Leapmotor is racing desperately towards the giants

Author | Chai Xuchen

Editor | Wang Xiaojun

After BYD and Changan sparked a wave of intelligent driving equality, Leapmotor also joined the battle with a new elite team.

On the evening of March 10, Leapmotor officially launched its first model in the B series, the B10, targeting the mainstream market. All five versions of the model come with intelligent driving features, with a starting pre-sale price of 109,800 yuan. The version equipped with lidar is priced starting at 129,800 yuan, breaking the price record of 140,000 yuan set by GAC Toyota's bZ3X.

This is just the pre-sale price of the B10; according to industry practices, the official price will likely drop further. "Who else is there under 150,000 yuan?" Leapmotor's Vice President Cao Li said on stage in a "Versailles" manner.

The market responded quickly, with the B10 receiving 15,000 orders just one hour after the pre-sale began. Chairman Zhu Jiangming expressed his excitement, stating, "This is the highest number of orders for a Leapmotor product within one hour!" Moreover, over 70% of the orders were for the intelligent driving version equipped with lidar.

"We are very happy to be competing fiercely right now," Zhu Jiangming told Wall Street Insights in an interview after the launch event.

Leapmotor's aggressive entry into the fiercely competitive 150,000 yuan market is driven by its urgent desire to capitalize on the momentum and secure a ticket to the final stage.

Last year, after a brief turbulence at the beginning of the year, Leapmotor unexpectedly broke through with four models in the C series, becoming a new force with monthly sales exceeding 40,000 units, and even reached the threshold of profitability in the fourth quarter.

The market did not anticipate that Leapmotor, which two years ago was selling at a negative gross margin and losing money on every vehicle, would quickly rebound to become the second new force to achieve profitability after Li Auto, distancing itself from other players still struggling with deficits.

According to Leapmotor's executives, the scale effect was the biggest contributor to achieving profitability last year. According to financial report data, Leapmotor's gross margin in Q4 last year climbed to a double-digit 13%. Although the revenue per vehicle dropped from 116,200 yuan to 109,500 yuan, it still generated a net profit of 80 million yuan.

This indicates that the feasibility of Leapmotor's low-margin, high-volume strategy has been validated by the market. However, even so, Leapmotor has not truly reached safety.

Similar to Xiaomi, Zhu Jiangming has always positioned Leapmotor's selling point as "affordable and good quality," winning the market with luxury configurations at mass-market prices. Therefore, Zhu Jiangming insists on maintaining a gross margin in the range of 12%-15%.

However, under the "covert price war" of intelligent driving equality, a gross margin below 15% seems insufficient to provide Leapmotor with a safety cushion. An annual sales target of 1 million units has been considered by Zhu Jiangming as the key to crossing the survival line for car manufacturers. Achieving this scale would mean obtaining a true ticket to safety.

Thus, increasing volume has become Leapmotor's most critical momentum this year, and the three models in the B series will serve as the vanguard for creating incremental growth. The next phase goal will be to sprint towards annual sales of 1 million units. Leapmotor has already planned to achieve a production capacity of 1 million by 2026, likely laying the groundwork for this goal Now, B10 has fired the first shot with its flagship weapons like LEAP3.0, and there are two more new B-series cars and new matrices in the A and D series to join the fray. However, beyond the "cost-performance ratio" label, Leapmotor needs to find its next strong point, and Tier 1 suppliers may be the new story for Leapmotor's second curve.

Zhu Jiangming told Wall Street Insight that the cooperation with FAW on components will soon be realized, and many other major automakers are also Leapmotor's clients. "There are several among the global Top 10 OEMs." This part of the business may become a new highlight in Leapmotor's financial reports as parts are shipped in the coming years.

Currently, Leapmotor is racing against giants, and only by doing so can this new force truly establish itself in the industry, even becoming a foundational infrastructure player in the automotive industry like Huawei's automotive BU, at which point its valuation will also be reassessed.

Below is the transcript of the conversation with Leapmotor Chairman and CEO Zhu Jiangming and Senior Vice President Cao Li (edited):

Q: The equalization of intelligent driving is essentially a disguised price war; how does Leapmotor view this?

