ZEEKR's Strategic Turnaround: Can Margin Expansion and Volume Growth Sustain Long-Term Profitability?

The electric vehicle (EV) sector is no stranger to volatility, but ZEEKR Intelligent Technology's Q2 2025 results have sparked a wave of optimism. After years of burning cash and battling razor-thin margins, the Chinese automaker has turned a corner. Let's dissect whether this turnaround is a fleeting rebound or a sustainable path to profitability—and what it means for investors.

Margin Expansion: A Game-Changer

ZEEKR's Q2 2025 gross margin of 20.6% is a seismic shift from 18.0% in Q2 2024 and 19.1% in Q1 2025. This improvement isn't just a one-time win—it's the result of disciplined cost-cutting, supply chain optimization, and a strategic pivot toward premiumization. The company's vehicle margin of 17.3% (up 5.8 percentage points year-over-year) underscores its ability to command higher prices with models like the Zeekr 7GT and Lynk & Co 900.

The operating margin story is even more compelling. ZEEKR reported an operating income of RMB285 million in Q2 2025, a stark contrast to a RMB2.27 billion loss in the same period the prior year. This isn't just a margin play—it's a sign of operational discipline. The company's adjusted net loss narrowed by 88.8% year-over-year, driven by economies of scale and integration with Lynk & Co.

Delivery Growth: Scaling Without Sacrificing Profitability

ZEEKR delivered 130,866 vehicles in Q2 2025, a 9.3% year-over-year increase and 14.8% quarter-over-quarter jump. The Lynk & Co brand, which accounted for 81,529 units (58.8% NEVs), is a key driver of this growth. International markets are also heating up: European deliveries rose 25%, and Southeast Asia saw a 30% surge.

This growth isn't just volume—it's value. ZEEKR's average selling price (ASP) increased by 12%, reflecting its shift to premium models. Compare this to NIO's Q2 2025 deliveries of 72,056 units and Li Auto's 111,074 units. While both peers are growing, ZEEKR's margin expansion and international diversification give it a unique edge.

R&D Investment: Balancing Innovation and Efficiency

ZEEKR's R&D spending of RMB2.15 billion in Q2 2025 (13.2% of revenue) is a double-edged sword. On one hand, it's lower than NIO's 26.4% and Xpeng's 12.5%, suggesting a more cost-conscious approach. On the other, it's still higher than Tesla's 4.6%, indicating a commitment to innovation.

The company is leveraging economies of scale from its integration with Lynk & Co to reduce R&D costs. For example, shared platforms and software ecosystems are cutting development time for new models. The upcoming Zeekr 9X, featuring 900V architecture and tri-silicon carbide e-motors, is a testament to this strategy.

The Bigger Picture: Can ZEEKR Sustain This Momentum?

The EV sector is a Darwinian landscape. By 2030, only 15 of today's 129 EV brands are expected to survive. ZEEKR's privatization under Geely (set to conclude by Q4 2025) will streamline R&D, procurement, and marketing costs while tapping into Geely's global distribution networks. This move positions ZEEKR to compete with Tesla's scale and BYD's vertical integration.

However, risks remain. The company's R&D spending, while efficient, still eats into margins. If the EV market cools or supply chain costs spike, ZEEKR's profitability could face pressure. Investors should also monitor its ability to maintain ASP growth as it expands into price-sensitive markets like Southeast Asia.

Investment Takeaway

ZEEKR's Q2 2025 results are a masterclass in strategic execution. The company has transformed from a cash-burning startup to a margin-expanding, volume-growing contender. For investors, the key question is whether ZEEKR can maintain this balance as it scales.

Buy if you believe in ZEEKR's ability to sustain margin expansion, international growth, and R&D efficiency. Wait if you're wary of the EV sector's volatility or ZEEKR's reliance on Geely's resources. Either way, ZEEKR is a name to watch in the race for EV dominance.