J.P. Morgan: European Checks Confirm Accelerating China Auto Exports; Raise BYD & Geely TPs

Overview

During the annual European Auto Conference, J.P. Morgan conducted field visits to BYD stores in London and Paris, becoming more optimistic about the overseas expansion prospects of Chinese OEMs. The report argues that Chinese automakers' growth in overseas markets like Europe has moved beyond the simple 'cheap EV' narrative, now relying on multi-powertrain portfolios (BEV+PHEV), intensive retail channel execution, and charging ecosystem development to win market share. Accordingly, the firm has raised its 2026E overseas sales forecasts and earnings estimates for BYD and Geely, lifted target prices for both companies, and maintained Overweight ratings.

Core views

Reconstruction of Overseas Growth Logic: From Pure BEV to Diversified Portfolio. The report notes that Europe is a 'hybrid transition market,' where Chinese OEMs are adapting to local demand by offering balanced BEV and PHEV/HEV product mixes. Store checks indicate strong demand for PHEV models (e.g., Seal U DMi), which account for 50-60% of order flow, while some BEV models (e.g., Sealion 7) face supply shortages with wait times of several months due to high cost-performance ratios. This suggests that Chinese OEMs' share gains no longer rely solely on price disruption but are achieved by aligning with local charging infrastructure conditions and actual consumer needs, with PHEVs serving as a critical commercialization bridge. Retail Execution as a New Moat. Chinese OEMs are shifting overseas from traditional export distribution models to a 'rapid retail expansion + service credibility' model. BYD emphasizes high-density dealer networks and store coverage, achieving test-drive conversion rates of 45-50%. More importantly, automakers are focusing on after-sales service depth to build trust and ensuring monthly payment competitiveness through strict residual value management, rather than engaging in pure sticker-price wars. This focus on total ownership experience is raising the competitive bar for incumbent foreign brands. Charging Ecosystem and Brand Upgrading as Key Differentiators. BYD treats charging infrastructure as part of the ownership experience, planning to deploy 3,000 flash chargers in Europe (including 300 in the UK) by end-2026. Although the premium Denza Z9 GT has not been officially launched and carries a guide price of approximately €115,000, it has already accumulated substantial orders with a six-month waiting list. This proves that through a combination of 'super-charging technology + premium products,' Chinese OEMs can reduce buyer friction and elevate competition from price to overall value proposition, thereby avoiding low-end involution. Structural Export Tailwinds and Localization Divergence. China's passenger car export mix is rapidly shifting toward NEVs (>50% share), with rising PHEV penetration supporting upside in overseas revenue and margins. Strategies to address tariff and regulatory risks are diverging: BYD favors vertically integrated overseas manufacturing (e.g., Hungary, Brazil), while Geely leans toward asset-light partnership/KD assembly routes (e.g., Proton in Malaysia, Ford collaboration in Spain). Meanwhile, global legacy automakers are also adopting 'In China, For Global' strategies, leveraging Chinese supply chains to feed global markets.

Analysis framework

The report employs a combined analytical approach of 'bottom-up field verification + top-down trend assessment.' Rather than relying solely on macro export data, analysts personally visited stores at Canary Wharf in London and Champs-Élysées in Paris to obtain first-hand terminal sales feedback (e.g., specific model wait times, discount levels, customer cross-shopping comparisons, charging infrastructure progress). These micro-level data points were used to validate and revise prior macro assumptions, leading to quantitative adjustments in overseas sales parameters within earnings models. Additionally, the report benchmarks Chinese OEM strategies against recent moves by European incumbents (e.g., capacity adjustments, sourcing strategies in China) to assess the sustainability of competitive advantages.

Methodology notes

• Industry Analysis FrameworkPenetration S-curve

  Transition Markets and Technology Adoption Stages

  The report defines Europe as a 'hybrid transition market,' implying the region is in the mid-stage of the electrification S-curve where infrastructure is not yet fully mature; thus, PHEVs retain strong viability as transitional products. This framework helps investors understand why PHEVs remain popular in developed markets rather than seeing an immediate leap to pure BEVs.

• Competition & Strategy FrameworkMoats / Competitive Advantage

  Retail Execution and Ecosystem Barriers

  The report argues that Chinese OEMs' competitive barriers are shifting from 'manufacturing cost advantages' to soft power such as 'channel density, after-sales trust, and energy replenishment networks.' Such non-price moats are harder to replicate and form the key logic supporting valuation premiums.

