China Autos: Weaker demand, ongoing consolidation

Research evidence excerpt

China Autos: Weaker demand, ongoing consolidation

24 July 2026

Equities

Automobiles China Autos

Weaker demand, ongoing consolidation China

◆ Lower 2026 forecasts on weaker-than-expected 1H26 demand Yuqian Ding*

Head of China Technology & Autos Research

◆ Ongoing consolidation and pricing pressure continue to The Hongkong and Shanghai Banking Corporation Limited

yuqian.ding@hsbc.com.hk

weigh on sector earnings +852 2288 5108

Li Yang*

◆ Revise OEM forecasts and remain selective on stock picks; Analyst, China Autos

downgrade Great Wall A/H to Hold/Hold; cut TPs Theli01.yang@hsbc.com.hkHongkong and Shanghai Banking Corporation Limited

+852 2288 6216

Demand has softened faster than expected: We lower our 2026 China passenger

vehicle and EV demand y-o-y growth forecasts to -13% (from -5%) and -6% (from * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

not registered/ qualified pursuant to FINRA regulations

+10%), respectively, following a weaker-than-expected 1H26. The latest CPCA data

continue to point to soft demand, with 1-19 July passenger car retail volume down

16% y-o-y and NEV retail volume down 4% y-o-y. Replacement demand has

moderated after the subsidy-driven pull-forward, while consumers have become

increasingly selective given frequent product launches and a more competitive

market. Although we expect demand to improve sequentially in 2H26, we believe the

recovery will be more gradual than previously anticipated.

Industry consolidation still in process, while domestic pricing likely to remain

under pressure: Rising EV penetration continues to reshape China’s auto market, but

industry profitability remains under pressure. Intense competition, persistent pricing

pressure and elevated inventories at traditional OEMs continue to weigh on margins,