An analysis of the May auto market highlights several key trends: a collapse in domestic sales of internal combustion engine vehicles, the dominant strength of new energy vehicles, and counter-trend growth in exports.

The primary driver of the overall domestic market decline was a significant drop in sales of traditional fuel vehicles, impacted by high oil prices. In May, fuel vehicles held a 37% market share, but their year-on-year sales decline accounted for 82% of the total passenger vehicle market's reduction, dragging down the overall performance. Factors such as high fuel costs and shifting consumer preferences are accelerating the transition from fuel to electric vehicles. This month, the retail penetration rate of new energy vehicles (NEVs) continued to break records, reaching a historic high of 62.9%.

Joint-venture brands are accelerating their electrification efforts. In May, sales of new energy models from joint ventures increased by 51% year-on-year, while sales of their fuel vehicles fell by 41%. Exports remain a core growth engine for the industry, with NEVs accounting for a record-high 54% of total exports in May. However, fuel vehicle exports also showed strong performance with 46% growth, contributing to a robust overall global performance for Chinese vehicle exports.

The current market is characterized by intensified competition within a largely static total volume, with internal industry divergence becoming more pronounced. The new energy market shows a polarizing trend: high-end electric vehicles are experiencing a boom, while low-end, economical models are under significant pressure. Markets in counties and townships, as well as entry-level models, have seen excessive declines. Simultaneously, the "new model effect" has become short-lived, with its ability to stimulate the market greatly diminished.

Pressure on the sales channel continues to be prominent, with the industry's pace of involuntary inventory reduction accelerating. Dealers are generally facing losses, and operational risks are climbing. Overall, the May market recovery was only structural. Electrification and overseas expansion have become the core pillars supporting the industry's long-term growth.

Key Features of the May 2026 Passenger Vehicle Market

First, the market faced overall pressure with significant structural divergence. The stark contrast between a "cold" fuel vehicle market and a "hot" NEV market was the central focus. The core reason for the domestic retail decline was the "collapse of fuel vehicles," which pushed the NEV retail penetration rate to a record 62.9%, indicating an electrification transition speed that exceeded expectations.

Second, joint-venture brands accelerated their electrification transformation. In May, domestic retail sales of mainstream joint-venture NEVs increased by 51% year-on-year, while overall domestic NEV growth for Chinese brands was -10%. Brands like Buick (with NEVs making up 45% of its sales) are beginning to see results from their transition to new energy.

Third, exports experienced explosive growth. NEVs accounted for a record 54% of total exports, driven by a dual engine of new energy and Chinese brands. "Going global" has become the core growth engine.

Fourth, involuntary inventory reduction was a clear feature, with channel inventory falling rapidly. Listed dealership groups reported comprehensive losses, and survival pressure for dealers continues to mount.

Fifth, breakthroughs by domestic brands in the high-end segment were prominent. Retail sales of passenger vehicles in the 200,000-300,000, 300,000-400,000, and over 400,000 RMB price brackets all exceeded 50% growth.

Sixth, micro electric vehicles faced pressure, the A-segment car market shrank, and entry-level consumption urgently needs support. Standards for economical electric vehicles are eagerly anticipated.

In May 2026, passenger vehicle retail sales fell by 22%, significantly lower than the 5% decline in wholesale sales, creating a pattern of "cold domestic, hot external" demand. The retail pullback was driven by the impact of high oil prices and the suspension of subsidies. Retail sales for both A-segment and A00-segment cars were relatively low in May, with A0-segment cars and high-end models becoming the main drivers of retail sales. High-end SUVs performed strongly, and within the sedan segment, A0-segment car sales saw a recovery.

Performance of Economy Passenger Vehicle Segments

A00-Segment Car Market

The A00-segment car market maintained its traditional structure, with the old manufacturer Xiali being replaced by FAW's Bestune. The positions of BYD Company Limited (SZ: 002594), Wuling, CHERY AUTO (HK: 09973), GEELY AUTO (HK: 00175), and Changan remained relatively stable. In May 2026, wholesale volume was 85,800 units, accounting for 11.57% of the wholesale market share. Wholesales fell 45% year-on-year but rose 23% month-on-month. Retail sales fell 54% year-on-year and increased 5% month-on-month.

From January to May 2026, cumulative wholesale volume was 310,000 units, down 54% year-on-year. Cumulative domestic retail volume was 190,000 units, down 64% year-on-year.

Key A0-Segment Car Models

In May 2026, A0-segment car wholesale volume was 153,600 units, accounting for 20.7% of the wholesale market share. Wholesales increased 16% year-on-year but fell 3% month-on-month. Retail sales increased 14% year-on-year and 10% month-on-month.

From January to May 2026, cumulative wholesale volume was 695,600 units, up 23% year-on-year. Cumulative domestic retail volume was 410,800 units, up 14% year-on-year.

