After a turbulent listing journey, Zeekr Automobile released its first quarterly financial report after going public yesterday (June 11).

In the first quarter of this year, Zeekr Automobile's total revenue was 14.737 billion yuan, representing a year-on-year increase of 71%. Among them, the core business automotive sales revenue was 8.174 billion yuan, representing a year-on-year increase of 73% and a quarter-on-quarter decrease of 22.8%.

However, the gross profit margin of the entire vehicle decreased slightly, with the first quarter's gross profit margin of Zeekr vehicles standing at 14%, a mere 1.3 percentage points lower quarter-on-quarter. This profit margin level is at the forefront among domestic automakers. Among the same U.S.-listed NIO, XPeng, and Li Auto, the gross profit margins of their entire vehicles in the first quarter of this year were 9.2%, 5.5%, and 19.3%, respectively, with Zeekr ranking second only to Li Auto.

"Second-generation" Zeekr's pre-listing valuation of 100 billion yuan had caused considerable controversy, and the capital market has now given it a realistic score. Yesterday (June 11), the stock prices of several Chinese automakers in the U.S. market all fell. The declines of NIO, XPeng, and Li Auto were 5.51%, 5.42%, and 1.95%, respectively. Zeekr saw the largest decline, with an intraday decline approaching 10% and a closing decline of 6.51%.

01 | Losses have narrowed, even R&D investment has decreased

After Zeekr Automobile listed on the New York Stock Exchange in the U.S. in May this year, its valuation and fundraising amount have shrunk significantly compared to previous levels. On the first day of listing, its market capitalization was 6.9 billion U.S. dollars, roughly half of Zeekr's initial valuation when it first submitted its prospectus to the U.S. stock market, but it is still the largest IPO by a Chinese company in the U.S. since 2021.

Over the past month, Zeekr's stock price first rose and then fell, closing at 22.12 U.S. dollars yesterday, basically returning to the issuance price level, with a current market capitalization of 5.546 billion U.S. dollars, lagging behind NIO, XPeng, and Li Auto.

In terms of core business automotive sales, Zeekr's performance was impressive. In the first quarter, when automakers' sales were generally dismal, Zeekr achieved a total delivery of 33,000 vehicles, maintaining an average monthly delivery of over 10,000, surpassing pure electric brands NIO and XPeng. Zeekr CEO An Conghui said that in the first quarter, Zeekr's sales increased by 117% year-on-year, making it the best Q1 since the brand started deliveries, consistently ranking as the sales champion among pure electric brands priced above 200,000 yuan in China.

Due to the lack of momentum in the previously released MPV model Zeekr 009, its sales in the first few months of the year hovered around 400 vehicles, far below the level of 2,310 vehicles in December last year. As a result, Zeekr's average selling price per vehicle in the first quarter fell to 247,000 yuan, down from 267,000 yuan in the previous quarter.

Zeekr is still in the red, but its losses have narrowed. In the first quarter, Zeekr's net loss was 2.022 billion yuan, down 18% year-on-year and 31.2% quarter-on-quarter. Zeekr's adjusted (non-GAAP) net loss in the first quarter was 2.019 billion yuan.

In addition to core business automotive sales, Zeekr's revenue also includes battery and component sales, R&D services, and other two businesses. The latter two businesses mostly rely on Geely's internal system, and the contributors of these two businesses, Ningbo Weirui and CETV, were originally spun off from Geely to Zeekr Automobile.

In the first quarter of this year, these two businesses contributed 6.319 billion yuan and 244 million yuan in revenue to Zeekr, respectively. Among them, battery and component revenue increased significantly, rising by 82% year-on-year and 56.5% quarter-on-quarter, respectively. Zeekr attributed this to the growth in battery pack and electric drive sales as well as overseas battery component sales. R&D service revenue declined sharply, mainly due to the reduction in R&D services and technology sales outsourced to related parties.

Apart from the support of the battery business, the narrowing of losses is partly due to Zeekr's significant reduction in fixed expenses. For example, in R&D expenditure, Zeekr's R&D expenditure in the first quarter was 1.925 billion yuan, a significant 39.1% decrease from the 3.163 billion yuan in the fourth quarter of last year. Zeekr explained that this was due to fluctuations arising from different stages of the design and development of new products and technologies.

Zeekr's sales and marketing expenses also decreased by 11.6% quarter-on-quarter in the first quarter, which Zeekr attributed to a reduction in marketing and promotional activities.

These cost savings are difficult to sustain. According to Zeekr's management's statements during the earnings call, due to factors such as an increase in models and significant investment in intelligent driving R&D, R&D expenditure this year will exceed that of last year, reaching an estimated 10 billion yuan.

