Sentiment Cools Ahead of the Summer Slow Season, Weekly Orders Diverge for China New Energy Vehicles

Overview

This report is Morgan Stanley’s weekly tracking of orders for major China new energy vehicle brands. Focusing on channel feedback from June 22 to 27, the report argues that overall order trends are diverging: the sentiment boost following new model launches is fading, and demand is weakening ahead of the summer slow season; at the same time, automakers are stepping up promotions to achieve second-quarter sales targets, which may bring a short-term rebound in orders at the end of June, though a demand gap may still emerge in July.

Core views

The core view is that short-term industry demand is not rising across the board, but is instead showing structural divergence driven jointly by model launches, promotional timing, and seasonal slowdown factors. Li Auto gained clear order momentum from the 2026 L8 launch, with a sharp week-over-week increase; Xiaomi and HIMA were broadly stable week over week and showed relatively better resilience; BYD retreated from previously high order levels supported by recent product launches; brands such as XPeng, NIO, and Geely Galaxy faced week-over-week or month-over-month pressure. The report maintains an In-Line view on the industry and advises investors to watch whether demand weakens materially in July after the end-of-June promotional push.

Analysis framework

The report mainly uses a weekly order-tracking approach based on channel feedback, comparing order ranges across major new energy vehicle brands from June 22 to 27 and separately observing week-over-week, month-over-month, and year-over-year changes to assess the impact of new product launches, promotional volume pushes, and the seasonal slow period on demand.

Methodology notes

• Demand TrackingWeekly Order Tracking Based on Channel Feedback

  Use weekly order ranges from dealers or channel feedback to observe short-term changes in demand.

  This method is suitable for capturing the short-term impact of model launches, promotions, and seasonal peak/off-peak cycles on orders, but since the data comes from channel feedback, it may differ from final deliveries or official sales figures.

• Relative RatingMorgan Stanley Relative Rating System

  O, E, U, and NR correspond to Overweight, Equal-weight, Underweight, and Not-Rated, respectively.

  Morgan Stanley states that its stock ratings assess risk-adjusted total return relative to industry coverage over the next 12 to 18 months, while an In-Line industry view indicates that the industry is expected to perform broadly in line with the relevant market benchmark.

Asset mapping & comparison

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

• China New Energy Vehicle Industry

  Core coverage theme of the report

  Strengths

  End-of-second-quarter promotional pushes may drive a rebound in orders at the end of June, and some brands still have new-product catalysts.

  Weaknesses

  The initial sentiment boost from recent new model launches is fading, and orders are weakening ahead of the summer slow season.

  Comparison

  Performance within the industry is highly differentiated, with Li Auto, Xiaomi, and HIMA relatively stronger than brands seeing larger week-over-week declines.

  Risks

  A July demand gap, reliance on promotions, price competition, and inconsistency between order data and final sales.

• BYD (1211.HK/002594.SZ)

  Major tracked automaker and O-rated name in the disclosure table

  Strengths

  Highest absolute order scale, with month-over-month growth still positive.

  Weaknesses

  Week over week fell 30%, retreating from the recent high driven by the Great Tang launch.

  Comparison

  Scale is significantly above peers, but short-term momentum is weaker than Li Auto and than Xiaomi and HIMA, which were stable week over week.

  Risks

  Fading new-product pulse, rising promotional intensity, and year-over-year decline.

• Li Auto (2015.HK/LI.O)

  A standout new energy vehicle name this week

  Strengths

  The 2026 L8 launch drove orders to 11.4-11.6k, up 75% week over week, with both month-over-month and year-over-year growth strongly positive.

  Weaknesses

  The improvement in orders relies heavily on the new-product cycle, and sustainability still needs to be verified.

  Comparison

  It significantly outperformed major peers this week.

  Risks

  Fading new-product enthusiasm, a July seasonal demand gap, and post-promotion order pull-forward.

• XPeng (9868.HK/XPEV.N)

  Major tracked automaker and O-rated name in the disclosure table

  Strengths

  The July 2 Mona LO3 launch could become a catalyst for subsequent orders.

  Weaknesses

  This week’s orders were 6.6-6.8k, with week-over-week, month-over-month, and year-over-year declines across the board.

  Comparison

  Short-term order momentum is weaker than Li Auto, Xiaomi, and HIMA.

  Risks

  A weaker-than-expected new model launch, insufficient order recovery, and intensifying competition.

• NIO (9866.HK/NIO.N)

  Major tracked automaker and O-rated name in the disclosure table

  Strengths

  Year-over-year growth of 160% indicates improvement from a low base or product-cycle effects.

