Chinese Autos: Exports Booming Amid Weak Domestic Demand; Jan-Feb SAAR 17.2mn Units, Retail -15% yoy, Export +53%, EV Penetration 37%
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Bernstein reports that China's passenger vehicle retail SAAR fell to 17.2 million units in January-February 2026, down 14.6% year-over-year and well below the estimated normal annual demand of approximately 22 million. Exports surged 53.3% year-over-year, driven by a 115% jump in EV exports, which now account for nearly half of all passenger vehicle exports. EV retail penetration reached 36.8%; however, EV sales declined 26.9%, underperforming internal combustion engine vehicles, which fell only 5.3%.
Domestic demand remains weak, constrained by front-loaded stimulus pulling forward roughly five million units of demand and an increase in the EV purchase tax from 0% to 5%. Leading exporters included Chery, BYD, Geely, SAIC, and Changan. Luxury brands saw mixed results, with domestic luxury brands growing 22.8% while imported brands declined 19.1%. Mass-market brands fell 18%, reflecting higher sensitivity to subsidy rollbacks among these buyers.
Bernstein maintains a cautious industry outlook, projecting 2026 wholesale volumes of 28 to 29 million units, representing a 4% to 8% decline. Domestic retail demand is expected to reach 21 to 22 million units, down 5% to 9%, while exports should hit 6.5 to 7 million units, growing 10% to 20%. Long-term EV growth remains intact, with domestic EV sales projected to grow 5% to 10% and penetration to reach 61% in 2026.
Top picks include BYD, Xiaomi, and Geely, all rated Outperform, while Li Auto, XPeng, NIO, Great Wall Motor, GAC, and SAIC carry Market-Perform ratings.