On October 9, the Hong Kong-listed new energy vehicle sector saw a collective rebound, with Xiaomi Group surging nearly 10%, followed by gains from BYD, Geely Automobile, Li Auto, and Leapmotor.

Three key events around the holiday period have altered market expectations for China's automotive industry.

The first is new vehicles. Xiaomi's extended-range SUV Pengcheng series, launched in September, secured over 70,000 orders in its debut month. Notably, the extended-range market shrank by nearly 20% in the first eight months of this year, yet Xiaomi's vehicle proved that demand for quality products remains robust.

The second is overseas expansion. According to BYD's production and sales report, overseas sales reached 180,000 units in September, accounting for nearly 40% of total sales. JPMorgan's latest report estimates that Chinese automakers' overseas market share has risen to 8.2%, capturing 19% of Europe's new energy vehicle market.

The third is a previously underestimated national plan. Nine departments, including the Ministry of Industry and Information Technology, jointly issued the "15th Five-Year Plan for the Development of the Intelligent Connected New Energy Vehicle Industry," setting 2030 as the deadline for China to join the ranks of global automotive powers.

Together, these three events reveal the direction for high-quality development of China's new energy vehicles over the next five years: innovation and overseas expansion. The capital market is redefining the criteria for "top-tier" automotive brands.

Pengcheng and Overseas Markets: Two Hidden Signals

2026 marks a pivotal year for China's auto market: the purchase tax exemption shifts from full to partial, domestic sales volume peaks, and investor patience with automakers thins.

In the final week of September, shares of Xiaomi and BYD dipped, reflecting this sentiment.

Thus, the post-holiday rebound in the automotive sector signals two key reversals.

The first signal comes from Xiaomi: new vehicles can still drive demand, and the approach to doing so has matured.

The Pengcheng series launched on September 7, securing over 70,000 orders in its debut month. In the extended-range market, which shrank by nearly 20% in the first eight months (according to the China Passenger Car Association), Xiaomi secured 70,000 orders in a shrinking market. How?

Image source: Xiaomi Automobile

On July 30, Xiaomi held a technical launch event, showcasing the product without revealing the final price. On September 7, the official launch saw 10,000 orders locked in within four minutes. Nationwide deliveries began on September 12, with Lei Jun announcing cumulative deliveries of 800,000 Xiaomi vehicles, leveraging past achievements to endorse the new model.

"Launch-and-deliver"—after a decade of new-force automakers, the survivors have mastered the same lesson: user-centric thinking, introduced by them, now converges with traditional automakers' manufacturing expertise.

The second signal comes from BYD: overseas markets, driven by localization, support financial growth.

According to BYD's report, overseas sales hit 180,000 units in September, up 154% year-on-year, accounting for nearly 40% of total sales—a 21-percentage-point increase from the previous year. While domestic sales fell by about 30% in the first three quarters, total sales dropped only 4%, with overseas markets filling the gap.

More crucially, BYD's overseas revenue accounted for over half of total revenue in the first half. According to Guolian Securities, overseas gross margins stood at 21.7%, significantly higher than domestic margins, with average vehicle prices about 1.5 times those in China.

For BYD, overseas expansion has moved beyond storytelling to profit realization.

One signal speaks to growth, the other to profitability. Together, they clarify the market's shifting attitude.

The market is reassessing the potential for simultaneous growth and profitability in China's new energy vehicle sector. So, what lies ahead for China's new energy vehicles?

The most compelling question is undoubtedly the planning for the second phase of globalization.

The First Half of Globalization Ends; the Second Half Competes on Systems

The export curve no longer surges as it did in recent years, marking the arrival of a new phase.

According to the China Passenger Car Association, passenger vehicle exports fell 4.2% month-on-month in August to 888,000 units, with new energy vehicle exports dropping 5%. BYD's overseas sales also fell 5% month-on-month in September. Under the triple constraints of tariffs, logistics, and base effects, shipping vehicles abroad has become increasingly marginal.

Behind this, Chinese automakers' overseas logic has shifted from pursuing shipment scale to sustainable and profitable market share expansion.

Just as overseas auto giants once entered China, BYD is advancing localization by moving factories abroad to enable local production and sales, mitigating tariff impacts.

According to public information, BYD plans to produce about 750,000 vehicles in Thailand, Brazil, Uzbekistan, and Hungary. The Hungarian factory is set to start production soon, with a second South European base under consideration.

BYD's factory in WHA Industrial Park, Rayong, Thailand. Image source: Thailand Headlines

Not just BYD—Geely's years-long layout (strategic layout ) have also entered a new phase of returns.

In Southeast Asia, Geely acquired Proton in 2017, revitalizing the veteran automaker through "technology plus management" exports. Proton's 2024 sales reached 152,000 units, with market share hitting a decade-high. In Europe, Geely's HORSE joint venture with Renault licenses powertrain technology, while this year, Geely acquired a 34% stake in Ford's Spanish factory for €221 million, sharing production lines instead of building new ones—cutting costs to 10-20% of standalone construction.

