Chery’s Overseas Sales Surpass 70% as Localization Accelerates
TREE NEWS reports: Chery Automobile reported October sales of 282,500 vehicles across its five major brands, up 7.2% year-over-year, with new energy vehicle (NEV) sales reaching 132,000 units and exports accounting for 194,700 units. The strong overseas performance has become a key pillar for the company’s transition to electrification, as revealed in its latest monthly sales data and third-quarter earnings report.
For the first three quarters, Chery’s revenue rose 12.29% to 241.234 billion yuan, while gross profit jumped 32.38% to 39.004 billion yuan, lifting the gross margin from 13.71% to 16.17%. However, net profit attributable to shareholders dipped 2.8% to 13.963 billion yuan, largely due to a 40.21% increase in R&D spending to 11.046 billion yuan and a foreign exchange loss of 3.171 billion yuan, compared to a gain of 2.974 billion yuan in the same period last year.
Market Implications
The impressive overseas growth and margin expansion are likely to bolster investor confidence in Chery’s global strategy, especially as it shifts from vehicle exports to local manufacturing. The company’s efforts to establish a presence in Europe and South Africa, including the opening of a European operations center in Barcelona and the takeover of a factory in South Africa, signal a long-term commitment to overseas markets. This localization strategy could help mitigate currency risks and trade barriers while supporting profitability.
However, the decline in net profit due to increased R&D and FX losses may raise concerns about short-term earnings volatility. Investors will be watching how effectively Chery manages these headwinds, particularly as it ramps up investments in new energy technologies and smart driving features. The company’s ability to improve domestic NEV profitability and streamline its multi-brand structure will also be critical.
From a broader market perspective, Chery’s performance reflects the growing importance of overseas expansion for Chinese automakers amid intense domestic competition. As trade tensions and regulatory scrutiny of Chinese EVs in Europe and the U.S. persist, local production and supply chain diversification are becoming essential. Chery’s proactive approach could set a precedent for peers, potentially influencing sector valuations.
Key Takeaways for Investors
- Overseas sales are a major profit driver: With over 70% of sales from exports, Chery’s ability to maintain pricing power and navigate local regulations will be crucial for sustained growth.
- Margin improvement offsets profit pressure: Despite higher costs, gross margin expansion demonstrates operational efficiency and pricing strength in overseas markets.
- Currency and R&D risks: FX volatility and rising R&D expenses may continue to weigh on net income, requiring careful monitoring.
- Localization as a strategic move: Building manufacturing and R&D capabilities abroad can enhance competitiveness and reduce exposure to trade risks.
- Domestic NEV challenge: Chery needs to boost domestic NEV sales and profitability to balance its overall performance.
