Has Leapmotor managed to "survive"?

Can you surpass a hit by replicating it?

Since finding its positioning as "a more ideal home for the young," Leapmotor's sales have skyrocketed. Once in the same boat as Nezha, Leapmotor's situation is now quite different. After turning a profit in the fourth quarter of last year, Leapmotor achieved a sales volume of over 80,000 vehicles in the first quarter of this year, a period generally considered the off - season for sales.

Image source: Leapmotor official website

Leapmotor doesn't seem to mind being called the "Mini Li Auto." By seizing Li Auto's successful positioning and emphasizing "having everything you need at a rock - bottom price," Leapmotor has achieved strong sales, similar to the internet strategy of "replicating a hit to become a hit."

However, after becoming a hit, we need to ask the next question: Where is Leapmotor's moat?

When it went public, Leapmotor positioned itself in the mid - to high - end market with prices ranging from 150,000 to 300,000 yuan. Now, its average selling price has dropped to 110,000 yuan. After trading on price for volume, "cost - effectiveness" has gradually become Leapmotor's positioning in consumers' minds.

This may be a positioning for a hit product, but it's also a dangerous one. Because pursuing "cost - effectiveness" means two things: 1. Difficulty in making money; 2. Difficulty in moving upmarket. These two problems have gradually emerged as Leapmotor turned from profit to loss in the first quarter.

After becoming a hit, how Leapmotor can "survive" has become a difficult problem in the next stage.

01 Selling more, but still losing money

It's a common belief in the automotive industry that those who gain scale will win the market.

Take Li Auto for example. In 2020, Li Auto sold more than 30,000 vehicles, with a gross profit of 1.55 billion yuan. By 2024, when Li Auto delivered over 500,000 vehicles, its gross profit exceeded ten times that amount, reaching 29.66 billion yuan. However, Leapmotor, known as the "Mini Li Auto," doesn't seem to have broken the low - profit curse with scale.

In the first quarter of 2025, during the generally recognized off - season for the automotive industry, Leapmotor still achieved a sales volume of 87,552 vehicles, getting closer to Li Auto's 93,000 vehicles. However, Leapmotor's gross profit margin in the first quarter was 14.9%, while Li Auto's was 20.5%.

Moreover, in the last quarter of 2024, Leapmotor achieved a profit of 80 million yuan. In the first quarter of this year, this figure turned into a loss of 130 million yuan.

Why hasn't scale shown its "miracle effect"?

In Leapmotor's 2024 annual report, the cost of raw materials was disclosed in detail. It can be seen that Leapmotor's raw material cost was 27.2 billion yuan, accounting for 92.4% of the total production cost. This is equivalent to a raw material cost of 93,000 yuan per vehicle, while the average price of Leapmotor cars is around 110,000 yuan.

Image source: Leapmotor's 2024 annual report

That is to say, the cost of parts alone accounts for 85% of the selling price of Leapmotor cars. For consumers, this is a car company with a reasonable pricing strategy. But for the car company, it makes cost control more difficult.

Because scale can more easily spread out fixed costs such as depreciation and labor. The marginal effect of scale on these costs is stronger. When the proportion of variable costs like raw materials in the overall cost is too high, it will dilute the "magic" of scale. Moreover, the fluctuations in the prices of upstream raw materials are almost beyond the control of the enterprise.

On the other hand, Leapmotor, which adheres to "full - stack self - research," has another factor that "eats up" profits - R & D expenses.

For example, in 2024, Leapmotor's R & D expenses were 2.9 billion yuan, exceeding the gross profit of 2.69 billion yuan. A loss was inevitable. In the first quarter of this year, Leapmotor's R & D expenses were 800 million yuan, still maintaining a year - on - year growth rate of over 50%.

However, when compared with its peers, this level of R & D expenses that thins Leapmotor's profits seems insignificant.

From 2022 to 2024, Leapmotor spent a total of 6.2 billion yuan on R & D, which is equivalent to XPeng's R & D investment in 2024 and less than half of NIO's R & D expenses in 2024. Even Li Auto, which is known for being "frugal" among new - energy vehicle startups, spent over 10 billion yuan on R & D in 2024.

