Foreign car sales are increasing, so why are profits shrinking? Over 10 billion yuan in profits is being swallowed by an invisible black hole, with seemingly no solution in sight. While overseas markets offer opportunities, they also harbor significant risks. Listed automakers had hoped to earn three to five times more profit per vehicle sold overseas compared to domestic sales. This optimistic plan may be thwarted in the short term.
Data disclosed by the China Association of Automobile Manufacturers shows that from January to April, China's automobile exports reached 3.127 million units, a sharp increase of 61.5% year-on-year, in stark contrast to the decline in the domestic market.
At first glance, this figure suggests Chinese automobiles are conquering the global market with unstoppable force. However, a look at the first-quarter reports disclosed by listed Chinese automakers reveals undercurrents. According to incomplete statistics, due to exchange rate risks, the net profit losses for several listed automakers have already exceeded 12 billion yuan.
Recently, China's major listed automakers have successively released their first-quarter financial reports. BYD Company Limited's net profit attributable to shareholders plummeted by 55.38%, Changan Automobile's net profit attributable to shareholders plunged by 74.09%, GAC Group's non-GAAP net loss expanded by 55%, Great Wall Motor Company Limited's net profit attributable to shareholders shrank by 46.01%, and Geely Automobile's net profit attributable to shareholders fell sharply by 27%...
Interestingly, these listed automakers experiencing significant profit contraction have almost all seen explosive growth in overseas sales, meaning "more exports, less profit." The collective predicament faced by Chinese listed automakers sounds an alarm for the entire industry. The era of easy profits from simple exports has come to an end during this period of turbulent international political and economic conditions.
The first warning signal in this adjustment is a data point in the financial reports that most people usually pay little attention to—exchange gains and losses.
In the first quarter of this year, BYD Company Limited's operating revenue was 150.225 billion yuan, a year-on-year decrease of 11.82%; net profit attributable to shareholders was 4.085 billion yuan, a sharp drop of 55.38% year-on-year. Among this, financial expenses changed from -1.908 billion yuan (net exchange gain) in the same period last year to 2.1 billion yuan (net expenditure), a difference of approximately 4 billion yuan. BYD stated in its financial report that this period recorded exchange losses, whereas the same period last year recorded exchange gains.
In other words, BYD's hard work selling approximately 320,000 vehicles overseas was offset by about 4 billion yuan in book profit due to the single variable of the RMB's appreciation. This is not an isolated case. As mentioned earlier, listed automakers with high overseas business proportions and surging sales, such as Geely Automobile, Great Wall Motor Company Limited, Changan Automobile, and SAIC Motor, have all been affected by exchange rate fluctuations, becoming the main factor dragging down first-quarter profits.
Geely Automobile reported a net foreign exchange loss of approximately 497 million yuan in the first quarter, compared to a net gain of about 3 billion yuan in the same period last year, a difference of up to about 3.5 billion yuan. During the same period, overseas sales were 203,000 units, a significant increase of 126% year-on-year. Geely Automobile stated this was mainly due to the depreciation of foreign currencies such as the Euro and US Dollar against the Renminbi, resulting in book valuation losses from the revaluation of multi-currency monetary assets and liabilities held by overseas subsidiaries at the period-end.
Great Wall Motor Company Limited's financial expenses shifted from -1.028 billion yuan to a positive expenditure, a difference of over 1.1 billion yuan. During the same period, export sales were 130,000 units, a year-on-year increase of 43%. Changan Automobile's financial expenses rose from -1.074 billion yuan to 314 million yuan, a change exceeding 1.3 billion yuan. During the same period, export sales were 213,000 units, a year-on-year increase of 33.2%. GAC Group directly stated in its financial report that the non-GAAP net loss expanded by 55.03% year-on-year, primarily due to "exchange losses incurred in this reporting period due to exchange rate changes, compared to exchange gains in the same period last year."
The combined exchange rate impact on just these five automakers involves an amount exceeding 10 billion yuan. And the cause of all this is merely the Renminbi's appreciation against the US Dollar of less than 2% in the first quarter.
More ironically, after excluding these exchange rate factors, the core operating profits of most automakers are not bad. BYD Company Limited's core automobile manufacturing business profit decreased by only 4% year-on-year, Geely's core net profit even increased significantly by 31% year-on-year, and Great Wall Motor Company Limited's core business profit grew by approximately 42% year-on-year. This indicates that the core operational capabilities of Chinese automakers have not collapsed, but their profit statements are not ideal. The reason lies in the fact that when overseas revenue scales are expanding at a doubling rate, the foreign currency assets and exposures on the books are simultaneously magnified. The influence of exchange rate fluctuations on book profits has become disturbingly large.
