Moody's Grants Geely (00175) Baa3 Issuer Rating and Revokes Its Ba1 Business Family Rating

The Zhitong Finance App learned that on August 28, Moody's Ratings (Moody's) granted Geely Auto (00175) a Baa3 issuer rating while also withdrawing its Ba1 Business Family Rating (CFR). The rating outlook was adjusted from positive to stable.

“This rating action and stable outlook reflect Geely Automobile's good past performance in continuously expanding its market share and improving profit levels in a fiercely competitive environment in the industry. Thanks to the expansion of the global layout and the rich product matrix, the company's operating fundamentals have been strengthened, thus achieving these results.” Daniel Zhou (Daniel Zhou), vice president of Moody's Ratings and an analyst, said.

“We expect Geely to continue to maintain strong credit fundamentals: low leverage, abundant liquidity, and strong cash reserves. These advantages are sufficient to cushion the pressure of intense industry competition and continued capital expenditure.” Chow Yat-wai added.

Rating basis

Geely Auto's Baa3 rating reflects that it has a strong competitive position in the Chinese automobile industry and has maintained a long-term financial position with low leverage, excellent liquidity, and net cash.

However, the rating also takes into account related risks and challenges: intense competition in the Chinese automobile market, capital investment pressure and project execution risks brought about by the expansion of overseas markets. Geely's leading position in the industry, sound financial position, and abundant cash flow can hedge against these risks.

In January and July 2026, Geely's sales increased 2% year on year, outperforming the market (overall industry decline of 3.7%); overseas market sales rose sharply by 165%, becoming the core growth driver.

Moody's predicts that this growth trend is expected to continue: in the next 12 to 18 months, with the launch of new models and a rise in overseas production capacity to drive an increase of overseas demand, the domestic market will gradually pick up after the effects of stimulus overdraft policies subside in 2025, and the company's sales volume is expected to increase by 5% to 10%.

Geely's profitability improved, with gross margin rising to 17.9% in the first half of 2026 and 16.6% for the full year of 2025. The increase in profit is mainly due to high-margin overseas business, the increase in the share of revenue for high-end brands, and cost savings brought about by operational synergy effects after asset consolidation.

After the privatization of Geely Krypton was completed, Geely repaid most of Krypton's bank loans; by the end of June 2026, the size of the company's debt had dropped sharply from 23 billion yuan at the end of 2025 to 13 billion yuan.

Although capital expenditure may increase slightly in the next 12 to 18 months to support overseas production capacity expansion and continued investment in R&D; Moody's determined that Geely's strong operating cash flow would be sufficient to cover capital requirements, and the company expects to continue to generate positive free cash flow during the same period.

Moody's predicts that in the next 12 to 18 months, Geely Auto's profit margin before interest and tax (EBIT profit margin) will stabilize in the 5.0% to 5.5% range, and the debt/EBITDA ratio will remain around 0.5 times; as of June 2026, the two indicators will be 4.8% and 0.6 times, respectively. The company's extremely low level of leverage and continuously improving EBIT profit margins have reached the level of global investment-grade car companies' peers.

Geely's mobility is excellent. As of June 30, 2026, excluding restricted cash, the company's net cash balance reached RMB 46 billion. Geely has maintained a net cash position for a long time since the end of 2012.

The current issuer rating is not affected by the subsidiary's debt payment order. Although Geely is a holding platform, and most of the debt is borne by subsidiary companies, the layout of multiple business segments and diversified subsidiaries at home and abroad has effectively reduced structural secondary risks.

Environmental, social and governance (ESG) considerations

Geely has taken a number of measures to reduce environmental and social risks, including laying out multiple electric vehicle technology routes, launching a rich electrification product matrix, and implementing sustainable development projects across all business lines.

The company has long adhered to a conservative financial strategy and a sound risk management system (historical records of low leverage and net cash can be corroborated). Coupled with the management's excellent operating performance and credibility in the past, it has mitigated the governance risks caused by the controlling shareholders' high voting rights to a certain extent.