In recent times, while many domestic automotive startups have been struggling to maintain momentum in an increasingly competitive market, some companies have emerged from the shadows of losses and are beginning to see the light at the end of the tunnelNotably, after achieving its first quarterly profit in Q4 of 2020, Li Auto's resurgence has been closely followed by Leap Motor, which four years later has finally disentangled itself from the depths of financial deficits.
Leap Motor's recent profit announcement has generated considerable buzz within the industryThe company revealed that by Q4 of 2024, it had turned its net profit positive, achieving this goal a year ahead of scheduleSuch a tangible achievement resonates far more compellingly than even the most ambitious rhetoric, marking a significant milestone in Leap Motor’s journey.
The news of this financial turnaround was met with a surge in Leap Motor's stock price, which spiked by over 12% on January 14, propelling it to the forefront of the Hong Kong automobile sector
This jump in share prices did not just benefit Leap Motor; it created a ripple effect that lifted the shares of other electric vehicle companies like Li Auto and Xpeng Motors, showing a collective recovery among industry players.
One of the primary drivers behind Leap Motor's success has been its ability to capitalize on economies of scaleIn 2024, the company outperformed Li Auto in terms of sales growth, achieving a remarkable year-over-year increaseBy December of that year, Leap Motor reported total vehicle deliveries of over 42,517 units, a staggering 128% increase compared to the previous year, marking a significant milestone as deliveries exceeded the 40,000 mark for two consecutive months.
Industry experts agree that electric vehicle manufacturers typically need to reach a production threshold of around 500,000 units annually to break even financiallyThe founder of Leap Motor, Zhu Jiangming, underscored this point, stating that achieving a production volume of between 400,000 to 500,000 vehicles is crucial for attaining profitability
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By the fourth quarter of 2024, Leap Motor had already surpassed 120,000 cumulative deliveries, which played a pivotal role in its ability to report positive net income for the quarter.
When looking at the entire year of 2024, Leap Motor delivered nearly 300,000 vehicles, representing over 100% year-on-year growthIn contrast, other players such as Li Auto, Xpeng, and NIO saw delivery growth rates fall within the 33% to 40% rangeThis striking contrast showcases Leap Motor's momentum and its capability to seize market share.
With such robust growth, Leap Motor's ambitions are on full display, setting an audacious target of achieving sales of 500,000 vehicles by 2025, which represents a year-on-year increase of approximately 70%. Concurrently, the company aims to maintain a gross margin exceeding 10% for the same year, showcasing their confidence in future performance.
Thanks to effective cost management strategies, product optimization, and scaling operations, Leap Motor anticipates that its gross margin will reach no less than 8% in 2024, a significant improvement from the slim 0.5% margin reported in 2023. Revenue projections for 2024 stand at a robust minimum of 30.5 billion RMB, reflecting at least an 80% increase year-on-year compared to the previous year's growth of only 35.2%.
Leap Motor's cost control capabilities are comparable to industry leader Li Auto
The company’s senior vice president, Cao Li, emphasized last August that Leap Motor remains committed to comprehensive in-house research and development, producing over 60% of essential components internally, thereby allowing them to set competitive pricing based on costsThis meticulous control over key components has enabled Leap Motor to significantly lower procurement costs and maintain a competitive pricing structure.
As Leap Motor looks to 2025, Zhu Jiangming's optimism is palpableOn January 1, he announced the anticipated launch of a revolutionary platform known as LEAP 3.5. Built upon this new architecture, Leap Motor’s upcoming B series is expected to enhance its market competitiveness further, potentially surpassing the success of the current C series, which includes several models priced between 100,000 to 200,000 RMB.
According to last year’s strategies, Leap Motor has earmarked its 2025 product focus on the B series, targeting the largest segment of the Chinese automotive market for A-class cars priced between 100,000 to 150,000 RMB
This strategic pivot aims to fuel exceptional sales growth in the coming years.
During the third quarter earnings conference last year, the management team disclosed plans to launch B series models, which will include the B10, alongside a sedan and an SUVAnalysis from Guosen Securities suggests that the new LEAP 3.5 technology is poised to elevate the value proposition of the B series, enhancing both cost efficiency and intelligence, paving the road for Leap Motor's accelerated advancements in 2025.
However, 2025 will also see the release of several popular new models from competitors, posing challenges to Leap Motor’s new offeringsWith new entries from brands like Xiaomi with the Yu7, Avita 06, Xpeng G7, and Galaxy L9, the competitive landscape promises to be fierceThe secretary-general of the Passenger Car Association, Cui Dongshu, noted that the growth trajectory of new energy vehicles in China is explosive, and while competition at the top remains dynamic, the pricing wars are expected to continue unabated into 2025.
As domestic competition intensifies, many electric vehicle startups are now turning their eyes beyond borders
Leap Motor has strategically aligned itself to leverage international expansion opportunitiesIn October 2023, the company announced that Stellantis, the parent company of Maserati, intends to invest approximately 1.5 billion euros for a 20% stake in Leap MotorThis move is seen as a strategic partnership that could significantly bolster Leap Motor’s overseas ambitions while facilitating shared resources, capacity, and after-sales services to enhance global sales swiftly.
According to data disclosed by Leap Motor, by October 2024, the joint venture with Stellantis established under the name Leap International has already set up 339 stores across 13 countries in EuropeAdditionally, the company plans to expand its operations into Asia Pacific, the Middle East, Africa, and South America, with aspirations of surpassing 500 global sales locations by the end of 2025.
Research from Changjiang Securities highlights Leap Motor’s prospects in international markets, emphasizing that strategies focusing on exporting, SKD (Semi-Knocked Down) assembly, and localized production are pivotal for unlocking overseas potential, promising significant profitability through high earnings per vehicle