J.P. Morgan: China Auto Sales May — Moment of Truth for ICE Autos This Summer; NEV Shift Continues
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J.P. Morgan reports that China's automotive sales in May 2026 grew 8% year-over-year to 2.1 million units, driven entirely by new energy vehicles. NEV sales surged 35% to 1.1 million units, achieving a remarkable 52% market penetration rate. In stark contrast, internal combustion engine vehicle sales plummeted 12% to 1 million units, carrying escalating summer inventory pressures.
The average price gap between ICE and NEV models has narrowed significantly, dropping from 15% in 2025 to just 5% today. Despite this diminishing price advantage, the structural shift toward NEVs continues to accelerate unabated. J.P. Morgan emphasizes that the summer season represents a critical moment of truth for legacy ICE manufacturers, who now face 45 days of inventory versus the 35-day industry average.
BYD continues to dominate, recording a 40% sales increase and expanding its market share from 25% to 30%. Li Auto and XPeng also outperformed, posting year-over-year growth of 50% and 60% respectively. Meanwhile, Tesla China saw modest sequential growth of 10% but a tepid 5% year-over-year increase amid fierce local competition.
J.P. Morgan maintains an Underweight stance on traditional ICE automakers, citing mounting profitability risks and potential industry consolidation. The firm favors NEV leaders, recommending BYD, Li Auto, and XPeng for their competitive product lines, while downgrading SAIC Motor due to severe ICE headwinds.
Key exhibits
Exhibit 1
