For Leapmotor, which does "half - price" business, selling high - end products is the biggest challenge.
On August 1st, Leapmotor announced that its total vehicle deliveries in July reached 50,129 units, a year-on-year increase of over 126%. In July, Leapmotor also made its debut on the Fortune China 500 list for the first time.
The main models driving Leapmotor's soaring sales are the C-series SUVs, known as the "half-price Li Auto". They replicate Li Auto's intelligent and comfortable experience in the 150,000 - 200,000 yuan price range, helping Leapmotor top the sales list of new - energy vehicle startups for four consecutive months.
Leapmotor has mastered the strategy of using extreme cost - effectiveness to compete with star models and tap into the sinking market. At the B01 launch event, through frequent comparisons and emphasis, Leapmotor rightfully tagged the B01 as the "half - price Tesla Model 3". As a result, the number of locked orders for the B01 exceeded 10,000 within 72 hours.
This "high - configuration, low - price" model may seem simple, but few new - energy vehicle startups can replicate it. Behind this lies sophisticated cost - control capabilities, system resources to support "full - scale self - research", and precise decision - making on self - research projects... It's not easy to have all these elements in place.
Cost - effectiveness is the key to Leapmotor's success, yet it also leads to its high - end market dilemma. On July 28th, the topic "Leapmotor executives respond to the 'half - price Li Auto' title" trended on Weibo, with over 20 million views. The incident started when Cao Li, the vice - president of Leapmotor Technology, clarified on Weibo that the brand's first D - series flagship SUV targeting the 300,000 - yuan market is not the "half - price Li Auto".
Cao Li's statement was interpreted as Leapmotor's aversion to the "half - price" label. However, Zhu Jiangming, the chairman, had previously responded, saying that the "half - price Li Auto" label is recognition of Leapmotor's product strength and actually adds value to the brand. It's just that the C - series models in the 150,000 - 200,000 - yuan range are the core products competing with Li Auto. If the higher - end D - series, priced above 300,000 yuan, is still associated with the "half - price Li Auto" label, it will do more harm than good to its attempt to enter the high - end market.
Leapmotor has been preparing for its high - end product line. In an interview at the B01 launch event, Zhu Jiangming clearly stated that "Leapmotor will never enter the ride - hailing vehicle market", aiming to reduce brand resistance for high - end products. Since the launch of the C - series, Leapmotor has been laying the groundwork for the D - series, as this is a crucial step in achieving a healthy gross profit margin.
Nevertheless, judging from the current market feedback, it remains a huge challenge for Leapmotor, which started from the cost - effective market, to get the mainstream market to accept models priced above 300,000 yuan.
The 'half - price business' is not easy, and Leapmotor's cost - reduction method is hard to replicate
To offer products with half the price of star models while maintaining core configurations requires extremely high cost - control capabilities from car manufacturers. Leapmotor's cost - saving strategies have been thoroughly analyzed over the years.
Firstly, it adopts a light - asset sales model. In China, over 90% of Leapmotor's sales channels are through dealers. Leapmotor believes that dealers are more cost - conscious, with a higher input - output ratio and more cost - effective. Overseas, it leverages the global channels of its major shareholder, Stellantis, and sells cars in Stellantis' existing stores, saving on expansion costs. Now, it has over 400 overseas sales outlets.
More importantly, Leapmotor has a very high technology reuse rate and parts sharing rate. The C10, C11, and C16 of Leapmotor are all developed on the same platform, and the proportion of shared parts for each model can reach up to over 80%. The parts sharing rate of the B - series models may eventually reach 88%.
However, these are not impossible to replicate. What makes Leapmotor unique among new - energy vehicle startups is its high - level self - research. According to official data, Leapmotor has achieved self - research and self - manufacturing of core components accounting for 65% of the vehicle cost, including even the audio system. Zhu Jiangming once said in a media interview that making the audio system in - house can save at least one or two hundred yuan compared to purchasing from suppliers.
Core components such as the three - electric system and intelligent driving are the focus of Leapmotor's self - research, covering over 60% of the vehicle's BOM (Bill of Materials) cost. According to Zotye Auto Research, Leapmotor's R & D cost per vehicle is 40% lower than the outsourcing model.
