Guosheng: Domestic and external factors are reshaping the overseas expansion landscape, and leading automakers' advantages are becoming more prominent.

Guosheng released a research report stating that amid domestic pressure on auto retail, overseas markets will become one of the main sources of incremental growth for China's auto industry. At the same time, considering the increase in global trade barriers, the window period for Chinese automakers to expand overseas is gradually narrowing, and coupled with domestic policies advocating "high-quality" overseas expansion by automakers, the bank is more optimistic about the overseas space for leading automakers in the future. Guosheng's main views are as follows: Overseas markets have become a stabilizer for automakers' sales and profits In 2026, domestic auto retail enters a period of deep adjustment, but auto exports remain at a relatively high growth rate. In the first three quarters of 2026, export sales as a proportion of China's total auto sales reached 35.3%, and overseas markets have become an important component of each automaker's sales. In addition to driving sales growth, overseas markets are also an important support for automakers' profits, as the gross margins of automakers' overseas businesses are currently significantly higher than domestic ones. Long-term overseas space is broad The overseas market size accessible to Chinese automakers is approximately 35 million units, with Europe, Latin America, and Asia-Pacific being the core. The bank believes that in the short to medium term, multiple Chinese automakers will achieve overseas sales of more than 2 million units, with core factors including: 1) market demand: a single automaker reaching a 5%-6% market share overseas would be sufficient to reach an overseas scale of 2 million units; 2) rising global new energy vehicle penetration; 3) global automaker leaders have also fully demonstrated this Toyota, Hyundai-Kia, Volkswagen, Stellantis, and Honda all exceeded 2 million units in overseas sales in 2025 (excluding sales in their home countries and China). Automakers' overseas expansion tiers are diverging, with leading players showing clear resource advantages Leading automakers have significant overseas resource advantages and have already established localized production capacity layouts in key overseas markets such as the EU, Latin America, and Southeast Asia. However, leading automakers also differ considerably in their strategic layouts in overseas markets. BYD Company Limited is deeply cultivating localization overseas through heavy assets, while GEELY AUTO leverages resources within Geely Holding and external partners to implement localized operations. Some automakers have formed strong competitive advantages in specific regions. Great Wall and Changan have leading advantages in the Russia/Central Asia market, but in key markets such as the EU, Southeast Asia, and Latin America, Great Wall and Changan lag somewhat behind the leading automakers. Among new force automakers, apart from Leapmotor and XPeng, other automakers have not yet formed sales scale overseas. In addition, in terms of strategic layout, new forces' overseas operations are mainly asset-light. For example, Leapmotor mainly leverages Stellantis' overseas resources. In terms of regional selection, new force automakers are currently mainly concentrated in the European market. Under the resonance of trade barriers and policy guidance, leading automakers' overseas space is viewed more favorably On the one hand, increasing global trade barriers may accelerate the narrowing of the window period for Chinese automakers' overseas expansion. On the other hand, domestic policy also intends to guide automakers toward "high-quality" overseas expansion. Against this backdrop, leading automakers, relying on their early layout and global resource advantages, have already demonstrated certain competitive advantages. Therefore, the bank believes that leading automakers with global resource integration capabilities and accumulated localized production capacity have greater certainty in their future overseas development space. Risk warnings: 1) Continued weakness in domestic auto sales dragging down automaker profitability; 2) risk that automakers' overseas expansion falls short of expectations; 3) policy risks faced by auto exports; 4) risk of continued pressure on profit margins in the auto industry.