Tashkent, Uzbekistan (UzDaily.uz) — Chinese automakers are shifting from an export-led model to localised production overseas, a move that Moody’s Ratings expects to strengthen their long-term competitiveness while increasing financial and regulatory compliance risks over the next one to two years.
The assessment was published in a report in Hong Kong on 15 October 2026, according to Moody’s Ratings.
The agency attributes the shift to intensifying competition in China’s domestic market and rising export tariffs. Overseas manufacturing will improve access to foreign markets and reduce companies’ exposure to tariffs. Expanding production capacity abroad will also help localise supply chains and create growth opportunities for Chinese auto-parts manufacturers.
Foreign markets are becoming a key growth driver for the industry. Chinese vehicle sales overseas reached a record 7 million units in 2025. Moody’s expects exports to continue growing strongly over the next one to two years, helping offset weaker domestic sales as government subsidies are phased out. Rising tariffs and local-content requirements are also accelerating the move towards overseas production.
Automakers are adopting different localisation strategies depending on their scale, resources and priorities. BYD is building factories from the ground up. This approach requires substantial investment and time to reach full production capacity, but provides greater control and reduces integration risks.
Chery and Great Wall Motor are acquiring existing factories. This limits expenditure and speeds up market entry, but creates risks associated with upgrading ageing facilities, integrating workforces and restructuring supply chains.
Geely, which has a Baa3 rating with a Stable Outlook, and Leapmotor are pursuing partnership models with local companies.
These arrangements reduce capital expenditure and execution risks but limit control, technology protection and profit shares. The success of each strategy will depend on financial resilience, brand positioning and execution quality, according to Moody’s.
The agency expects financial pressure on automakers to intensify during the expansion phase. Heavy upfront investment will increase leverage and weaken free cash flow, particularly while new facilities are under construction. Start-up expenses, low factory utilisation and rising compliance costs will weigh on profitability during the first one to two years.
Regulatory compliance is another major challenge. Chinese automakers will need to meet local labour laws, environmental standards and sustainability requirements.
They will also have to comply with data protection rules for intelligent vehicles and undergo foreign investment screening in advanced technology sectors.
To manage these risks, Moody’s says companies will need robust global compliance systems, locally adapted management practices and stronger supply chain oversight.
