LEAPMOTOR swiftly embarks on its journey to Hong Kong

Author | Chai Xuchen

Editor | Zhou Zhiyu

Opening a store in a former Porsche showroom, Leapmotor's first move into Hong Kong is filled with intensity. This is not only a well-planned product launch but also a high-profile brand positioning.

On June 11, Leapmotor's 1,500th store opened in the central business district of Hong Kong. The next day, Leapmotor quickly showcased its actual market weapons at the Hong Kong International Auto Show—its SUV sales champion model C10 and compact car T03.

Among them, the C10 targets young family users and has been labeled as "half-price Li Auto" in mainland China, being a market-tested bestseller; while the T03 is more suited to the crowded driving environment of Hong Kong.

Leapmotor has keen insights into the Hong Kong market. Despite the large number of high-net-worth individuals, the market exhibits characteristics of "price-sensitive consumption" due to the impact of high initial registration taxes. Leapmotor intends to capture market share from traditional strong brands like Toyota with its "good but not expensive" strategy, replicating its successful path in mainland China.

By choosing this time to enter Hong Kong, Leapmotor is eyeing the local policy dividends. According to Wall Street Insights, the penetration rate of new energy vehicles in Hong Kong reached 68% in the first four months of this year. Behind this is the strong push from the Hong Kong government: pure electric vehicles are exempt from initial registration taxes and enjoy lower annual license fees, effectively reducing the cost of car ownership. At the same time, the government is accelerating the improvement of charging infrastructure, creating favorable conditions for the popularization of low-maintenance electric vehicles.

However, at a time when car manufacturers are competing to "grab land" and seek entry tickets to the final round, the annual market size of only 40,000 to 50,000 units in Hong Kong seems insufficient for Leapmotor to make a significant effort.

In response, Leapmotor's founder and chairman, Zhu Jiangming, explained the deeper considerations behind this move in an interview with Wall Street Insights.

He stated that Hong Kong, as an international financial center, is a key window for brand exposure and showcasing technological strength. Additionally, with a concentration of investors, Zhu Jiangming hopes to attract more capital to understand Leapmotor.

Furthermore, this also paves the way for Leapmotor's upcoming D-series flagship models priced between 200,000 to 300,000 yuan. Hong Kong families rely on MPVs, but the high maintenance costs of fuel vehicles are a pain point that the D-series can address, allowing it to make a strong impact in Hong Kong first.

After collaborating with Stellantis Group, Leapmotor can also share the R&D costs for right-hand drive models by entering the Hong Kong market, preparing for future expansion into right-hand drive markets in the UK, Australia, and Southeast Asia.

It can be seen that Leapmotor is using Hong Kong as a springboard to lay out a global strategy. For this new force "dark horse," this will be an important step in winning the entry ticket to the final round.

Zhu Jiangming admitted that Leapmotor's development over the past year has been smooth, progressing basically as expected. Last year, it achieved nearly 300,000 total sales, and this year it has continuously claimed the sales champion among new forces for several months, with gross margins steadily rising and aiming for profitability But Zhu Jiangming knows that now is not the time to pop the champagne. On the eve of the finals, all competitors are striving to squeeze into the first tier, with rivals like Deep Blue, LeDao, ZEEKR, BYD Dynasty/Ocean, and Geely Galaxy constantly compressing Leapmotor's "comfort zone." At this critical juncture of striving for annual profitability and achieving self-sustainability, Leapmotor cannot afford any mistakes.

"Leapmotor must maintain its running speed to keep moving forward and not be stepped on by others." Zhu Jiangming believes that the next three years will be the most brutal finals period for the industry.

To this end, he has proposed aggressive sales targets: achieving 500,000 to 600,000 units this year, reaching 1 million units in two years, and sprinting to 4 million units in five years.

From the perspective of product planning, the C-series product matrix in the 100,000 to 200,000 yuan range was completed last year, helping Leapmotor solidify its market position; this year, the B-series will further delve into the 60,000 to 100,000 yuan range to seek incremental growth; the A-series and D-series will be launched in 2026, ultimately forming a complete product line covering the mainstream price range of 60,000 to 300,000 yuan to meet the needs of consumers at different levels.

Globalization efforts are also accelerating. Currently, Leapmotor has established about 600 stores in Europe and other regions through partnerships with dealers. The opening of the Hong Kong store will serve as a hub connecting the European and Southeast Asian markets, further enhancing its global footprint.

Sources close to Leapmotor reveal that its overseas channel deployment is progressing rapidly, especially under the brand endorsement of Stellantis, with global models like the B-series expected to quickly open up markets, driving this year's overseas sales beyond expectations.

Backed by Stellantis's global resources, Leapmotor's Malaysian factory will achieve localized assembly of the C10 by the end of this year and is expected to realize localized production in Europe by mid-next year.

With the accumulation of experience in global models and support from Stellantis in local market insights, Leapmotor's globalization path may be faster than that of most new forces.

