Low-Price Strategy Analysis: Can Leapmotor Sustain Its Leading Market Position?

The more you sell, the more you lose.

Automobiles are the largest bulk consumer goods second only to real estate, an extension of identity recognition, and a symbol of technological strength. In the automotive industry, "cheap" has never been a label that can be relied on for a long time.

On August 12, Leapmotor dropped a price bomb.

The A05 was officially launched with a starting price of 63,900 yuan. This price is similar to a large-sized low-speed electric vehicle for the elderly, but it is equipped with LiDAR, Qualcomm 8650 chip, 8295 cockpit, 510km CLTC range, 30%-80% energy replenishment completed in 16 minutes, 43 assisted driving functions, and a space utilization rate of 88.4% — if consumers three years ago saw these configurations, they would probably think this is a model at the 150,000-yuan price level.

But Leapmotor sells it for only 63,900 yuan.

The moment the news was released, social media exploded. "How are we supposed to survive this?" "Competitors held overnight meetings to revise their PPTs" "Is Leapmotor trying to push new energy vehicles down to below 50,000 yuan?" All kinds of comments flooded in.

This is not the first time Leapmotor has shocked the market. From being unknown in 2024 to achieving full-year profit for the first time in 2025, and then delivering 110,000 vehicles globally in the first quarter of 2026 with overseas sales skyrocketing 442% year-on-year, Leapmotor has blazed a bloody path in the red ocean of new energy vehicles with its "low price and high configuration" Uniqlo-style model.

However, behind the flowers and applause, a dangerous signal is flashing: in the first quarter of 2026, Leapmotor's gross profit margin plummeted to 9.4%, a sharp drop of 5.5 percentage points compared with 14.9% in the same period last year; the attributable net profit loss was 390 million yuan, ending the previous profit record of three consecutive quarters; the average selling price per vehicle fell to 98,000 yuan, hitting a new low in the past two years.

The capital market has long taken a cautious attitude towards Leapmotor's low-price strategy. After the A05 was launched, Leapmotor's stock price performed flat, like a mirror reflecting its true appearance after the aura of popularity faded.

More sales mean more losses. This "cost-performance formula" that Leapmotor once was proud of seems to be approaching its limit.

The dark horse breaking out from the sinking market

To tell Leapmotor's story, we have to go back to the era when "new car-making forces" were still equated with "bottomless money-burning pits".

While Nio, Li Auto and Xpeng were fighting in the high-end market above 300,000 yuan, Leapmotor chose a completely different path — sinking. Founder Zhu Jiangming, with more than 30 years of accumulated electronic engineering technology, has embedded "self-research and self-manufacturing" into Leapmotor's genes. The proportion of self-researched and self-manufactured core components accounts for 60% of the total vehicle cost, including the three-electric system and intelligent system.

This means that Leapmotor can push costs to a level that competitors can hardly imagine. While other manufacturers are still relying on suppliers for battery packs and motors, Leapmotor has achieved vertical integration from chips to electric drives. This "electronics factory thinking" gives Leapmotor hidden cards in the price war that others do not have.

In 2025, Leapmotor's full-year gross profit margin reached 14.5%, a significant increase from 8.4% in 2024, and as high as 15.0% in the fourth quarter. That was Leapmotor's highlight moment — sales volume approached 600,000 units, achieving full-year profit for the first time, the joint venture "Leapmotor International" with Stellantis Group was officially put into operation, and overseas channels expanded rapidly.

In 2026, Leapmotor even set an ambitious target of 1 million annual sales and 5 billion yuan in net profit. In the first quarter, overseas sales reached 40,900 units, accounting for 37.1% of total sales, with a staggering year-on-year increase of 442%. In Europe, Leapmotor registered 23,300 units in 16 countries in the first quarter, a year-on-year increase of 726.5%; in Italy, the market share of pure electric vehicles is as high as 33.5%.

For a time, Leapmotor became a benchmark for Chinese new energy vehicles going global, a "dark horse among new forces" in the eyes of the capital market, and a synonym for "so good that people love it" in consumers' mouths.

But on the flip side of the myth is the continuously compressed profit margin.

When cost performance becomes a double-edged sword

The financial report for the first quarter of 2026 has sounded the alarm for Leapmotor's low-price strategy.

The gross profit margin is 9.4%, and the gross profit margin of the whole vehicle is only about 7%. For every vehicle sold, the gross profit Leapmotor earns may not be enough to cover sales expenses and administrative expenses. The net cash flow from operating activities in the first quarter was -6.61 billion yuan, and the free cash flow gap was as high as 7.4 billion yuan.