In the first half, Geely's overseas sales hit 474,000 units, up 158% year-on-year, surpassing its 2025 full-year target in just six months. The company raised its full-year export target from 640,000 to 920,000 units.

Geely CEO Gui Shengyue stated at the interim results briefing that industry competition hinges on systemic strength, strategic resolve, and long-term value creation.

This statement essentially defines the second half of China's automotive overseas expansion.

Compared to these "veteran" overseas players, new forces have their own differentiated approach of "trading technology for market share and profits."

For example, Leapmotor "hitches a ride" overseas by forming Leapmotor International with Stellantis, leveraging over 700 dealerships to enter 35 countries. In the first half, exports surged 372.6% year-on-year to 96,300 units. Zhu Jiangming, in a CCTV interview, outlined a three-stage globalization plan: starting with a 40-60 split, moving to 50-50, and ideally reaching a 40-60 split in favor of overseas markets (60% overseas) for true globalization.

From independent brands to new automotive forces, this marks a new era of China's automotive industry going global.

Chery's Barcelona joint venture factory is operational, SAIC announced plans to build the EU's first complete vehicle (complete vehicle) factory in Spain, and CATL's battery plant will start production in Zaragoza by year-end.

Chinese automakers are systematically entering Europe's industrial heartland, shifting from selling products to participating in local industrial reconstruction.

Drawing historical parallels, Japanese cars entered the U.S. in the 1980s by dominating exports, only to be forced by tariffs and quotas to build factories in Kentucky. Local production ultimately transformed Toyota into a truly global automaker.

Chinese automakers are retracing this path in a fraction of the time, with one key difference: while Japanese cars once sold on fuel efficiency, Chinese cars now sell on electrification and intelligence, showcasing a stronger technological edge.

Innovation and overseas expansion are intertwining to draft a new industrial blueprint. China's automotive reassessment has begun, with the market now watching three things: whether new vehicles can Continuously leading (continue to lead) niche track (niche segments), how much overseas markets contribute to gross margins, and who advances new technologies to mature, controllable onboard integration.

Valuation Logic Shifts; the Future Lies in "AI Hardware Products"

The reassessment is underway. Over the past five years, the market's anchors for valuing automakers have shifted twice: in the first half of electrification, sales growth mattered; in the elimination round, profit delivery took center stage.

Now, amid expectations of industrial maturity and profit improvement, the automotive sector faces a new moment of differentiation.

Penetration rates offer a preview. According to the Ministry of Industry and Information Technology, L2 autonomous driving penetration reached 70.5% this year, while NOA (Navigate on Autopilot) penetration hit 34.2%.

Geoffrey A. Moore, in *Crossing the Chasm*, famously argued that once a new technology surpasses early adopters, it accelerates into the mainstream market.

NOA's penetration exceeding one-third signals that intelligent driving is crossing this chasm.

Beyond it, a new technological race begins.

Despite differing approaches, automakers' leaders share a consensus, visible through their actions:

First, drive technological adoption through accessibility. In late May, BYD announced that its Tian Shen Zhi Yan B laser version would be optionally available across all models at ¥12,000. According to Wang Chuanfu, this is at cost price: "Urban navigation should not be tied to vehicle prices or used as a premium tool." BYD also pledged to underwrite urban navigation safety for one year.

Second, streamline and focus on next-gen technological shifts. At the Chongqing Auto Forum, Geely Holding Chairman Li Shufu discussed downsizing, orderly shutdown of redundant entities, and consolidating resources to strengthen core listed platforms. AI competition is costly, and Geely chose to tighten its fist first.

Third, strengthen in-house technological capabilities, correcting long-held misconceptions about the brand. At Xiaomi's nearly three-hour September 7 event, Lei Jun unveiled the Pengcheng series, Xuanjie O3 chip, and HyperOS 4 with on-device large models—keeping chips, systems, and terminals in-house.

Additionally, Xpeng and Li Auto no longer define themselves as "automotive companies" but as "physical AI tech groups" or "embodied intelligence enterprises."

Li Auto founder Li Xiang stated that 2026 is the final year for aspiring AI leaders to enter the market. Companies simultaneously developing foundation models, chips, embodied intelligence, and operating systems will number fewer than three globally.

All these moves point to the future of technological competition, with automakers now vying for new "entry tickets."

From a capital perspective, sales and profits determine current valuations, but only intelligence can answer "how much this company will be worth in the future." Whether seen as automakers or AI enterprises, the two identities correspond to two valuation frameworks.

In short, the purchase tax returns the auto market to market forces, overseas expansion exposes automakers to the world, and AI expands imagination into the next era.

Source: Hong Kong Stocks Research Society