Automotive stocks on the Hong Kong market extended their decline. At the time of writing, shares of BAIC MOTOR (01958) were down 5.61% at HK$1.01. XPENG-W (09868) shares fell 5.46% to HK$57.95, while LI AUTO-W (02015) dropped 4.39% to HK$53.4.

The downward pressure follows the release of industry data. Figures released on June 8th show that retail sales of passenger vehicles in China for May totaled 1.51 million units. This represents a year-on-year decline of 22.1%, though it marks a 9.2% increase from the previous month. Cumulative retail sales for the year to date stand at 7.099 million units, down 19.5% compared to the same period last year.

Within this total, retail sales of new energy passenger vehicles in May reached 950,000 units. This figure indicates a 7.5% decrease year-on-year, but a 12.4% rise month-on-month. From January to May, new energy vehicle retail sales amounted to 3.697 million units, reflecting a 15.1% drop from the prior year.

Analyst Perspective on the Sector

In a recent research note, Huayuan Securities commented on the sector's outlook. The firm stated that the vehicle manufacturing segment is beginning to show divergence, and they believe there may be no opportunity for a systemic, broad-based rally in the near term.

The analysis suggests that, from a macro perspective, capacity utilization in China's automotive manufacturing industry appears higher than in countries like the United States and Thailand. This implies that severe overcapacity may not be a widespread issue across the entire industry.

However, the firm notes that at the enterprise level, structural overcapacity is likely present within China's auto sector. The analysts' view is that any industry consolidation is more likely to be confined to some small and medium-sized original equipment manufacturers, and a severe, widespread shakeout process is not anticipated.