Going global is becoming the decisive factor. / AI-generated image

Handmade labor / Edited by Shou Mei / Produced by Jiao Shu / Unicorn Observation
The stock-market siege of China's domestic auto market is pushing globalization from an optional growth story to a life-or-death imperative for automakers.

In October, domestic passenger vehicle retail sales fell sharply year on year, while new energy penetration continued to climb but failed to drive overall market growth. The electrification dividend has peaked, fuel vehicle demand is shrinking rapidly, and structural capacity mismatches are compounding the problem. The domestic market has officially entered a zero-sum phase of dividing up a shrinking pie.

The auto export figures stand in stark contrast: exports of new energy passenger vehicles nearly doubled year on year, and the countertrend growth of leading automakers such as Chery, Geely, and BYD relied heavily on overseas markets for support.

This glaring scissors gap between domestic and overseas performance has led the industry to a broad consensus: going global is the most important breakthrough direction at present.

However, global market rules are fragmented and barriers abound. Southeast Asia, Europe, Latin America, and North America each have their own assessment standards, and globalization also hides multiple reefs: profitability, branding, and geopolitics.

Domestic competition has hit rock bottom, and overseas is the real decisive factor—but it is not a cure. It is a new arena with higher difficulty.

01 The Auto Market: A Tale of Fire and Ice

Last month, China's auto market displayed a rare sense of rupture.

Data from the Passenger Car Association branch show that in October domestic retail sales of narrow passenger vehicles were 1.643 million units, down 27.1% year on year; cumulative sales from January to October were 14.978 million units, down 22.3% year on year. Retail sales of new energy passenger vehicles were 1.109 million units, down 13.7% year on year; retail sales of conventional fuel vehicles fell 45% year on year, of which pure fuel vehicles fell 51%.

The export side presents the exact opposite picture: in October passenger vehicle exports were 928,000 units, up 68.5% year on year, and their share of passenger vehicle manufacturers' sales rose from 19% in the same period last year to 35%; among them, exports of new energy passenger vehicles were 582,000 units, surging 144.7% year on year. Based on calculations by institutions using the Passenger Car Association methodology, cumulative passenger vehicle exports from January to October were 7.91 million units, up 74% year on year; cumulative exports of new energy passenger vehicles were 4.47 million units, up about 140% year on year.

On one side is a double-digit collapse in terminal retail sales; on the other is export growth galloping at nearly 70%. This scissors gap has split China's auto industry in 2026 into two worlds.

This also shows up in corporate financial statements as a tale of fire and ice. Chery Group's October exports were 200,600 units, up 58.7% year on year, accounting for 67.8% of its total October sales of 295,900 units. Geely's October exports were 107,200 units, up 158% year on year, while total sales of 310,200 units grew only 1%. BYD's October sales were 490,200 units, up 11% year on year, but domestic sales were 321,000 units, down 10% year on year, and the full-month growth was supported by exports of 170,200 units.

New forces are even more extreme. Leapmotor's global deliveries in October were 106,127 units, up 51% year on year; XPeng delivered 50,237 units, up 19.6% year on year, both hitting year-highs. By contrast, HarmonyOS Smart Mobility delivered about 33,500 units, halving year on year; Li Auto delivered 29,025 units, down about 8.6% year on year; NIO delivered 34,246 units, down 15% year on year.

Leapmotor and XPeng were able to maintain growth, and overseas increments played an indispensable role. XPeng especially: October overseas deliveries were 13,326 units, up 166% year on year, accounting for 26.5% of monthly deliveries; based on its public data, the overseas year-on-year increment was about 8,300 units, already exceeding the total year-on-year increment for the month (about 8,200 units).

Between rises and falls, one judgment is being repeatedly verified: in the stock-game domestic market, the depth of globalization is becoming the watershed that determines survival.

02 When Involution at Home, Expansion Abroad

Attributing the decline of the domestic auto market simply to weak consumption is a one-sided judgment.

Pressure on the domestic market is the result of multiple intertwined factors. The dividend from electrification substitution is nearing its end. In October, new energy retail penetration reached 67.5%, up 10.5 percentage points year on year and a record high, but the scale of new energy retail still fell 13.7% year on year.

When the vast majority of new cars in the market are already new energy models, the track bids farewell to the incremental expansion stage and shifts into a contest for existing share. The era when growth could be harvested simply by keeping up with capacity is over.

The accelerating shrinkage of the fuel vehicle market further amplifies pressure on the overall market. In October, retail sales of conventional fuel vehicles fell 45% year on year, and the decline for pure fuel vehicles reached 51%. Many fuel vehicle users did not switch to new energy vehicles but simply exited the car-buying market. New energy is diverting not only fuel vehicle share; the total volume of the entire auto market is also contracting.

At the same time, the industry still has a prominent structural mismatch in capacity. Data from the National Bureau of Statistics show that in the first half of 2026, the capacity utilization rate of the automobile manufacturing industry was 70.6%, a slight year-on-year decline and below the 75% healthy line for manufacturing. Overcapacity is not evenly distributed. Leading new energy automakers such as BYD have long maintained high capacity utilization, while mid-tier automakers with annual sales of 100,000 to 500,000 vehicles are underutilized. The contradiction persists between idle outdated fuel vehicle production lines and scarce capacity for high-quality orders.

A research report comparison by East Money shows that in 2025 the average capacity utilization rate of China's automobile manufacturing industry was about 73%, higher than markets such as the United States and Thailand, so simply concluding that the industry has severe overcapacity is not rigorous. A more accurate understanding is that total volume has not completely spun out of control, but structural imbalance objectively exists, and the price war is precisely the way the industry releases this pressure.