  Weaknesses

  Week over week fell 8% and month over month fell 55%, showing insufficient short-term sequential momentum.

  Comparison

  Year-over-year performance is stronger than that of many automakers, but sequential performance is weaker than Li Auto and week-over-week stable brands.

  Risks

  Continued month-over-month decline, order pressure during the slow season, and volatility in channel feedback.

• Xiaomi (1810.HK) and HIMA

  Brands cited in the report as more resilient week over week

  Strengths

  Broadly flat week over week, showing relative stability as industry sentiment weakens.

  Weaknesses

  Both declined month over month, and Xiaomi’s year-over-year drop was substantial.

  Comparison

  Short-term resilience is stronger than that of BYD, Geely Galaxy, XPeng, ZEEKR, and other brands with week-over-week declines.

  Risks

  Month-over-month deterioration, a short sample period, and uncertainty over the sustainability of follow-up orders.

Key data

• Industry ViewIn-LineApplicable to China Autos & Shared Mobility, with a time frame typically defined as 12 to 18 months under Morgan Stanley’s rating framework.
• BYD (1211.HK/002594.SZ)72.7-73.2k, WoW -30%, MoM +9%, YoY -11%Orders have normalized from the recent high level driven by the Great Tang launch, though the absolute scale remains high.
• Geely Galaxy (0175.HK)17-17.5k, WoW -11%, MoM -25%, YoY -23%Week over week, month over month, and year over year were all negative, indicating near-term order pressure.
• Li Auto (2015.HK/LI.O)11.4-11.6k, WoW +75%, MoM +38%, YoY +50%The 2026 L8 launch boosted order momentum, making it one of the standout brands this week.
• NIO (9866.HK/NIO.N)13-13.2k, WoW -8%, MoM -55%, YoY +160%Year-over-year growth was strong, but sequential momentum was weak, with a notable month-over-month decline.
• XPeng (9868.HK/XPEV.N)6.6-6.8k, WoW -8%, MoM -72%, YoY -30%Orders were under pressure, and the market is watching whether the July 2 Mona LO3 launch can bring improvement.
• Leapmotor19-19.5k, WoW -2%, MoM +25%, YoY +90%Week over week was broadly stable, while month-over-month and year-over-year performance remained strong.
• Tesla China9.5-9.7k, WoW -10%, MoM -5, YoY -18%In the original text, the month-over-month figure is written as '-5 MoM' without a percent sign.
• HIMA15.3-15.8k, broadly flat WoW, MoM -32%It showed greater resilience week over week, though month-over-month still declined materially.
• Aito9.9-10.1k, WoW +9%, MoM -41%, YoY +29%Week over week improved, but month-over-month remained weak.
• ZEEKR5.7-5.9k, WoW -11%, MoM -35%, YoY +27%Sequentially weaker in the short term, but still positive year over year.
• Xiaomi (1810.HK)7-7.2k, broadly flat WoW, MoM -22%, YoY -98%Stable week over week, and the report lists it as one of the relatively more resilient brands.

Impact & implications

In terms of investment implications, the report does not provide a clear change in buy/sell recommendations, but instead emphasizes divergence in short-term order momentum and timing risk. End-of-second-quarter promotions may support short-term sales targets, but if demand depends mainly on promotions and new-product enthusiasm, the July slow season may reveal underlying demand pressure. Investors need to distinguish among absolute order scale, sequential trend, and new-product catalysts: BYD remains large in scale but is pulling back from a high base; Li Auto is seeing the strongest short-term boost from new products; XPeng needs to be watched to see whether Mona LO3 improves weak orders; and the week-over-week stability of Xiaomi and HIMA is relatively noteworthy.

Risks

• The July summer slow season may lead to a demand gap, undermining the sustainability of the end-of-June promotional push.
• Weekly orders are based on channel feedback and may differ from final deliveries, official sales, or company-disclosed data.
• While promotional volume pushes help achieve second-quarter sales targets, they may also bring price competition, margin pressure, and demand pull-forward.
• The order pulse from new model launches may fade quickly, especially for brands relying on a single model catalyst.
• The report includes disclosures of Morgan Stanley’s business relationships with some covered companies, and investors should treat the research view as one factor in decision-making rather than the sole basis.

What to watch

• Whether end-of-June promotions drive an order rebound as the report expects.
• The magnitude and duration of the July seasonal demand gap.
• Whether order momentum for Li Auto’s 2026 L8 can continue in subsequent weekly data.
• Whether XPeng orders improve after the July 2 Mona LO3 launch.
• Whether BYD orders can stabilize after pulling back from new-product-driven highs.
• Whether the week-over-week stability of Xiaomi and HIMA can offset month-over-month pressure.