• Valuation MethodologySOTP Valuation

  Differentiated Pricing for Domestic vs. Overseas Businesses

  In valuing Geely, the report implicitly applies sum-of-the-parts thinking, assigning ~15x PE to overseas business and ~8x PE to domestic business, resulting in a weighted target PE of 11x. This reflects the market's pricing logic of awarding higher premiums to high-growth overseas segments.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BYD (1211.HK / 002594.SZ)

  Core Beneficiary: Overseas sales beat expectations; leadership in premiumization and ecosystem development

  Strengths

  Strong vertical integration; dual BEV/PHEV drive; aggressive flash-charging network rollout; premium Denza brand successfully penetrating luxury segment; high test-drive conversion rate.

  Weaknesses

  Domestic NEV demand expected to decline ~9%; heavy asset-intensive overseas investment exposes company to geopolitical and tariff risks.

  Comparison

  Compared to Geely, BYD's overseas strategy leans more toward vertical integration and self-built factories, with faster premium brand progression and higher valuation multiples (~20x PE vs. Geely's 11x).

  Risks

  Sales miss; intensified competition from VW, Geely, and other domestic/foreign brands; overseas policy changes.

• Geely Auto (0175.HK)

  Beneficiary: Accelerating overseas expansion; asset-light model reduces risk

  Strengths

  Comprehensive multi-powertrain matrix (BEV/HEV/EREV); asset-light global expansion via partners like Renault, Proton, and Ford; platform strategy driving cost synergies; strong ESG rating.

  Weaknesses

  High proportion of capitalized R&D expenses implies relatively aggressive accounting treatment; weaker momentum in brand premiumization versus BYD.

  Comparison

  Compared to BYD, Geely's overseas strategy is more flexible and asset-light, but currently exhibits lower per-unit profitability and brand premium, resulting in a notable valuation discount.

  Risks

  Sales underperformance; slower-than-expected improvement in profitability.

Key data

• BYD 2026E Overseas Sales Forecast1.75mn unitsRaised by ~15% from prior forecast of 1.5mn units
• Geely 2026E Overseas Sales Forecast950k unitsRaised by ~30% from prior forecast of 750k units
• Chinese OEMs' European NEV Market Share18%Apr 2026 data; more than tripled from 5% a year ago
• BYD H-Share Target PriceHK$124Previous HK$120; based on blended multiples and median DCF valuation
• Geely Auto Target PriceHK$29Previous HK$28; based on 11x 2026E P/E
• BYD Store Test-Drive Conversion Rate~45-50%Reflects strong terminal demand and sales execution efficiency
• Denza Z9 GT Estimated Starting Price in Europe€115,000Benchmarked against Porsche Taycan; secured significant orders pre-launch

Impact & implications

For Chinese OEMs, success in overseas markets validates that their globalization capabilities have upgraded from product exports to system exports. Through differentiated local strategies (self-built vs. partnerships) and multi-powertrain layouts, BYD and Geely are unlocking new profit growth drivers. For European legacy automakers, Chinese competitors' leadership in feature richness, smart experiences, and charging ecosystems forces a re-evaluation of pricing strategies and product definitions, even necessitating reverse utilization of Chinese supply chains. For investors, this implies greater attention should be paid to progress in overseas channel development, brand premium capability, and compliant localization, rather than focusing solely on aggregate export volume data.

Risks

• Overseas sales growth falling short of expectations or being hindered by tariff and non-tariff barriers
• Persistent weakness in domestic NEV demand dragging on overall performance
• Intense competition from mainstream domestic and foreign brands like VW and Great Wall pressuring margins
• Execution setbacks in overseas localized manufacturing or partnership projects failing to effectively hedge trade risks

What to watch

• Progress and actual utilization rates of BYD's flash charger rollout in Europe
• Actual delivery volumes and user feedback following the official European launch of the Denza brand
• Implementation and sales contribution from Geely's overseas partnership projects with Renault, Ford, etc.
• Subsequent evolution of EU tariffs on Chinese EVs and OEM countermeasures
• Monthly registration volumes and market share trends for Chinese OEMs in Europe and other overseas markets