ZTO Q2 2025: AI & Autonomous Tech Slash Delivery Cost to $0.08
- Technology-Driven Cost Efficiency: Management highlighted initiatives in AI, autonomous vehicles, and digitization that have already reduced frontline management headcount, cut mis-sorting rates by over 60%, and lowered last mile delivery costs from around $0.12–$0.15 to approximately $0.08 per parcel, strengthening the company's competitive advantage.
- Improving Pricing Environment: The call noted that recent upward price adjustments, especially in key regions like Guangdong where the lowest price has improved to RMB 1.4, indicate a return to reasonable pricing that can help relieve cost pressures and support margin expansion.
- Robust Operational Execution and Market Share Growth: Despite industry uncertainties, management reported sequential market share improvements in recent months and maintained a strong volume guidance of 14.14%–18% annual growth, underpinned by a robust franchise network and strong cash generation capabilities that support sustainable expansion and shareholder returns.
- Uncertain Market Outlook: Management highlighted a wide guidance range of 14% to 18% volume growth amid multiple macroeconomic and competitive uncertainties, suggesting potential slowing growth that could negatively impact future earnings.
- Persistent Price Pressure: There is continued intense price competition, with trends of pricing below cost and adjustments only recently easing, which could further compress margins and profitability.
- Execution Risk from Technology Investments: While efforts in autonomous vehicles and digitization aim to reduce costs, the reliance on new technology introduces execution risk and potential delays in realizing cost benefits, potentially affecting overall performance.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Parcel Volume | FY 2025 | 40.8 billion to 42.2 billion parcels, representing 20% to 24% year-over-year increase | 38.8 billion to 40.1 billion parcels, representing 14% to 18% annual increase | lowered |
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Industry Outlook
Q: What factors impact H2 market growth?
A: Management noted that while overall industry growth reached 18.7% from January to July and 15.1% in July, uncertainties—such as intensified price competition and a shift toward quality service—suggest a slower pace in the second half. -
Pricing Outlook
Q: How will pricing evolve this year?
A: They expect market prices to stabilize as cost-based pricing prevails, moving from aggressive discounting to a more sustainable value and capability competition environment. -
Price Sustainability
Q: Will Guangdong prices remain sensible?
A: Management believes the recent upward adjustment in Guangdong—where the industry’s lowest price is now RMB 1.4—is likely to persist, protecting operator interests and improving delivery fees. -
Technology & AI
Q: How is AI improving operations?
A: By integrating AI and digitization, management has reduced frontline management by one-third and cut mis-sorting rates by over 60%, while autonomous systems now handle more than 2,000,000 customer requests daily. -
Autonomous Vehicles
Q: What benefits come from autonomous vehicles?
A: Early commercialization of autonomous vehicles has driven significant cost reductions, lowering last-mile delivery costs from around $0.12–$0.15 to approximately $0.08 per parcel, with deployment expanding across over 2,000 vehicles. -
Shareholder Returns
Q: Will there be more buybacks or dividends?
A: Management confirmed that, given strong cash reserves and robust cash flow, they remain committed to a balanced approach using both dividends and share repurchases to steadily boost shareholder returns. -
E-Commerce Impact
Q: How do higher parcel prices affect e-commerce?
A: They view the current price adjustment as a necessary return to sensible pricing; while lower-priced packages may see volume compression, overall e-commerce demand remains solid as service quality and differentiated offerings take precedence.
Research analysts covering ZTO Express (Cayman) Inc.