Leapmotor (Minutes): 2025 Sales Target of 500,000 to 600,000 Units

The following is $LEAPMOTOR(09863.HK) 4Q24 conference call minutes. For financial report commentary, please read [Leapmotor: Dark Horse Counterattack, Is "Li Auto" Going Crazy?].

I. Core Information Review of Financial Report

II. Detailed Content of Financial Report Conference Call

2.1 Key Information from Executive Statements

1. Delivery and Sales Situation:

2024 delivery volume: The company's total vehicle delivery volume for 2024 is 293,724 units, an increase of 163.8% year-on-year, with an average monthly sales exceeding 40,000 units in the fourth quarter. As of December 31, 2024, the cumulative delivery volume exceeds 600,000 units.

Among them, the cumulative delivery volume of the C series is 225,071 units, accounting for 76.6% of total sales, an increase of 112.9% compared to 2023. The C10 model delivered 75,469 units throughout the year, with an average monthly sales of nearly 10,000 units in the fourth quarter; the C16 model delivered 43,528 units throughout the year, with an average monthly sales exceeding 8,000 units in the fourth quarter.

Sales in January-February 2025: In January and February 2025, the company’s cumulative sales reached 50,457 units, an increase of 167.8% compared to the same period in 2023.

2025 sales target: The company expects the total delivery volume for 2025 (including overseas) to be between 500,000 and 600,000 units.

2. Products and Technology:

New product launches in 2024: In 2024, two new models, C10 and C16, were launched based on the new C platform. Since its global debut, the C10 model has received international authoritative safety certifications and has won numerous awards, including the American Industrial Design Excellence Award and the French Design Gold Award.

Technological innovation achievements: The advanced driver assistance system with framework-based parking integration technology, the industry's first unordered city network access control technology applicable to all urban scenarios, the industry's first non-inductive OTA upgrade technology, and the industry's first new energy golden power technology, with the overall vehicle architecture generalization rate reaching the industry’s highest at 88%.

LEAP3.0 central vision integrated regional control technology has been successfully applied, leading the C series models to achieve market success. In the fourth quarter of 2024, the average monthly sales of the C series exceeded 30,000 units, ranking among the top five in their respective market segments.

3. Technology Release in 2025

On March 10, 2025, the LEAP3.5 architecture will be launched, featuring the world’s first super-integrated central domain control architecture, equipped with the Qualcomm 8650 intelligent driving chip and laser radar and other intelligent driving hardware, supporting an end-to-end high-level intelligent driving integration system for the cockpit, power, body, and motion functions.

4. Autonomous Driving System Development:

In 2024, the end-to-end large model autonomous driving system development roadmap will be determined, and an Intelligent Technology Research Institute will be established, expanding the autonomous driving team to over 500 people, achieving results such as high-speed NAP, urban NAC autonomous driving, and HPA parking memory. In 2025, continue to increase investment in AI computing power and data infrastructure resources, achieving comprehensive integration of urban NOA on the new LEAP 3.5 architecture by the end of the year, entering the first tier of intelligent driving.

OTA Upgrade Service: In 2024, continue to provide technical upgrades for new and existing users, completing 8 OTA upgrades in LEAP 2.0 architecture models, adding and optimizing over 50 functions; in LEAP 3.0 architecture models, complete 8 OTA upgrades, adding and optimizing over 100 functions. At the same time, support the integration of Alibaba Cloud's Tongyi Qianwen large model and DeepSeek large model, providing users with rich intelligent voice interaction options.

5. Sales Management and Service:

Sales Model and Channel Layout: A new retail model primarily based on dealers and supplemented by direct sales will be initially established in 2024.

As of December 31, 2024, there will be 695 sales stores and 427 service stores, covering 264 cities, with an increase of 82 cities compared to 2023.

Continuing to adhere to the "1+N" model, by the end of 2024, there will be 262 Leapmotor centers and 433 experience centers, an increase of 186 Leapmotor centers compared to 2023, significantly strengthening the core channel carrying capacity. In 2024, 77 high-quality partner channels will be introduced, with channel profitability exceeding 80%.

Digital Marketing and Service: Implement a full-chain digital marketing and service system, based on the user full lifecycle management concept, using precise delivery tools such as DMP to achieve systematic and digital full-chain operations, enhancing store operational efficiency. With "three blocks and two provinces" as the core service concept, service satisfaction will be significantly improved in 2024, building an efficient after-sales service system covering 427 stores nationwide, providing one-to-one exclusive services through dedicated housekeepers, relying on remote diagnostic technology to reduce user store visits, optimizing common checklists to shorten repair cycles, and establishing a full-scenario ecosystem for charging, installation, vehicle pick-up and delivery, roadside assistance, and extended warranty for all models, providing users with full-cycle service guarantees.

