Chinese EV makers cut losses as price war persists

Chinese EV makers are under pressure to reduce losses as price competition continues in the world’s largest vehicle market.

Nio, Xpeng, and Geely’s Zeekr reported narrowed losses in Q2 2025, with Nio’s deficit down 26% quarter-on-quarter to 5.0 billion yuan (US$699 million), Xpeng’s shrinking by two-thirds to 480 million yuan (US$67.31 million), and Zeekr’s by 88% to 290 million yuan (US$40.6 million).

Industry consultants say listed EV firms must curb losses due to investor concerns about overcapacity and limited funding options.

Nio aims to deliver 50,000 EVs monthly in Q4 to meet its break-even target, double its Q2 sales.

Li Auto has been profitable since 2023, while Leapmotor, backed by Stellantis, posted a 30 million yuan (US$4.2 million) profit in H1 2025.

Fewer than 10% of China’s EV brands are expected to be profitable in the next five years, industry estimates show.

Discounting remains intense, though average price cuts narrowed to 16.7% in July.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s EV overcapacity problem mirrors earlier industrial boom-bust cycles

Despite massive scale, Chinese EV companies are struggling to convert volume into profits, revealing a fundamental overcapacity issue.

Only half of China’s 20 million unit annual EV production capacity was actually used last year, according to Goldman Sachs data1. Yet companies like Nio still reported operating margins worse than -30% in 2024, even as they narrow quarterly losses2.

This pattern echoes China’s solar industry experience, which also faced a boom-bust cycle due to overproduction and heavy reliance on government support3.

The current discount war, with manufacturers offering average discounts of 16.7% in July 2025, shows how excess capacity forces companies to compete primarily on price rather than profitability1.

Even with Nio targeting 50,000 monthly deliveries to break even, the fundamental challenge remains: too many companies chasing the same market with insufficient differentiation to command premium pricing.