A reader who has already seen the Wall Street CN

Twelve Chinese automakers that separately disclose foreign-exchange gains and losses recorded combined net FX losses of 11.2 billion yuan in the first half of 2026. The same group reported combined FX gains of 17.3 billion yuan a year earlier. The swing amounted to nearly 28.5 billion yuan — erased or added back purely by exchange-rate movements, rather than by changes on the factory floor.

That is the paradox running through this earnings season. BYD's overseas gross profit per vehicle is now close to twice its domestic level, according to Gong Min, an analyst covering China's auto sector at UBS. Chery's overseas revenue surged 51% to 98.97 billion yuan, accounting for 69% of its total sales. Yet its net profit fell 11.7% after a 3.4 billion yuan FX gain last year turned into a 2.09 billion yuan loss this year. BYD lost 4.7 billion yuan to currency movements alone, while SAIC lost 1.95 billion yuan and Geely 673 million yuan. Excluding the currency swing, SAIC's core profit rose 72% year on year and Geely's increased 46.2%.

This is not a problem unique to China. Japanese and South Korean automakers encountered the same challenge a generation ago, when export-heavy earnings fluctuated with every major move in the yen and won. They eventually expanded local production, sourcing and financing in key markets, reducing the amount of cash that needed to cross borders. Chinese carmakers are at an earlier stage of the same process. Most still purchase parts and pay workers in yuan, while collecting payments in euros, Brazilian reais or South African rand — sometimes months after vehicles have been shipped. This leaves a growing pool of foreign-currency receivables exposed to the yuan's next move.

Hedging can help, but it is attempting to catch a moving target. Derivatives offset roughly 30% of Great Wall Motor's exchange loss. BYD's hedging operations generated 481 million yuan, against a 4.7 billion yuan loss — a gap that shows how far its hedging coverage still lags behind the growth of its overseas sales. Seres and Leapmotor did not hedge at all. SAIC's forward contracts largely covered the risks they were designed to address, but its unhedged foreign-currency assets and liabilities continued to be revalued as exchange rates changed.

The mechanism matters more to Hong Kong-listed shareholders than the headline loss figures might suggest. BYD (1211.HK), Geely (0175.HK) and other companies listed in both Hong Kong and the mainland report the same consolidated figures to investors in both markets. On a quarterly scorecard, a currency-driven profit shortfall looks identical to an operational decline unless investors separate the two. A Sept. 2 note from Guosen Securities summarized the difference at the industry level: after adjusting for currency effects, first-half profit at listed passenger-car makers rose by about 3% across the sector, even as reported profit presented a weaker picture.

Chery is furthest along in addressing the issue. It took over a plant in Rosslyn, South Africa, this year, with production targeted to begin by mid-2027 and local content expected to reach 40% by 2028. The move would allow revenue from South African vehicle sales to pay South African workers and suppliers directly, avoiding a currency conversion in between. A finance executive at a major automaker told Wall Street CN that the company is increasing the proportion of costs at its overseas plants denominated in local currencies for the same reason.

That is the more difficult and gradual task behind the foreign-exchange loss figures: The question is no longer whether Chinese cars can sell overseas — they clearly can — but whether the money earned abroad can be collected, spent and reported in the same currency in which it is generated.

Originally published on IBTimes Hong Kong