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Author | Chai Xuchen

Editor | Zhou Zhiyu

"Within three years, Leapmotor must be among the top five in the Chinese auto market."

At the earnings conference on the evening of August 15, Leapmotor Chairman Zhu Jiangming issued a "military order", which is related to whether Leapmotor can truly take root in the automotive industry in the future.

More than a month ago, with the launch of the flagship C16, all four of Leapmotor's C series products were updated and released. This once second-tier emerging player also ushered in its own glorious moment, with deliveries exceeding 20,000 in both June and July.

The booming sales volume is clear, but the gross profit margin and revenue in the second quarter were lower than expected.

The financial report shows that Leapmotor's total revenue in the second quarter was 5.36 billion yuan. Although it rebounded by 54% month-on-month, it was lower than the market expectation of 5.94 billion yuan; the gross profit margin of 2.8% was also lower than the institutional forecast of 5.5%.

At the performance meeting, Zhu Jiangming did not avoid this issue. He explained that due to the switch from old to new models this year, Leapmotor made price concessions at the terminal, so the overall gross profit margin in the second quarter was dragged down.

However, Zhu Jiangming said that with 24 models launched and 23 models cleared, Leapmotor's full-year gross profit margin is expected to return to the expected range of 5%. In July, the gross profit margin has rebounded to above 5%.

In addition, maintaining high investment in research and development in the first half of the year is also a factor that kept Leapmotor's gross profit margin low.

Wu Qiang, president of Leapmotor, revealed that the company's gross profit increased by 440 million yuan in the first half of the year, but R&D expenses increased by nearly half, consuming nearly 400 million yuan more than the same period last year, which offset each other. He also emphasized that increasing R&D will be the main theme of Leapmotor in the future, and maintaining a 50% increase in R&D expenditure throughout the year.

Wu Qiang said that Leapmotor already has seven models in its pipeline, which will be gradually introduced to the market in the next two years. At the same time, Leapmotor is also betting on the deployment of an "end-to-end" intelligent driving model to build momentum for the next stage.

Currently, Leapmotor is increasing its investment in manpower, computing power and equipment in the field of intelligent driving, and has even established a separate intelligent driving research institute, which has become the company's largest investment project in R&D. Zhu Jiangming boasted that he would enter the first echelon of intelligent driving by the end of next year.

Obviously, the huge demand for products and technologies makes it inevitable to increase investment. However, Wu Qiang also said that Leapmotor is still the company with the highest R&D efficiency-output ratio in the industry.

Daring to push the chips in its hand onto the table, Leapmotor is betting that it can press on with its victory and rush to the top of the industry.

In Zhu Jiangming's view, the current sales results prove that the C series has established itself firmly in the 150,000 yuan price range and will reach a sales peak of 30,000 units in August. He revealed that as of the 15th of this month, Leapmotor's backlog of orders has exceeded 15,000 units, breaking the company's historical record, and the company is confident of achieving the annual KPI of 250,000 units this year.

This means that Leapmotor's focus strategy has been initially realized, and the next step is to strike while the iron is hot and expand into other market segments.

Wu Qiang said that the first Leapmotor B platform model, codenamed B10, will be unveiled at the Paris Motor Show in October this year. This model is aimed at the largest market segment and is expected to become the company's next hit model after delivery in the second quarter of next year, further supporting Leapmotor's sales target next year. By June next year, the second B01 sedan and a hatchback crossover sports car codenamed B05 will also be launched.

For the B series, Zhu Jiangming is already sharpening his knife: "Although it is a B-class car, we want to sell it at the price of an A-class car, positioning it in the 100,000-150,000 level, which is the market with the largest volume. This series must achieve 40,000 units per month."

Leapmotor's spoilers don't stop there. Zhu Jiangming said that in 2026, the A series and D series will be the main models, corresponding to the 60,000-80,000 and 250,000 yuan range respectively. His ambition is to achieve full coverage of the 60,000-250,000 yuan market through the four platforms of "ABCD" and to be among the top five in China within the next three years.

Beneath the ALL IN poker table lies the anxiety of this "player" in the mid-to-low-end market.

"The penetration rate of new energy vehicles has exceeded 50% in July. We predict that the penetration rate will grow very fast after breaking five," said Zhu Jiangming. "Now everyone is trying to grab market share from fuel vehicles, which is relatively easy. There will be no incremental growth in the future, and they can only compete with each other in the existing market, which will be more difficult."

"If you don't have scale, you don't even have the capital to compete," Zhu Jiangming said bluntly.

As the scale of Leapmotor increases and the story of becoming a "quasi-giant" in the automotive industry gradually takes shape, the entire business model of Leapmotor becomes more attractive. Zhu Jiangming said that we still made a loss in selling cars last year, but this year we will strive to achieve a gross profit margin of 5% or even better, and next year we will move towards 10%, and eventually 15%. This will also be close to Tesla's gross profit level.

However, even if Leapmotor has occupied a place in the Chinese market in a timely manner with the "Uniqlo" and "Pinduoduo" strategies, it is still difficult to avoid the internal circulation of the entire market. Zhu Jiangming gave two solutions - optimizing local channels and accelerating external expansion.

Zhu Jiangming said that in the second half of the year, the coverage of blank cities will be expanded and the expansion to county-level cities will be accelerated. At the same time, the number of investment entities should be reduced. "Even in first-tier cities, we will strive to have no more than four dealers to minimize unnecessary internal competition."

At the same time, Leapmotor’s cooperation with global auto giant Stellantis has become a trump card for it to overtake others.

Wu Qiang revealed at the performance meeting that Leapmotor International has completed the establishment of a core team and investment promotion work, and will open more than 200 stores in Europe in September, when the C10 and T03 models will start sales and delivery in Europe. The total sales target for this year is expected to be 6,000 to 7,000 units, and will be increased to tens of thousands next year.

On the other hand, Leapmotor's Tire1 auto parts export business will also increase in volume next year and the year after, which will add another layer of profit space for it.

Zhu Jiangming was very excited throughout the performance meeting. Starting from the low-end market, facing strong competitors such as BYD, Geely, Changan, and Great Wall, it was not easy to fight monsters and break through. Perhaps, he, who came from a "grassroots" background, can reproduce Wang Chuanfu's miracle again.

However, on the road to advancement, Leapmotor needs to respond to the ever-changing market changes with a more agile attitude, so that its dream of becoming a TOP5 giant can be truly realized.