Chinese auto manufacturers are revising growth forecasts after a weak start to 2026. Morgan Stanley analysts, led by Tim Hsiao, warn that weakening demand and policy shifts have disrupted original sales plans. New car sales momentum has faded sharply, with Q1 passenger vehicle sales projected to fall 5–7% year-on-year.

The slowdown is forcing a strategic pivot. Major electric vehicle makers see order intake drop 30–40% month-on-month, pushing manufacturers to prioritize de-stocking over aggressive discounts. This marks a sharp reversal from years of subsidy-driven expansion, with the sector now facing a "new normal" of lower volumes and profitability.

For the full year, Morgan Stanley forecasts a 3% overall sales decline, ending a three-year growth streak. While domestic volumes may fall 5–7%, export growth of roughly 16% is expected to provide a partial offset. Overseas markets are becoming critical, especially if minimum pricing on Chinese EVs in Europe replaces tariffs.