Accelerating Global Expansion! Wall Street Judges: Short Covering in Chinese New Energy Vehicles Will Continue

China's NEV sales in July outperformed expectations, with exports continuing to rise and inventory pressures easing, prompting Wall Street to upgrade its judgment on the trading recovery of auto stocks. Citigroup believes that short covering in the auto sector will continue.

According to Zhuifeng Trading Desk, Citigroup analyst Jeff Chung pointed out in a research report on August 2 that, including brands that have disclosed data, China's NEV industry wholesale volume in July is expected to increase by 1% month-over-month and 23% year-over-year, exceeding market expectations. Compared to the industry's 4% month-over-month decline in July of the previous year, the positive month-over-month growth in July this year is seen as an important signal of improved demand resilience.

Ming Hsun Lee, an analyst at Merrill Lynch Hong Kong (Bank of America Global Research), noted in his tracking of the Chinese auto industry on August 3 that the main theme in July was "strong export performance, with Leapmotor and NIO's year-over-year growth rates outperforming peers." BYD, Geely, Great Wall Motor, and Chery all maintained high export shares, with overseas markets becoming a key support in the sales structure of many automakers.

For the market, the July data does not imply a comprehensive acceleration of the industry, but rather a position correction driven jointly by exports, inventory, peak season expectations, and increased volume from certain brands. Profit realization still needs to be verified during the Q2 earnings season, but against the backdrop of sales exceeding expectations, previously bearish trades still face pressure for continued covering.

Sales Exceed Expectations, Supporting the Logic for Short Covering

Citigroup's core judgment is that the NEV industry's wholesale volume in July grew by 1% month-over-month and 23% year-over-year, exceeding market expectations, and that short covering in the auto sector will continue.

The key to this judgment lies not in the absolute magnitude of the 1% month-over-month increase, but in the change in the growth slope. The year-over-year growth rate of NEV wholesale volume rose from 8% in April and 13% in Q2 to over 20% in July, indicating a significant improvement in industry momentum compared to the earlier period.

Inventory is also an important variable in the trading recovery. Citigroup pointed out that industry inventory had largely been destocked by June compared to April, meaning sales improvements were no longer fully offset by inventory pressure. Meanwhile, the proportion of passenger car exports to wholesale volume rose from 28.9% in March to 37.2% in June, and is expected to remain around 37% in July.

This means the market is shifting from previous concerns about sales, inventory, and price pressure to re-evaluating the support that exports and the peak season provide for second-half profit visibility. Citigroup believes that automakers with higher export shares, such as BYD, Geely, Chery, and Great Wall Motor, will benefit more directly from this change.

Exports Become the Main Theme, Overseas Sales Reshaping Automaker Structures

Bank of America's research shows that exports in July were no longer just marginal growth but had become the backbone of sales tables for many automakers.

BYD exported 180,500 units in July, a year-over-year increase of 123.6%, with an export share of 43.1%. In other words, for every 10 cars BYD sold that month, more than 4 came from overseas markets. From January to July, BYD's exports totaled 972,200 units, a year-over-year increase of 78.4%, with an export share of 43.6%.

Geely exported 106,700 units in July, a year-over-year increase of 202.4% and a month-over-month increase of 4%, with an export share of 42.6%. However, Bank of America noted that Geely's domestic wholesale volume was approximately 143,000 units, a year-over-year decrease of 29%, with wholesale below retail, indicating that channels are still destocking.

Chery's export orientation is even more prominent. In July, Chery's total sales were 261,900 units, of which 196,300 were exports, resulting in an export share of 75%. From January to July, Chery's cumulative sales reached 1.537 million units, a year-over-year increase of 10.3%, achieving 52.8% of Bank of America's full-year forecast, placing it ahead among major independent automakers.

Great Wall Motor sold 108,100 units in July, a year-over-year increase of 3.5% and basically flat month-over-month. However, exports amounted to 62,000 units, a year-over-year increase of 50.9%, with an export share of 57.4%. Without the support of overseas markets, Great Wall's total performance for the month would have been much flatter.

BYD Returns to Growth in a Single Month, with Focus on Overseas and Pure Electric Vehicles

BYD sold 419,200 NEVs in July, a year-over-year increase of 21.8% and a month-over-month increase of 4%. Among these, NEV passenger car sales were 411,100 units, a year-over-year increase of 20.5%.

Structurally, pure electric vehicles (BEVs) performed stronger. BYD's BEV passenger car sales in July were 233,100 units, a year-over-year increase of 31.0% and a month-over-month increase of 16%, accounting for 56.7% of NEV passenger car sales; plug-in hybrid (PHEV) passenger car sales were 178,000 units, a year-over-year increase of 9.1% and a month-over-month decrease of 9%.

