Summary of Key Points
Zroo Auto missed this year’s new energy vehicle promotion campaign in rural areas, but its overseas sales surged. The reason for missing out was due to late registration, an already extensive presence in rural channels, and low profits. Its overseas success is largely thanks to the sales network of Stellantis Group, which has helped it quickly enter new markets. However, Zroo still faces challenges such as limited in-vehicle technology and chaotic distribution, and its profit margins remain modest. In the future, it will need to compete with domestic peers in overseas markets.
1. Why Didn’t Zroo Participate in the New Energy Promotion Campaign? – Three Practical Reasons
Zroo was not included in this year’s campaign not because it was unqualified, but due to three main factors:
- Too Late to Join: The A05 and A10 models, which Zroo is focusing on this year, were launched late, missing the registration period for the promotion (previous models from 2024-2025 were selected).
- No Need: Zroo already has a dense network of stores in rural areas, with 53% of its stores located in third-tier and lower cities, making it easy for rural consumers to purchase cars without the need for such campaigns.
- Low Profits: Participating in the promotion would require subsidies, and Zroo is currently facing significant financial losses (a loss of 390 million yuan in the first quarter of 2026, three times that of the same period last year).
2. Why Are Sales Up Despite Losses? – Low Profit Margins and High Volume
Zroo’s sales increased by 60.8% in the first half of 2026, but profits decreased. The issues lie in two main areas:
- Low Profit Margins: Zroo follows a strategy similar to Uniqlo in the automotive industry, focusing on high volume at low prices (e.g., the popular A10 series). As a result, its gross profit margin dropped from 15% in the fourth quarter of 2025 to 9.4% in the first quarter of this year, meaning it earns only 9.4 yuan for every 100 yuan in sales, a decrease of more than 5 yuan.
- High Research and Development Costs: R&D expenses increased by 30% in the first quarter, amounting to 1.04 billion yuan (nearly 10% of revenue). Investing in advanced technologies like intelligent driving and in-vehicle systems is costly and has not yet generated significant profits.
3. Why Has Zroo Seen Rapid Overseas Growth? – By Partnering with Stellantis
Zroo’s overseas sales increased by 442% year-on-year in the first quarter of 2026, largely due to its partnership with Stellantis Group.
Stellantis, the parent company of brands like Peugeot and Fiat, is Zroo’s largest shareholder, and the joint venture they established is responsible for overseas sales. With Stellantis’ existing network of over 1,000 stores and multiple market channels, Zroo can enter new markets without having to build its own infrastructure. For example, in Italy, Zroo holds a 33.5% share of the electric vehicle market, thanks to Stellantis’ presence.
4. Challenges in Overseas Expansion
Despite the growth in sales, Zroo still faces several issues:
- Limited In-Vehicle Technology: European regulations restrict the use of screen mirroring functions in vehicles, and Zroo’s in-vehicle systems do not support CarPlay, limiting the user experience.
- Chaos in Distribution: In some markets (e.g., Malaysia), there are multiple dealers competing with varying discounts, leading to poor service quality. In Australia, some dealers sell Zroo products without proper knowledge of the brand, affecting customer trust.
5. Can Zroo Maintain Its Success? – Relying on Channels vs. Product Quality
Zroo’s current overseas success is largely due to Stellantis’ channels, not the unique advantages of its products. As domestic competitors like BYD, Chery, and Geely also establish their own sales networks abroad, Zroo may lose its competitive edge if it does not improve its product quality and resolve issues with in-vehicle technology and brand recognition. Ultimately, customers will judge a car based on its performance, not just who sells it.
Zroo’s current situation is somewhat paradoxical: it faces high profit pressures domestically but has seen rapid growth overseas thanks to external partners. To sustain its success in the long term, it needs to focus more on product development and brand building. Otherwise, as competitors catch up, its advantages may disappear.