Under the superposition of multiple factors, the logic of domestic competition has completely changed. The market has shifted from making the cake bigger to dividing the existing cake. The marginal returns for companies continuing to increase bets at home keep declining, and globalization has changed from an optional growth bonus into a must-take path.

But globalization is not a unified blue ocean. The global market has differentiated into multiple tracks with vastly different rules, testing different capabilities of automakers.

Southeast Asia is the main battlefield for cost-effective models. Japanese fuel vehicles have deep roots, and local consumers are highly price-sensitive. Chinese automakers rely on cost and configuration advantages to scale quickly; their weakness is weak brand premium, and they are also prone to involution among peers.

Europe is a dual test of brand power and compliance capability. WVTA whole-vehicle certification, the carbon border adjustment, the foreign subsidies regulation, and electric vehicle anti-subsidy rules together build high thresholds.

Latin America and the Middle East have considerable growth potential and relatively friendly policy environments, but infrastructure shortcomings, exchange rate fluctuations, and geopolitical risks follow closely. BYD's development in Brazil is quite representative: October local sales were 24,114 units, ranking fourth in the market.

The North American market is constrained by stringent trade barriers and local subsidy rules, and the channel for direct whole-vehicle exports is basically closed, making it a difficult plate for Chinese automakers' globalization map to break through.

Differences in rules across markets determine that the core test of globalization competition is not whether cars can be sold, but whether the right markets are chosen and the right operating models are found.

Direct whole-vehicle export is a light model: fast to land and low investment, but highly vulnerable to tariffs, exchange rates, and policy changes. Localized factory construction and building local supply chains and R&D systems is a heavy model: longer investment cycles, but it can bypass trade barriers and get closer to local users.

03 A Harder Examination Room

Domestic is a dilemma, and overseas is by no means a smooth road. Pretty sales numbers cannot cover the holes in the income statement.

XPeng, which relied on overseas growth as a second curve and set a year-high in deliveries, also failed to cross the profit-loss line. In its 2026 interim report, XPeng's revenue was 32.78 billion yuan, down slightly 3.8%, with a half-year loss of 3.12 billion yuan.

BYD's gross margin in the first half rose 0.84 percentage points to 18.85%, and its automobile business gross margin was 22.33%, but net profit attributable to shareholders had declined year on year for four consecutive quarters.

Scale is rising, but profit is not keeping up—this is the common situation of the entire industry.

What is more alarming is that making money in overseas business is no easier than in China.

Channel deployment, local marketing, after-sales networks, and compliance certification—each cost is significantly higher than in China. Many companies have good overseas sales but negative profits, essentially relying on profits from the domestic market for transfusions.

In addition, the concentrated export of a large number of low-priced models can easily solidify "Chinese cars" as "cheap cars" in the minds of overseas users. Once this impression takes shape, subsequent high-end models will find it hard to command a premium.

Beyond the hidden reefs, the divergence in routes among leading companies is already clear.

The cost-effective volume faction is represented by BYD, Chery, SAIC, and Leapmotor, with common features of prioritizing scale, pushing prices down, and densely expanding channels. Chery is the most typical sample: first-half revenue was 143.28 billion yuan, up only 1.2% year on year, and net profit attributable to shareholders was 8.567 billion yuan, down 11.7% year on year, but overseas revenue was 98.968 billion yuan, up 51% year on year, accounting for nearly 70% of total revenue. In other words, Chery's income statement is propped up by overseas markets, while its domestic business is contracting.

The high-end brand faction is represented by XPeng, NIO, and Zeekr, building brands on technology and experience and focusing on high-value markets such as Europe, betting on long-term brand assets. XPeng's overseas average price exceeds 40,000 euros, with overseas revenue accounting for 25%, currently the most presentable report card on this path; NIO takes a differentiated route in Europe with battery swapping and service systems, but its scale is still limited.

It is worth noting that the two paths are not mutually exclusive. BYD pursues volume in China and simultaneously rolls out both mass-market and high-end brands overseas. Denza, Fang Cheng Bao, and Yangwang had cumulative sales of about 220,000 vehicles in the first half, following a dual-track parallel route; Leapmotor uses Stellantis' channels to sell its own cost-effective products, following a ship-borrowing globalization route. The real divide is not the route itself, but whether companies have the ability to simultaneously manage the three accounts of scale, profit, and compliance.

October's rises and falls were largely determined by the depth of globalization. This judgment holds, but three qualifications are needed.

First, globalization solves the capacity outlet, not the profit structure. It can absorb idle capacity, dilute R&D costs, and provide a growth story, while also bringing channel costs, compliance costs, and brand-building costs. Whether globalization can make money depends on per-vehicle gross profit, not export unit counts.

Second, the endgame of this competition is not who exports more, but who can operate overseas for the long term. Three indicators truly worth tracking are: overseas business gross margin, share of localized capacity, and share of overseas proprietary channels. Export volume is only the starting point, only GMV; these three are the real decisive factors.

At present, what China's auto industry is undergoing is a capability leap from "selling cars" to "operating." The domestic stock game has hit bottom. Overseas is not a sanctuary, but an arena with more complex rules, stronger opponents, and lower tolerance for error. Those who can run out will not be the company with the prettiest export numbers, but the one with the most solid global organizational capability.

Globalization is never the endpoint; it is just a harder starting position. (End)