China Auto OEMs: 1Q26 Preview - High-End and Overseas Sales to Offset Cost Pressure
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Morgan Stanley expects first-quarter results for Chinese auto OEMs to show significant dispersion. While cost pressures and lower utilization rates present challenges, premium positioning and robust overseas sales should help mitigate these headwinds. Effective cost management will ultimately determine which companies exceed earnings expectations. The report previews 1Q26 earnings for BYD, Geely, and Great Wall Motor, projecting results broadly in line with updated consensus estimates.
BYD's first-quarter sales fell 48% quarter-on-quarter and 30% year-over-year to 700,000 units. However, overseas sales reached a record 47% of total volume, up from 26% in the prior quarter. Revenue is projected at RMB 134 billion, with gross margins improving to 18.4%. Geely delivered 709,000 units, with overseas sales climbing to 29% of the mix. Its revenue is estimated at RMB 98 billion, with net profit forecast at RMB 4.3 billion and per-unit profit rising to RMB 6,100.
Great Wall Motor saw quarterly sales drop 33% sequentially to 269,000 units, but overseas volume surged to 48% of total sales. Net profit is projected at RMB 2.0-2.1 billion, representing a 66% sequential increase, with per-unit profit reaching RMB 7,500-8,000. Looking ahead to the second quarter, investors will closely monitor new model launches, continued overseas expansion, and further cost reductions. While market sentiment remains optimistic, the firm warns that sentiment may peak around upcoming auto shows, potentially introducing volatility.