China Auto/EV - Unexciting May-26, as expected

Research evidence excerpt

China Auto/EV - Unexciting May-26, as expected

a likelihood that 2026F

will show a double-digit y-y decline for the first time in history, while exports will offset

some negative impact to the entire China auto industry. We remain cautious on the entire

auto sector. Exports could be the key highlight of the China auto market in 2026F, in our

view.

Strong growth in exports and encouraging progress in select markets; more efforts

needed to enjoy sustainable long-term growth

China’s auto industry exported 809k units of PVs (+73.0% y-y, +1.6% m-m) in May-26,

according to CAAM, and YTD exports reached 3.5mn, +70% y-y. Most of the leading

players in both PV/EV segments recorded strong exports in YTD-26. Further, China

OEMs are making meaningful progress in select regions and countries (e.g., the EU

market, Brazil and Australia; Fig.18-Fig.20).

Considering the strong overseas growth from end-25, we believe two things need to be

taken into account while looking at the long-term outlook of China auto players. First is the

addressable markets. With the fast development in some of the target countries, we

believe sector players will always have to put additional efforts in opening new markets,

which could result in further uncertainties. And secondly, growing fast in some key auto

markets may trigger uncertainties such as trade tensions. According to a Bloomberg news

report (URL), the EU-China trade relationship is facing further pressure, which is more or

less creating additional risk for the auto segment. And with the fast development globally,

we see increasing auto-related tariffs in many counties such as Russia, Brazil and

Mexico. Hence, faster exports growth in the short-term could also create further

challenges for the industry into the mid/long run, in our view.