Signs of recovery in China's two-wheeler demand in 2Q26, with UBS recommending renewed focus on the sector leaders

Overview

This report evaluates industry demand, pricing, margins, exports and changes in company guidance based on a series of recent conference calls by UBS with Chinese two-wheeler and related powersports companies. The key conclusion is that demand for China electric two-wheelers began to stabilize in 2Q26, industry price increases helped offset input cost pressure, and high oil and gas prices supported overseas demand, improving the fundamentals of the leaders while investor positioning remained limited.

Core views

UBS believes the two-wheeler industry is recovering from the 1Q26 trough: sales improved from roughly a 20% year-on-year decline to flat, price war risk is limited, and leaders can pass through costs with 3%-5% price increases. The report is most constructive on Ninebot and Yadea because their fundamentals are improving, growth targets are clear, and positioning is relatively uncrowded; it also remains positive on CFMoto and Loncin, while flagging near-term disruptions such as tariffs, exchange rates and declining OEM demand.

Analysis framework

The report combines industry demand tracking, management conference calls, sales and ASP guidance, gross margin trends, export market feedback, product mix and valuation methods. It separately reviews operating trends for Yadea, Ninebot, CFMoto, Loncin and Zongshen Power, and explains PE multiples or DCF methods as well as upside and downside risks in the valuation and risk sections.

Methodology notes

• valuation methodPE multiple method

  relative valuation

  The report states that Ninebot, Yadea and Loncin are valued using PE multiples, with a focus on the impact of sales growth, ASP, gross margin and new business monetization on earnings expectations.

• valuation methodDCF method

  discounted cash flow

  The report states that CFMoto is valued using the DCF method, with key variables including demand for large-displacement motorcycles, overseas four-wheel vehicle exports, tariff exemptions, raw material costs and product safety risks.

• industry analysisdemand recovery and cost pass-through framework

  sales stabilization, price increases and margin recovery

  The report analyzes 1Q26 sales declines, 2Q26 demand stabilization, April-May price increases, rising input costs and second-half gross margin improvement within one framework to judge the quality of the industry recovery.

Asset mapping & comparison

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

• Ninebot Limited (689009.SS)

  One of the report's most favored names, Buy rated

  Strengths

  Maintains its 2026 target of 5.5 million electric two-wheeler sales and expects a strong 3Q26 peak season; Vietnam may replicate China's electric two-wheeler experience; more electric bicycle models will launch from the end of May.

  Weaknesses

  The company warned that 2026 gross margin in the electric two-wheeler business may be lower than in 2025, and cost inflation in motors, tires and lighting still poses pressure.

  Comparison

  Compared with traditional brands, Ninebot is expanding share in the Rmb3,500-4,000 price band, but it will not further move down into the Rmb3,000-3,500 band without a cost advantage.

  Risks

  Industry sales retreat, worsening price competition, and new businesses such as robot mowers and ORV underperforming expectations.

• Yadea Group (1585.HK)

  One of the report's most favored names, Buy rated

  Strengths

  Maintains 2026 guidance for 17 million units in sales, 5%-10% ASP growth and flat gross margin; wholesale sales resumed growth after April; sodium batteries, three-wheelers and overseas business provide incremental upside.

  Weaknesses

  Retail sales are still only flat year on year, and the pace of sodium battery adoption and Southeast Asia expansion still need to be verified.

  Comparison

  Compared with peers, Yadea has a first-mover advantage in sodium batteries and may benefit from the Wuxi electric light motorcycle pilot.

  Risks

  The new national standard may push consumers toward buses and subways, price competition may intensify, new businesses in the post-battery market may underperform, sodium-ion battery adoption may be slower than expected, and Southeast Asia expansion may be weaker than expected.

• Zhejiang CFMoto Power (603129.SS)

  Buy rated; the report sees fundamentals as solid but with near-term external headwinds

  Strengths

  U.S. ORV demand is healthy, and North American 1Q sales grew 40% year on year; motorcycle export orders are improving, and the company expects full-year export growth of 20%-30%; Zeeho still maintains its target of 1.15 million units.

  Weaknesses

  U.S. tariffs, RMB appreciation and declining OEM demand are creating near-term pressure; Zeeho's losses in 2026 are expected to narrow, but the probability of reaching breakeven has fallen.

  Comparison

  Unlike pure electric two-wheeler companies, CFMoto benefits from ORV, large-displacement motorcycles and overseas markets at the same time, but it is also more exposed to tariffs and exchange rates.

  Risks

  New large-displacement motorcycle launches and market acceptance underperform expectations, four-wheel vehicles do not receive export tariff exemptions, product safety incidents, and rising raw material costs.

• Loncin Motor (603766.SH)

  Buy rated; the report covers it as a two-wheeler and powersports-related name

  Strengths

  The report assigns a Buy rating and believes there is upside from large-displacement motorcycles and expansion into overseas four-wheel vehicles.

  Weaknesses

  There is less disclosed information, and the investment thesis mainly depends on product cycle execution and overseas expansion delivery.