Loss issues may continue to plague Zeekr Automobile. Compared to its peers, although Zeekr is backed by its parent company Geely Automobile, its cash flow situation is even more dire. As of March 31 this year, Zeekr's cash balance on its books was only 3.791 billion yuan. In comparison, NIO, which lost 20 billion yuan last year, had a cash balance of 45.3 billion yuan over the same period.

02 | Except for 001, others are not performing well

Zeekr's sales target for this year is 230,000 vehicles. Based on the performance of delivering 68,000 vehicles in the first five months of this year, Zeekr needs to maintain an average monthly sales of 23,000 vehicles in the next seven months. In the past, Zeekr has never reached this number.

During last night's earnings call, An Conghui reiterated this target, saying that the company is confident of achieving it. This year, Zeekr will also launch two new models, namely the Zeekr MIX unveiled during the Beijing Auto Show and a mid-to-large pure electric SUV.

The Zeekr MIX comes from Geely's Robotaxi project in collaboration with autonomous driving company Waymo. This model targets the family market, featuring a bold design with the traditional B-pillar removed and adopting a suicide door design. It is speculated that its pricing may be significantly lower than that of the business-oriented Zeekr 009. Zeekr's new pure electric SUV, codenamed CX1E, targets the mainstream consumer market, featuring a design similar to the 007 and pricing in the range of 200,000 to 300,000 yuan.

In addition to the currently available Zeekr 001 pure electric coupe, Zeekr 007 sedan, Zeekr 009 MPV, and the compact SUV Zeekr X, Zeekr will have a total of six models on sale this year.

Currently, the Zeekr 001, which debuted three years ago, still accounts for the majority of Zeekr's sales. The Zeekr 001 is Zeekr's first model released to the public and is also its best-selling model to date.

In February this year, the Zeekr 001 underwent a significant mid-term facelift, with upgrades to the body, three electric systems, and the intelligent cabin. As An Conghui put it, about 30% of the model's facelift would involve updates, but the all-new Zeekr 001 exceeded 50%.

With improved configurations, the pricing of the Zeekr 001 has been reduced by 31,000 to 57,000 yuan. In the first month of its launch, it received over 30,000 orders, and its delivery volumes in April and May both exceeded 10,000 units, making it the sales champion among pure electric models priced above 250,000 yuan.

The sales of the other three models currently available from Zeekr are not satisfactory. Excluding the higher-priced Zeekr 009, the Zeekr 007, which was released at the end of last year, only achieved a sales volume of over 5,000 in its first month after release, and its sales have mostly hovered around 4,000 units in the past four months, falling short of competitor Xiaomi SU7. In May, Xiaomi SU7's monthly new deliveries were 8,630 units, roughly twice that of the Zeekr 007.

The sales of the Zeekr X are even worse. This compact SUV, with a starting price of 200,000 yuan, has maintained sales in the hundreds over the past few months, with sales of 548 and 378 units in April and May, respectively.

In its three-year history, Zeekr has yet to create another model that can rival the 001 - even this model did not originate from Zeekr itself but was derived from the previously released concept model Zero concept from Lynk & Co.

During the earnings call, analysts were particularly concerned about how Zeekr would achieve its annual target. Zeekr CFO Yuan Jing placed his hopes on the upcoming two new models, especially the new pure electric SUV, stating that this model would become the mainstay of Zeekr's sales in the second half of this year and next year.

In addition, Zeekr will accelerate its overseas expansion. As of the end of May, Zeekr has entered more than 20 countries and regions, including the Netherlands, Sweden, Thailand, and the United Arab Emirates. The Zeekr 001 and Zeekr X have already started deliveries in Europe. The right-hand drive models of the Zeekr 009 and Zeekr X are expected to start deliveries in the third quarter, with the first batch entering Singapore, Hong Kong, China, and other regions.

An Conghui said that by the end of this year, Zeekr is expected to enter 6 to 8 major European markets, as well as more than 50 countries and regions worldwide in Southeast Asia, the Middle East, Latin America, Australia, and other regions. Yuan Jing said that they have already signed dealerships in regions such as Mexico and plan to sign dealerships in more than 58 countries and regions worldwide by the end of the year.

At the same time, they will also accelerate their expansion in third-tier and fourth-tier cities. Currently, Zeekr has established at least 380 stores in China and expects to expand to 520 stores this year, with most of the new stores located in下沉市场.

Previously, there were market rumors that Zeekr was planning to develop extended-range or plug-in hybrid models, but Zeekr's management denied this claim during the earnings call, stating that they will still focus on the pure electric market.

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