Li Tengfei, Vice President and CFO of Leapmotor, explained on the earnings call that there are three main reasons for the decline in gross profit second, the decline in capacity utilization leads to an increase in manufacturing cost per unit; third, the reduction in strategic cooperation business.

To put it in layman's terms: in order to boost sales, Leapmotor has sold more cheap cars, and the profits of these cheap cars are extremely thin.

This is a typical "scale trap" — you think more sales can dilute costs, but when the price war reaches its extreme, the scale effect will be completely swallowed up by the continuously declining profit per vehicle. Li Tengfei admitted that at present, Leapmotor loses about 4,000 yuan on average for each vehicle sold.

Behind Leapmotor, raw material prices are also pressing step by step. Prices of lithium carbonate, chips and precious metals continued to rise in 2026. Li Tengfei revealed that the company has stocked up on major raw materials last year, which can basically cover the production and use in the first quarter, but this is not a long-term solution after all. If raw material prices continue to rise from the third quarter to the fourth quarter, under the premise of unchanged terminal selling prices, it will have a great impact on Leapmotor's gross profit margin.

And what is Leapmotor's choice? Continue to cut prices.

The 63,900 yuan price of the A05 is already cheaper than many fuel vehicles of the same level. What's next? 50,000 yuan? 40,000 yuan? When an intelligent electric vehicle equipped with LiDAR is sold at a price similar to that of an iPhone, we have to ask: Is this a blessing brought by industry, or has it been pushed to the limit by involution?

The going-global narrative

Leapmotor's overseas story sounds very nice, but there is another flavor when you savor it carefully.

In the first quarter of 2026, Leapmotor's overseas sales reached 40,900 units, and the European market grew rapidly. But what supports these sales is still the cost-performance strategy of "good and affordable". In the price range of 150,000 to 200,000 yuan in Europe, Leapmotor fills the gap left by local automakers in the field of affordable electric vehicles.

This reminds people of Japanese cars in the 1980s and South Korean cars in the 1990s, which also knocked on the door of European and American markets by relying on cost performance. But the difference is that Toyota took 30 years to turn "lean production" into a global standard, and Hyundai and Kia completed brand transition through design and quality. They finally got out of the low-price quagmire and established brand premium.

What about Leapmotor? Its good sales performance in Europe is largely due to the support of Stellantis' channels. Leapmotor uses Stellantis' global sales network to establish nearly 1,000 sales and service outlets in more than 40 countries. In Spain, Leapmotor plans to achieve localized production through Stellantis' factories to avoid the EU's maximum 37.6% countervailing duty on Chinese electric vehicles.

This is indeed a smart going-global strategy. But the question is, when European consumers walk into Stellantis' showrooms, are they buying the brand "Leapmotor", or "that cheap Chinese electric car in Stellantis' channels"?

Compare with the real benchmarks of going global: BYD sells its Blade Battery and DM-i technology in Europe, Geely relies on the brand matrix of Volvo and Zeekr, Xpeng bets on intelligent driving, and Chery has established a complete localized R&D and manufacturing system overseas. Their core competitiveness for going global lies in technology, brand and product strength, not simple price advantages.

Leapmotor's success in overseas markets is currently more reflected in "channel success" and "price success". If the cooperation with Stellantis changes someday, or the EU's tariff policies are further tightened, where is Leapmotor's brand moat?

The cold eyes of Hong Kong investors

On the Hong Kong Stock Exchange, Leapmotor's stock price trend reveals the true attitude of the capital market.

Although sales have repeatedly hit new highs, Leapmotor's stock price has not experienced a corresponding surge. While cheering for the sales volume, investors are also calculating the increasingly thin gross profit account.

The loss of 390 million yuan in the first quarter of 2026 makes the full-year net profit target of 5 billion yuan seem out of reach. According to Li Tengfei's calculation, 11% of the annual sales target has been completed in the first quarter, and about 640,000 units need to be delivered in the second half of the year to achieve the million-unit target; in terms of profit, there is still a gap of about 5.4 billion yuan to fill to reach the 5 billion yuan target.

Caitong Securities pointed out in a research report that Leapmotor's overall operation in Q1 is under pressure, but the performance is in line with expectations. Affected by the downward demand of the industry in Q1, the year-on-year growth rate of the company's sales slowed down, and the sales matrix showed a structural decline. The sales proportion of the C-series fell to 45.1%, resulting in a double kill of gross profit margin and ASP.

