[SMM Analysis]"China Auto Sales: September NEV Retail Up 2% MoM, 42% YoY Drop in Final Week"

According to data released by the CPCA on September 30, retail sales of passenger vehicles in China reached 1.258 million units during September 1-27, 2026, down 29% YoY but up 1% MoM from the same period last month. Within this total, retail sales of new energy vehicles reached 827,000 units, down 20% YoY but up 2% MoM, with a retail penetration rate of 65.7%. On the producer side, the wholesale penetration rate of new energy vehicles surpassed 70%. The coexistence of overall volume pressure and record-high penetration rates remained the most distinctive structural feature of the end-use market this month, but the marginal changes in the weekly pace within the month deserve greater attention.

Front-Loaded Month with a Sharp Loss of Momentum in the Fourth Week

Looking at the weekly breakdown, the September auto market showed a clear "front-loaded, back-loaded" pattern: daily average retail sales improved steadily on a MoM basis from the first through the third week (at -1%, +8%, and +14% respectively compared with the same period last month), following a normal peak-season ramp-up pace. However, in the fourth week, daily average retail sales fell to 54,000 units, with the YoY decline abruptly widening to 42% and a MoM reversal to -13%. The MoM gains accumulated over the first three weeks were rapidly eroded in the final week, dragging the full-month MoM growth rate of new energy retail sales down from 14% under the September 1-20 reporting period to just 2%.

The fourth-week slowdown involved two factors. First, September 2025 marked the peak of the buying spree before subsidies were discontinued in some regions, making the YoY base most challenging at month-end. Second, after demand was concentrated in the first three weeks of this month, the momentum of subsequent orders was insufficient, compounded by wait-and-see sentiment ahead of the Mid-Autumn Festival and National Day holidays, leading to a phased pullback in end-user market conditions. In addition, this year's trade-in subsidies were generally mild, providing limited boost to the low- and mid-priced segment dominated by first-time buyers, which also constrained the elasticity of the peak season.

Producer Side Cools First as Wholesale Turns Negative MoM

The producer side also showed marginal weakening signals: new energy wholesale volume reached 1.032 million units during September 1-27, down 11% YoY and down 7% MoM from the same period last month. This compares with a still-strong 25% MoM growth in wholesale volume under the September 1-20 reporting period, which turned negative by month-end. This indicates that producers, having observed weakening retail sales, have begun proactively controlling the pace of channel inventory buildup to leave room for adjustment in Q4. Structural highlights remain, with three key variables to watch in Q4

Despite the overall weakness, the logic of electrification penetration remains intact: the retail penetration rate of 65.7% hit a new high for the same period, and the share ceded by accelerating internal combustion engine vehicle exits continues to shift to new energy. Looking ahead, three key variables stand out in the Q4 end-use market: first, whether the traditional October peak season and the intensive deliveries of new car models in Q4 can offset the pressure from a high base; second, the follow-up arrangements for local subsidy policies at year-end, which will directly affect the intensity of the December installation rush; and third, the divergence in sales between mid- and low-priced LFP car models and high-end extended-range models, which will continue to transmit through and reshape the upstream battery cell production schedule structure—this echoes the divergence on the supply side in September, when power battery cell production saw LFP up 6.2% MoM and ternary down 15% MoM, with supply and demand confirming each other.