Has the investment hotspot for cars changed?

Xiao He is an industry practitioner in the automotive sector. In 2020, guided by a friend from a securities firm, she bought a New Energy Vehicle Fund for the first time. She was lucky, catching the wave of general market rise around 2021. The fund reached a peak unrealized profit of 90%. At that time, she thought it would rise further, so she didn't sell.

Later, influenced by friends, Xiao He was no longer satisfied with just buying funds; she opened an account to trade individual stocks. Over the six years, she not only failed to make money but lost about 10,000 yuan. When it rose, she was greedy and wanted to see it rise more; when it fell, she waited to break even. In this cycle, she got stuck.

Xiao He is not an isolated case. From 2021 to 2025, New Energy Vehicle sales in China grew from 3.5 million to 16.49 million, an increase of nearly 4 times. But for many investors who bought car stocks, these five years were not a period of wealth growth, but five years of being stuck.

The industry is growing, but investors are losing money. The investment logic of car stocks has changed.

Once a hot favorite

2021 was the golden age for car stocks.

Xiao He remembers that summer, in the office, colleagues discussed not cars, but how much their funds or stocks had risen during lunch breaks. The New Energy Vehicle Fund she bought reached a peak unrealized profit of nearly double.

In 2021, the CSI New Energy Vehicle Index rose 56.96% for the year. It was an era where buying funds meant making money. "Funds that sold out in a day" appeared frequently, with scenes of new funds selling out in one day or single-day subscriptions exceeding 10 billion yuan repeating. The new energy sector was the focus of capital pursuit. For example, when the Invesco Great Wall New Energy Industry Fund was issued, the subscription amount exceeded the 6 billion yuan limit, triggering proportional allocation.

Image source: SheTu Figure

Why was capital so crazy? Because they were not buying cars; they were buying the future. The market universally believed three things at the time.

First, new energy would replace fuel vehicles. This is a certain industrial revolution, like smartphones replacing feature phones. Whoever seized this opportunity would become the next Apple.

Second, Chinese car companies would produce global giants like Tesla. BYD, NIO, Li Auto, Geely... were all expected to be great. At the moment Tesla's market cap surpassed Toyota, many believed Chinese car companies could do the same.

Third, intelligentization would redefine cars. Cars would become "smartphones on four wheels", and software and data would become new profit sources. Just like Apple made a fortune from the App Store, future car companies could make money from software charging.

Market expectations stacked these three layers, giving car stocks valuations far higher than traditional car companies.

At the end of 2021, CATL's market cap climbed to a peak of 1.6 trillion yuan, with the stock price touching a historical high of 692 yuan. Institutions generally viewed CATL as the "Moutai of the new energy era". Around the same year, BYD's market cap also once broke through 1 trillion yuan.

In August of the same year, the CSI New Energy Vehicle Index's P/E ratio once reached 160 times. At that time, the market didn't care how much car companies were earning now, but how much they could earn in the future. At that time, few doubted this story.

Xiao He's friend Xiao Ming bought at over 90 yuan per BYD stock and sold when it rose to over 200 yuan in 2021. Because he needed money urgently to buy a house then, he didn't regret selling early. But more people didn't sell; they believed stock prices could still rise.

Xiao He also didn't sell her held funds. Influenced by friends, she felt new energy was a long-term track and should be held long-term. She even recommended this fund to three or four friends.

One friend traded in and out short-term, made money, and bought a luxury bag worth tens of thousands. Looking back now, that friend instead became the smartest person.

The rise of car stocks in 2021 was not because car companies earned that much at the time, but because the market bet ahead on industrial changes over the next ten years. But the question is, the future came too fast and too ruthlessly.

After the tide recedes: from buying tracks to buying winners

2022, the tide began to recede gradually. That year, the CSI New Energy Vehicle Index fell nearly 30%.

Xiao He lost over 9,000 yuan that year, leaving little of what she earned the previous year.

The sharp decline in New Energy Vehicle funds was closely related to the broader environment. Pandemic impact, rising upstream raw material prices, subsidy phasing out, Fed interest rate hikes... various negative factors叠加, the new energy sector's heat cooled down quickly, entering the so-called bubble unwinding phase.

In April 2022, CATL stock price fell below 400 yuan, market cap fell below one trillion yuan. This distance from the 1.6 trillion high point, only four months had passed.

The fund redemption wave came. Many fund investors who entered at highs in 2021 couldn't stand the losses and cut losses to exit. Xiao He also exited at the end of October that year. But she didn't leave car stocks, just didn't get on for a short time. In 2024, Xiao He bought the previous funds again. Meanwhile, under the influence of friend Xiao Ju, she started paying attention to individual stocks.