The high upfront investment and uncertain future returns are the biggest obstacles to self - research. Leapmotor's courage to pursue full - scale self - research is partly due to the founder's wealth, which can support the early development stage. In 1993, Zhu Jiangming and his friend Fu Liquan founded the predecessor of Dahua Technology. Seizing the opportunity of the digitalization of video surveillance recording technology, they entered the security industry. Now, Dahua Technology has become a security giant with the second - highest global market share and a market value of over 60 billion yuan. In 2015, Zhu and Fu founded Leapmotor together.
In a documentary on Leapmotor's 9th anniversary, when talking about the past difficult times, Wu Cun, the person in charge of Leapmotor's electric drive business, said, "At that time, I firmly believed that as long as the boss persisted, we would be fine because we knew the boss was rich." Zhu Jiangming also mentioned that for a long time, when the company couldn't pay salaries, he and shareholder Fu Liquan would transfer money into the company according to the proportion. This is something that professional managers can't do.
As Leapmotor raises funds, goes public, and expands in scale, the financial support from the founder and original shareholders gradually weakens. However, the methodology and technological accumulation that Zhu Jiangming gained from his first startup are more crucial for Leapmotor's subsequent development. Zhu Jiangming once publicly stated that "since its establishment, Leapmotor's strategy has been to self - research all core technologies", and his confidence comes from Dahua Technology's technological and data accumulation in the intelligent transportation field.
According to a report by The Paper, in an interview two years after Leapmotor's establishment, Zhu Jiangming mentioned that network interconnection, software - hardware integration, and embedded applications are Dahua's core competencies, which all empower Leapmotor. He also mentioned at that time that Leapmotor's assisted - driving system would incorporate Dahua's data on urban traffic violation monitoring, including the driving habits and violation preferences of pedestrians and vehicles, to enhance the assisted - driving capabilities.
Dahua provides Leapmotor with rich technological, human, and supply - chain resources. Coupled with Zhu Jiangming's past cost - management experience, Leapmotor's self - research has a very high input - output ratio, which many new car - making startups can't achieve. From 2019 to 2021, Leapmotor developed three models with a total R & D cost of only 1.4 billion yuan.
However, Leapmotor won't blindly pursue "self - research for everything". In many interviews, Zhu Jiangming always emphasizes the "input - output ratio", which led Leapmotor to discontinue some popular self - research projects, such as chip development.
In 2020, Leapmotor released the "Lingxin 01" assisted - driving chip, which was jointly developed with Dahua Technology over three years. In an interview with 21st Century Business Herald in 2024, Zhu Jiangming said that chip self - research has been suspended. The reason is that the process requirements for intelligent driving chips are getting higher and the iteration speed is getting faster. Due to Leapmotor's limited scale and low chip usage, the return on investment for self - research chips is very low.
It's difficult to abandon sunk costs. NIO made a different choice. NIO has invested a large amount of capital and manpower in self - researching chips. Founder Li Bin said that the investment cost of researching the Shenji NX9031 chip is "about the same as building 1,000 battery - swapping stations", which is about 1.5 billion yuan.
Previously, he mentioned that self - researching chips can save several hundred yuan per vehicle. Assuming a savings of 900 yuan per vehicle, NIO would need to sell about 1.67 million vehicles equipped with the Shenji NX9031 to break even. Therefore, NIO is currently actively seeking cooperation with automakers and investors for its chip business to recover funds.
Breaking into the high - end market, firmly refusing to enter the ride - hailing vehicle market
Although Leapmotor focuses on cost - effectiveness, it is very cautious about being regarded as a ride - hailing vehicle brand. Cao Li mentioned in a media interview at the B01 launch event that "mainstream sedans, especially those priced around 100,000 yuan, really test a car manufacturer's capabilities. If an electric sedan is poorly made, it may end up as a ride - hailing vehicle. If it's well - made, it's difficult to control the cost at this price point." Zhu Jiangming also emphasized, "Leapmotor will never enter the ride - hailing vehicle market."
