Zeekr's Q2 Earnings: A Glimpse into the Future of China's EV Consolidation

In the second quarter of 2025, Zeekr Group delivered a performance that was equal parts encouraging and instructive. The company's unaudited financial results revealed a revenue of RMB27.4 billion ($3.83 billion), a modest 0.9% decline year-over-year but a robust 24.6% increase from its first-quarter total. This growth, though modest in absolute terms, signals a critical inflection point in the company's journey. Zeekr's gross margin expanded to 20.6%, up from 18.0% in Q2 2024, driven by cost-saving initiatives and supply chain optimization. More importantly, its vehicle margin hit 17.3%, a 58% year-over-year jump, as the brand pivoted toward premiumization with models like the Zeekr 7GT and Lynk & Co 900. These metrics suggest that Zeekr is no longer merely surviving in the hyper-competitive Chinese EV market—it is adapting to thrive.

The Margin Play: A Strategic Shift

Zeekr's margin expansion is not accidental. The company has systematically reoriented its business model to prioritize profitability over volume. For instance, the Zeekr brand's average selling price (ASP) rose 12% in Q2 2025, even as its domestic sales dipped 9.99%. This shift toward premiumization mirrors the strategies of global automakers like Tesla and BYD, which have long understood that margin, not just scale, is the key to long-term value creation.

The numbers tell a compelling story. Zeekr's operating income turned positive at RMB285 million ($39 million) in Q2 2025, a stark contrast to the RMB2.27 billion loss in the same period the previous year. Its net loss narrowed by 88.8% YoY to RMB287 million ($40 million), and on a non-GAAP basis, the adjusted net loss was RMB257 million ($36 million), a 59.8% improvement from Q1 2025. These figures are not just a testament to better cost control but also a reflection of the company's ability to navigate the industry's brutal price wars without sacrificing its financial health.

Product Mix and Global Ambitions

Zeekr's product mix further underscores its strategic agility. While the Zeekr brand delivered 49,337 units in Q2, the Lynk & Co brand accounted for 81,529 deliveries, with 58.8% of those being New Energy Vehicles (NEVs). This diversification is critical in a market where consumer preferences are rapidly evolving. Moreover, Zeekr's international expansion is gaining traction: European deliveries grew 25%, and Southeast Asian sales increased 30%. These geographic gains are not just about volume—they are about building a global brand identity that can rival Tesla's dominance in the West.

The company's recent launch of the Zeekr 9X, equipped with a 900V high-voltage architecture and a 70kWh battery pack, is a bold statement. This model, set to begin deliveries in Q3 2025, is designed to compete with Tesla's Model S and BYD's Han EV, both of which are benchmarks in the luxury EV segment. The 9X's 380km range and 275hp output are not just technical specifications—they are signals of Zeekr's intent to capture a share of the premium market, where margins are higher and brand loyalty is more enduring.

Valuation Metrics: A Tale of Two EVs

Zeekr's valuation metrics paint a nuanced picture. Its Price-to-Sales (P/S) ratio of 0.7x is significantly lower than both the industry average of 1.3x and the peer average of 3.4x. This suggests that the market is discounting Zeekr's revenue growth, perhaps due to its unprofitable status. However, when compared to its competitors, the story becomes more compelling. BYD, the market leader, trades at a forward P/E of 18.4x and a P/S of 0.65x, while Tesla's multiples are 168.8x and 10.4x, respectively. Zeekr's P/S of 0.7x is thus more attractive than Tesla's, particularly given its improving margins and global ambitions.

The company's Enterprise Value-to-EBITDA (EV/EBITDA) ratio of -12.7x is a red flag, but this is largely due to its ongoing net losses. Analysts, however, are optimistic. The 12-month price target of $37.38 implies a 26% upside from its current price of $29.63, and the stock's low P/S ratio suggests it is undervalued relative to its growth potential. This is especially true in the context of the industry's next phase of consolidation, where only the most efficient and innovative players will survive.

Industry Consolidation: Zeekr's Strategic Position

China's EV market is entering a period of intense consolidation. By 2030, the industry is expected to reduce its 129 current brands to just 15 financially viable survivors. Zeekr's recent privatization under Geely by Q4 2025 is a strategic masterstroke. The merger is expected to save several billion yuan annually by streamlining R&D, procurement, and marketing costs. It also allows Zeekr to leverage Geely's global distribution networks and Volvo's luxury brand equity, creating a unified premium EV platform.

This consolidation is not just about cost-cutting—it's about building scale. Geely's “One Geely” strategy aims to reduce internal redundancies and enhance cross-brand synergies, a model that could serve as a blueprint for other Chinese automakers. For Zeekr, this means access to Geely's $21 billion in cash reserves and its expanding international footprint, including a 32% year-on-year growth in exports to 2.17 million units in 2024.

The Road Ahead: Is Zeekr a Buy?

Zeekr's Q2 performance and strategic moves position it as a strong contender in the next phase of China's EV consolidation. Its margin expansion, premiumization strategy, and global ambitions are all aligned with the industry's long-term trends. However, the company still faces challenges, including its unprofitable status and the need to scale its international operations.

For investors, the key question is whether Zeekr's current valuation reflects its potential. At a P/S of 0.7x and a forward P/E that is not yet applicable, the stock appears undervalued relative to its peers. The 26% upside implied by analyst targets is not a guarantee, but it is a compelling argument for those willing to bet on Zeekr's ability to navigate the industry's next phase.

In the end, Zeekr's story is one of transformation. It is a company that has moved from survival mode to a disciplined, margin-driven growth model. As the EV market consolidates, Zeekr's ability to balance innovation with profitability will determine whether it becomes one of the 15 survivors or another casualty of the “Great Winnowing.” For now, the numbers suggest it is on the right path.