In the first quarter of 2026, the cumulative appreciation of the RMB against the US dollar exceeded 1.1%. Leading car companies such as BYD and Geely all experienced large exchange losses, and the profit gap of some companies reached several billion yuan. For the automobile export industry, for every 0.1 exchange rate fluctuations, the profit of a US$10,000 model may be swallowed up by 2000 yuan."Increasing income without increasing profits" has become a common pain point in the industry. Exchange rate fluctuations are not short-term challenges, but long-term norms. If China car companies want to stabilize profits in the wave of going overseas, they must abandon the speculative thinking of "betting on exchange rates" and shift to "risk-neutral" systematic management, and build a profit protection network from four dimensions: financial hedging, settlement optimization, operational hedging, and long-term layout.

1. Short-term risk avoidance: Use financial instruments to lock in profits and bid farewell to "streaking"

Uncertainty about exchange rate fluctuations is the core trigger for profit loss. The most direct solution in the short term is to make good use of foreign exchange derivatives, lock in the exchange rate for foreign exchange settlement in advance, and "keep out" volatility risks.

- Forward foreign exchange settlement and sales: Lock in future exchange rates

Sign an agreement with a bank to stipulate the currency, amount, term and exchange rate of future foreign exchange settlement. Regardless of the subsequent rise and fall of the exchange rate, it will be exchanged at the agreed price to completely lock in the profit of the order. For example, a car company in Xiangyang has saved more than 1 million yuan in financial costs in 2025 through long-term lockdown. Mainstream car companies such as Xiamen Jinlong have incorporated forward settlement and sales into regular operations, and the hedging ratio covers core orders.

- Foreign exchange options: low-cost "buy insurance"

Pay a small amount of option fee and gain the right to settle foreign exchange at a specific time in the future at the agreed exchange rate. Exercise the right to stop losses when the RMB appreciates, abandon the right to exercise when it devalues, enjoy exchange rate dividends, taking into account "risk protection" and "income elasticity." Small and medium-sized car companies can choose "option-free put options" to enter the market at zero cost.

- Layered hedging: Smoothing long-term risks

Instead of hedging in full at one time, it is split according to the order cycle and hedging on a rolling basis. Short-term orders are hedged by 50%-60%, and long-term orders are covered in batches to avoid fluctuations at a single point in time. Geely and other car companies have adopted this combination strategy to control exchange rate risks within a controllable range.

2. Front-end optimization: Reduce exposure from the source of settlement and reduce risk exposure

Financial instruments are "ex post facto remedies", and optimization of settlement models is "source risk control". By adjusting settlement currencies, accounting periods and pricing terms, the probability of the impact of exchange rate fluctuations can be directly reduced.

- Promote RMB settlement and eliminate exchange rate risks

In markets with high RMB acceptance such as Southeast Asia and the Middle East, priority is given to RMB pricing and settlement. Avoiding the risk of US dollar fluctuations once and for all can also reduce exchange fees. Currently, cross-border RMB settlement has become a trend. In order to simplify the process, some customers are willing to accept RMB settlement and give small price discounts.

- Shorten the collection period and reduce the exposure time of funds

If you refuse to have too long account periods (such as OA of more than 90 days), you will adopt the "30% prepayment + payment by seeing a copy of the bill of lading" model to speed up the withdrawal of funds. During the RMB appreciation cycle, for every extra day accounts receivable stay, the risk of profit erosion increases by one point, and "foreign exchange settlement is achieved as soon as it is received."

- Add exchange rate clauses to the contract to share risks

It is clear in the export contract that when the exchange rate fluctuates by more than ±3%, the two parties will renegotiate the price, or share the profits and losses according to the fluctuation proportion. High-end markets (such as Europe) can appropriately raise prices to transfer costs, while low-end markets use clauses to lock in the bottom line of profits to avoid unilaterally bearing fluctuation losses.

3. Operational hedging: Use supply chain and market layout to naturally offset risks

In the long run, relying solely on financial instruments and settlement adjustments is not enough. It is necessary to build a "natural hedging" barrier through currency matching of revenue and expenditure, localization of production capacity, and diversification of markets to absorb the impact of exchange rate fluctuations from the operational level.

- Match foreign exchange receipts and expenditures and reduce foreign exchange settlement operations

Exports receive US dollars and imports pay US dollars. Overseas revenue is used to directly pay overseas procurement and marketing expenses, reducing the frequency of foreign exchange settlement in US dollars and RMB purchases, and naturally offsetting the impact of exchange rate fluctuations. For example, revenue from overseas subsidiaries of automobile companies is directly used for local parts procurement and operating expenses.

- Overseas factories + localized procurement to lock in costs

Build factories in target markets such as Southeast Asia, the Middle East, and Mexico to achieve "local production and local sales." On the one hand, tariffs are avoided, on the other hand, local currency is used to pay wages and purchase parts, so that income is consistent with the currency of expenditure, and exchange rate exposure is completely eliminated. BYD, Great Wall and others have deployed production capacity in Thailand and Brazil to effectively hedge exchange rate risks.

- Diversify the market and reduce dependence on the single currency

Reduce over-reliance on the US dollar zone (Europe and the United States) markets and vigorously explore emerging markets such as ASEAN, the Middle East, Russia, and South America. Most of these markets are settled in local currency or RMB, and demand is growing rapidly, which can not only disperse exchange rate risks, but also expand sales growth. In 2025, China car companies will account for more than 60% of exports to emerging markets.

4. Long-term layout: increase added value + build a risk control system to enhance anti-risk capabilities

The essence of exchange rate fluctuations is the squeeze of profit margins. The key to long-term breaking is to break out of low-price competition, increase product premiums, and build a professional risk control system so that profits are "thick enough" and are not afraid of the impact of fluctuations.

- Focus on high value-added products and improve premium capabilities

Reduce the export of low-cost fuel vehicles and focus on new energy and intelligent connected models. New energy vehicle companies can sell for 2-3 times in the European market, and high net interest rates can cover losses from exchange rate fluctuations. BYD's Han and Tang series have a significant premium in Europe, effectively offsetting the impact of RMB appreciation.

- Establish an exchange rate early warning mechanism and dynamically adjust strategies

Establish a professional exchange rate risk control team to track exchange rate trends, central bank policies and geopolitical changes in real time, and predict fluctuation trends in advance. Set exchange rate warning lines (such as 6.9 and 6.7), and immediately adjust the hedging ratio, settlement price or market strategy after triggering to avoid passive response.

- Refined financial management to strip off the impact of exchange gains and losses

Optimize the financial accounting system, separate exchange gains and losses from core operating profits, and avoid exchange rate fluctuations interfering with operating decisions. At the same time, we will strengthen cash flow management, accurately forecast foreign exchange receipts and expenditures, provide data support for hedging and settlement adjustments, and provide basis for every decision.

conclusion

Exchange rate fluctuations are a challenge and a "catalyst" for the upgrading of China's automobile exports. In the short term, relying on financial instruments to lock in profits, relying on operational optimization to reduce risks in the medium term, and relying on product upgrades to strengthen premiums in the long term. Only by combining the three can we stabilize profits and achieve stability and long-term development in the face of exchange rate storms. China's automobile exports have entered a new stage of "paying equal attention to scale and profit." Only by abandoning the mentality of luck, establishing the concept of risk neutrality, and building systematic exchange rate management capabilities can we truly gain a firm foothold in global competition and move from a "big exporting country" to a "powerful exporting country."

Source: Digital automobile export-Huohuo

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