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Tencent News "First Line" Author Guo Yifei Editor Liu Peng

"Everyone is moving towards 'end-to-end' intelligent driving. The gap is not very large at present. We hope to use one or two years to enter the first echelon of the industry's intelligent driving by the end of next year." On the evening of August 15,Leapmotor(09863.HK) founder and chairman Zhu Jiangming said at the financial report performance meeting.

Zhu Jiangming believes that Leapmotor is not late to the intelligent driving field. It is the most cost-effective to invest in intelligent driving at this time. Others have already made many mistakes in many areas, including the transition from opening cities with maps to opening cities without maps. These ground-breaking product work does not need to be done. "There is a surplus of computing power in the country now. Many government agencies have purchased a lot of NVIDIA servers. We can just rent them instead of buying them. Currently, Leapmotor has invested a total of 100 million in computing power servers, and the rest is leased."

However, he did not disclose the specific investment in the field of intelligent driving, but only said that the company's overall R&D expenses will increase by 50% this year. The financial report shows that in 2023, Leapmotor's R&D expenses will be 1.92 billion yuan.

In 2024, Leapmotor established the Intelligent Technology Research Institute and plans to reach a team of 500 people by the end of this year. The current team is close to 400 people. It also plans to launch the Urban Intelligent Driving Function (CNAP) based on the end-to-end intelligent driving big model in 2025.

As a new force in car manufacturing, in the first half of 2024, Leapmotor delivered 86,696 vehicles, a year-on-year increase of 94.8%. Its annual sales target is 250,000 to 300,000 vehicles.

The financial report shows that thanks to the increase in sales and improvement in product structure, the gross profit margin in the first half of 2024 was 1.1%, of which the gross profit margin improved to 2.8% in the second quarter, while it was -5.9% for the whole year of 2023.

However, the increase in gross profit margin did not lead to a significant reduction in losses. Leapmotor's operating income in the first half of the year was 8.85 billion yuan, a year-on-year increase of 52.2%, and its net loss reached 2.212 billion yuan, a year-on-year decrease of only 2.8%. Leapmotor attributed the loss trend to the increase in R&D investment. The financial report shows that R&D expenses in the first half of the year were 1.221 billion yuan, a year-on-year increase of 48.4%.

Zhu Jiangming said that for Leapmotor, sales volume is more important than gross profit margin and gross profit. "Of course, you can't sell at a loss. You must have a certain gross profit margin and gross profit. Our strategy is to increase the gross profit margin year by year and in a planned manner. Last year, we still lost money when selling cars. This year, we will strive to achieve an average gross profit margin of 5%, or even better. Next year, we will move towards 10%. In the end, Leapmotor's gross profit margin should be around 15%."

In terms of product planning, Leapmotor has five models on sale, all of which are from the C series, including the T03 microcar, the C01 sedan, two 5-seater SUVs (C11 and C10), and the C16 6-seater SUV. The latter four models are all priced between 100,000 yuan and 200,000 yuan.

According to the plan, the first model of the Leapmotor B series, the B10, will debut at the Paris Motor Show in October 2024. It is a 5-seater SUV priced at RMB 100,000 to 150,000. It will be released in the domestic market at this year's Guangzhou Auto Show and is scheduled to be launched in the second quarter of 2025.