6. Global Development:

Overseas Market Layout: In May 2024, a joint venture named Leap International will be established with Stellantis Group, responsible for overseas market exports, sales, and localized production. Starting from September 24, 2024, sales of the T03 and C10 models will be launched in major European countries. By the end of December, 13,726 complete vehicles will be exported overseas.

Overseas sales channels are rapidly being established, with over 400 sales and after-sales service points set up globally, including over 350 in Europe and nearly 50 in the Asia-Pacific, Middle East, Africa, and South America markets. It is expected that by 2025, Leapmotor International will form a channel scale of over 550.

Overseas Profitability Goal: The company's requirement for Leap International in 2025 is to rapidly expand sales channels, enhance overseas brand strength and sales, aiming to achieve breakeven.Overseas Sales Estimate: The overall overseas sales are estimated to be in the range of 50,000 to 60,000 units in 2025.

7. Strategic Cooperation:

Cooperation with FAW: On March 3, 2025, a strategic cooperation memorandum was signed with China FAW Group Corporation, highlighting two aspects: first, to jointly develop new energy passenger vehicles and cooperate on components, enhancing product competitiveness through technological integration; second, to explore the feasibility of deepening capital cooperation to achieve resource synergy across the entire industry chain.

8. 2025 Model Planning

B platform models: Three products from the B platform (B10 model, B01 model, and B05 model) will be launched in 2025, with the B10 model starting pre-sales on the evening of March 10.

C platform models: The C10 and C16 will see their annual models launched in the first half of 2025, while the C11 will launch a mid-term facelift model in mid-2025.

9. Capacity Planning:

Current capacity: The company currently has two factories in Jinhua City, Zhejiang Province.

New planning: To respond to the increase in production, the company has plans for additional factory capacity.

10. Intelligent Driving Investment:

Expansion: The intelligent driving team will expand from 500 to over 600 people in 2025, and high-level intelligent driving talents will be introduced.

Investment costs: The total investment in intelligent driving will exceed 800 million yuan in 2025.

Computing power reserve: Through self-investment and leasing, a computing power reserve of over 1.5 EFlops will be secured to ensure the development progress of intelligent driving products.

III. Q&A

Q: What are the company's guidance for sales, gross margin, and profitability in 2025?

A: The company expects the total delivery volume (including overseas) in 2025 to be in the range of 500,000 to 600,000 units; the annual gross margin target is 10% to 11%; from the perspective of net profit, the company strives to achieve profitability for the entire year of 2025, turning net profit positive.

Q: What is the company's model planning for 2025?

A: Three new B platform vehicles:

In 2025, the company will launch three major products from the B platform, including the B10 model, B01 model, and B05 model, with the B10 model starting pre-sales on the evening of the meeting.

Three product facelifts from the C platform:

The C10 and C16, which were launched in 2024, will see their annual models released in 2025, while the C11 will launch a mid-term facelift model in mid-2025.

Q: What is the current capacity situation of the company, and is there a future need for increased capacity?

A: The company currently has two factories in Jinhua City, Zhejiang Province, and to respond to the upcoming increase in production, the company has plans for additional factory capacity.

Q: The gross margin improved rapidly in Q3 and Q4 of 2024; what is the contribution of self-research? How do self-research and external cooperation contribute to the overall vehicle gross margin, and how to compete at scale with leading automotive companies?

A: The reasons for the improvement in gross margin in Q3 and Q4 of 2024 include:

① A significant increase in overall sales leading to economies of scale, reducing fixed costs;

② Changes in model structure, with the increase in sales of C10 and C16 leading to a higher proportion of the C series;③ Cost improvement, with the proportion of self-researched and self-manufactured components in the C series increasing, has made an important contribution to cost reduction, while the procurement cost of components is also continuously decreasing.

For the future, the gross profit of self-researched and self-manufactured components is very important for the company targeting the mass market, as most of the gross profit of the complete vehicle ultimately reflects the gross profit of self-researched and self-manufactured components. While meeting its own needs, the company will expand the sales supply channels for core components through cooperation, combining external sales and self-use to enhance scale, increase revenue, share costs, improve component profitability, and feed back into the complete vehicle, achieving profitability for the complete vehicle, maintaining a high cost-performance advantage for products, and realizing stable profitability in operations.