From being an industry "latecomer" to now standing at the C position in the new energy track as a "dark horse," Leapmotor is accelerating its transformation. Industry insiders believe that with the improvement of the new model matrix, the enhancement of gross margins, and the expectations of collaboration with FAW in parts supply and equity cooperation, Leapmotor's market value still has considerable growth potential.

This means that this new force dark horse's challenge for a market value of 100 billion yuan may be just around the corner. How will Zhu Jiangming and his Leapmotor secure victory in this final battle?

Below is the full dialogue between Leapmotor Chairman Zhu Jiangming, Senior Vice President Cao Li, Vice President Li Tengfei, and Wall Street Insights (edited):

Q: What considerations led Leapmotor to choose Hong Kong?

Zhu Jiangming: Although the Hong Kong market is not large, with annual sales of 40,000 to 50,000 units, we take it seriously because it is a window for brand exposure. Hong Kong is one of the most famous cities in the world and a place to showcase Leapmotor's brand and products. Moreover, many investors in Leapmotor are based in Hong Kong, and we hope to use this window to help the capital community better understand Leapmotor, which is why we place such importance on it Leapmotor's familiarity with globalization will share a lot of research and development costs, and the right-hand drive market requires a lot of development. This can simultaneously meet the needs of right-hand drive markets such as Europe, the UK, and Southeast Asia. Our biggest advantage in the Hong Kong market is Leapmotor's internationalization, moving faster, with a richer product lineup, which is beneficial for the overall development of the Hong Kong market.

Q: What is Leapmotor's strategy for exports and localization?

Cao Li: Leapmotor is a cost-conscious company. Whether to localize in certain areas or to do CBU exports depends on which cost has more advantages.

Q: How do you view the demand for compact and small vehicles in the European market?

Cao Li: The T03 has become the top-selling new energy small car in the German market in the past few months. I believe that not only Leapmotor, but Chinese new energy vehicles currently have a cost advantage in Europe, and everyone will come to compete. The key is how to maintain a competitive advantage and control costs while deeply understanding local user needs.

Q: Leapmotor's overseas sales target this year aims to double to 50,000-80,000 units. Where will the main growth come from?

Cao Li: Last year was our first batch of overseas user deliveries, just getting started. From January to May this year, two models have reached leading levels in local markets, with over 500 stores covered. We have nearly 600 stores overseas, a large portion of which are in Europe. This year, we aim to expand into South America, the Middle East, Africa, and the Asia-Pacific region beyond Europe. The target of 50,000-80,000 units is a conservative expectation.

Q: Leapmotor has a vision of achieving one million sales, which corresponds to monthly sales of 50,000-100,000 units. How will Leapmotor achieve this?

Zhu Jiangming: Monthly sales of 50,000 to 100,000 is just a target. When to achieve it depends on the progress of the entire industry chain, such as the market share of new energy vehicles. When over 90% of the market is new energy vehicles, I believe that possibility will arise, but it is too early to say now. This year, we already have a production capacity of over 500,000 units, and next year's target capacity construction is also in alignment.

Q: In the second half of the year, a high-end model will be launched, which will be Leapmotor's most expensive car. How will you balance cost-effectiveness and high-end positioning?

Zhu Jiangming: Our high-end D series will still adhere to the principle of full self-research, striving to minimize the overall vehicle cost. We also hope to provide users with more configurations and higher quality, not by lowering prices but by enhancing configuration quality. The D series products are more luxurious, but the pricing will not follow luxury car pricing. Of course, the D series will definitely be worth looking forward to in terms of technology and configuration.

Q: Leapmotor's store expansion is very rapid. Can you specifically introduce the distribution pattern of the stores?

Cao Li: We currently have 1,500 stores globally, with a domestic to international ratio of 2:1. We will choose capable dealers and eliminate those who perform poorly. Our requirements for dealers are the same; they must have the ability to sell cars and provide services. Domestically, we adhere to the 1+N store opening model. Another principle for opening stores is to cover more lower-tier markets while maintaining a stable base. Overseas, we will first occupy mature market areas and then explore high-potential areas Question: What specific measures will Leapmotor take to achieve its goal of profitability for the entire year in 2025?

Li Tengfei: We had a slight loss in the first quarter, but we are very hopeful for profitability in the second quarter, and we are very confident about achieving breakeven for the year. From a profitability perspective, we have several measures: First, we aim to achieve an annual scale of 500,000 to 600,000 units, which will bring about economies of scale; second, we will adhere to comprehensive in-house research and development to enhance our cost capabilities, allowing us to maintain an overall gross margin above ten percentage points; third, we will continuously launch refreshed models to improve our gross margin; fourth, we will implement efficiency-enhancing measures across the company to control our expenses; finally, strategic partnerships will contribute positively to our gross margin.

Question: What level of debt ratio is considered healthy for automotive companies?

