Chinese makers of smart electric vehicles (EV) will have to redouble their efforts over the next few quarters to stay on track to break even as the brutal discount war in the world’s largest vehicle market shows few signs of abating.
From Nio to Xpeng and Zeekr, China’s EV start-ups have been reporting smaller losses in the second quarter, as discounts helped to encourage more buyers to ditch their oil-guzzling vehicles for battery-driven cars.
Nio’s second-quarter loss narrowed by 26 per cent from the previous three months to 4.99 billion yuan (US$699 million). Xpeng’s loss shrank by two-thirds to 480 million yuan in the same period, while Geely Automobile Holdings’ Zeekr unit improved on its loss, narrowing it by 88 per cent to 287 million yuan in the quarter that ended in June.
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“The [publicly] listed EV makers have to cut their losses [because] it is difficult to raise fresh funds from investors” amid persistent concerns about overcapacity, said Ding Haifeng, a consultant at the financial advisory firm Integrity, in Shanghai. “Heavy losses over the coming quarters would threaten some Chinese EV builders, making them likely to be expelled from the highly competitive market.”
The cockpit of an Xpeng X9 minivan during the Auto Shanghai show on April 23, 2025. Photo: Reuters alt=The cockpit of an Xpeng X9 minivan during the Auto Shanghai show on April 23, 2025. Photo: Reuters>
To survive the brutal competition and stay on its target to break even by the fourth quarter, Nio’s CEO William Li needs his 10-year-old company to deliver 50,000 EVs every month to customers, double what the Shanghai-based carmaker sold in the second quarter.
“We are aiming to deliver 50,000 cars each month in the fourth quarter,” Li said during a post-earnings briefing on Tuesday. “This will be a goal that our company is determined to achieve.”
Some of Nio’s competitors have it easier. Li Auto, Tesla’s nearest rival in mainland China, has been profitable since 2023, as its spacious sport utility vehicles with extended-range technology attracted thousands of wealthy consumers to make it their family vehicle.
Hangzhou-headquartered Leapmotor, backed by Fiat owner Stellantis, turned to profit in the first half of 2025 as its net income hit 30 million yuan, spurred by surging deliveries of its cheaper models, according to its earnings report published in mid-August.
Leapmotor, Nio, Xpeng and Zeekr pledged to break even in 2025. They are in the minority, as fewer than 10 per cent of China’s EV brands are expected to be profitable in the next five years.
Carmakers’ margins faced further pressure from discount wars and chronic overcapacity, global consultancy AlixPartners said last month. Only half of the nation’s EV production capacity – about 20 million units – was used last year, according to Goldman Sachs.
The small assemblers that sell fewer than 1,000 EVs a month face almost certain death, as they are likely to be pushed out of the market, said Stephen Dyer, Greater China co-leader and head of the Asia automotive practice at AlixPartners.
An easing of China’s price war could do a lot to improve carmakers’ profit margins, said Ding. The average discount offered by Chinese EV and petrol car manufacturers shrank to 16.7 per cent in July from an unprecedented 17.4 per cent in June, according to data compiled by JPMorgan.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
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