by GE Cheng
China's carmakers have entered the thick of the third-quarter earnings season, with results from both rising EV players and legacy manufacturers offering a close look at the sector's competitive pressures and the direction of the industry’s transition.
For years, Nio, XPeng and Li Auto — the trio often grouped as "Wei-Xiao-Li" — have been treated as bellwethers of China's EV boom. Each is more than a decade old, and their financial performances are frequently used as proxies for the industry's maturity. But their latest earnings underscore growing divergence within the group.
XPeng delivered the strongest set of numbers in the quarter. Revenue doubled to 20.38 billion yuan, marking a record high, while gross margin crossed the 20% threshold for the first time. That level far outpaced Nio's 13.9% and Li Auto's 16.3%. The improvement was driven by record quarterly deliveries of 116,000 vehicles, which expanded scale and lowered unit manufacturing costs. Net loss narrowed sharply to 380 million yuan, bringing XPeng close to breakeven.
Nio reported a different picture: revenue growth alongside continued deep losses. Third-quarter revenue hit a record 21.79 billion yuan, up 16.7% year on year. Gross margin improved to 13.9%, with vehicle margin at 14.7%, the best in nearly three years. But the company still posted a net loss of 3.48 billion yuan, the largest among the three. Nio said the drag reflects the lagging contribution of new high-margin models such as the Onvo L90, as well as sales and branding outlays that remain difficult to trim.
Li Auto delivered the biggest surprise. Despite leading the trio in revenue at 27.4 billion yuan, sales fell 36.2% from a year earlier. Net profit swung from a 2.8 billion yuan gain a year ago to a 624 million yuan loss, ending an 11-quarter streak of profitability. The company attributed the reversal to a roughly 1.1 billion yuan provision linked to the Mega recall, intensified competition for its L-series range-extender models, and slower-than-expected production ramp-ups for its pure-electric i8 and i6.
According to LI Yanwei, an expert with the China Automobile Dealers Association, the split performances show that none of the leading EV start-ups has yet achieved a decisive profitability breakthrough. Competition has shifted toward value-for-money, and Li Auto's setback reflects the challenges of moving from a dominant position in range-extender vehicles to the faster-moving pure-EV segment, where technology cycles are shorter and pricing pressure is far more acute.
These shifts are not isolated. The contrasting performances of Nio, XPeng and Li Auto point to a broader change in how China's EV makers compete — from a focus on stand-out products to a test of system-wide capabilities. Short-term financial swings increasingly reflect long-term strategic bets, and the balance between value-for-money and technological differentiation has become a critical dividing line.
The three companies have begun adjusting strategy in response. Nio is pulling back and refocusing on its core car business, cutting non-essential spending and tightening sales and administrative costs. XPeng, while doubling down on autonomous-driving R&D, is also expanding into range-extender models — a nod to Li Auto's proven market playbook — with the X9 and other launches aimed at widening its addressable market.
Li Auto is attempting the most radical transformation as it shifts away from its long-standing "family car" positioning and pushes toward an "embodied intelligence" ecosystem. Its newly launched AI glasses mark an early step in building a broader hardware-software platform, though the company still faces a difficult balance between forward-leaning investment and restoring profitability in its vehicle business.
Beyond the three, other emerging players are rising quickly. Leapmotor has reported back-to-back quarterly profits driven by scale expansion, while Xiaomi Auto has reached single-quarter profitability ahead of schedule. Meanwhile, traditional carmakers' EV sub-brands are gaining ground, compressing the space available to the first generation of EV start-ups.
Industry analysts note that while firms such as Leapmotor, Xiaomi and Huawei-backed brands have carved out pockets of advantage, the shakeout has yet to reach its endgame. Competition is intensifying across all fronts — pricing, cost control, product definition, supply-chain depth and brand building. Single-point strengths are no longer enough; companies need multi-dimensional capabilities to withstand thinner margins and shrinking room for error.
The near-term test is profitability. Both Nio and XPeng have set the fourth quarter as a key milestone for reaching breakeven, while Li Auto must contain the fallout from the Mega incident and accelerate production of its pure-electric models to regain momentum. Over the longer term, their bets on next-generation technology — XPeng's "physical AI" and Robotaxi push, Li Auto's embodied-intelligence system, and Nio's battery-swap network and premium EV platform — will begin to show whether their strategic positioning is durable.
With global competition heating up, overseas markets are emerging as the next major battleground. XPeng is accelerating expansion in Norway and Southeast Asia; Nio is deepening its swap-station model in Europe; and BYD and Xiaomi are pushing into markets from Southeast Asia to the Middle East. Success abroad will hinge on mastering local regulations, supply-chain buildout and consumer acceptance.
As China's EV industry enters a consolidation phase, 2026 may prove decisive. The companies that achieve sustained profitability while securing a credible technological lead will shape the next stage of the market — and survive the sector's most consequential reshuffle yet.