Zhu Jiangming: Our intelligent driving can be widely popularized and launched as a standard product thanks to a year of preparation in advance, and the pre-sale price was set six months ago and has not changed, not following BYD. Making intelligent driving a standard feature has always been Leapmotor's pursuit.

Q: We have achieved a price of 120,000 with lidar and advanced intelligent driving; how did Leapmotor do it?

Zhu Jiangming: First, we optimized the solution, which is the latest generation lidar + 8650 chip, giving us advantages in cost and power consumption. We also integrated LEAP3.5 to save more costs; we certainly cannot incur losses in profits, and we hope the entire B10 series can achieve at least single-digit profits.

Q: The company's target sales for 2025 are 500,000 units; yesterday's earnings conference raised this target to 500,000-600,000 units. What is the reason for this change?

Zhu Jiangming: Last year, Leapmotor sold 300,000 units, and by the end of the year, we had a monthly sales capacity of 40,000, which translates to 480,000 units. We launched B10 yesterday, and there will be B01 in June and B05, so there will definitely be an increase in 2025, which is why we estimate a range of 500,000-600,000 units.

Additionally, overseas sales were only 13,000 units last year, and this year's target is 50,000 units, making it quite possible to exceed 500,000 units. The reservations from yesterday also exceeded our expectations, boosting our confidence significantly.

Q: The B series is the largest segment in the domestic market; what will be the proportion of the B series in the 500,000-600,000 unit plan next year? What is the expected gross margin for next year?

Zhu Jiangming: Considering the competitive landscape in 2025, we have relatively lowered our gross margin expectations to a range of 10%-12% this year. We hope that after two years of cultivation, the entire B series will be rich and complete, achieving sales levels comparable to or even surpassing the C series by the end of next year. The C and B series cover the price range of 100,000-200,000, which will account for over 60% of total automotive sales, or even more Question: B10 has entered BYD's strongest price range, where does Leapmotor's advantage lie?

Zhu Jiangming: Leapmotor's platform capability and architecture planning will be clearer, with stronger commonality. BYD's scale is larger than ours, giving it a cost advantage.

Question: Both sides focus on supply chain integration, and BYD also started with technology. What are the main differences, and will we still consider them a competitor?

Zhu Jiangming: Leapmotor focuses on complete vehicles in its main channel, first ensuring our own products are well-made, while components are just supplementary increments. Leapmotor still needs to innovate more in platformization and complete vehicle architecture.

The LEAP 3.5 released yesterday has integrated many features, including the four-domain integrated pre-controller, cockpit integration, and many components consolidated into one. This is a significant trend for the future, where a single chassis integrates many elements, making products simpler, costs lower, and performance better. Previously, television circuit boards were densely packed; now there's just a small chip in the corner, which illustrates the integration process.

Cao Li: Leapmotor's self-research is more focused on core electronic system components, and we delve deeper into our studies. Leapmotor has a very systematic approach to core components, core system synergy, and new energy architecture for complete vehicles, achieving higher synergy. In the same price range, BYD's competitiveness is not as strong as Leapmotor's.

Question: Will there be a product priced at 250,000 in the future?

Zhu Jiangming: Our planning at Leapmotor includes four series: A, B, C, and D, covering price ranges of 60,000-100,000, 100,000-150,000, 150,000-200,000, and 200,000-300,000. The 150,000-200,000 range is the most competitive market in China in the future, requiring a gradual approach based on the existing foundation, with additional increments.

We hope to fully develop the B series by 2025, covering everything from SUVs to sedans, including a Cross-style hatchback, and some personalized SUVs to make products in the 100,000-150,000 price range the most competitive. The B10 is the first model, with the B01 sedan to be launched at the Shanghai Auto Show in April, and the B05 hatchback to be unveiled at the Munich Auto Show, which will be more popular in Europe. Our design is excellent and should also sell well in China.

In 2026, we will focus on two series: one is the high-end D series priced at 200,000-300,000, with top-tier product capabilities.

