On August 20, Chery Automobile (09973.HK) released its interim results, revealing revenue of 143.28 billion yuan for the period, a 1.2% increase year-on-year. The gross margin improved to 16.1%, up from 13% in the same period last year.

However, net profit for the period fell to 9.016 billion yuan, a 9% decrease year-on-year, while profit attributable to shareholders declined by 11.7% to 8.567 billion yuan. Behind this profit decline, the impact of exchange rate volatility was particularly prominent.

According to the financial report, Chery Automobile's other income and gains dropped 27.1% year-on-year, primarily due to reduced foreign exchange gains. The company recorded a net exchange loss of 2.092 billion yuan during the reporting period, compared to a net exchange gain of 3.398 billion yuan in the same period last year—a swing of approximately 5.49 billion yuan.

This drastic fluctuation was the core reason for the significant reduction in the "other income and gains" item and the primary drag on the period's profit decline. Despite the nearly 5.5 billion yuan profit "hole" created by exchange rate movements, improvements in other areas partially offset the adverse effects.

Finance costs dropped sharply from 1.449 billion yuan to 549 million yuan year-on-year, saving approximately 900 million yuan. Impairment losses on financial assets swung from a loss of 133 million yuan to a gain of 186 million yuan, an improvement of about 319 million yuan. Under the combined effect of these multiple factors, the period's profit ultimately decreased by 890 million yuan year-on-year, with the decline controlled at 9%.

While profit came under pressure, Chery Automobile's globalization strategy continued to achieve breakthroughs. Overseas market revenue reached 98.968 billion yuan in the first half, up 51% year-on-year, solidifying its position as China's leading automobile exporter. The passenger vehicle gross margin improved from 12.4% to 15.6%, mainly attributable to the increased contribution of overseas sales to total revenue, as overseas sales carry higher gross margins than domestic sales in China.

Chery Automobile's new energy vehicle business generated revenue of 59.284 billion yuan, a 63.8% increase year-on-year, with its share of total revenue rising from 25.6% to 41.4%. Research and development spending also increased, from 5.2 billion yuan to 6.672 billion yuan, an increase of 28.3%, reflecting the company's continued investment in electrification and intelligent technology.

As of June 30, 2026, Chery Automobile operated 12 major production bases globally, including three overseas bases. The company stated that it plans to broaden its product lineup, increase R&D investment, strengthen electrification and intelligence capabilities, and continue advancing its globalization strategy in the second half of the year.

This year, while the domestic auto market has faced pressure, Chinese automakers have accelerated their overseas sales pace. However, based on first-quarter reports, exchange rate shocks have become a significant reason for many companies experiencing "increased revenue without increased profit." Managing currency risk effectively while stabilizing profits has become a critical challenge for automakers expanding overseas.

In its financial report, Chery Automobile stated that the group faces transactional exchange rate risk. To ensure the group's currency risk exposure remains at acceptable levels and to minimize mismatches between assets and liabilities denominated in the same currency, the group has entered into foreign currency forward contracts to hedge part of its foreign exchange risk exposure.