Q: How fast will the progress be in overseas non-European regions this year, and will there be significant volume?

A: The company has over 300 network channels in Europe, and outside of Europe, there are about 50 sales networks in the other three major regions.

The company's goal is to achieve around 450-500 channels in Europe by 2025, and around 200 channels in the other three major regions.

The company's vehicles have already been sold in countries and regions such as South America, Brazil, the Middle East, Turkey, Asia-Pacific, and Australia, and are favored by local consumers. Leapmotor will continue to make efforts in the four major regions in 2025, rapidly laying out network points to achieve overseas sales targets.

Q: What is the launch timeline and reserve situation for new products priced above 200,000?

A: Leapmotor has laid out four platforms: A, B, C, and D. The D platform is the main brand for the market above 200,000 and is Leapmotor's highest-end platform. Products on the D platform are expected to be launched successively for consumers in the first half of 2026, and will adhere to Leapmotor's highly competitive style.

Q: How will the intelligent driving products in the 100,000-200,000 and subsequent 200,000+ segments be laid out this year?

A: You can pay attention to the B10 launch event at the technology day tonight, where the intelligent driving products will be explained in detail, and the entire intelligent driving function will be reflected in the B10 product. Leapmotor has the technical strength and platform generalization capability, and once a certain technology is applied to a specific model, it will be quickly promoted across all platform models.

In terms of equal rights for intelligent driving, our competitors have helped us significantly, which will show everyone our efforts in this area.

Q: What is the guidance for overseas profitability in 2025?

A: The company's requirement for Leapmotor International is to quickly expand sales channels and enhance overseas brand strength and overall sales. The goals set by both shareholders for Leapmotor International are to achieve breakeven, focusing more on brand, sales, and channels, and rapidly promoting products.

Q: What is the sales guidance for overseas markets in 2025, especially for the European market?

A: The overall overseas sales estimate for 2025 is in the range of 50,000 to 60,000 units, which is our sales target, and the sales guidance for the European market has not been separately mentioned.

Q: How do you view the policies for range-extended vehicles in Europe?

A: Range-extended vehicles will be launched not only in Europe but also in other regions such as South America. The pace of electrification overseas is not as fast as in China, and some overseas countries have insufficient infrastructure for charging facilities. Range-extended vehicles can enjoy the advantages of electric vehicles while avoiding charging anxiety, which has strong market demand.

Q: What are the estimated gross margins for the C10 extended range version and the pure electric version, and what is the approximate difference between the two?

The overall gross margin levels for extended range vehicles and pure electric vehicles overseas will not differ significantly, but it is inconvenient to disclose the specific difference in points, as the extended range vehicles still need to test the final situation.

Q: How will the European tariff issue be resolved?

A: Leapmotor is exploring the localization process together with its partner Stellantis. Both parties have begun extensive preliminary work, and specific actions are expected shortly. The localization process will be superior to competitors in terms of both speed and quality. However, it is also necessary to consider the uncertainties brought about by localization costs and policy changes.

Q: When will the B10 extended range version be launched in overseas markets?

A: It should be in the second half of this year.

Q: Regarding the empowerment of the company by intelligent driving, is the business model still focused on driving overall sales? Besides the empowerment brought by intelligent driving, are there considerations for directions like robotaxi and robots?

A: Currently, the overall direction of intelligent driving is based on the product itself. Driving sales is one aspect, but more importantly, it is about providing users with satisfactory, advanced, and better-experienced products to enhance product competitiveness. It has not been mentioned whether there are considerations for directions like robotaxi and robots.

Q: Will models priced between 100,000 to 150,000 or even below 100,000 consider equipping laser radar by the end of this year? How will the future development of intelligent driving equity on the A platform unfold?

A: Please pay attention to tonight's press conference, where there will be results that everyone is looking forward to. Products on the A platform are expected to be launched next year; it is still too early to discuss how intelligent driving will develop on the A platform.

Q: In the company's sales target for this year, what are the contributions of the B series and C series models to the sales target?

A: The company's annual sales target is set in the range of 500,000 to 600,000 units, with the overall sales composition mainly consisting of the C series and B series models, which will account for a higher proportion. However, it is currently inconvenient to disclose the specific ratio of the B series and C series, as this involves the overall launch rhythm of the B series, the launch rhythm of the C series, C10, C16 model updates, and the C11 mid-term updates.