The other is the A series, which includes an SUV and a hatchback, completing Leapmotor's product map. We hope to thoroughly, strongly, and significantly develop each series, rather than having one rise while another falls, which would hinder overall growth. We need incremental growth in every product line every year, and product competitiveness must increase annually to avoid decline and instead achieve growth.

Question: Will all models be launched with both range-extended and pure electric options?

Cao Li: The majority of Leapmotor's models are still predominantly pure electric. Looking at future trends, it will definitely head in the direction of pure electric, but currently, during this transitional phase, range-extended hybrids will occupy a portion of the market. The pace of change will accelerate. Our smaller vehicles will primarily focus on pure electric, while our larger C series will have range-extended options, and the D series will follow suit Question: How is Leapmotor's internationalization process currently?

Zhu Jiangming: Our cooperation with Stellantis is progressing rapidly. By the end of last year, we had formed a scale of 400-500 dealers, and now we have over 2,000 monthly sales. Last year, our export volume was 13,700 units, and this year's goal is to complete over 50,000 units. This year, the main task is to establish localized manufacturing in Europe. After the B10 is launched and mass-produced in China, we will export it to Europe and globally for overseas sales on a quarterly basis.

Stellantis made significant adjustments at the senior management level at the end of last year. They have always believed that investing in Leapmotor is a very correct decision. This year, Stellantis Chairman John Elkann specifically visited Leapmotor. He hopes that all the executive teams will come over for in-depth understanding and pursue more cooperation. The CEO and CTO of Ferrari also visited Leapmotor and reached some intentions. This month, its CTO came to Leapmotor again, hoping to seek more cooperation.

Question: How to customize differentiated overseas market strategies?

Cao Li: The three series of ABC are all focused on global models. D may be a bit too large for overseas markets, so we focus on the domestic market, especially the A and B series, which are the largest segments in China. For overseas, especially the B series, we will develop the basic models of the ABC series globally, designing differentiated configurations for different global markets.

Question: This year's export is expected to be around 50,000 units. What is the expectation for B10 overseas? What specific work will be done for localization overseas?

Cao Li: The B10 will reach certification and delivery overseas by Q4, so the overseas proportion this year will not be too high, mainly focusing on T03 and C10. In terms of specific localization work overseas, we need to select locations. We will look for suitable production sites in Europe and consider Stellantis's existing vehicle production capacity to introduce the first model, requiring more than 45% of components to be sourced outside of China. This is also a key focus for this year.

Question: Will Leapmotor's localization in Europe take the form of multiple blooming points?

Cao Li: We are currently deciding which region to establish overseas. We have fully discussed the production lines of the initial factory, surrounding component supply resources, and the entire product introduction plan. Now we are comparing several proposals.

From a global perspective, we will definitely have different points. For example, Southeast Asia and South America will have different requirements, and we will localize according to the differences in different regions. In some places, we will directly export complete vehicles, while in others, we may use SKD or CKD (Semi-Knocked Down/Completely Knocked Down) forms. In Europe, we will first focus on maximizing the capacity of one factory and minimizing the overall manufacturing costs. After these plans are in place, we will consider establishing points in other locations.

Question: Will there be more cooperation on components between domestic and overseas car companies in the future? Zhu Jiangming: After our cooperation with Stellantis overseas, we have a certain exclusivity, and the probability of equity cooperation with other brands is relatively low. More often, it is about components, such as electric drives, headlights, etc. Cooperation at the component level is possible, but it is more difficult at the platform level. In China, it is also more about component cooperation.

Question: Can you reveal the ten partner companies that have adopted Leapmotor's self-developed three-electric technology?

Zhu Jiangming: In terms of cooperation, the proportion of joint ventures and foreign car companies will be greater than that of independent brands, and many of them are leading companies with high quality requirements. Our deliveries will basically start gradually by the end of this year or next year.

Question: How will Leapmotor change the consumption habits of European and American consumers? Will Leapmotor open LEAP3.5 to Stellantis and FAW in the future?

Cao Li: We will still fully promote the implementation of high-level intelligent driving overseas because Chinese car companies going abroad do not rely on low prices for competition. We will actively layout high-level algorithm functions. Not only LEAP3.5, but the intelligent cockpit will also have a first-mover advantage overseas.

