HSBC cuts China auto demand forecast to 13% decline, slashes targets

HSBC Global Investment Research cut its 2026 China passenger vehicle retail demand forecast to a 13% decline, down from a prior estimate of 5%.

"The industry consolidation will continue, while high inventories and pricing pressure among traditional automakers will weigh on profit margins," the HSBC analysts wrote in a report dated July 24.

The broker also revised its electric vehicle demand growth forecast to a 6% decline from a prior estimate of 10% growth. HSBC lowered its 2026 earnings forecast for GWMOTOR by 23% and downgraded the stock from Buy to Hold, slashing the price target to HKD9.3 from HKD21.6. The stock traded at HKD8.78 on Thursday, implying limited upside at the new target.

HSBC now expects GAC GROUP to record a net loss of RMB5.9 billion in 2026, compared with its previous forecast for breakeven, mainly due to continued weakness in its joint venture business, particularly the significant contraction at GAC Honda. The broker maintained its Hold rating on GAC but cut the price target to HKD2.13 from HKD3.62.

For BAIC MOTOR, HSBC lowered its 2026 earnings forecast to a net loss of RMB1.025 billion and reduced the price target to HKD0.8 from HKD2.2, while keeping a Hold rating. The sharp target cuts reflect weaker-than-expected second-quarter guidance and rising uncertainty over Russia scrappage tax refunds, which could further pressure export-dependent Chinese automakers.

The downgrades signal a deepening downturn in China's auto sector, where overcapacity and price wars have eroded margins across the industry. The shift from growth to contraction in EV demand is particularly concerning for the broader electric vehicle supply chain, including battery makers and parts suppliers. Investors will watch upcoming second-half sales data and potential government stimulus measures for signs of stabilization.

This article is for informational purposes only and does not constitute investment advice.