Leapmotor attributes its R & D level, which is far lower than that of its peers, to efficiency. For example, by the end of June 2024, Leapmotor had about 3,800 R & D employees and stated that its R & D backbone team came from the electronics and IT industries. When they switched to the R & D field of intelligent new - energy vehicles, they had a first - mover advantage that many other car companies didn't have. In short, the efficiency was very high.

But if we say that strong employee capabilities and high efficiency are enough, then BYD, which invested 54.2 billion yuan in R & D in 2024, has 120,000 R & D engineers, and invested 5,000 people in intelligent driving, and Xiaomi, which invested 24.1 billion yuan in R & D in 2024 and has about 22,000 R & D personnel, would be "unconvinced."

Caught between high costs and expenses, Leapmotor has achieved high sales but hasn't made a profit.

02 What does it mean to "survive"?

When Zhu Jiangming was asked in an interview, "Has Leapmotor survived?" He simply said: "Not yet."

This is not just a humble statement. If we look closely, Leapmotor is still under great pressure, especially financial pressure. Good product sales mean that more human and material resources are needed to keep up. Professionally speaking, Leapmotor is in an expansion phase, and expansion requires money.

In 2024, with the hot sales of Leapmotor C10 and C16, Leapmotor's operating cash flow rapidly increased to nearly 8.5 billion yuan. However, the capital expenditures for equipment, rent, and human resources also increased, reaching 13.3 billion yuan, far exceeding the cash flow from car sales. So, in fact, the overall cash and cash equivalents decreased from 11.7 billion yuan in 2023 to 6.4 billion yuan by the end of 2024.

When comparing Leapmotor's asset - liability situation with other new - energy vehicle startups, in 2024, Leapmotor's asset - liability ratio was 73%, far higher than XPeng's 62% and Li Auto's 56%.

Of course, Leapmotor has come up with many ways to "survive" and "keep going."

To improve the efficiency of sales expenses, Leapmotor adopted a "1 + N" sales model, which means a small number of direct - operated stores plus a large number of agent stores. This helps Leapmotor reduce asset investment while expanding rapidly. As of the first quarter of 2025, Leapmotor had 756 sales stores and 449 service stores, and its marketing expenses accounted for only 6% of its revenue. In contrast, XPeng, which also uses a direct - operated + dealer model, had a total of 690 stores in the first quarter, and its marketing expenses accounted for 12% of its revenue. Li Auto, which mainly uses a direct - operated model, had a marketing expense ratio of 10%. Overall, Leapmotor has proper control over its marketing expenses.

Image source: Leapmotor's financial report

However, this distribution model has also received a lot of controversy and complaints. The original intention of the "1 + N" model was for a city manager to support multiple dealers. But as the number of dealers increases, the difficulty of regional management also increases. Moreover, 4S stores are essentially self - supporting, and there may even be a competitive relationship between different dealers. For example, a netizen on Xiaohongshu complained that after picking up a car at the Yanqing store in Beijing and going to the Yayuncun store for window tinting, they found that only customers who ordered cars at that store would get a full - car window tint, while customers from other stores would only get the four windows tinted. Another car owner complained that the 4S store where they picked up the car went bankrupt, and the promised free labor for car maintenance when they bought the car was never fulfilled, and they had nowhere to complain.

Zhang Jia (a pseudonym), a senior practitioner in the new - energy vehicle industry, told Node Auto: "Insiders know that different 4S stores of the same brand have their own KPIs and competitive relationships, but consumers won't understand. This is a common problem for car companies using the dealer model. In the end, they will complain about the brand's service. Improper dealer management will ultimately damage the brand's reputation."

Similarly, the relationship between the brand and dealers is also a science. Leapmotor was even "betrayed" by its own dealers, who exposed that Leapmotor "forced dealers to register cars under employees' names to boost sales," accusing it of "sales fraud."