Whether the overall architecture of LEAP3.5 will cooperate with Stellantis and FAW, we will still provide a comprehensive packaged solution, and like the other ten major manufacturers, it will be in the form of component supply, not as a technical export of the entire system solution, which is currently not available.

The CEO of Ferrari is very interested in our core resource components. This week, their CTO will bring more of their technical team to have deeper exchanges with Leapmotor's self-developed product team.

Question: How much support does external supply of components provide for gross profit?

Zhu Jiangming: Currently, we are still in the early stages. The earliest we can start supplying these designated projects will be by the end of this year or early next year.

Question: Will FAW invest in Leapmotor?

Zhu Jiangming: We have gone through many cooperation negotiations with FAW from 2019 until now, including the strategic agreement signed with Bestune in the early stages, and we almost reached a cooperation with Jetta last year. This strategic cooperation agreement has also been signed, and substantial progress will soon see some projects land. Investment is still under discussion.

Question: Why did you choose to cooperate with state-owned enterprises at that time, and what were the considerations behind it?

Zhu Jiangming: Because Leapmotor's comprehensive self-research includes many components, we want more manufacturers to share development costs. Last year, we achieved ten designated projects for external customers for components. In addition to components, platform-level cooperation can bring greater benefits to both parties, reducing investment from both sides. Each platform can achieve larger sales volumes and share development costs.

Question: Where else can costs be reduced in the future?

Cao Li: In the future, costs will be reduced by amplifying the cost advantages of our self-developed components through platformization. Because our ABCD series in three-electric, core intelligent driving, and pre-controller are all platform-compatible, as the volume increases, the cost advantages will become more apparent In addition, there are innovative concepts; the automotive industry has undergone tremendous structural changes over the past 100 years. Now, vehicles are becoming increasingly electronic, and the transformation in the electronics industry will outpace that of the mechanical industry, leading to more opportunities.

Q: He Xiaopeng mentioned that in the future, car companies will only survive if they have the capabilities of large-scale sales and AI. What capabilities must car companies possess to survive?

Zhu Jiangming: First is patience, second is the overall capability and strategy for scale, because the automotive industry is a long-distance race. Missing a step may take years to recover, so planning ability is very important.

The automotive industry is manufacturing; although brand genes are important, the product is everything. We must also serve our users well, which I believe is fundamental to survival.

In the future, at least seven or eight companies will survive, and China will definitely become a leader in the global automotive industry. Currently, Chinese companies are producing more components for new energy vehicles, and the supply chain components for relatively high-cost items like batteries, electric drives, and IGBTs will be more from China.

Q: Will Leapmotor develop intelligent robots?

Zhu Jiangming: Leapmotor has said relatively little about robots. We currently have a team of dozens of people rehearsing this area. These technologies are all possessed by car companies, and we have a large AI algorithm team, as well as significant autonomous computing resources. We have corresponding technical personnel in motion and control, and a very complete team capable of developing robots.

We believe that it’s not just about creating something to see; it must be useful and solve problems in our own factories. Many of our production lines need to be automated, so how to use robots to solve issues in our equipment processes, replace manual labor, improve efficiency, and reduce labor costs is our main goal.

Q: Last year, the number of channels actually decreased. What was the consideration behind this?

Zhu Jiangming: The number of stores is decreasing, but we are optimizing the process. The number of stores from sales to delivery to service has increased significantly, now exceeding 200. We have also optimized our presence in more automotive business circles, hoping that our dealers do not conflict with each other, and that each area is managed by a specific dealer.

Therefore, in 2024, we will make overall adjustments and optimizations, reducing the number of investors while increasing coverage in over 80 cities. In 2025, we will further optimize and adjust based on this foundation, aiming for 1,000 to 1,200 outlets, increasing according to the distribution of cities and the characteristics of each city.

In 2024, 80% of Leapmotor's dealers will be profitable, while others may be in the opposite situation, which has stimulated everyone's enthusiasm. Now, some excellent investors who want to apply to become Leapmotor dealers need to meet very good conditions; the selected locations must be excellent, operational performance must be very good, and the team must be outstanding to qualify for a Leapmotor store