The trend of domestic electric vehicles replacing fuel vehicles is evident. The competitive landscape has shifted from being dominated by joint ventures to a new trend led by domestic brands. Previously, Japanese brands Toyota and Honda held strong positions, but in recent years, domestic entry-level fuel cars have faced relatively difficult conditions. The full electrification trend in the A0-segment is clear, with virtually no strong fuel vehicle products remaining, highlighting the clear product advantages of domestic pure electric vehicles.

A0-Segment SUV Sales

In May 2026, A0-segment SUV wholesale volume was 278,400 units, accounting for 20.04% of the wholesale market share. Wholesales surged 70% year-on-year and increased 26% month-on-month. Retail sales increased 7% year-on-year and 2% month-on-month.

From January to May 2026, cumulative wholesale volume was 992,700 units, up 19% year-on-year. Cumulative domestic retail volume was 449,900 units, down 10% year-on-year.

Mainstream Japanese and Korean small SUVs have largely exited the market, while domestic electric vehicle models are performing strongly.

Performance of A-Segment Passenger Vehicle Market

Key Compact Car Models

In May 2026, A-segment car wholesale volume was 220,800 units, accounting for 29.76% of the wholesale market share. Wholesales fell 33% year-on-year but increased 2% month-on-month. Retail sales fell 40% year-on-year and increased 1% month-on-month.

From January to May 2026, cumulative wholesale volume was 1.2213 million units, down 25% year-on-year. Cumulative domestic retail volume was 1.0142 million units, down 35% year-on-year.

In 2024, new energy vehicles dominated the mainstream sedan market, with BYD Company Limited holding an absolute lead. In 2025, the fuel vehicle market experienced a temporary recovery, with Volkswagen's fuel vehicles still holding some market space. Mainstream family cars remain the most practical segment for fuel vehicles.

Key Compact SUV Models

In May 2026, A-segment SUV wholesale volume was 687,600 units, accounting for 49.5% of the wholesale market share. Wholesales were flat year-on-year but increased 2% month-on-month. Retail sales fell 32% year-on-year but increased 8% month-on-month.

From January to May 2026, cumulative wholesale volume was 3.2354 million units, down 2% year-on-year. Cumulative domestic retail volume was 1.8296 million units, down 24% year-on-year.

The mainstream SUV market landscape is changing rapidly. SUVs from BYD Company Limited, GEELY AUTO, Changan, and CHERY AUTO are performing exceptionally well, achieving comprehensive breakthroughs for domestic SUVs both domestically and internationally.

Performance of B-Segment and Above Passenger Vehicle Market

B-Segment and C-Segment Car Market

In May 2026, B-segment car wholesale volume was 239,200 units, accounting for 32.24% of the wholesale market share. Wholesales fell 25% year-on-year but increased 2% month-on-month. Retail sales fell 26% year-on-year but surged 18% month-on-month.

From January to May 2026, cumulative wholesale volume was 1.1372 million units, down 25% year-on-year. Cumulative domestic retail volume was 1.0565 million units, down 24% year-on-year.

Japanese brands still maintain some stable demand in the high-end sedan market, while high-end domestic NEVs are rising rapidly. The high-end market for ride-hailing and car-hailing services, in particular, is being captured by domestic electric vehicles.

B-Segment SUV Market

In May 2026, B-segment SUV wholesale volume was 333,500 units, accounting for 24% of the wholesale market share. Wholesales increased 9% year-on-year but fell 1% month-on-month. Retail sales were flat year-on-year but increased 13% month-on-month.

From January to May 2026, cumulative wholesale volume was 1.6386 million units, up 22% year-on-year. Cumulative domestic retail volume was 1.2539 million units, up 5% year-on-year.

Domestic new energy vehicles are rapidly rising in the high-end SUV market, weakening the traditional advantage of high-end fuel vehicles. Recently, high-end brands like BMW have shown some improvement.

B-Segment and Above MPV Market

In May 2026, B-segment MPV wholesale volume was 33,100 units, accounting for 40.95% of the wholesale market share. Wholesales increased 9% year-on-year but fell 4% month-on-month. Retail sales fell 1% year-on-year and 9% month-on-month.

From January to May 2026, cumulative wholesale volume was 168,000 units, up 15% year-on-year. Cumulative domestic retail volume was 137,500 units, up 27% year-on-year.

In May 2026, C-segment MPV wholesale volume was 37,100 units, accounting for 45.97% of the wholesale market share. Wholesales fell 19% year-on-year but increased 7% month-on-month. Retail sales fell 32% year-on-year but increased 5% month-on-month.

From January to May 2026, cumulative wholesale volume was 167,300 units, down 26% year-on-year. Cumulative domestic retail volume was 168,200 units, down 25% year-on-year.

The MPV market has shifted from a phase of high growth to a trend of low growth. Models like the Wey Gaoshan and Buick GL8 have performed strongly recently. MPVs from BYD Company Limited, Denza, and GAC Trumpchi are performing exceptionally well, while the advantage of Japanese MPVs is declining rapidly.