China’s July Auto Market Holds Steady in Seasonal Slump; August-September Recovery Seen Ahead — Morgan Stanley
An Authorized IMA Street Signal research note attributed to Morgan Stanley says China’s auto market softened in July because of the traditional summer seasonal slowdown.
An Authorized IMA Street Signal research note attributed to Morgan Stanley says China’s auto market softened in July because of the traditional summer seasonal slowdown. Deliveries at EV makers including NIO, XPeng and Li Auto declined month over month. BYD, however, posted record overseas sales, driving strong year-over-year growth, while its domestic decline narrowed to within 10%. Industry retail sales fell about 15% year over year, in line with expectations.
The note says improved product supply, including the MONA L03 and Li Auto’s L6 and L8, should drive a month-over-month sales recovery in August and September. July is traditionally a low season, so the weaker data were expected. The market had already largely anticipated a lackluster July, according to the note, and share prices had reflected the seasonal weakness. A stronger-than-expected recovery could provide an upside surprise.
The note’s stated trading implication is to look past July’s subdued performance and focus on the pace of August’s sales rebound and automakers’ subsequent momentum. It concludes that July’s auto market was stable in the off-season as expected, with improved new-model supply driving a month-over-month recovery in August and September, and characterizes the muted data as a potential positioning window.
The note is positive on BYD (1211.HK) because of its record overseas sales and neutral on NIO, XPeng and Li Auto because their month-over-month deliveries weakened but new models are expected to help. July’s seasonal data were already fully anticipated, while a subsequent recovery had not yet been priced in.
The catalysts identified are August delivery data; the ramp-up pace of the MONA L03 and Li Auto’s L6 and L8; and expectations for the traditional “Golden September and Silver October” peak season.
The note says improved product supply, including the MONA L03 and Li Auto’s L6 and L8, should drive a month-over-month sales recovery in August and September. July is traditionally a low season, so the weaker data were expected. The market had already largely anticipated a lackluster July, according to the note, and share prices had reflected the seasonal weakness. A stronger-than-expected recovery could provide an upside surprise.
The note’s stated trading implication is to look past July’s subdued performance and focus on the pace of August’s sales rebound and automakers’ subsequent momentum. It concludes that July’s auto market was stable in the off-season as expected, with improved new-model supply driving a month-over-month recovery in August and September, and characterizes the muted data as a potential positioning window.
The note is positive on BYD (1211.HK) because of its record overseas sales and neutral on NIO, XPeng and Li Auto because their month-over-month deliveries weakened but new models are expected to help. July’s seasonal data were already fully anticipated, while a subsequent recovery had not yet been priced in.
The catalysts identified are August delivery data; the ramp-up pace of the MONA L03 and Li Auto’s L6 and L8; and expectations for the traditional “Golden September and Silver October” peak season.