This is because once the brand image is associated with ride - hailing vehicles, it will be a devastating blow to Leapmotor's upcoming high - end product line. Many brands chose to cooperate with ride - hailing companies in the early stage to increase sales volume, but ended up being labeled as "ride - hailing vehicle brands", making it difficult to break into the high - end market. For example, the decline of Nezha Automobile is largely due to its early association with the ride - hailing vehicle brand, which led to the market's rejection of its mid - to high - end products. The investment didn't yield results, and the profit couldn't be improved, so it was naturally eliminated in the fierce competition.
BYD, the leader in the new - energy vehicle market, is also deeply associated with this label. Internet memes like "Buy a car and get a job, that's the reputation" and "When BYD Qin owners have a meet - up, the city's traffic comes to a standstill" not only create a negative perception of BYD's mid - to high - end product line but also affect the real - life experience of private car owners.
Although Leapmotor doesn't actively target the ride - hailing vehicle market, individual ride - hailing drivers' purchases and use are beyond the manufacturer's control. Cao Li said that the biggest highlight of the B01 is its well - rounded performance. The top - end model is priced at only 119,800 yuan, with a range of over 600 km, equipped with a lidar for assisted driving, and has a space comparable to a B - class car. It is indeed attractive in its class.
However, there's no need to worry about Leapmotor. On the one hand, the ride - hailing vehicle market is approaching saturation, and the demand for new operating vehicles is low. On the other hand, brands with a large share in the ride - hailing vehicle market, such as BYD and Aion, not only provide more comprehensive services for operating vehicles, including handling procedures and warranties, but also have a good industry reputation based on the operation of numerous ride - hailing vehicles, which is difficult for new brands and models to shake.
According to the financial report, Leapmotor's gross profit margin in the first quarter of this year reached 14.9%, a record high. Zhu Jiangming revealed that although Leapmotor's semi - annual report hasn't been released yet, the monthly sales volume in the second quarter has been stable at over 45,000 units, and there will be significant improvements in various aspects such as gross profit margin and net profit. He said, "Leapmotor not only aims to break even but also to steadily increase the gross profit margin. This is Leapmotor's goal and what we are currently working on."
The mid - to low - end product line can generate sales volume, but the profit is always limited. To pursue a healthier gross profit margin, it's necessary to produce higher - priced products, which is almost an inevitable path for every cost - effective brand.
Leapmotor has been preparing for its high - end product line for a long time. Zhu Jiangming said in an interview that Leapmotor first launched the C - series priced at 150,000 - 200,000 yuan because this price range is relatively easier to promote compared to the luxury car market and also demonstrates the brand's certain technological capabilities. If it started with the A - series priced at 50,000 - 100,000 yuan and gradually moved up the price range, it would be more difficult. Launching the C - series first is to facilitate the subsequent launch of the high - end D - series.
In brand building, to maintain its "high - end" image, Leapmotor has established a strategy of "comparing upwards" since the C - series. For example, the 150,000 - 200,000 - yuan C - series competes with Li Auto models priced above 300,000 yuan, and the 100,000 - 150,000 - yuan B01 competes with the Tesla Model 3 priced above 200,000 yuan. Following this logic, the D - series priced above 300,000 yuan is likely to compete with star models priced above 500,000 yuan.
According to the currently exposed information about Leapmotor's D - series, Leapmotor's approach to high - end SUVs is to increase the size and upgrade the configurations. Cao Li posted on Weibo that the D - series is positioned as a full - size SUV (the largest and most spacious type of SUV) and will be equipped with the most advanced technologies in Leapmotor and the entire industry. Previously, Zhu Jiangming revealed that Leapmotor's next - generation central domain controller, which will be launched simultaneously with the D - series, will be the first to be equipped with Qualcomm Snapdragon dual 8797 chips.
However, judging from the current market reaction, consumers are not very interested in Leapmotor models priced above 300,000 yuan. It is generally believed that the D - series will only sell well if priced below 250,000 yuan. In addition, many netizens think that the launch of the D - series is a bit late because vehicle purchase tax will be levied next year, and many competitors will preempt the market share next year this year.
It seems that despite Leapmotor's preparations, there are still significant obstacles to climbing up the price range. After reducing costs to the limit, it will be even more difficult to improve the gross profit margin.