In addition to service issues, Leapmotor's products are often complained about for having "no major problems but constant minor problems." During this year's March 15th Consumer Rights Day, Leapmotor was collectively reported on the "Black Cat Complaint" platform. The "main character" of this complaint was the 2023 C01 606 Smart Edition. More than 100 car owners complained about problems such as instability at high speeds, abnormal noises, and malfunctions in the automatic parking function. The C11 also became a "hot - spot" for complaints due to problems with its abnormal noises, stalling, motor, braking system, and transmission. Of course, Leapmotor also couldn't escape the common problems of new - energy vehicles, such as inflated range and issues with the deposit refund policy...

It should be noted that when Leapmotor went public, its prospectus described the brand as a mid - to high - end market brand with prices ranging from 150,000 to 300,000 yuan. With the hot sales of low - priced cars, the average selling price of Leapmotor cars in the first quarter has dropped to 110,000 yuan. It can be said that it is getting farther and farther away from the "mid - to high - end" market.

Trading on price for scale, Leapmotor, which wants to "survive," still can't avoid the pressure of quality, service, and cash flow.

03 Can Leapmotor survive the tough journey overseas?

In 2024, Leapmotor ranked 11th in global sales. To survive, it has to make it into the top five.

Relying solely on trading on price for volume will only increase the pressure. So, Leapmotor must expand its market. Therefore, going overseas has become an inevitable path.

Not long ago, Leapmotor opened its first store in Hong Kong. "The choice of Hong Kong may be due to policy promotion and further international layout," Zhang Jia told Node Auto. "Firstly, the Hong Kong government provides exemptions from the first - registration tax for electric vehicles, low annual license fees, and accelerates the construction of charging networks, significantly reducing the cost of car ownership for users. From January to April 2025, the penetration rate of new - energy vehicles in Hong Kong has reached 68%. Leapmotor's cost - effective products match the consumption demand under the policy dividends. Secondly, like Hong Kong, the European market also uses right - hand - drive vehicles. After using the policy dividends in Hong Kong to develop right - hand - drive vehicles, it will be very smooth to further penetrate this type of vehicle into Europe."

Image source: Auto Home Research Institute

When it comes to going overseas, the first thing that comes to mind is local layout, which means spending a lot of money. To solve this problem, Leapmotor came up with a way - reverse overseas expansion. Leapmotor and Stellantis Group jointly established "Leapmotor International." The joint - venture company has the rights to export, sell, and manufacture products in markets outside the Greater China region.

Obviously, what Leapmotor wants to do is to leverage the strength of others. It wants to use Stellantis Group's mature sales channels and good reputation to improve its efficiency in going overseas.

However, as Wu Qiang, the co - president of Leapmotor and the person in charge of the joint - venture project between Stellantis and Leapmotor, said, "Don't think that overseas expansion is that easy, especially for a company like ours that has never done it overseas. Although Stellantis Group is helping us, we should see the challenges rather than just the gold everywhere."

Node Auto believes that the right to speak may be Leapmotor's first challenge. Stellantis Group holds 51% of the shares in the joint - venture enterprise, which may mean that Leapmotor has to make concessions in terms of product positioning, pricing, etc. Of course, for now, it seems okay for Leapmotor to hold on to Stellantis Group's "thigh" and make these concessions. However, this may plant a hidden danger.

There is a precedent for the collapse of an automotive alliance due to equity distribution. Nissan and Renault are a typical example. After Renault saved Nissan from the verge of bankruptcy, Nissan's sales exceeded Renault's. But due to the equity distribution problem, most of the profits were distributed to Renault, which became the reason for their final split.

If the challenge of profit distribution is still in the future, then the more immediate challenge for Leapmotor, which focuses on cost - effectiveness, is how to increase sales volume and make money overseas.

For example, Leapmotor's sales volume in Hong Kong is only around 40,000 - 50,000 vehicles per year. Coupled with the R & D expenses for right - hand - drive models, this will inevitably dilute Leapmotor's profits. Even if the joint - venture enterprise