Electric vehicle sales just capped off 2024 by setting records. This was true in both the United States and China. American car makers General Motors (NYSE: GM) and Ford Motor (NYSE: F) both saw their EV sales spike, resulting in them moving the most EVs in their history. The strength was broader in China, as six automakers hit monthly sales records in December. This extended to two up-and-coming players in the Chinese EV space, ZEEKR Intelligent Technology (NYSE: ZK) and Xpeng (NYSE: XPEV)
It's great to see rising sales. However, it's hard to get too excited if companies aren't also improving profitability. Companies like Rivian Automotive (NASDAQ: RIVN) still have a negative gross margin on their cars. Based on the materials and labor costs alone, the company loses money on every vehicle it sells. Luckily for both Zeekr and Xpeng, that’s not the case. Gross margins are positive and rising. Other profitability metrics are improving as well. Below, I’ll break down the progress these two EV makers have achieved and provide insight into factors that will impact 2025.
Zeekr: Hits All-Time Deliveries High, Profitability Moving in the Right Direction
Zeekr sold just over 27,100 electric vehicles in December. This marked the fourth consecutive month that the company’s monthly sales hit an all-time high. This was a 102% increase over Dec. 2023. Overall, the company delivered more than 222,000 vehicles in 2024, resulting in an 87% increase from 2023. However, despite sales surging at the end of the year, the company still fell short of its full-year goal of 230,000 deliveries.
The company has improved its gross margin for the last 12 months by nearly 500 basis points since Q3 2023. Operating and normalized net income margins have also increased by about 400 and 250 basis points, respectively, though both remain negative. Looking ahead, Zeekr aims to boost deliveries by 44% in the coming year, reaching 320,000 vehicles.
Xpeng: Massive Margin Improvements, Deliveries Expected to Over Double in 2025
Xpeng achieved delivery of nearly 37,000 vehicles in December. This was an 82% increase from the previous December and a 19% increase from Nov. 2024. In Q4, deliveries hit over 91,000, slightly above the high end of the company’s guidance. Overall, full-year sales hit 190,000, a 34% increase over 2023. Xpeng no longer provides full-year deliveries guidance, per the company’s Q3 earnings call. However, analysts at Deutsche Bank are forecasting deliveries of 400,000 vehicles. This would mark a 110% increase from 2024.
Xpeng has significantly improved its profitability. In Q3 2023, its gross margin over the last 12 months was just above 0%, but it has now climbed to nearly 12%. On a quarterly basis, this marks the highest level in five years. The operating margin improved from -50% to -17%, and the net income margin improved from -31% to -9% over the last 12 months.
2025 Outlook: The Good and the Bad
Recent news coming out of Beijing provides a reason to be upbeat about the Chinese EV market. China’s National Development and Reform Commission (NDRC) extended a key subsidy that has been important for the success of EV sales. Consumers will receive approximately $2,700 in cash for replacing an old vehicle with a new EV. Uncertainty was mounting that lawmakers would not extend this subsidy into 2025. The government apparently heard the calls coming from inside the country to extend it, doing so just days ago.
Per Reuters, analysts see these renewed subsidies adding 3 million units of demand for the full year 2025. Industry experts see new electric vehicle sales growing by 20%. This represents a significant decline from the 40% growth seen in 2024. Still, over the full year in 2025, analysts predict EVs will account for over half of all cars sold in China.
One headwind is that analysts expect the exports of EVs out of China to be flat. That will impact growth. However, international sales still make up a relatively small portion of Xpeng and Zeeker's total sales. It's 15% of total volume for the former and around 10% to 15% for the latter. Ultimately, the macro environment for these two companies still remains largely uncertain. Their lofty projected delivery growth creates a somewhat intimidating situation amid this backdrop. Whether they will be able to live up to this and also continue increasing profitability is a dicey call.