  Comparison

  It competes with Zongshen Power under the same ultimate controller, and the two sides plan an asset swap to optimize business boundaries.

  Risks

  Large-displacement motorcycle product launch timing and market acceptance falling short of expectations, product safety incidents, and overseas four-wheel vehicle expansion underperforming expectations.

• Zongshen Power (001696.SZ)

  Unrated, but the report discusses its business relationship with Loncin and the proposed asset swap

  Strengths

  General power products sold about 5 million units in 2025, with ASP around Rmb9,000; it has four factories in Vietnam and benefited in 2025 from U.S. tariffs blocking some Chinese suppliers; the aero-engine business generated about Rmb200m in revenue in 2025 and is in a fast growth phase.

  Weaknesses

  The current general power business still relies mainly on OEMs, while self-owned brands and global manufacturing are still being built out; the new energy business remained small in 2025.

  Comparison

  It competes with Loncin under the same ultimate controller, Zongshen Group, and plans an asset swap in which Loncin would divest the general power business and take in Zongshen's motorcycle engine business.

  Risks

  Uncertainty over the asset swap execution, weaker-than-expected brand building in overseas markets, and weaker-than-expected growth in general power and aero-engine businesses.

Key data

• Industry sales trendAbout a 20% year-on-year decline in 1Q26, improving to basically flat in 2Q26The report believes this points to a recovery in demand for China electric two-wheelers.
• Industry price increase3%-5%OEMs passed through higher costs with price increases from April to May, and the report believes there was no large-scale price war.
• Yadea 2026 sales guidance17 million unitsThe company also guided for 5%-10% ASP growth, flat year-on-year gross margin, and net profit per unit rising from Rmb179 in 2025 to Rmb180-200 in 2026.
• Yadea sodium battery target1 million sets in 2026, about 6%-7% of two-wheeler salesThe company believes sodium batteries have a cost advantage over lithium batteries when lithium carbonate prices are above Rmb150k per tonne.
• Yadea overseas shipment guidance500,000 units in 2026 versus 310,000 in 2025If high oil prices continue, the company believes there is upside risk to the guidance.
• Ninebot 2026 electric two-wheeler sales target5.5 million unitsThis implies roughly 30% year-on-year growth, and the company expects the 3Q26 peak season could set a new historical high.
• CFMoto ORV performanceU10 Pro monthly sales in 1Q26 exceeded 10,000 units, implying an annualized run rate above 40,000 units1Q shipments grew 25% year on year, North American sales grew 40% year on year, but U.S. tariffs and RMB appreciation created pressure.
• CFMoto motorcycle export target20%-30% export growth for the full yearThe company believes 1Q is the typical off-season and expects export growth to accelerate from 2Q26.
• Zeeho sales target1.15 million unitsFrom January to April, sales were mainly electric motorcycles, accounting for over 80%, and the focus will later shift to electric bicycles.
• UBS rating distribution disclosureGlobally covered names: Buy 54%, Neutral 40%, Sell 6%The disclosure shows that 24% of the companies in the Buy category received investment banking services in the past 12 months.

Impact & implications

If demand stabilization, price increases and strong exports continue, revenue growth and margin resilience of the electric two-wheeler leaders may be re-rated. The investment implication is positive overall: Ninebot and Yadea have higher growth certainty, while CFMoto and Loncin remain supported by Buy ratings but depend more on overseas demand, exchange rates, tariffs and product cycles. At the industry level, sodium batteries, easing access restrictions for electric light motorcycles, urban congestion and industry consolidation may become medium-term catalysts.

Risks

• The 2024 new national standard may cause travel preferences to shift back from electric two-wheelers to buses and subways, thereby depressing industry sales.
• The industry competitive landscape may worsen due to intense price competition.
• Rising raw material costs may compress gross margins.
• U.S. tariffs and RMB appreciation may affect sales and margins of export-oriented companies such as CFMoto.
• Expansion into overseas markets such as Southeast Asia may be slower than expected.
• Sodium-ion battery adoption may be slower than expected.
• Product safety incidents may hurt motorcycle or four-wheel vehicle sales.
• New businesses such as robot mowers, ORV, Zeeho electric two-wheelers and the post-battery market may underperform expectations.

What to watch

• Whether China electric two-wheeler retail and wholesale sales in 2Q26 and 3Q26 move further from flat to growth.
• Whether the 3%-5% price increases from April to May are smoothly accepted by distributors and consumers.
• The progress of Yadea's 2026 targets for 17 million units in sales, 5%-10% ASP growth and 1 million sets of sodium battery shipments.
• Ninebot's 5.5 million electric two-wheeler sales target and 3Q26 peak-season performance.
• Whether the Wuxi electric light motorcycle pilot expands to more cities and leads to eased road-access restrictions.
• Whether high oil prices continue to boost electric two-wheeler demand in overseas markets such as Europe, ASEAN and Vietnam.
• Whether CFMoto obtains tariff exemptions, whether ORV inventories in the United States remain healthy, and whether the RMB exchange rate continues to create pressure.
• Whether the industry sees large-scale price wars or accelerated exits by small and mid-sized players.