Headlines
Analysis-China's cutthroat EV revolution leaves little margin for profit
Published by Global Banking & Finance Review®
Posted on April 22, 2025
6 min readLast updated: January 24, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on April 22, 2025
6 min readLast updated: January 24, 2026
China's EV market is fiercely competitive, with companies like Xpeng striving for global expansion and profitability. Despite innovation, few firms are profitable.
By Brian Thevenot and Victoria Waldersee
HONG KONG (Reuters) -As the sun set over Hong Kong's Victoria Harbour, well-dressed social media influencers swarmed a lineup of sleek electric vehicles from Chinese automaker Xpeng, among the buzziest brands in the world’s premier EV market.
Xpeng had come to the cruise-ship terminal ahead of this week's Shanghai auto show to unveil its upscale X9 minivan priced from 359,800 yuan ($49,231) with automated-driving features, a drop-down screen to entertain rear-seat passengers - and even a built-in refrigerator.
The biggest crowds surrounded Xpeng's concept flying car, which sat alongside a six-wheeled van designed to carry it.
At a press conference the next day, Xpeng CEO He Xiaopeng and President Brian Gu bristled with ambition, predicting the company would emerge as one of few survivors from China’s hypercompetitive EV industry by expanding globally and building in-house artificial-intelligence capabilities. Like Tesla, it aims to develop robotaxis and humanoid robots.
Unlike Tesla, Xpeng has yet to turn a profit, despite fast-growing sales since its first car debuted in 2018 and an investment from Volkswagen. The same is true of scores of other China EV makers, even as the sector leads a technological revolution that is upending the automotive industry globally. Only a handful make money, most notably BYD, China's biggest EV-and-hybrid producer and Tesla's leading rival.
The burning question facing China’s EV industry as it gathers in Shanghai is how and when it can convert explosive sales of ground-breaking vehicles into sustainable profits. The intense competition driving the sector's innovation has also made China a market with precious few winners, foreign or domestic.
Xpeng President Gu takes a clear-eyed view of the challenge.
"In the past two decades, we can see that only a few companies are performing well," he said. "I’m very concerned about Chinese automakers … I think in the end, only 10 will survive."
Xpeng is among the Chinese EV startups best positioned to thrive as the industry moves from the "electrification" era to "smartification" - competing on self-driving and other AI-driven technology, said Bo Yu, a China-market expert at research firm Jato Dynamics.
"They're not profitable because they've invested in a lot of new things, but their profitability is improving," she said of Xpeng. "They've started in-house development of AI and self-driving, and the flying car isn't just a show - they really believe in it."
Volkswagen bought a 5% stake in Xpeng in 2023 to secure its help in accelerating the German giant's software and EV development. Like all foreign automakers in China, VW has rapidly lost sales to domestic EV startups.
Jato Dynamics data show that 169 domestic and foreign auto brands are fighting it out in China, but only 14 have a market share higher than 2%. Last year, 86 brands produced a total of 327 EV models, not including hybrids.
The competition has depressed prices to levels unfathomable outside China. As Tesla and other automakers struggle to produce EVs to sell for less than $30,000 in the United States, BYD's entry-level Seagull electric hatchback - the star of the 2023 Shanghai auto show - is priced below $10,000.
CHINA LOSSES DRIVE EXPORTS
Xpeng founder He said his company would have to balance chasing technological breakthroughs with cost control - and "globalisation" to seek profits outside China. Xpeng entered 30 new markets in 2024 and aims to enter another 30 countries this year. It aims to eventually sell half its vehicles outside China, where it will have more "pricing power," the CEO said.
Gu said Xpeng's "core regions" for expansion will be Europe, Southeast Asia, Middle East and Latin America. Conspicuously absent from that list is the United States, where President Donald Trump is escalating a long-running trade war with Beijingthat has effectively banned Chinese cars and components.
Such protectionism could backfire on U.S. automakers, said Cameron Johnson, a Shanghai-based supply-chain consultant with Tidalwave Solutions.
"Chinese firms have the best automotive connected technology in the world, and foreign firms need it to be competitive around the world, especially as Chinese brands go global," he said.
Gu said the industry revolution requires automakers to become tech companies themselves rather than relying on suppliers. Xpeng announced last week that it would soon equip its vehicles with its own AI chips.
"You have to possess capabilities in AI, in software, in technology and in manufacturing,” Gu said. “The players that can possess this full-stack capability will have a greater chance of survival.”
PATHS TO PROFITABILITY
A handful of China's EV-and-hybrid makers have overcome the steep profitability challenges.
BYD has done so with massive sales volumes - hitting 4.2 million vehicles globally last year, up seven-fold from 2020 - by offering a dizzying array of models. BYD is also among the world's most vertically integrated automakers, meaning it makes the vast majority of its vehicle components, saving time and money.
Last year, BYD made a record profit of about $5.5 billion on revenues of nearly $107 billion. By comparison, Tesla reported 2024 net income of $7 billion on revenues of nearly $98 billion.
Other profitable players include mature China automakers such as Chery and Geely, which had large gasoline-powered vehicle businesses before they began producing EVs.
Two smaller EV makers, Leapmotor and Li Auto, are also now in the black, albeit with contrasting strategies. Li Auto has focused mostly on premium extended-range hybrids that offer fewer charging hassles than EVs, said Yu, the Jato Dynamics analyst. Leapmotor has produced lower-cost cars - both EVs and hybrids - and controlled costs through vertical integration and shared vehicle platforms for different models.
"The price war isn't a good thing" for industry profitability, she said. "But it isn't a bad thing, either, because it drives innovation."
Xpeng also focuses on the higher-end segment and has seen accelerating sales, which last year totalled about 190,000 vehicles. The automaker said in a statement that it remained committed to its goal of turning a profit this year.
($1 = 7.2914 Chinese yuan renminbi)
(Reporting by Brian Thevenot and Victoria Waldersee in Hong Kong; Additional reporting by Qiaoyi Li in Beijing; Editing by Jamie Freed)
The article discusses China's competitive EV market and the challenges companies face in achieving profitability.
Xpeng aims to leverage global markets for better pricing power and profitability outside of China's competitive landscape.
Xpeng focuses on AI and self-driving technology, aiming to transition from electrification to smartification.
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