Bernstein: Chinese Autos — Weak Start to 2026; January Retail Volume -15.1% YoY, EV -19.7%, Export +48.9%
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China's passenger vehicle retail volume totaled 1.57 million units in January 2026, representing a significant 15.1% year-over-year decline and falling considerably short of expectations. The seasonal boost typically associated with the Lunar New Year failed to materialize. Consequently, the retail seasonally adjusted annual rate (SAAR) plummeted from 20.4 million units in December 2025 to just 14.4 million units, well below Bernstein's estimated normalized annual demand of approximately 22 million units.
The electric vehicle segment underperformed the broader market, with retail sales declining 19.7% year-over-year and penetration dropping to 36.2%. By contrast, traditional internal combustion engine vehicles saw a comparatively milder decline of 12.2%. Bernstein attributes this weakness to approximately five million units of demand being pulled forward into 2024 and 2025 by aggressive subsidies and tax incentives.
Exports remained a powerful growth engine, surging 48.9% year-over-year. EV exports doubled, accounting for half of all export volumes. BYD led domestic EV sales with 105,000 units and an 18.5% market share, followed by Geely. Bernstein projects that domestic retail demand will contract by 5-9% in 2026, with wholesale volumes declining 4-8%. However, EV penetration is still expected to climb to 63% by year-end. The firm maintains Outperform ratings on BYD (HKD 130 target), Xiaomi (HKD 46 target), and Geely (HKD 21 target), while assigning Market-Perform ratings to Li Auto, NIO, and XPeng.