However, looking at the first seven months, BYD is still repairing the earlier gap. Cumulative sales from January to July were 2.2277 million units, a year-over-year decrease of 10.5%; cumulative BEV passenger car sales were 1.1006 million units, a year-over-year decrease of 8.4%; and cumulative PHEV passenger car sales were 1.0879 million units, a year-over-year decrease of 13.2%.

Performance among internal brands was also inconsistent. Denza sold 19,200 units in July, a month-over-month decrease of 6%; Fangchengbao sold 41,200 units, a month-over-month increase of 16%; and Yangwang sold 485 units, a month-over-month increase of 3%. For investors, the core variable for BYD in July is not the total volume itself, but whether the improvement in overseas sales and BEV month-over-month performance can be sustained.

Intensifying Divergence Among New Forces, Leapmotor and NIO Outperform Peers

The divergence among new force automakers became more pronounced in July. Leapmotor delivered 101,300 units, a year-over-year increase of 102% and a month-over-month increase of 8%, significantly outperforming the industry among brands that have disclosed data. From January to July, Leapmotor's cumulative sales were 457,800 units, a year-over-year increase of 68%, achieving 50% of Bank of America's full-year forecast.

NIO delivered 35,900 units in July, a year-over-year increase of 71%, but a month-over-month decline of about 10%. Cumulative deliveries from January to July were 227,400 units, a year-over-year increase of 68%, achieving 47% of Bank of America's full-year forecast. Among sub-brands, ONVO delivered approximately 10,200 units in July, and Firefly delivered approximately 5,800 units, already contributing visible incremental growth.

In contrast, XPeng and Li Auto had a slower pace. XPeng delivered 38,000 units in July, a year-over-year increase of 4% and a month-over-month decrease of 5%; cumulative deliveries from January to July were 204,000 units, a year-over-year decrease of 13%, achieving 39% of Bank of America's full-year forecast. Bank of America stated that L03 production capacity is still ramping up, and M03 orders have also been somewhat diverted by the L03.

Li Auto delivered 30,500 units in July, with slight year-over-year and month-over-month decreases; cumulative deliveries from January to July were 223,900 units, a year-over-year decrease of 5%, achieving 48% of Bank of America's full-year forecast. Materials indicate that production of some models in July was affected by a shortage of headlight supplies, and a fire incident at a supplier also disrupted deliveries.

Traditional Independent Automakers Also Show Internal Stratification

Geely's total sales in July were 250,200 units, a year-over-year increase of 5.2% and a month-over-month increase of 4%; cumulative sales from January to July were 1.6731 million units, a year-over-year increase of 1.6%, achieving 47.7% of Bank of America's full-year forecast.

However, Geely's internal structure showed significant divergence. Zeekr delivered 35,800 units in July, a year-over-year increase of 111.1% and a month-over-month increase of 2%; cumulative deliveries from January to July were 214,200 units, a year-over-year increase of 98.9%, achieving 69.0% of the full-year forecast. Lynk & Co sold 16,400 units in July, a year-over-year decrease of 39.8% and a month-over-month decrease of 14%, becoming a drag on performance.

Great Wall Motor's total volume growth in July was moderate. At the brand level, Haval sold 56,300 units in July, basically flat year-over-year and down 7% month-over-month; WEY sold 7,725 units, down 23.1% year-over-month; Tank sold 17,200 units, down 13.9% year-over-month; Ora sold 10,800 units, up 151.6% year-over-month; and pickups sold 16,000 units, up 16.2% year-over-month. Great Wall maintained positive year-over-year growth mainly relying on exports, Ora, and pickups.

Next Steps: Watch Earnings and Peak Season Sustainability

The July data has already given signals of a trading turnaround, with sales exceeding expectations, inventory destocking, rising export shares, and the industry entering the peak sales season. These factors collectively explain why Citigroup judges that short covering will continue.

However, the boundaries are also clear. Profits still lag behind sales, and month-over-month improvement does not equal synchronous profit improvement. The Q2 earnings season will be the first verification point, where the market needs to see whether sales recovery can translate into profit elasticity.

Looking at the completion rate of Bank of America's full-year forecasts, Chery is at 52.8%, Leapmotor at 50%, Geely at 47.7%, Li Auto at 48%, NIO at 47%, Great Wall at 46%, BYD at 45%, and XPeng at 39%. This ranking shows that pressure is not distributed according to sales scale, but depends on completion rates and structural quality.

If the peak season in the second half continues to sustain momentum and export shares remain high, the profit visibility of automakers with higher export weights will further improve. Conversely, if July was merely a single-month recovery for local brands, industry divergence will continue to widen, making it difficult for capital to buy into the "complete vehicle sector" as a whole.