The first half of 2026 saw domestic wholesale vehicle sales in China reach 15.017 million units, down 4.1% year-on-year. Passenger vehicle wholesale sales totaled 12.72 million units, a 6% decline, while the commercial vehicle segment showed stronger performance with 2.297 million units sold, an 8.3% increase. Domestic terminal demand faced pressure, with wholesale sales of 9.921 million units, dropping 21.1% from the prior year.

In contrast, exports maintained robust growth, with Chinese vehicle exports hitting 5.096 million units in H1 2026, up 65.3% year-on-year. For the full year 2026, total vehicle exports are projected at 10 million units, representing roughly 40% growth. Overall, China's vehicle sales are forecast to reach 34.81 million units in 2026, a 1.2% increase, including 30.18 million passenger vehicles (up 0.3%) and 4.64 million commercial vehicles (up 8%).

Rising raw material costs and improvements in vehicle mix have led to a marginal recovery in passenger vehicle pricing in 2026. The industry is transitioning from a state of "price-for-volume and expanding discounts" toward "higher average selling prices and narrowing terminal incentives."

Key Trends in New Energy Vehicles

New energy vehicles (NEVs) have become a core driver of export growth and structural upgrade. In H1 2026, NEV exports totaled 2.355 million units, more than doubling year-on-year. Europe remains the largest market for Chinese independent brand exports, but Latin America is the fastest-growing region with the most significant structural improvements.

NEV penetration continues to rise, with pure electric (BEV) sales rebounding notably. BEV sales grew approximately 32.9% year-on-year in June, significantly outpacing plug-in hybrid (PHEV) and range-extender models at 6.4%. This recovery is primarily attributed to increased supply of mid-to-high-end BEVs and strong export demand. In contrast, PHEVs and range-extenders face challenges from high prior-year bases, intensifying homogeneous competition, and a partial shift in demand back to long-range BEVs.

Since 2026, the average battery capacity per BEV has risen sharply. The batch average for BEVs in 2026 stands at 69.4 kWh, up 4.35 kWh from the 2025 average. Both BEV and range-extender models are increasingly competing on "large vehicle platforms and high value," with product mix continuing to shift toward mid-to-high-end, large-sized, and long-range offerings.

Preferred Investment Areas

Against a backdrop of compressed industry profitability, the brokerage highlights two key themes. First, the Deluxe luxury segment is favored due to lower price sensitivity and substantial room for domestic substitution. Second, the export-oriented theme is promising, as overseas high-margin markets can help offset domestic demand and cost pressures.

Risk Factors

Key risks include: 1) weaker-than-expected domestic economic activity; 2) intensified industry competition impacting profit margins; and 3) lower-than-expected export performance.