Source: Geek Park
Author: Cao Siqi

"Elimination" is nearly everyone's consensus in China's Electric Vehicles market.

Some think that ultimately only 5 car manufacturers will remain, while others are slightly more optimistic, believing that 8 or 10 could still be around. But in any case, when everyone starts counting on their fingers which enterprises can ultimately get the ticket to the final stage, $BYD COMPANY (01211.HK)$ , Huawei, $XIAOMI-W (01810.HK)$ Among the new car manufacturers, "LEAPMOTOR" might not be the first name that comes to mind.

But it is precisely this relatively low-profile car company that has become the biggest dark horse in China's Electric Vehicles market in 2024. $LEAPMOTOR (09863.HK)$ In total, nearly 300,000 new cars were delivered throughout the year, doubling compared to the same period last year, ranking third among all new car-making forces. In the past year, LEAPMOTOR's stock price has increased by more than 80%, with a market capitalization exceeding 60 billion Hong Kong dollars. As of Friday's market close, LEAPMOTOR's stock price was reported at 48.05 Hong Kong dollars, with a latest total market capitalization of approximately 64.2 billion Hong Kong dollars.

At the same time, the latest Earnings Reports show that LEAPMOTOR achieved a quarterly profit turn-around in the fourth quarter of 2024, one year ahead of the group's originally set goal. $Li Auto (LI.US)$ 、 $Chongqing Sokon Industry Group Stock (601127.SH)$ Afterward, the 3rd successful new force auto company to turn a profit.

Even so, most people still do not understand what kind of company LEAPMOTOR is. When mentioning LEAPMOTOR's products, it often requires a nickname closely related to competitors, "Half-price Ideal," to label it.

All these phenomena make one feel that this company is very "not a new force" – no founder's golden phrases, no grand visions related to new technologies such as autonomous driving, and even no news and stories related to burning money – this so-called "full-stack self-research" auto company spent less than 3 billion yuan on R&D in 2024, only 1/3 or less than other new forces.

We are very curious about what kind of auto company LEAPMOTOR is and why it can stay ahead of many star competitors.

1. "Half-price Ideal"? It's not that simple.

LEAPMOTOR's current sales core is basically supported by "extended-range SUVs."

In the total delivery volume of nearly 0.3 million in 2024, the C series accounted for 76.6%, with the C10, C11, and C16 models providing extended-range power options contributing to the core sales.

From the results, the models that drove LEAPMOTOR’s sales to double growth conform to the current product formula in China’s New energy Fund market, "extended-range + SUV = bestseller." The first and second places ahead of LEAPMOTOR in the new force sales are also based on such models as market mainstays.

The biggest difference is that LEAPMOTOR's cars are cheaper than theirs and quite a bit cheaper. According to the Earnings Reports data, in 2024, the average selling price of a LEAPMOTOR vehicle is about 0.108 million yuan, with the official top configuration price of the flagship six-seat SUV C16 being 0.23 million cheaper than the entry-level six-seat SUV L9 from Ideal, and it is a full 0.29 million cheaper than the Wenjie M9.

It is precisely for this reason that LEAPMOTOR has been playfully referred to as "half-priced Ideal" on Social Media.

However, the decision to layout the range extender was made back in April 2020.

The environment at that time was very different from now: Ideal had not yet become the sales champion among the new forces, and there were no blockbuster products available for imitation on the market; the range extender was viewed as "backward technology"; LEAPMOTOR's first two-door pure electric sports car S01 only sold a few thousand units in its first year after release, and the company’s owner Zhu Jiangming even had to dip into his own pockets to pay employees' salaries.

Therefore, Zhu Jiangming believes that the key to LEAPMOTOR achieving a doubling growth in 2024 does not lie in hitting a big jackpot, but in being able to provide consumers with "good but not expensive" products - this has always been the price-friendly brand tag he wishes to place on LEAPMOTOR. The Earnings Reports show that LEAPMOTOR's gross margin in 2024 is 8.4%. In contrast, Ideal reached a gross margin of 22.2% in 2023, while other new forces are generally above 10%.

In fact, it is not only the gross margin; LEAPMOTOR's operational philosophy has substantial differences from most of the new force automakers established during the same period.