Zhu Jiangming: It’s not just the high or low debt ratio that determines whether a company is good or bad; like a health check-up, all indicators need to be considered. This is a comprehensive issue. Leapmotor is overall in a healthy state, and we have done very well in terms of rhythm and interpretation and control of the entire balance sheet. We aim to achieve profitability for the year.

Li Tengfei: The debt ratio is influenced by several factors. First, it varies according to the different stages of development, especially for manufacturing companies like ours, which will certainly differ between rapid growth and a stable operation phase after reaching a certain scale.

The nature of the enterprise greatly affects the debt ratio; we cannot compare the debt ratio levels of manufacturing companies with those of technology and internet companies. Of course, we will have a warning threshold, and the upper limit of our debt ratio will vary at different stages.

Question: How to judge the "true" and "false" comprehensive in-house research and development in the market?

Zhu Jiangming: Comprehensive in-house research and development requires a long time to accumulate. The reason Leapmotor has come this far is that more than 95% of our components, including electric drives, headlights, battery packs, intelligent cabins, intelligent driving, and all controllers, are developed and manufactured in-house. Each component must be perfected to achieve higher quality, better cost, and improved performance; otherwise, if it is cheaper from suppliers, it becomes a burden.

Cao Li: True comprehensive in-house research and development tests deep research and development capabilities. Previously, we worked with suppliers for TR1, where they provided the entire cockpit assembly. Now we need to connect with chip-level suppliers, which tests our chassis software development capabilities, so we can collaborate effectively and produce truly competitive components. The difference between true and false comprehensive in-house research and development lies in deep development capabilities.

Question: What advantages does adhering to the in-house research and development route provide the company in terms of risk resistance?

Zhu Jiangming: Leapmotor's balance sheet is considered the healthiest and most benign. Although we have many accounts payable, we have a cash reserve of 28 billion in Q1, and our interest-bearing debt is very low.

We aim to strive for a sales target of one million units next year, which requires us to reserve production capacity for one million units, and this will require investment. The total fixed assets will be around five to six billion, and by the end of the year, it will not exceed ten billion.

Leapmotor's management capability, risk resistance capability, and risk awareness are all at the highest level. We have almost no intangible assets; all research and development costs are expensed and do not form intangible assets. Because we have been in the real industry for over thirty years, we pay full attention to risks Question: The industry is opposing price wars, but not participating in price wars may affect sales and lead to idle capacity. How does Leapmotor view this contradictory phenomenon?

Li Tengfei: Recently, BYD proposed a price reduction, which is our main competitor, and we have been observing it. We achieve excellent cost control capabilities through comprehensive self-research, and we have always maintained our own rhythm in pricing and policy formulation, including profit expectations. Currently, Leapmotor has not been affected by competitors; their moves are within our predictions and tolerances.

Zhu Jiangming: The price war is not as intense as everyone imagines; it’s just that various discounts have been combined under different names, possibly to attract attention. We can provide users with better configurations and experiences. The C series is basically complete, and the B series will also be mostly launched this year, with the D series debuting next year. We have made sufficient industry trend predictions for each category, and dealers are very happy because Leapmotor's prices are very stable. We are the least willing to engage in a price war.

Question: How does Leapmotor view the controversy over the 60-day payment term?

Li Tengfei: Since our establishment, we have adhered to the principle of payment within 60 days, and Leapmotor has a good reputation among suppliers.

Question: Recently, 0-kilometer used cars have become very common in the industry. What is the reason?

Li Tengfei: We do not have the phenomenon of 0-kilometer used cars. There may be some degree of this among dealers in the industry; some dealers may need to register domestically before exporting to neighboring countries during parallel exports. The volume of Leapmotor's parallel exports is also very, very small. After Leapmotor International was established, all sales operations outside Greater China were handed over to Leapmotor International, which has a mature sales service system overseas, and this is also an advantage for Leapmotor.

Question: Is there room for capital cooperation between Leapmotor and FAW besides technical collaboration?

Li Tengfei: We expect the results of the first project to be reflected in the second half of next year. Our cooperation with FAW is actually a comprehensive strategic partnership. In addition to vehicle projects, we are also discussing follow-up projects such as components, and both parties have a high intention regarding capital. However, as FAW is a state-owned enterprise, investment decisions need to be more cautious, and the overall process needs to be more refined, which requires some time.

Question: Will Leapmotor rely on cooperation to rapidly improve its gross margin level like XPeng?

Li Tengfei: The impact on the overall gross margin of the company after cooperation is not very significant. From the perspective of long-term company strategy, we must first do our own work well, and Zhu Jiangming is very firm on this. We will not replicate a cooperation model similar to Huawei because we are a main engine manufacturer; we will focus on our own brand, and external cooperation will be more with core partners.

Through such cooperation, we achieve complementary advantages. We have been established for ten years and still have much to learn from traditional car companies like FAW. Through such strategic cooperation, we continuously fill our shortcomings. We will be very cautious in selecting similar partners and will not develop cooperative businesses as the main business of the future company Risk Warning and Disclaimer

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