This also shows that the exchange rate risk management capabilities of most Chinese automakers are far from keeping pace with the speed of their overseas sales expansion.
While automakers are busy dealing with exchange rate shocks, a heavy blow has come from the other side of the globe. At the end of February, the sudden change in the Middle East situation led to the practical closure of the Strait of Hormuz, rendering this throat passage carrying about one-third of global seaborne oil trade almost non-functional for substantive navigation. At the same time, Yemen's Houthis continued to attack commercial ships in the Red Sea, forcing over 80% of global container ships to detour via the Cape of Good Hope.
As a result, soaring war risk insurance and freight costs, along with widespread increases in raw material prices, have significantly raised costs for the automotive industry. Most critically, as the domestic car market is deeply mired in a price war, terminal selling prices not only cannot be raised but continue to decline. This prevents automakers from passing on increased costs downstream. Squeezed from both ends, it's no wonder that Zhao Fei, General Manager and Deputy Party Secretary of China Changan Automobile Group, publicly stated, "Currently, automakers can no longer profit merely from selling cars!"
According to data from the National Bureau of Statistics, the profit margin of the automotive industry in the first quarter of 2026 has fallen to 3.25%, the worst level in nearly a decade.
Comfortingly, while the Middle East conflict creates disasters, it has also unexpectedly brought opportunities for Chinese automakers. Japanese automakers have reduced production or even suspended exports to the Middle East due to supply chain disruptions. Among them, Toyota announced production cuts of 20,000 and 18,000 vehicles for models exported to the Middle East in March and April respectively, Mazda explicitly stated it would stop exports before the end of May, and Nissan's Kyushu plant reduced production by about 1,200 vehicles.
In contrast, the market share of Chinese brands in the Middle East has risen against the trend to over 20%, exceeding 25% in core markets like Saudi Arabia and the UAE. Meanwhile, high oil prices have accelerated the global trend of consumers "abandoning oil for electricity," forming a synergy with China's most competitive new energy vehicle exports.
For Chinese automakers focusing on new energy vehicles, the greater risk lies not on the demand side, but on the cost and supply chain sides. This tests the global resource allocation capabilities of every Chinese automaker "going global."
Beyond external "storms" like exchange rates and the Middle East conflict, the biggest challenge facing China's automotive industry is the domestic overcapacity exceeding 15 million vehicles. Calculations based on National Bureau of Statistics data show that by the end of 2025, China's automobile production capacity had already reached as high as 47.5 million units. However, the actual sales volume that year, including dealer inventory and exports, was less than 35 million units. This means a large portion of China's automobile production lines are idle.
Although exports are seen as an emergency "antidote" that can digest some excess capacity, they also delay the exit of outdated capacity from the market. As leading automakers accelerate building factories overseas to achieve "production for sales," a large number of final assembly and welding positions will be permanently transferred from mainland China to places like Thailand, Hungary, and Brazil. At that time, overseas production capacity will become the "death knell" for domestic capacity.
Currently, BYD Company Limited has clearly stated that its next phase focus will shift to building complete localized industrial chains in different regions globally. Great Wall Motor Company Limited, Geely, and Chery are also accelerating factory construction in Southeast Asia, the Middle East, and South America, with construction periods for some projects compressed from the originally planned 3 to 5 years down to 12 to 18 months.
It is believed that by then, a large number of marginal automakers may collapse, some capacity will shift overseas, and only those who ultimately survive will be qualified to go further in the global market.
Currently, what deserves high vigilance is that while the overseas sales of Chinese automakers are climbing steadily, profits continue to decline. However, this is not a problem with operational capabilities. After excluding exchange rate factors, the core business profits of most remain robust. This means that what is truly choking them is no longer automotive technology or sales channels, but the most basic financial risk management capability in global operations.
A 2% appreciation of the Renminbi can swallow tens of billions in profits; slight fluctuations in geopolitical conflicts can push up operational costs across the entire industry chain; tens of millions of units of domestic overcapacity are still waiting for the export "antidote"... If Chinese automakers cannot shift from a simple "product export mindset" to a mature "global operation mindset," and cannot establish exchange rate risk hedging systems, highly resilient supply chains, and deeply localized competitive barriers that match the scale of their overseas business, the current seemingly unstoppable wave of going global will eventually evolve into a vicious internal competition that consumes themselves.
China's automotive globalization transformation already has little room for trial and error or waiting.
Export is a way out, but not a panacea.
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