While China's electric vehicle (EV) market was soft in March, the exports surged year-on-year, signaling robust external demand. The divergent performance between wholesale and retail growth, where wholesale up 1.1% YoY and 58.3% MoM, versus retail down 14.4% YoY but up 82.6% MoM, was largely bridged by surging exports which climbed 139.9% YoY and 29.6% MoM, with inventories moving to the distributors.
On the battery front, after three years of destocking, the sector has entered an active restocking phase, signaling producers' optimism toward Q2 demand. However, risks remain regarding the pace of domestic demand recovery and over-reliance on exports.
In detail, China's wholesale volume of electric passenger vehicles reached 1.144 million units, up 1.1% YoY, while retail sales stood at 848,000 units, down 14.4% YoY. Among them, the exports hit 349,000 units, surging 139.9% YoY, accounting for 30.5% of wholesale volume.
The YoY decline in domestic retail sales reflects a slower post-Chinese New Year consumption recovery and a high base last year. Despite the 14.4% YoY drop, the strong MoM rebound indicates that real end-market demand is beginning to pick up.
At the same time, the OEMs achieved wholesale growth by ramping up the exports, making exports a core pillar of wholesale performance and capacity digestion.
However, once export capacity or orders become saturated, it could bring persistent pressure on the wholesale side should the retail market fail to maintain strength.
On the inventory front, by the end of March, cumulative electric passenger vehicle inventory stood at 155,000 units at OEMs and 637,000 units at the distributors, a decline of 21,000 and 53,000 units, respectively, from February, reflecting synchronized destocking. In the early stage of demand recovery, inventory shifted constructively from OEMs to distributors, indicating stronger confidence among distributors toward end-market demand.
When converted to inventory days, the distributors held approximately 14.12 days of electric passenger vehicles inventory, while OEMs' inventory days were around 3.64 days. (Inventory days are derived from the 12-month rolling inventory-to-sales ratio multiplied by 30 days.)
Sources: China Automobile Dealers Association, Mysteel
Both metrics fell significantly from January–February levels and were also below year-ago levels, serving as clear evidence of improved inventory turnover and better supply-demand balance. The decline in inventory days shows that retail recovery is gradually absorbing channel and factory inventories.
As of end-March 2026, cumulative battery cell inventories stood at 325.6 GWh, of which LFP batteries accounted for 262.1 GWh (80.5%) and ternary batteries for 63.8 GWh.
Based on the 12-month rolling inventory-to-sales ratio, the overall ratio for battery cells edged down in March. Within this, the ratio for ternary cells rose slightly, while that for LFP cells declined.
After three consecutive years of destocking, battery cell producers have now entered an active restocking phase. Combined with a near-doubling of installed capacity in March 2026 compared with February, this suggests downstream optimism toward Q2 demand and proactive preparation, according to data from China Automotive Battery Innovation Alliance.
In summary, China's EV market saw successful destocking among both OEMs and distributors, through a combination of gradual retail recovery and strong exports, laying a healthier foundation for the second quarter.
Upcoming auto shows from late April to early May are expected to further stimulate consumer demand and support sales growth. On the battery front, LFP battery demand is expected to outperform ternary, driven by both energy storage demand and a marginal improvement in power-battery demand.
Written by Aggie Hu, huchenying@mysteel.com
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