March sales stabilized; China auto sector could continue to accelerate in 2Q26

Overview

This report focuses on China auto industry sales data for March 2026 and the outlook for 2Q26. J.P. Morgan notes that the March sales figures released by CAAM were broadly in line with expectations and showed signs of stabilization: passenger vehicle wholesale sales reached 2.4 million units, up 57% month on month and down 2.3% year on year, while the year-to-date decline narrowed from roughly 11% in January-February to 7.5%. The report believes the recovery trade from March to April is not over yet, and is especially favorable for companies with higher NEV orientation and export exposure.

Core views

The core view is that China auto demand will gradually accelerate in 2Q26. Supporting factors include: first, policy clarity improved after the March Two Sessions, combined with potential demand release from buyers waiting for new models at the Beijing Auto Show, and passenger vehicle wholesale and retail sales in 2Q26 are expected to rise 25% to 30% quarter on quarter; second, the Beijing Auto Show will be held from April 24 to May 3, and historically buying the China auto sector about one month before the show has delivered positive average returns; third, Brent crude prices staying above USD 80 per barrel support consumer preference for NEVs over gasoline vehicles and are favorable for share performance.

Analysis framework

The report combines CAAM monthly sales, passenger vehicle wholesale and retail trends, brand discount rates, export data, heavy truck data, historical stock performance before and after auto shows, and J.P. Morgan's proprietary AI-driven China auto buyer sentiment index to assess industry demand and stock trading opportunities.

Methodology notes

• Industry sales trackingCAAM monthly sales analysis

  Use wholesale sales, retail sales, and year-on-year/month-on-month changes to gauge industry conditions.

  The strong month-on-month rebound in March passenger vehicle wholesale sales and the narrowing year-to-date year-on-year decline were used as key evidence that demand is stabilizing.

• Alternative data / sentiment indicatorJ.P. Morgan China Auto Buyer Sentiment Index

  An AI-driven indicator tracking buyer interest in car purchases and brand selection.

  The index rose above the 75th percentile and improved for the fifth consecutive week, supporting the view that grassroots demand is recovering.

• Event drivenBeijing Auto Show catalyst

  New model launches and investor attention around major auto shows can affect auto stock performance.

  The report says that historically, buying the China auto sector about one month before the auto show delivered average returns of around +2%, but given the sector's strong gains over the past month, further upside after the show still needs to be watched.

• Macro cost and substitution effectsImpact of oil prices on NEV preference

  High oil prices increase consumers' preference for NEVs relative to gasoline vehicles.

  When Brent crude is above USD 80 per barrel, the report believes NEV stocks have a stronger relative performance advantage versus traditional gasoline automakers.

Asset mapping & comparison

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

• BYD

  One of the top NEV picks

  Strengths

  Strong NEV portfolio, rich product pipeline, and scale and export potential.

  Weaknesses

  Industry price competition may still pressure margins.

  Comparison

  Benefits more from higher NEV penetration than traditional gasoline automakers and joint ventures.

  Risks

  Price wars, subsidy changes, and execution risk in overseas expansion.

• Geely

  One of the top picks

  Strengths

  Strong share performance over the past month; the report notes a 46% gain, and the name has NEV and product-cycle catalysts.

  Weaknesses

  The stock has already rebounded sharply in the near term, and the auto-show and sales catalysts still need to be realized.

  Comparison

  A leader in the China auto sector recovery trade.

  Risks

  Valuation digestion, intensifying competition, and weaker-than-expected new model sales.

• NIO

  One of the top NEV picks

  Strengths

  Benefits from NEV preference and attention on new models at the Beijing Auto Show; the report notes a 32% gain over the past month.

  Weaknesses

  Profitability and scale-up remain market focus areas.

  Comparison

  Benefits more than traditional gasoline automakers from higher oil prices and improving NEV sentiment.

  Risks

  Weaker-than-expected deliveries, loss-making pressure, financing risk, and competition risk.

• XPeng

  One of the top NEV picks

  Strengths

  Clear NEV orientation and potential to benefit from improving sentiment and the product cycle.

  Weaknesses

  It still needs to prove the sustainability of sales growth and margin improvement.

  Comparison

  Better than the conventional ICE/JV SOE names the report recommends avoiding.

  Risks

  New model performance, price competition, and gross margin volatility.

• Leapmotor

  One of the top NEV picks

  Strengths

  Rapidly growing NEV exposure that fits the report's preferred direction.

  Weaknesses

  Scale, brand strength, and earnings resilience still need continued validation.

  Comparison

  More able to benefit from higher NEV penetration than conventional gasoline exposure.

  Risks

  Intensifying competition, weaker-than-expected model cycles, and execution risk in overseas expansion.

• SAIC、Guangzhou Auto、Brilliance China、Li Auto

  Names the report recommends continuing to avoid

  Strengths

  Some of these companies have scale, channel reach, or brand foundations.

  Weaknesses

  They have relatively high exposure to conventional gasoline vehicles, joint ventures, or SOE characteristics, and are not fully aligned with the report's preferred NEV/export themes.

  Comparison

  Less attractive than BYD, Geely, NIO, XPeng and Leapmotor.

  Risks

  If conventional vehicle demand or individual new model performance beats expectations, the avoid call could face reversal risk.

Key data

• March passenger vehicle wholesale sales2.4mn unitsUp 57% month on month and down 2.3% year on year.
• Year-to-date passenger vehicle sales performance-7.5%The year-on-year decline narrowed from roughly -11% in January-February.
• 2Q26 passenger vehicle wholesale/retail sales forecast+25% to +30% QoQWell above the roughly 5% seasonal increase.
• NEV penetration48%March NEV penetration for passenger vehicles, above February's 47%.
• 1Q26 auto exports+57% YoYExports remain a bright spot for the industry.
• 1Q26 heavy truck sales+20% YoYHeavy trucks performed strongly, and commercial vehicle exports grew 26% year on year.
• Overall market discount rate17.3%It eased slightly in the second half of March from the record 17.6% at the end of February, but pricing competition remains challenging.
• Buyer sentiment indexabove the 75th percentileA significant improvement from below the 25th percentile at the end of February.

Impact & implications

The investment implication of the report is that the near-term trading theme should still lean toward NEVs, strong product cycles, margin improvement, and overseas growth exposure. The recovery in sales and the Beijing Auto Show may reinforce the market's focus on new model cycles, while high oil prices further enhance the structural appeal of NEVs versus gasoline vehicles. By contrast, conventional gasoline vehicles, joint-venture systems, and companies with stronger state-owned enterprise characteristics may continue to face demand mix shifts and pricing pressure.

Risks

• Ongoing price competition and elevated overall market discount rates could weigh on industry margins.
• If 2Q26 demand recovery falls short of the expected 25% to 30% quarter-on-quarter growth, the sector's recovery trade could pull back.
• The sector has already risen materially ahead of the Beijing Auto Show, and profit-taking may follow once catalysts are realized.
• Changes in subsidy policy, oil prices, and consumer preferences could affect NEV penetration.
• Export growth faces overseas tariff, trade policy, FX, and local competition risks.

What to watch

• New model launches and order feedback at the Beijing Auto Show from April 24 to May 3.
• Whether passenger vehicle wholesale and retail sales in April and May continue the March improvement.
• Whether NEV penetration remains above 48%.
• Whether J.P. Morgan's China auto buyer sentiment index stays above the 75th percentile.
• Whether industry discount rates continue to fall from above 17%, or whether price wars re-intensify.
• Whether auto exports and heavy truck sales can extend the strong 1Q26 performance.