Moody's assigns a Baa3 issuer rating to GEELY AUTO (00175) and withdraws its Ba1 corporate family rating.

On August 28, Moody's Ratings (Moody's) granted a Baa3 issuer rating to GEELY AUTO (00175) while withdrawing its Ba1 corporate family rating (CFR). The rating outlook has been revised from positive to stable. "This rating action and stable outlook reflect GEELY AUTO's strong track record of continuously expanding market share and improving profitability in a highly competitive industry environment. The enhancement of the company's fundamental business aspects, benefiting from global expansion and a diverse product matrix, has led to these results," said Daniel Zhou, Vice President and Analyst at Moody's. "We expect GEELY AUTO to continue maintaining a robust credit profile: low leverage, ample liquidity, and substantial cash reserves. These advantages are sufficient to cushion against the pressures brought by intense industry competition and ongoing capital expenditures," Zhou added. Rating Basis The Baa3 rating of GEELY AUTO reflects its strong competitive position in the Chinese automotive industry, along with a long-term maintenance of low leverage, excellent liquidity, and a net cash financial state. However, the rating also takes into account relevant risk challenges: the fierce competition in the Chinese automotive market, the capital investment pressure from overseas market expansion, and project execution risks. Nonetheless, GEELY AUTO's leading industry position, solid financial condition, and abundant cash flow can hedge against these risks. From January to July 2026, GEELY AUTO's sales increased by 2% year-on-year, outperforming the market (which saw an overall decline of 3.7%); overseas market sales surged by 165%, becoming the core growth driver. Moody's anticipates that this growth momentum is likely to continue: in the next 12 to 18 months, with the launch of new models and ramping up of overseas production capacity driving demand growth, coupled with a gradual recovery in the domestic market as the demand stimulus effect of the 2025 policy fades, the company's sales are expected to achieve an increase of 5% to 10%. GEELY AUTO's profitability has improved, with a gross margin rising to 17.9% in the first half of 2026, compared to a gross margin of 16.6% for the entire year of 2025. The rise in profitability primarily comes from high-margin overseas business, an increased share of revenue from premium brands, and cost savings from operational synergies following asset integration. After the privatization of Zeekr, Geely repaid most of Zeekr's bank loans; as of the end of June 2026, the company's debt had significantly decreased from 23 billion RMB at the end of 2025 to 13 billion RMB. Although capital expenditures may increase slightly in the next 12 to 18 months to support overseas capacity expansion and ongoing R&D investments, Moody's believes that Geely's strong operational cash flow will be sufficient to cover funding needs, and the company is expected to continue generating positive free cash flow during this period. Moody's predicts that in the next 12 to 18 months, GEELY AUTO's EBIT margin will stabilize within the range of 5.0% to 5.5%, with a debt/EBITDA ratio maintained at around 0.5 times; for the past 12 months ending June 2026, these two indicators were 4.8% and 0.6 times, respectively. The company's very low leverage level and continuously improving EBIT margin have reached the level of global investment-grade automotive peers. GEELY AUTO's liquidity position is excellent. As of June 30, 2026, excluding restricted cash, the company's net cash stood at 46 billion RMB. Since the end of 2012, Geely has consistently maintained a net cash position. This issuer rating is not affected by the debt repayment priority of its subsidiaries. Although Geely serves as the holding platform, most of the debts are borne by its subsidiary companies; however, the diversified layout of multiple business segments and subsidiaries both domestically and internationally effectively reduces structural subordination risks. Environmental, Social, and Governance (ESG) Considerations GEELY AUTO has undertaken various measures to mitigate environmental and social risks, including establishing multiple electric vehicle technology routes, launching a rich array of electrification products, and implementing sustainability projects across its entire business line. The company has adhered to a conservative financial strategy for the long term, with a robust risk management system (evidenced by its low leverage and net cash history), and the excellent operational track record and credibility of the management team have somewhat alleviated the governance risks posed by the controlling shareholder's high-voting rights holdings.