In 2025, for China’s new generation of electric vehicle (EV) makers, the contest is no longer about flashy delivery numbers—it’s about turning a profit. Amid rising competition and investor impatience, the race to achieve profitability has become a decisive survival test. The scoreboard may still favor sales, but it is profit, not volume, that now determines who stays in the game.

According to the China Passenger Car Association, retail sales of passenger vehicles in May reached 1.932 million units, up 13.3% from a year earlier. Yet within the EV startup segment, the rankings are shifting. Leapmotor led monthly deliveries for the third straight month, followed by XPeng, which has maintained a steady 30,000-unit monthly run rate. Li Auto, which topped charts last year, now ranks second, while NIO has fallen to the bottom among the four major startups.

Behind these delivery figures is a tightening race on the financial front. In the first quarter of 2024, Li Auto posted the highest revenue at RMB 25.93 billion. XPeng, NIO, and Leapmotor followed with RMB 15.81 billion, RMB 12.03 billion, and RMB 10.02 billion, respectively—marking year-on-year increases of 141.45%, 21.46%, and 187.1%.

But the real battleground has shifted to profitability.

Li Auto, benefiting from its extended-range electric vehicles (EREVs), reported a gross margin of 20.5%, flat year-on-year, and a net profit of RMB 647 million, up nearly 10%. XPeng and Leapmotor improved margins through technology licensing and volume gains. Leapmotor’s gross margin rose to 14.9%, aided by partnerships with Stellantis and FAW. XPeng reached a 15.6% margin, driven in part by a RMB 5.04 billion technology services deal with Volkswagen.

While still in the red, both Leapmotor and XPeng significantly narrowed their losses—Leapmotor by 87.13% to RMB 130 million, and XPeng by 51.5% to RMB 660 million. NIO, by contrast, saw its gross margin rise to 7.6%, but widening operating expenses led to a larger net loss of RMB 6.891 billion.

Despite divergent performances, all four companies remain optimistic about their paths to profitability. NIO expects its gross margin to rebound to 15% in the second quarter. XPeng projects double-digit margins in the second half of the year. Leapmotor has set a full-year profitability target. Li Auto aims to maintain gross margins around 19%.

Still, profits won’t come from revenue alone. Cost control and operational efficiency are increasingly vital.

XPeng CEO He Xiaopeng described 2025–2027 as a three-year elimination round for EV startups, calling 2025 “the first true knockout year.” Leapmotor CEO Zhu Jiangming echoed that view, noting that competition now comes not only from domestic peers but from global auto giants.

NIO has responded with aggressive restructuring. CEO William Li has introduced a "Cell Business Unit" (CBU) framework to align spending with return on investment. “Every penny must echo back,” he said. The approach has shown short-term results—sales headcount for the company’s Onvo brand reportedly fell 40% in May, even as deliveries rose by the same percentage.

R&D and administrative costs are also under pressure. NIO’s first-quarter R&D spending fell 12.5% from the previous quarter. Leapmotor and XPeng trimmed R&D expense ratios to 7.98% and 12.53%, respectively. Even Li Auto, which is currently profitable, cut its sales and administrative expenses by 15%.

While XPeng and Leapmotor continue to monetize their tech stacks, Li Auto is making a high-stakes bet on a full transition to battery-electric vehicles. The company plans to launch a new MEGA flagship model and five additional EVs in 2025—an effort to replicate its EREV success in the fully electric era.

NIO’s challenge is different: to balance premium branding with the scale required for profitability. Despite lagging in deliveries, Li told investors that the company has “emerged from the most difficult stage,” laying out a phased turnaround plan with a goal of reaching full operational stability by the fourth quarter.

With market windows narrowing and investors no longer rewarding cash-burning growth, China’s EV startups are being judged on their ability to deliver sustainable business models. Technology partnerships, cost discipline, and earnings visibility now trump hype and headcount.

In this new game governed by profits rather than promises, no player can claim safety. The elimination round has begun—the only question is, who stays at the table when the dust settles?