China auto retail decline narrows in July; Nomura favors selected new-model beneficiaries
Based on preliminary China Passenger Car Association data, domestic retail sales in China’s auto market are expected to have declined by a high-double-digit percentage year over year in July.
Based on preliminary China Passenger Car Association data, domestic retail sales in China’s auto market are expected to have declined by a high-double-digit percentage year over year in July. That would be an improvement from declines of more than 20% in each month of 2Q26, mainly because of the low comparison base in the second half of 2025, particularly 4Q25.
Wholesale data were mixed. BYD’s total July sales were 411.1k vehicles, up 20.5% year over year. Overseas sales rose 124% to 180.5k vehicles, while implied domestic wholesale sales were 230.5k vehicles, down 11% year over year. The domestic decline improved significantly from 23% in June. Leapmotor’s monthly sales exceeded 100,000 vehicles for the first time, rising 102% year over year. NIO delivered 35.9k vehicles, up 71%, with strong orders for the ES9. XPENG delivered 38.0k vehicles, up 3.6%, supported by strong demand for the Mona L03.
Nomura remains cautious on the sector overall. It said the June rebound was triggered by the release of AI-related fund flows rather than an improvement in fundamentals, and it highlights selectively focusing on automakers with new models or technology upgrades.
Over the longer term, automakers are accelerating their expansion into the humanoid-robot market. BYD is scheduled to release a humanoid-robot product in August, and the source highlights its advantages in hardware and software integration.
In summary, China’s auto-retail decline narrowed in July and could improve sequentially in 2H26 because of the low comparison base. However, the underlying demand outlook has changed little. Nomura remains cautious on the sector and favors selected beneficiaries of new-model launches, including BYD, XPENG and NIO.
The source identifies BYD as a positive, citing 124% overseas-sales growth and new Blade Battery 2.0 models entering the below-150,000-yuan market. It also identifies XPENG as a positive because of strong Mona L03 demand, and NIO as a positive because of strong ES9 orders. Li Auto is viewed negatively because of lackluster L6 demand and competition from Xiaomi’s EREV models. Leapmotor is a neutral watch, with monthly sales surpassing 100,000 vehicles as a milestone.
The market has already priced in part of the expected 2H26 improvement from the low comparison base. Nomura believes the rebound was driven by AI-related fund flows rather than fundamentals, making its durability uncertain. It also says the sector has not yet fully absorbed the risk of intensifying competition.
Potential catalysts cited by the source are: (1) BYD’s humanoid-robot release at the August “DI Space” event; (2) the market performance of BYD’s Blade Battery 2.0 models, Qin MAX and Seal 06, after entering the below-150,000-yuan segment; (3) the impact on competition after Xiaomi formally launches its EREV models, the SkyNomad N90 and N70; (4) the ramp-up in NIO ES9 deliveries, with monthly production capacity of about 6k vehicles; and (5) monthly China Passenger Car Association retail data confirming whether the narrowing-decline trend continues.
Wholesale data were mixed. BYD’s total July sales were 411.1k vehicles, up 20.5% year over year. Overseas sales rose 124% to 180.5k vehicles, while implied domestic wholesale sales were 230.5k vehicles, down 11% year over year. The domestic decline improved significantly from 23% in June. Leapmotor’s monthly sales exceeded 100,000 vehicles for the first time, rising 102% year over year. NIO delivered 35.9k vehicles, up 71%, with strong orders for the ES9. XPENG delivered 38.0k vehicles, up 3.6%, supported by strong demand for the Mona L03.
Nomura remains cautious on the sector overall. It said the June rebound was triggered by the release of AI-related fund flows rather than an improvement in fundamentals, and it highlights selectively focusing on automakers with new models or technology upgrades.
Over the longer term, automakers are accelerating their expansion into the humanoid-robot market. BYD is scheduled to release a humanoid-robot product in August, and the source highlights its advantages in hardware and software integration.
In summary, China’s auto-retail decline narrowed in July and could improve sequentially in 2H26 because of the low comparison base. However, the underlying demand outlook has changed little. Nomura remains cautious on the sector and favors selected beneficiaries of new-model launches, including BYD, XPENG and NIO.
The source identifies BYD as a positive, citing 124% overseas-sales growth and new Blade Battery 2.0 models entering the below-150,000-yuan market. It also identifies XPENG as a positive because of strong Mona L03 demand, and NIO as a positive because of strong ES9 orders. Li Auto is viewed negatively because of lackluster L6 demand and competition from Xiaomi’s EREV models. Leapmotor is a neutral watch, with monthly sales surpassing 100,000 vehicles as a milestone.
The market has already priced in part of the expected 2H26 improvement from the low comparison base. Nomura believes the rebound was driven by AI-related fund flows rather than fundamentals, making its durability uncertain. It also says the sector has not yet fully absorbed the risk of intensifying competition.
Potential catalysts cited by the source are: (1) BYD’s humanoid-robot release at the August “DI Space” event; (2) the market performance of BYD’s Blade Battery 2.0 models, Qin MAX and Seal 06, after entering the below-150,000-yuan segment; (3) the impact on competition after Xiaomi formally launches its EREV models, the SkyNomad N90 and N70; (4) the ramp-up in NIO ES9 deliveries, with monthly production capacity of about 6k vehicles; and (5) monthly China Passenger Car Association retail data confirming whether the narrowing-decline trend continues.