Guojin Securities believes that the year-on-year and month-on-month decline in Leapmotor's gross profit margin in the first quarter is mainly due to changes in the product mix of the whole vehicle, the insufficient release of the sales scale effect and the relatively low capacity utilization rate.

Investors are actually very clear that Leapmotor is now exchanging profits for scale, and short-term losses for long-term space. This logic works when capital is abundant and the industry is expanding rapidly. But when the industry enters the "New Energy Vehicle 2.0 Era", the penetration rate has exceeded half, the growth rate has slowed down, and competition has shifted from incremental to stock, how long can the simple scale logic last?

A Hong Kong stock fund manager who asked for anonymity told me: "Leapmotor's problem is not whether it can sell cars, but whether it can make money. Now it is bleeding for every car it sells. If the industry price war lasts for another two years, how long can its cash reserve last? 30.6 billion sounds like a lot, but it burned 7.4 billion in free cash flow in the first quarter."

This is not alarmist talk. From January to February 2026, the profit margin of China's automotive industry was only 2.9%, which is significantly lower than the average level of 5.8% of downstream industrial enterprises. When the whole industry is bleeding, Leapmotor's low-price strategy is no longer a way to break through, but overdraw its own future.

The New Energy Vehicle 2.0 Era

Let's shift our vision away from Leapmotor and take a look at what is happening in China's entire new energy vehicle industry.

In 2026, the penetration rate of new energy vehicles in China has exceeded 50%, and the market has entered a "stock game" from an "incremental game". The key word of competition at this stage is no longer "who is cheaper", but "who has stronger technical barriers", "whose brand is more valuable" and "who can win in the second half of the intelligentization".

BYD has Blade Battery and full-industry chain vertical integration; the Huawei-related system has intelligent driving and ecological empowerment; Xiaomi has traffic and brand momentum; Li Auto has precise product definition and family user mindshare; Xpeng goes all-in on pure vision intelligent driving; Nio builds its moat through battery swapping and services.

What does Leapmotor have? Its self-research capability is indeed strong, and its cost control is indeed strict, but these things were core competitiveness in the "1.0 Era", but only entry tickets in the "2.0 Era".

More critically, Leapmotor's brand image is being solidified by "low price". When the A05 is sold for 63,900 yuan, when the B-series becomes the main sales force, and when the average price per vehicle falls to 98,000 yuan, Leapmotor is becoming a synonym for "cheap cars" in consumers' minds. For an automotive brand that wants long-term development, this is an invisible ceiling.

Li Tengfei revealed that Leapmotor is planning a second brand, positioned in the market above 300,000 yuan, which is expected to be launched in the second half of 2027. At the same time, the D99 flagship MPV will open pre-sales in June, and the D19 model is highly anticipated, with the goal of achieving stable monthly sales of 10,000 units.

The success of these high-end initiatives will determine whether Leapmotor can jump out of the "low-price trap". But the road to brand upward is never easy. Just look at the difficulties Wuling Hongguang encountered when trying to impact the high-end market with its "Silver Label" series, you will know how difficult it is to change once consumers' minds are formed.

The ultimate interrogation of the Uniqlo model

Some people say that Leapmotor is the Uniqlo of China's automotive industry — with extreme cost performance, ordinary people can also enjoy the dividends of technological progress. This metaphor seems appropriate at first glance, but selling clothes and selling cars are ultimately two different sets of logic.

Uniqlo can succeed globally because it sells a "no-fault daily consumer choice". Cars are different. Automobiles are the largest bulk consumer goods second only to real estate, an extension of identity recognition, and a symbol of technological strength. In the automotive industry, "cheap" has never been a label that can be relied on for a long time.

What's more, Uniqlo's profits come from extreme supply chain management and scale effects, while Leapmotor's profits are being continuously compressed.

Leapmotor used to be brilliant. It took only a few years to grow from an unknown second-tier new force to an industry dark horse with monthly sales of 70,000 units and rapid overseas expansion. It has proved that "Made in China" can push the cost of intelligent electric vehicles to a level that amazes the world.

But the glory belongs to the past. In the 2.0 era of new energy vehicles, what China's automotive industry needs are brands, technology, innovation and global operation capabilities, rather than endless price involution. Chery, Geely, BYD, Xpeng and others have used their success in overseas markets to prove that Chinese cars can win the respect of the world by product strength, not by the word "cheap".

Low price can win for a while, but not for a lifetime. Whether Leapmotor can continue to lead in its next chapter does not depend on the price tag, but on whether