2025 (YoY +8.8%), retail sales were 23.744 million units (YoY +3.8%), and export sales were 5.739 million units (YoY +19.7%). While domestic demand experienced seasonal fluctuations, the overseas market achieved high export growth driven by the competitiveness of new energy and hybrid products, effectively countering domestic price war pressures and weak demand. In Q1 2026, the domestic market showed significant off-season characteristics, with retail sales declining by double digits year-on-year. In contrast, overseas geopolitical conflicts and the resulting energy transition drove a surge in new energy vehicle orders, pushing export growth to a record high for the period. In terms of financial performance, the passenger vehicle sector's operating revenue increased by 10.9% YoY in 2025, with net profit attributable to shareholders rising by 3.0% YoY. In Q4 2025, operating revenue grew by 2.8% YoY, while net profit attributable to shareholders increased by 15.2% YoY, indicating profit performance outpacing revenue. In Q1 2026, dragged down by sluggish domestic demand, sector operating revenue declined by 8.4% YoY, and net profit attributable to shareholders fell by 37.8% YoY. Among these, leading OEMs with high export exposure, such as BYD, Geely Automobile, and Chery Automobile, demonstrated relatively resilient profitability.
Commercial Vehicles: Leading companies exhibit strong profit resilience. Commercial vehicle industry sales in Q1 2026 reached 1.115 million units, a year-on-year increase of 6.1%. Among these, heavy-duty truck sales totaled 318,000 units (YoY +19.9%), and large/medium bus sales reached 24,000 units (YoY +5.2%). The year-on-year sales growth in the commercial vehicle sector in Q1 was primarily driven by exports, which served as the strongest growth engine. Based on statistics from 20 A+H listed commercial vehicle companies, the industry's total revenue in Q1 2026 was 155 billion yuan, up 14.2% YoY; combined net profit attributable to shareholders was 6.2 billion yuan, up 12.5% YoY. Exports have become the strongest growth driver for Chinese commercial vehicles. According to data from the China Association of Automobile Manufacturers (CAAM), commercial vehicle exports in Q1 2026 totaled 305,000 units (YoY +26.0%), with heavy-duty truck exports reaching 101,000 units (YoY +36.8%). This growth is mainly attributed to surging demand for mineral extraction, transportation, and logistics in regions such as Africa and Southeast Asia.
Automotive Parts: Downstream consumer demand faces pressure, companies actively cultivate new growth curves. The automotive parts sector's operating revenue grew by 9.7% YoY in 2025, with net profit attributable to shareholders increasing by 23.2% YoY. In Q1 2026, operating revenue grew by 2.7% YoY, outperforming the industry's decline of 23.4%; however, net profit attributable to shareholders declined by 12.8% YoY, underperforming revenue growth. While sector revenue growth continues to outpace the industry, profitability is clearly under pressure. This is mainly due to the subdued industry sentiment in Q4 2025 and Q1 2026, significant increases in commodity prices, and substantial pressure from annual price reductions demanded by automakers. Looking ahead to the second and third quarters, industry end-market sales are expected to recover sequentially. The impact of some commodity price increases and annual price reductions is also expected to be gradually absorbed, leading to a significant rebound in both revenue and profit quality. Platform-type companies with capabilities for technological and process expansion are actively developing new businesses beyond the automotive industry, such as robotics, liquid cooling, gas turbines, and commercial aerospace, actively sketching new growth curves outside their core automotive operations. It is expected that these industries will contribute significantly to the revenue and profits of companies in the supply chain within 2026.
Two-Wheelers: Domestic demand expected to warm up in Q2, global expansion of two-wheeled products is timely. In 2025, 17 A/H listed two-wheeler companies achieved revenue of 152.7 billion yuan, a year-on-year increase of 24.2%; net profit attributable to shareholders was 12.2 billion yuan, up 42.2% YoY. The significant growth in revenue and profit in 2025 was driven by factors such as the transition to new national standards and subsidy programs for replacing old vehicles. Due to the relatively high base in the period from Q4 2024 to Q1 2025, coupled with the rapid appreciation of the Renminbi in the current period, the industry's growth rate faced pressure for two consecutive quarters from Q4 2025 to Q1 2026, with profits declining by 26.6% and 33.3% year-on-year in Q4 2025 and Q1 2026, respectively. Considering that the demand cycle mismatch caused by the national standard transition has persisted for nearly two quarters, and combined with signs of recovery in domestic demand sales observed in March-April, it is judged that the domestic demand market is expected to warm up in the second quarter.
Risk Factors: Risk of further escalation of conflicts in regions such as the Middle East; Risk of intensifying international trade frictions; Risk of domestic macroeconomic performance falling short of expectations; Risks stemming from insufficient overseas demand, weak domestic consumption, or government investment falling short of expectations; Risk of related industrial policies not meeting expectations; Risk of slowdown in automotive demand growth; Risk of significant price increases in key raw materials; Risk of substantial valuation decline for related companies due to autonomous driving accidents; Risk of insufficient data privacy management for smart cars; Risk of rising risk-free interest rates and declining liquidity in overseas markets; Risk of declining market confidence in the development prospects of the new energy or intelligent vehicle sectors.
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