By Jules Rimmer

Bank of America report highlights the drag on global automobile sales caused by chronically weak China demand

China commands 59% of the global BEV - or battery electric vehicles - market.

Chinese car manufacturers are gobbling up European market share, especially in electric vehicles, and are rapidly expanding market share at the expense of the European automobile companies. Declining growth in China's domestic market is bolstering that trend, a research note from Bank of America reports Wednesday.

Unable to sell at home, China's auto companies are looking to sell elsewhere.

Little wonder, then, that on the same day, Alfredo Altavilla, the special adviser to China's second-largest car manufacturer, BYD (CN:002594), claimed that the job cuts announced by Volkswagen this week were a "wake-up call for the industry."

In May, global auto sales were down 3.4% from a year before, but it's the 17% slump in demand from China that's dragging figures down overall. While Europe may derive some satisfaction from moderate growth of 3%, alarm bells will be ringing at who is benefiting. It isn't the European car companies; it's the Chinese - and they are eating everyone's lunch.

Recent weakness in China is driving the divergence, with ex-China markets showing relatively better resilience.

Having seen BYD's sales in Europe rise 270% to 188,000 vehicles in 2025 and doubling to north of 100,000 in the first five months of 2026, Altavilla went further and suggested that it was "bloody useless" for Europe's industry to try "fighting that invasion."

Bank of America's global automobile-industry note, authored by lead analyst Horst Schneider and team, analyzed May sales data and observed that the biggest drag on the sector worldwide was the depressed Chinese market. However, the increased adoption of battery electric vehicles, or BEVs, favors the Chinese original equipment manufacturers while putting pressure on the sales volumes of European incumbents trying to unload cars with internal-combustion engines.

In the U.S., Schneider relates that it's the Japanese and Korean manufacturers that are stealing market share, while, in China itself, consumers are trading up to premium brands. Any OEM that isn't exposed to China, he observes, is probably boasting better sales figures.

Globally, BEV penetration continues to trend higher, rising from 14% in the first quarter and tracking toward 18% in the second. The Chinese command 59% of that BEV market and continue to pull away, Schneider points out. Its key export players are BYD, Chery (HK:9973) and Leapmotor (HK:9863).

China continues to dominate EV adoption structurally, with the EU following and North America lagging significantly.

While Europe is generally struggling in the car business, it's the problems associated with China that's hindering performance. Bank of America reports that Volkswagen (XE:VOW), BMW (XE:BMW), Porsche (XE:P911) and Mercedes (XE:MBG) are all affected by the China weakness.

In the U.S. sales figures are starting to show that "fuel efficiency may matter more than many people assume." This would explain why Japanese and Korean OEMs, which offer more fuel efficient powertrains, are gaining market share.

Worryingly for U.S. manufacturers, the Bank of America note sees improving consumer sentiment overall, but this isn't extending to light-vehicle purchases. "Auto-specific buying sentiment remains weak with around 80% of consumers saying it is not a good time to buy a car."

-Jules Rimmer

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