Moody's has made a rare move by upgrading a privately-owned Chinese automaker. On August 28, the rating agency assigned a Baa3 issuer rating to GEELY AUTO, simultaneously withdrawing its Ba1 corporate family rating, marking the company's return to investment grade. The outlook has been revised from positive to stable.

The gap between Baa3 and Ba1 represents the investment grade threshold. Certain institutions are restricted to allocating only investment-grade assets. With the return to Baa3, GEELY AUTO gains access to a broader funding pool, and the rating will serve as a benchmark for future bond pricing. The company climbed just one notch on the rating scale but crossed a significant financing barrier.

This marks a recovery of lost ground. In 2019, GEELY AUTO first achieved a Baa3 rating; however, in April 2024, Moody's downgraded it to Ba1, citing that price competition in the new energy vehicle market was eroding profits while investments in new models and R&D continued. As recently as February of this year, Moody's maintained the Ba1 rating with only a positive outlook adjustment. It took six more months for the rating to cross back over the line.

Over the past two years, the industry environment has not become noticeably easier. GEELY AUTO sold 1.673 million vehicles in the first seven months of this year, a modest 2% year-on-year increase. Yet profitability has rebounded first. In the first half of the year, the company generated revenue of RMB 173.6 billion, up 15%. Gross margin improved to 17.9%, rising from 16.6% for the full year of 2025. Net profit attributable to shareholders reached RMB 9.09 billion, down 2%, but after excluding items such as foreign exchange gains or losses and asset impairments, core attributable profit hit RMB 9.68 billion, a 46% surge.

While sales volume did not skyrocket, profits were wrung out through product mix improvements and regional sales adjustments. In the first seven months, GEELY AUTO's exports reached 581,000 vehicles, a 165% increase year-on-year, now accounting for over 30% of total sales during the period.

In its rating report, Moody's noted that the rising share of overseas business and premium products had improved profitability. Internal asset restructuring within the group also began to yield cost savings. These profits have been converted into cash. In the first half, GEELY AUTO's operating activities generated RMB 19.92 billion in cash, approximately RMB 4.9 billion more than the same period last year. Meanwhile, capital expenditure on purchasing property, plant, equipment, and intangible assets totaled less than RMB 8 billion. While R&D and capacity expansion continue to require funds, daily operations now cover these expenses. The company subsequently repaid RMB 11.75 billion in bank borrowings, resulting in a net cash outflow of RMB 11.95 billion from financing activities.

According to Moody's calculations, the company's debt decreased from RMB 23 billion at the end of 2025 to RMB 13 billion by the end of June this year. Following the completion of the Zeekr privatization, most of its bank loans were also repaid. During the same period, GEELY AUTO's net cash, excluding restricted cash, stood at RMB 46 billion. The company has maintained a net cash position since the end of 2012.

This cash reserve is critical to the rating upgrade. In 2024, Moody's concern was that thin profit margins and sustained investment would gradually deplete the balance sheet. Now, GEELY AUTO continues to invest in R&D and overseas production capacity, and remains in a price war, yet it can fund these investments with operational cash flow while also repaying debt.

Moody's projects that over the next 12 to 18 months, GEELY AUTO's sales will grow by 5% to 10%. During this period, the EBIT margin is expected to remain between 5.0% and 5.5%, with a debt-to-EBITDA ratio of approximately 0.5 times. While the ramp-up of overseas production will increase capital expenditure, operating cash flow should still cover these costs, allowing the company to generate positive free cash flow. For the 12 months ending June 2025, these two indicators were 4.8% and 0.6 times, respectively, already approaching the range provided by Moody's.

However, Baa3 is only the lowest tier of investment grade. Moody's decision to change the outlook from positive to stable also signals limited room for near-term further upgrades. Domestic price reductions could still compress profits, and overseas plant construction will consume cash. These factors require GEELY AUTO to achieve even better operational results in the future to maintain its status.

Returning from speculative grade to investment grade remains a rarity among private Chinese automakers. Ahead of the rating announcement, Yue Sang Kwai, Deputy Chairman of the Board of Directors of Geely Automobile Holdings, stated at the interim results meeting on August 17 that in the foreseeable future, both sales and profits for Geely Automobile are likely to hit new highs. He described the half-year report as "sustainable in the long term with immense room for improvement."

The day after those remarks, GEELY AUTO completed a management transition. An Conghui succeeded as Chairman of the Board, while Gan Jiayue was appointed Chief Executive Officer. The task of driving sales and profits to new records while safeguarding the newly regained investment grade now rests squarely on the shoulders of the new leadership team.