Large SUVs enter a high-intensity elimination round, with demand concentrated in a few hot-selling models and higher-trim versions

Overview

The report is based on store visits in Shanghai to brands including BYD, Denza, Xiaomi, NIO, ONVO, Li Auto, and Tesla, combined with CAAM, CPCA, and price-discount data, to assess demand, pricing, inventory, exports, and model competition in China’s auto industry in 2H26. The key conclusion is that large five- to seven-seat SUVs have become the most crowded competitive segment, with consumers seeking "bigger, better, and cheaper" vehicles, and demand concentrated in a small number of accurately positioned new models rather than a broad industry recovery.

Core views

Supply of large SUVs is increasing rapidly, but configurations such as screens, refrigerators, massage seats, and assisted driving are converging, making model differentiation more difficult. Large models in the Rmb200-250k range create pressure on NIO, Li Auto, and Huawei models above Rmb450k, as well as BMW and Benz models priced at Rmb250-350k but smaller in size. Store feedback shows that hot-selling new cars can maintain waiting periods of several months and that consumers prefer mid- to high-trim versions, while older or highly competitive models rely on cash discounts, interest-free financing, and trade-in subsidies to sustain sales. Marginal improvement in industry fundamentals is reflected in narrowing discounts and declining inventories, but domestic sales remain weak, and exports continue to serve as the growth engine.

Analysis framework

The report uses a store-channel survey approach combined with cross-validation against industry data: interviews with salespeople and potential consumers are used to observe order waiting periods, configuration preferences, pricing, and promotions; these are then combined with sales, discounts, inventory, penetration rates, and export data to assess the industry cycle; finally, model cycles are linked to each automaker’s sales, margins, cash flow, and investment rating in 2H26.

Methodology notes

• Primary researchStore-channel visits

  Identify real demand strength, consumer preferences, and promotional strategies through feedback from terminal stores.

  The survey covered multiple mainstream new energy vehicle brand stores in Shanghai, focusing on comparisons of waiting periods, order structure, share of mid- to high-trim versions, cash discounts, interest-free financing, and trade-in subsidies. Store samples are timely but may not necessarily represent the national market.

• Industry cycleSales-price-inventory triangulation

  Observe sales, average discounts, and channel inventory simultaneously to avoid judging recovery based on a single indicator.

  Domestic sales remain under pressure, but average discounts have improved continuously and inventory has declined, indicating a marginal repair in supply-demand conditions, though this is not yet sufficient to confirm that the industry has exited the trough.

• Competitive analysisProduct cycle and price-band comparison

  Compare the competitive positions of different brands in terms of size, price, powertrain type, configurations, and model lifecycle.

  The analysis focuses on competition among large five- to seven-seat SUVs across BEV, PHEV, and EREV, and assesses the impact of early-stage price discipline for new cars and late-stage promotions for older models on brands and margins.

• Company researchTransmission from model cycle to profitability

  Map changes in orders, model mix, and promotions to sales volume, average selling price, margins, and cash flow.

  BYD’s flash-charging models and overseas business, NIO’s ES8 and ES9 order backlogs, and Li Auto’s discounts and model overlap are the main bases for judging performance divergence in 2H26.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BYD Company Limited-A (002594.SZ) and BYD Company Limited-H (1211.HK)

  A key beneficiary of product refreshes, the flash-charging ecosystem, and overseas expansion, rated Overweight.

  Strengths

  Broad model coverage, value-for-money large SUVs in the Rmb200-250k range, flash charging and charging ecosystem that can support pricing, and overseas business as a major earnings engine.

  Weaknesses

  Weak domestic passenger vehicle demand could still affect sales delivery, and industry competition may limit price and margin improvement.

  Comparison

  Compared with competitors that rely only on brand premium, BYD builds a stronger defense through technology, product portfolio, and scale.

  Risks

  Domestic recovery falling short of expectations, flash-charging model penetration below expectations, overseas trade barriers, and local operating challenges.

• NIO (NIO)

  ES8 and ES9 order backlogs support revenue and margins in 2H26, rated Overweight.

  Strengths

  ES9 has a waiting period of about 4 months and orders are tilted toward mid- to high-trim versions; ES8 and ES9 new-car order backlogs provide earnings visibility.

  Weaknesses

  There are no major new model launches in 2H26, and high-priced large SUVs must prove that their functionality and experience offer significant advantages.

  Comparison

  Demand performance is better than that of some large SUV competitors, but its price band is significantly higher than that of new entrants in the Rmb200-250k range.

  Risks

  Order conversion falling short of expectations, price competition, cash burn, and failure to achieve breakeven and free cash flow targets.

• Li Auto (2015.HK, LI)

  Overlapping competition in large five- to six-seat SUVs is intensifying, rated Underweight.

  Strengths

  Has brand recognition in the family large SUV market, and the new i8 can currently still maintain sales with no discounts.

  Weaknesses

  L9 Livis and i6 have already adopted cash discounts, indicating that some models face demand and competitive pressure.

  Comparison

  When facing new large SUV products from Xiaomi, BYD, and others, product overlap is relatively high and the price advantage is limited.

  Risks

  Deeper promotions, sales below expectations, pressure on average selling price and margins, and concentrated launches of new competing products.

• Xiaomi Auto

  Skynomad may become an important variable in large SUV price competition, but the report believes the certainty of sales exceeding expectations is insufficient.

  Strengths

  Indicative pricing is competitive, and brand traffic and new-product attention are high.

  Weaknesses

  Competing models are crowded, and market feedback suggests its popularity may be lower than that of Yu7.

  Comparison

  Pricing may be lower than that of some premium models of similar size, but it still needs to compete with BYD, NIO, Huawei, Li Auto, and Denza.