LEAPMOTOR was established in December 2015. Among the new car manufacturers established during the same period, the founders mostly came from the Internet industry, while LEAPMOTOR's founder, Zhu Jiangming, is a technology background individual born in the 1960s. Before founding LEAPMOTOR, he worked in the IT industry for over 30 years and helped Zhejiang Dahua Technology become the second largest in the global Security monitoring industry, having a deep understanding of research and development and technology.

If Li Xiang is a super product manager who can create the concept and product of a "mobile home" with a strong Internet vibe, then Zhu Jiangming is a typical traditional engineer. He has famously said:

"Electric vehicles are just electronic products, with 70% consisting of electronic components."

For him, the biggest opportunity is to reuse the accumulation of over thirty years in the electronics industry on 70% of the components of the whole vehicle, thus producing the same product at a lower cost.

From this perspective, whether in technical background or the approach to popularizing products, Zhu Jiangming is more like BYD's founder Wang Chuanfu. However, the two have slight differences in specific technical directions. Wang Chuanfu, who graduated from the Nonferrous Metals Research Institute, made breakthroughs starting with batteries, acquiring key technologies for Electric Vehicles; while Zhu Jiangming, from the IT Hardware industry, intends to pave a technical path belonging to LEAPMOTOR through hardware-software integration and electronic integration.

2. Comprehensive self-research and cost-cutting maniac.

After LEAPMOTOR was established, Zhu Jiangming quickly clarified a principle: for core components related to the three electric systems, LEAPMOTOR must achieve "fully self-research and development".

In fact, "fully self-research and development" is a phrase that most Electric Vehicles companies use when communicating externally to highlight their technological advantages. Generally, for Hardware and the underlying driving algorithms, Auto companies directly purchase mature solutions from suppliers and then develop Application software at a higher level, such as new features like smart driving, active suspension, and smart cockpit.

Therefore, typically the technologies and functionalities corresponding to "fully self-research and development" are cutting-edge and can create product premiums.

However, LEAPMOTOR's "fully self-research and development" is quite the opposite; its focus is not on pursuing the most cutting-edge features. Just like LEAPMOTOR's products, they seem somewhat moderate and even uninteresting. However, the integration of hardware and software achieved through self-research and the advantages of platformization play a crucial role in reducing prices. Higher prices are not the goal of LEAPMOTOR's self-research; lower prices are.

From the key components of Electric Vehicles like electric drives and battery packs (unlike BYD, LEAPMOTOR does not participate in the development of Cells) to smaller components like doors and headlights, LEAPMOTOR focuses on self-research and manufacturing.

The most significant result of self-research and self-manufacturing is the advantage of platformization, often humorously referred to as "nested dolls" in the smartphone industry. There are two benefits of these nested dolls: one is that it can accelerate the development cycle of different vehicle models, and the other is that different models can reuse the same components. During procurement, the main manufacturers can obtain greater bargaining power due to larger shipment volumes.

LEAPMOTOR's two best-selling models last year, the C10 and C16, are typical "nested doll products". It is said that after Zhu Jiangming saw the ideal L9 (a three-row six-seat SUV model) selling well in 2022, he decided to accelerate the launch of the LEAPMOTOR C16—originally intended for a 2026 release—by nearly two years ahead of schedule. Compared to the two-row five-seat C10, over 80% of the components in both cars are interchangeable, and the development costs for the two vehicles are only 1.2-1.3 times higher than for a single vehicle.

Another direction of self-research is cost reduction through integration, which means achieving the same effect with fewer and more economical resources. This is very typical of engineering thinking. The "Four-leaf Clover" architecture released by LEAPMOTOR in 2024 realizes the integration of four domains, excluding the chassis field, for smart vehicles, somewhat similar to building cars using methods from chip manufacturing.

Another extreme example is: by integrating the controller that controls the electric door handle into the domain controller, LEAPMOTOR successfully saved an independent controller that is usually required for electronic doors, worth about 100 yuan.

