Bank of Communications International: January Passenger Car Domestic Demand Faces Temporary Pressure; Export Continues High Growth Trend

CITIC Securities APP has learned that China Merchants Securities released a research report stating that the automotive market in the first quarter of 2026 was relatively flat due to seasonal factors combined with prior consumption overextension. Although the “trade-in for new” policy continued to provide bottom support, terminal wait-and-see sentiment was strong, leading to some demand being deferred. Looking ahead, as local policies are accelerated and implemented, the automotive market is expected to gradually recover. In terms of exports, benefiting from positive progress in China-EU and China-Canada tariff negotiations and the deepening of domestic brands’ globalization strategies, new energy vehicle exports are shifting from simple trade exports to an “industry chain going abroad” model.

Regarding individual stocks, it is recommended to pay attention to: XPeng Motors (09868/XPEV.US/Buy), as the new P7/extended-range models are gradually launched, and local overseas production is steadily being implemented, driving sales and gross profit margins; Geely Auto (00175/Buy), as the privatization of Zeekr promotes internal resource integration; BYD (01211/Buy), as overseas production capacity enters a volume-up period, with overseas sales growth expected to further optimize profit structure.

CITIC Securities’ main views are as follows:

In January, the automotive market was under pressure due to policy adjustments and consumption overextension, with joint venture brands performing relatively resilient

Affected by the withdrawal of new energy vehicle purchase tax exemptions, adjustments to trade-in subsidies, and consumption overextension, retail sales of passenger cars in mainland China in January 2026 totaled 1.544 million units, down 13.9% year-on-year. Regarding market structure, domestic brands faced adjustments, with retail sales of 890,000 units, down 18% year-on-year, shrinking their market share by 3.5 percentage points to 57.5%; joint venture brands performed better than the overall market, with retail sales of 470,000 units, only slightly down 4% year-on-year, with German and Japanese brands increasing their shares by 1.4 and 2.1 percentage points to 19.8% and 15.5%, respectively.

New energy penetration rate sharply declined to 38.6% in January, while new entrants’ share increased against the trend

In January, retail sales of new energy passenger vehicles reached 596,000 units, down 20.0% year-on-year, with the new energy penetration rate decreasing by 20.5 percentage points to 38.6% month-on-month. Looking at different segments, penetration rates in all sectors declined significantly: domestic brand new energy penetration was 61.7% (down 19.2 ppts month-on-month), luxury brands fell to 16.1% (down 23.0 ppts). Notably, new car-making forces increased their share by 7.7 percentage points to 31.2% month-on-month.

Exports continue to show strong momentum, with new energy vehicles approaching 50% of total exports

In January, passenger vehicle exports (including complete vehicles and CKD kits) totaled 576,000 units, up 52.0% year-on-year. By brand, domestic brands remained the main exporters, with 476,000 units exported, up 49% year-on-year; joint venture and luxury brands exported 100,000 units, with a growth rate of 65%. Thanks to the continuous improvement in overseas recognition of domestic new energy vehicles, January exports of new energy passenger vehicles reached 286,000 units, up 103.6% year-on-year; their proportion of total exports increased to 49.6%, up 12.5 percentage points year-on-year.