ZEEKR's Profitability Pivot: Can Margin Gains Outpace EV Sector Headwinds?

The electric vehicle (EV) market has never been more crowded—or more contentious. Yet within this fiercely competitive landscape, ZEEKR, the high-end EV arm of Geely Holding Group, has quietly begun to carve out a path toward profitability. Its first-quarter 2025 financial results, released on May 7, underscore a critical question: Is ZEEKR’s narrowing net loss and margin expansion a sign of durable operational efficiency, or merely a temporary reprieve amid shifting demand cycles?

The Numbers Tell a Nuanced Story
ZEEKR’s Q1 2025 net loss narrowed to RMB763 million, down 60% year-on-year from RMB1.9 billion in Q1 2024, though it rose 21% sequentially from Q4 2024. Vehicle sales revenue grew 16.1% YoY to RMB19.1 billion, while deliveries surged 21.1% YoY to 114,011 units—driven by strong performance in its premium segment above ¥200,000. Vehicle gross margin expanded to 16.5%, up from 13.1% in Q1 2024, reflecting cost discipline and a strategic shift toward higher-margin models like the Zeekr 7GT and Lynk & Co 900 SUV.

But the sequential declines are equally telling. Revenue dropped 37.8% from Q4 2024’s RMB35.4 billion, and deliveries fell 32.6% from Q4’s 168,750 units—a drop-off Geely CEO Andy An attributed to “seasonal factors.” This volatility raises red flags: Can ZEEKR sustain margin improvements when demand softens? Or is its growth tethered to fleeting tailwinds like China’s EV tax incentives, which began phasing out in mid-2024?

Operational Efficiency: A Strategic Advantage or a One-Off Win?
ZEEKR’s margin gains are partly attributable to its February 2025 brand integration with Lynk & Co, which eliminated redundancies in R&D and manufacturing. The combined entity now shares platforms, batteries, and software systems—a move that cut R&D costs sequentially by 25.6% to RMB2.91 billion in Q1, even as it invested heavily in new models like the Zeekr 9X hybrid SUV.

This synergy is critical. Unlike Tesla or Rivian, ZEEKR lacks the scale to absorb R&D costs alone. Its reliance on Geely’s ecosystem—leveraging the group’s global supply chain and Lynk & Co’s mass-market production—gives it an edge. Yet, this also creates dependency: 65.7% of ZEEKR is owned by Geely, which recently proposed taking it private at a 13.6% premium to its stock price.

The offer underscores a paradox: Geely’s confidence in ZEEKR’s long-term value contrasts with the market’s skepticism. ZEEKR’s stock, trading near ¥26 per ADS, remains below its 2023 IPO price—a reflection of lingering doubts about its ability to compete in the premium segment.

The Premium Play: Defensible Niche or Costly Delusion?
ZEEKR’s focus on EVs priced above ¥200,000 is its most compelling growth lever. In Q1 2025, 42% of its deliveries fell into this premium bracket, up from 35% in 2023. This shift, combined with cost savings from shared platforms, has boosted margins. But here’s the catch: The ¥200k+ segment is already crowded. Tesla’s Model Y Long Range and BMW’s iX3 dominate China’s luxury EV market, while domestic rivals like NIO and Li Auto are targeting the same buyers.

To win, ZEEKR must double down on its software and design differentiation. Its newly launched Zeekr OS 5.0, featuring AI-driven cabin control and over-the-air updates, could become a moat—if adopted widely. Yet execution risks loom. A single software glitch or delayed model launch—a familiar pitfall in the EV sector—could derail its momentum.

The Bottom Line: Buy, Hold, or Bail?
ZEEKR’s Q1 results are a mixed bag. The narrowed loss and margin gains suggest progress, but its reliance on seasonal demand and Geely’s financial support leaves it vulnerable. Key risks remain:
- Price competition: Rival EVs are slashing prices to regain market share.
- R&D intensity: ZEEKR’s R&D spend is still 15% of revenue—unsustainable unless sales scale.
- Geely’s privatization timeline: If the buyout fails, ZEEKR’s stock could face renewed pressure.

However, the positives are compelling. ZEEKR’s premium segment traction, Geely’s ecosystem leverage, and its robust cash balance (RMB9.9 billion) provide a foundation for growth. At current levels, the stock trades at a 30% discount to its peers on a price-to-sales basis—a valuation that doesn’t reflect its margin improvements or Lynk & Co’s 72,608-unit delivery performance in Q1.

The verdict? ZEEKR is not a slam-dunk bet, but its trajectory offers a high-risk, high-reward opportunity. Investors should consider a gradual entry, using dips below ¥24 per ADS as an opening. The premium EV market is consolidating, and ZEEKR’s strategic moves—coupled with Geely’s backing—position it to survive the shakeout. For now, the margin gains aren’t just a rally; they’re a sign of a company finally getting its balance sheet right.

Final Call: Buy on weakness. The path to profitability isn’t clear, but ZEEKR is closer than it was a year ago.