According to LEAPMOTOR's official statement, 65% of the parts that account for the cost of the entire vehicle are self-developed and manufactured by LEAPMOTOR. It is precisely this self-development and manufacturing model that enables LEAPMOTOR to achieve an alternative "vertical integration" in the Electric Vehicles industry — a vehicle manufacturer that can almost handle all Tier 1 duties by itself.

The industry institution Boqi Data, which specializes in car product disassembly benchmarking, once provided a set of data: in the LEAPMOTOR C01 model, 80% of the high-value components that account for the BOM cost are only 7% directly procured from international suppliers; while for the Volkswagen ID.6, the proportion is 66%, and for the Xiaopeng P7+, the proportion is 47%.

Externally, the three electric components self-developed and manufactured by LEAPMOTOR have also received widespread recognition. LEAPMOTOR's official statement indicates that it has currently received project appointments from 10 global customers, including the fourth largest automaker in the world, Stellantis, as well as China's FAW Group. According to the memorandum, LEAPMOTOR will jointly develop New energy Passenger Vehicles and cooperate on components with FAW.

3. New coil method

By using technological innovation to control BOM costs, along with the "good and not expensive" low gross margin pricing concept, LEAPMOTOR's products captured a market share of 300,000 units in the highly competitive and largest market of 0.1-0.2 million. This is the sales foundation for LEAPMOTOR to turn a profit.

The other side of making money lies in the management's attitude and choices about costs, "spending where necessary, savings where possible."

It is well known that the automotive industry is a long-cycle and heavily invested industry, with previous standards generally considering tens of billions as the basic threshold for automobile manufacturing. For new forces emphasizing "full-stack independent research and development," the money spent on research and development is naturally not less. Data shows that in 2023, both Li Auto and NIO have annual R&D investments exceeding 10 billion, while XPeng's R&D expenses also exceed 5 billion yuan.

However, LEAPMOTOR has become an exception. Even with the label of "full-domain independent research and development," from 2015 to 2024, their accumulated R&D expenditure is only about 5 billion yuan!

There are two important reasons for this. One is that compared to founders entering the automotive industry from an Internet background, Zhu Jiangming, who transitioned from the IT electronics industry, can avoid many "hardware" pitfalls; the second is that he clearly understands the boundaries of research and development, focusing more on efficiency than scale.

Therefore, compared to R&D in areas like three-electric systems, LEAPMOTOR has adopted a following strategy in recent years regarding cutting-edge technologies related to intelligent driving. Zhu Jiangming believes that the algorithms for intelligent driving are still in a period of rapid iteration, and even if they initially gained an advantage by manpower, this may not be a long-term and efficient benefit, so it is better to follow quickly when the technology converges.

In other words, LEAPMOTOR is not looking to explore a new paradigm in the field of intelligent development; rather, most of the efforts remain on engineering optimization: achieving the same effect with smaller resources. At the LEAPMOTOR technology launch on March 10, LEAPMOTOR announced that on the future LEAP 3.5 platform, all NVIDIA Orin chips will be replaced with Qualcomm 8650 chips, and it was stated that the intelligent driving functions like urban NOA that have already been tested on Orin chips can still be achieved.

In 2025, LEAPMOTOR set a sales target of 0.5 million for itself and aims to achieve annual profitability. This is not an easy goal; they need to participate in the competition with brand new pure electric products in the niche market of the new B series. At the same time, they must rely on their collaboration with the Stellantis Group to layout sales in Europe and plan for localization of production.

When entering the Auto Industry, Zhu Jiangming once described LEAPMOTOR as the 'Xiaomi of the automotive world.' Later, after Lei Jun led the car manufacturing, this term was changed to 'the Uniqlo of the automotive world.'

Recently, when discussing LEAPMOTOR's future gross margin targets, Zhu Jiangming emphasized that LEAPMOTOR aims to create 'good yet affordable' products, with a gross margin ceiling of 10%—Lei Jun also mentioned in the early days of Xiaomi that the gross margin of Xiaomi phones should not exceed 5%.

Now, Xiaomi has shed the label of cost-effectiveness and has become a high-end technology brand capable of supporting luxury performance vehicle products. Meanwhile, Zhu Jiangming remains firmly committed to providing a counter-encroachment solution for the increasingly competitive New energy Fund market through technological innovation.

Editor/rice