The significant diversity of rotation curve (RC) shapes in dwarf galaxies has recently emerged as a challenge to Λ cold dark matter (ΛCDM): in dark matter (DM) only simulations, DM haloes have a universal cuspy density profile that results in self-similar RC shapes. We compare RC shapes of simulated galaxies from the NIHAO (Numerical Investigation of a Hundred Astrophysical Objects) project with observed galaxies from the homogeneous SPARC data set. The DM haloes of the NIHAO galaxies can expand to form cores, with the degree of expansion depending on their stellar-to-halo mass ratio. By means of the V2kpc-VRlast relation (where VRlast is the outermost measured rotation velocity), we show that both the average trend and the scatter in RC shapes of NIHAO galaxies are in reasonable agreement with SPARC: this represents a significant improvement compared to simulations that do not result in DM core formation, suggesting that halo expansion is a key process in matching the diversity of dwarf galaxy RCs. Note that NIHAO galaxies can reproduce even the extremely slowly rising RCs of IC 2574 and UGC 5750. Revealingly, the range where observed galaxies show the highest diversity corresponds to the range where core formation is most efficient in NIHAO simulations, 50 < VRlast/km s-1 < 100. A few observed galaxies in this range cannot be matched by any NIHAO RC nor by simulations that predict a universal halo profile. Interestingly, the majority of these are starbursts or emission-line galaxies, with steep RCs and small effective radii. Such galaxies represent an interesting observational target providing new clues to the process/viability of cusp-core transformation, the relationship between starburst and inner potential well, and the nature of DM.