Electric vehicle sales just ended 2024 with records. This was true in both the US and China. American automaker General Motors New York Stock Exchange: CEO and Ford Motor New York Stock Exchange: F both experienced a surge in EV sales, resulting in them selling the most EVs in their history. Growth was stronger in China, as six automakers set monthly sales records in December. This has extended to two up-and-coming players in the Chinese electric vehicle market, ZEEKR Intelligent Technology. New York Stock Exchange: ZK and Shpeng New York Stock Exchange: XPEV
It’s good to see sales growth. However, it’s hard to get too excited if companies aren’t improving profitability. Companies like Rivian Automotive NASDAQ: RIVN still have negative gross margins on their vehicles. Based on material and labor costs alone, the company loses money on every vehicle sold. Fortunately for Zeekr and Xpeng, this is not the case. Gross margins are positive and growing. Other profitability indicators are also improving. Below, I’ll review the progress these two EV manufacturers have made and discuss the factors that will impact 2025.
Zeekr: Record High Deliveries, Profitability Moving in the Right Direction
Smart technologies ZEEKR today
ZEEKR Intelligent Technologies
As of 01/13/2025 15:58 Eastern
- 52 week range
- $13.00
▼
$32.76
- Target price
- $32.02
Zeekr sold just over 27,100 electric vehicles in December. This was the fourth month in a row that the company’s monthly sales reached a record high. This is 102% more than in December 2023. Overall, the company delivered more than 222,000 vehicles in 2024, up 87% from 2023. its goal for the whole year is 230,000 births.
The company has increased its trailing-12-month gross margin by nearly 500 basis points since the third quarter of 2023. Operating and normalized net profit margins also increased by about 400 and 250 basis points, respectively, although both remain negative. Looking ahead, Zeekr plans to increase shipments by 44% next year, reaching 320,000 vehicles.
Xpeng: Significant improvement in profitability, shipments expected to double in 2025
XPeng today
As of 01/13/2025 15:58 Eastern
- 52 week range
- $6.55
▼
$15.68
- Target price
- $11.69
In December, Xpeng delivered nearly 37,000 vehicles. This is 82% more than in December last year and 19% more than in November 2024. In the fourth quarter, deliveries topped 91,000, slightly above the high end of the company’s forecast. Overall, sales for the full year reached 190,000, up 34% from 2023. Xpeng is no longer providing guidance for full-year shipments, according to the company’s third-quarter earnings report. However, Deutsche Bank analysts forecast deliveries of 400,000 vehicles. This represents an increase of 110% compared to 2024.
Xpeng has significantly improved its profitability. In the third quarter of 2023, the company’s trailing-12-month gross margin was just above 0%, but has now risen to nearly 12%. On a quarterly basis, this is the highest level in five years. Over the past 12 months, operating margin increased from -50% to -17% and net profit margin increased from -31% to -9%.
Prospects for 2025: good and bad
Recent news from Beijing provides cause for optimism regarding the Chinese electric vehicle market. China’s National Development and Reform Commission (NDRC) has extended a key subsidy that has been instrumental in the success of electric vehicle sales. Consumers will receive about $2,700 in cash for replacing their old car with a new electric vehicle. There was growing uncertainty that lawmakers would not extend the subsidy until 2025. The government apparently heard calls from within the country to extend it, having done so just a few days ago.
Analysts estimate the subsidy renewal will boost demand by 3 million units throughout 2025, according to Reuters. Industry experts predict a 20% increase in sales of new electric vehicles. This represents a significant decline from the 40% growth seen in 2024. However, analysts predict that for all of 2025, electric vehicles will account for more than half of all cars sold in China.
One headwind is that analysts expect Chinese electric vehicle exports to remain flat. This will affect growth. However, international sales still account for a relatively small portion of Xpeng and Zeeker’s total sales. This is 15% of the total volume for the former and about 10–15% for the latter. Ultimately, the macroeconomic situation for these two companies remains largely uncertain. Their high projected supply growth creates a somewhat frightening situation against this backdrop. Whether they can justify this and also continue to increase profitability is a risky question.
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