The company has very good expectations for the B series across the board. The B10 product launched tonight is highly competitive and is believed to be a blockbuster product.

Among the three products in the C series, the C11 has maintained strong vitality two to three years after its launch. This year will see the launch of the C11 mid-term facelift model; while the C10 and C16 are expected to be launched in 2024, with the C16 launching in June 2024. Therefore, the launches of the C10 and C16 models will be completed before the first half of 2025, and product strength will be further enhanced. The products of the B series and C series will support the achievement of the company's annual sales target of 500,000 to 600,000 units.

Q: What improvements or enhancements in gross margin can be expected from the newly launched products under the LEAP 3.5 platform architecture compared to the previous 3.0 platform products?

A: The LEAP 3.5 platform is more about enhancing product capabilities. It improves the overall concentration of domain control and the performance and capabilities of the entire vehicle, providing users with better The improvement in product gross margin is determined by multiple factors, not solely by one platform. It is influenced by the overall sales scale effect of the company, vehicle structure, and overall cost improvements, rather than being affected by the switch of a single platform.

Additionally, the B series has optimized the entire LEAP 3.5 solution, reducing power consumption. After matching with the whole vehicle, it is a platform product that offers both cost-effectiveness and functional benefits. Therefore, although the starting price of the B series is lower than that of the C series, it will ensure that the gross margin of B series vehicles remains very healthy and will not hold back the company. Both the B and C series have their advantages, with good cost and overall gross margin.

Q: What are the new models the company plans to launch overseas in the next two years and their timelines?

A: This year, the B series model B10 will be launched overseas in the second half of the year. Other products in the B series and the future A series products also have overseas launch plans, but since the overall plan is directly related to the vehicle development progress, we cannot fully lock in the details at this time. Additionally, some models have not yet been fully showcased, so some launch plans are not convenient to disclose.

Q: Is the goal for the joint venture company to achieve breakeven by 2025?

A: Yes, Leapmotor International must achieve breakeven, and it requires Leapmotor International to allocate more resources to market development and sales enhancement.

Q: Among the 13,000 vehicles exported in 2024, what are the proportions of T03 and C10? What are the company's plans for product structure in overseas markets?

A: Initially, due to the different certification timelines for products overseas, the current export product proportion structure cannot fully represent the final sales structure.

In the early stages, T03 has a slightly higher proportion, while C10 is relatively lower. However, C10 is expected to see rapid sales growth in November and December 2024 and February 2025. T03, as a compact platform model, is very popular among European users; although C10 is classified as a mid-to-large product in Europe, it maintains an excellent cost-performance ratio and is also well-received by local consumers. The company currently hopes that the Leapmotor brand can better enter overseas markets, allowing more overseas users to understand, accept, and use the products, rather than pursuing the proportion of product structure.

Q: The company is increasing resource investment in AI computing power and data infrastructure. Are there any quantifiable metrics you can share?

A: By 2025, the number of personnel in the intelligent driving team will expand from a potential 500 to over 600, and higher-level intelligent driving talents will also be recruited. The total investment in intelligent driving will exceed 800 million yuan in 2025. In terms of computing power reserves, we have secured over 1.5E Flops of computing power through self-investment and leasing to ensure the development progress of intelligent driving products.

Q: Will the C series models' facelift this year, which adopts the latest LEAP 3.5 architecture and new intelligent driving solutions, affect the gross margin?

A: The C series models C10, C16, and C11 will all adopt the new LEAP 3.5 architecture in this year's model and the mid-cycle facelift of C11.

The Leap 3.5 platform has further optimized its technical strength, capabilities, and cost efficiency, and we believe it will not affect the gross margin of upcoming products. Based on the platformization and technological generalization brought by comprehensive self-research, the application scale of new technologies in products will be larger, helping to control product costs.

Q: Can you briefly forecast the gross margin situation for Leapmotor in the first quarter and the expense expectations for the first quarter?

A: Currently, it is not convenient to provide specific data for the first quarter, but I can give a directional answer. Initially, it seems that the overall gross margin in the first quarter may experience a slight adjustment compared to December, as the average monthly sales in the first quarter are lower in scale compared to December. From January to February, the company's cumulative sales reached 50,457 units, achieving a 167.8% growth compared to the same period last year, but there is a gap compared to the average monthly sales of 40,000 units in December. This is due to industry characteristics and is related to the coefficients of new energy vehicles. However, the company's sales in January and February outperformed the overall market, and I believe the gross margin performance in the first quarter will not disappoint everyone.