Xiao Ju has deep research into the stock market, especially car stocks. She lost hundreds of thousands in the past two years, and broke even in 2024. She recommended buying BYD and CATL, "These two are leaders and can survive the cycle."

2024 was indeed the year of individual stock market. That year, the capital market began to shift from "valuing tracks" to "valuing enterprises". For example, Seres of the Huawei ecosystem rose from over 20 yuan in 2023 to over 130 yuan at the end of 2024 due to the hot sales of the AITO series.

Xiao Jun also entered that year. He currently holds three whole-vehicle stocks—BYD held for 428 days, Seres held for 545 days, JAC Motors held for 323 days. At over 90 yuan, he bought Seres and personally saw the stock price touch the historical high of 173 yuan, then fall all the way.

"A year ago, the car sector was still very hot, with many foreseeable imagination spaces." Xiao Jun recalled, at that time BYD's Supercharge hadn't been released yet. He was bullish on the Huawei ecosystem; Seres' layout in robotics and equity in Yinwang brought continuous positive news.

The launch of Maextro S800 brought a lot of imagination to JAC Motors. So, Xiao Jun bought JAC Motors. His profit expectation for JAC was above 20%, "At that time, people were too confident in car stocks, and reaching expectations might still require a wait." He once sold JAC Shares for profit, but because the stock continued to rise, he entered again.

The result was, from big rise to big fall, it took less than a year.

As of August 11, Seres stock price fell to around 56 yuan, down about 70% from the historical high, market cap shrank from 300 billion to less than 100 billion. JAC Motors stock price fell from the high of 58.8 yuan last May to around 26 yuan currently, market cap shrank to around 56 billion yuan.

Xiao Jun was stuck. He was very frustrated.

In the second half of 2025, Xiao He bought into the intelligent driving stock Qianli Technology under Geely based on friend advice. The reason for the bullish view was direct: Geely endorsement, its intelligentization and new energy popularization are fast, which can drive Qianli Technology business to improve.

Qianli Technology was formerly Lifan Technology. Geely became an important shareholder after its bankruptcy reorganization. In early 2025, Lifan Technology was officially renamed Qianli Technology and further focused on the "AI + Car" core strategy. It jointly launched the Qianli Haohan Intelligent Driving System with Geely, and in the second half of 2025 it was even invested in by Mercedes-Benz affiliated company. Multiple positive news drove Qianli Technology stock price to break 13.8 yuan/share at one point last year.

Photo provided by Xiao He

Unfortunately, Xiao He bought at the super-high position. To now, Qianli Technology has already made her lose over 10,000 yuan, loss rate over 30%. Holding it is hard, selling is unwilling, she can only self-soothe and insist it will improve.

Xiao Jun also bought Qianli Technology, similarly stuck.

Another investor Xiao Liang bought into New Energy Vehicle funds, after warming up in the first half of this year, now lost 6% again.

The experiences of these three are not isolated cases. From the second half of 2025 to now, the car sector as a whole experienced obvious fluctuations, and some hot car stocks even showed a "decline — warm up — decline again" trend.

Buy the dip?

Institutional holdings have dropped to the bottom, and voices of "buying the dip" are starting to appear in the market.

Orient Securities' latest research report shows, in Q2 2026, the heavy allocation ratio of active funds to the automotive industry was only 1.9%, down 2.2 percentage points month-on-month, hitting a five-year low. In terms of market cap share, the car sector accounts for 3.3% of All A-shares market cap, overweight ratio is minus 1.3%. It points out that fund holdings in passenger cars and parts sectors have both fallen to the bottom range.

Xiao He decided to enter after seeing content like this. She felt institutional holdings hit bottom, the sector should rebound, so she bought JAC Motors. But to now, she is still losing.

At the end of July, the car sector indeed once saw a brief warm up. As of July 31, the CSI Auto Index reported 9269.98 points, rising 0.78% for the day. For individual stocks that day, SAIC Motor rose 1.5%, JAC Motors rose over 7%, Seres and Changan Automobile achieved slight rise.

But this wave of warm up did not last. After entering August, the sector began to oscillate and correct again. On August 11, the CSI Auto Index closed down. From the high point in May to now, JAC Motors stock price has retraced nearly 50%, BYD stock price is also obviously lower than the high point of the past year.

Behind the correction is that industry fundamentals haven't given enough support. CAAM data shows, domestic passenger car sales in the first half were 8.287 million vehicles, down 24.3% year-on-year. The only highlight is exports; passenger car exports in the first half were 4.432 million vehicles, up 72% year-on-year.