  Risks

  Final pricing, consumer sentiment, competitor performance, and potential concerns triggered by recent CALB battery quality incidents.

• Denza

  The waiting period and preference for higher trims of Z9GT show that certain high-quality products still have resilient premium demand.

  Strengths

  Despite being priced above Rmb360k, it has no discounts, a waiting period of about 3-4 months, and a configuration mix favorable to margins.

  Weaknesses

  Premium demand may be concentrated in a few hot-selling models and is difficult to extrapolate directly to the entire product portfolio.

  Comparison

  Compared with models that need to rely on cash discounts, Z9GT currently has stronger price realization capability.

  Risks

  Order slowdown after freshness fades, and further escalation of competition in large SUVs and the premium new energy vehicle market.

Key data

• July passenger vehicle wholesale sales2.268 million unitsDown 5.6% MoM and 0.9% YoY; table data are based on CAAM.
• July domestic passenger vehicle salesDown 25% YoYDown 10% MoM, with no clear improvement compared with the 23% YoY decline in 1H26.
• July passenger vehicle exports900,000 unitsA new monthly high, up 2% MoM and 85% YoY.
• Year-to-date auto export growthUp 68% YoYFull-year passenger vehicle and commercial vehicle exports are expected to reach around 10 million units.
• Potential export scale before 2030About 15 million unitsExcludes output from Chinese automakers’ overseas factories; trade and regulatory barriers may slow the pace of realization.
• New energy passenger vehicle penetration rate64%Reached a historical high in July, compared with 63% in June.
• Average price discount15.4%As of end-July, it had improved for five consecutive months, narrowing from the February peak of 17.6%.
• Channel inventory1.5 monthsHas continued to improve since April, in line with summer off-season levels, and is expected to gradually rise ahead of the fourth-quarter peak season.
• Mainstream large SUV price bandRmb200-250kSome models have a length of about 5.3 meters and a wheelbase of over 3 meters, creating competitive pressure on higher-priced large SUVs.
• BYD Grand Tang waiting periodAbout 2 monthsExisting BYD owners receive a Rmb10k trade-in subsidy, while non-BYD owners receive a Rmb6k subsidy.
• NIO ES9 waiting periodAbout 4 monthsOrders are tilted toward mid- to high-trim versions; ES8 offers three-year interest-free financing or a Rmb10k cash discount.
• Denza Z9GT waiting periodAbout 3-4 monthsPriced above Rmb360k with no discounts, and consumers mainly choose mid- to high-trim versions.
• Li Auto promotionsRmb10k discount for L9 Livis; Rmb5k discount for i6; no discount for i8This reflects a strategy of maintaining early-stage price discipline for new models while increasing promotions for models facing intensified competition or in the later stage of their lifecycle.
• Xiaomi Skynomad indicative priceFive-seat version Rmb259.9k; seven-seat version Rmb299.9kStores said the official September price could be about 10% lower than the indicative price; a refundable Rmb1k deposit can currently be paid.
• Forecast share of BYD flash-charging model salesAbout 20% in 4Q26Viewed as an important driver of improvement in BYD’s domestic profitability in the fourth quarter.

Impact & implications

At the industry level, the sales recovery in 2H26 may be weaker than previously expected, and forecasts for the YoY decline in domestic passenger vehicle sales to narrow to 15% in 3Q and to mid-single digits in 4Q face downside risk. At the same time, narrowing discounts, improving inventories, and high export growth help cushion weak domestic demand. From an investment perspective, expectations for broad-based industry gains should be reduced, with focus shifting to automakers that have strong product cycles, reasonable price bands, a high-trim model mix, charging or brand differentiation, and overseas growth capabilities. Brands with prices above Rmb450k but insufficiently clear product advantages, or those with higher prices but less attractive size and configurations, may face greater sales and margin pressure.

Risks

• Domestic passenger vehicle demand recovery is slower than expected, and third- and fourth-quarter sales forecasts face downside risk.
• Concentrated launches of large five- to seven-seat SUVs may trigger a new round of price competition due to product homogenization.
• If high-priced brands cannot prove differences in brand, quality, and functionality, sales and margins may both come under pressure.
• Store visits were concentrated in Shanghai, and sample feedback may not fully represent nationwide demand.
• Export growth may be constrained by tariffs, non-tariff barriers, labor unions, overseas regulation, and localized operating issues.
• Quality concerns arising from Xiaomi’s use of CALB batteries have not yet been confirmed to affect sales, but they may disrupt consumer sentiment.
• Channel inventory is expected to rise before the fourth-quarter peak season; if terminal demand is insufficient, the improving discount trend may reverse.
• Some institutions covered in the report have market-making, client service, shareholding, or potential investment banking relationships with the relevant companies.

What to watch

• Whether the decline in domestic passenger vehicle sales can narrow as expected in 3Q26 and 4Q26.
• Whether average discounts can continue to improve, and the extent of channel inventory rebound in the fourth quarter.
• Whether BYD’s new flash-charging models can reach around 20% of domestic sales in the fourth quarter.
• Delivery conversion, margins, and cash flow performance of NIO’s ES8 and ES9 order backlogs.
• Whether Li Auto expands promotions for L9, i6, or i8 after more competing products are launched.
• Xiaomi Skynomad’s official September pricing, order volume, and consumer feedback on its battery supplier.
• Actual sales of BYD Grand Tang, Sealion 08, Fangchengbao Tai 09, NIO ES9, Aito M8, and Leapmotor D19.
• Whether China auto exports can maintain high growth, and trade and regulatory changes in Europe and other overseas markets.