The domestic market is becoming more like stock competition, the overseas market is becoming a new incremental market, but it is not enough to support the overall auto market size and performance to improve significantly. This means the auto industry is not without stories, but old stories are ending, and new stories still need to prove themselves.

Facing such market conditions, most stock investors choose to wait. Xiao Xia holds a car sector ETF for two or three years, warming up a bit this year, but he has no plan to increase holdings. Xiao Liang is also, he just wants to wait until profits recover to 20% to sell the fund.

Xiao Jun still chooses to hold BYD long-term. In his view, the core basis for distinguishing long-term holding from short-term attention is "is there potential and new story in the future". BYD's globalization is the new story he values.

BYD Sales January-June 2026

This story is being realized. From January to July 2026, BYD overseas sales were nearly 970,000 vehicles, July single month close to 180,000 vehicles, overseas share of total sales has reached 40%. Its Brazil and Thailand factories have mass production, Hungary, Turkey and other overseas bases are also progressing.

The market used to buy growth expectations brought by rapid rise in new energy penetration rate. Now penetration rate has entered a high position—July 2026 new energy passenger car retail penetration rate broke through 65%. Industry competition shifted from "who can seize the new energy bonus" to "who can survive and make money in stock competition". But under price war, most car company profits face pressure.

Industry growth does not equal enterprise profit, more does not equal stock rise. The industry incremental brought by new energy penetration rate rise, in the background of increasing enterprise numbers and intensified price competition, did not convert to profit growth synchronously. Data shows, the auto industry's overall profit margin has fallen to around 3%. Past early traded growth expectations were continuously realized, valuation center declined accordingly, capital began to look for new high growth expectations.

If profits are not good, the market needs new stories to support valuation. "Now new energy penetration rate has exceeded 50%, new car makers have all emerged, in other words, now we have reached the stage of a hundred schools of thought contending."

Xiao Jun believes, profit is a relatively important metric, but having profit alone is not enough, the capital market also needs new imagination space. "What supports capital market sentiment is new stories. Actually everyone is looking for new stories, such as XPeng's robotics, Li Auto's range extender, and following that we need to see if these new stories can continue."

But in veteran investor Tian Hu (pseudonym), these new stories are not enough to support car stocks returning to high points. "Electric vehicles' rising space is not much, and stocks are all about expectations." He judged, for a long period, car stocks will maintain oscillation trend, unless a truly explosive new technology appears. For the entire auto industry now, the only growth direction he is bullish on is exports.

Image source: Huaban

"I think, we must keep watching emerging industries like energy storage and computing power." Tian Hu said.

Capital is already voting with feet. Xiao He plans to sell Qianli Technology and other car stocks after breaking even or losses narrow, fully turning to tech class especially shares related to artificial intelligence. She has already bought quite a lot of tech funds and stocks. Xiao Liang also bought AI tech stocks, with significant gains.

In the capital circle chasing new stories, car stocks are not that hot anymore.

But this is not a problem of the auto industry.

Any industry going to maturity will experience such a moment: when incremental market becomes stock market, when the speed of storytelling can't keep up with the speed of capacity expansion, when the industry changes from "compare whose story is big" to "compare who can truly convert scale, technology, and cost into profit", capital will start to withdraw.

Internet was like this, smartphones were like this, new energy vehicles are like this. This is not industry failure, but a necessary path for industry to move from adolescence to adulthood.

Real tests, actually start after capital tide recedes. After capital tide recedes, enterprise real operational ability will be put on the stage. Companies relying on financing will disappear, companies relying on technology and efficiency will stay. Price wars will wash away a batch of players, industry concentration will rise, profits will concentrate at the top. This process might be very cruel, but it is not necessarily bad for industry long-term health.

And capital, always chases the next story. From new energy to AI, from energy storage to computing power, tracks change, logic doesn't change—always rush in when expectations are fullest, exit when realization is hardest.

For ordinary investors, the hardest is not finding the next hotspot, but admitting you might not find it. Not everyone can exit when it is hottest, not everyone can buy the dip when it is coldest. More often, we are attracted in when hottest, choose to stick around when coldest, and then repeat the same mistakes under the next hotspot.

Investment, ultimately is fighting with one's own humanity. Understanding cycles, accepting differentiation, not being swept by market emotion, is more important than betting on a track. The story of car stocks is finished, there will be the next story. But in the next story, hope we can all have a bit more calmness, a bit less greed.