In 2024, traditional car companies are accelerating their transformation, new forces are rising strongly, and technology giants are also making cross-border layouts, trying to occupy a place in this blue ocean market. However, even though the smart electric track is extremely lively this year, with waves of voices coming one after another, new technologies and new products are emerging in an endless stream. But the word "profit" has become a thorn in the hearts of many automakers. "Increasing revenue but not increasing profits" is a common phenomenon in the industry, and it is even a "luxury" for new car-making forces with an average age of less than 10 years old.

Previously, only Ideal Auto achieved profitability among the new car-making forces. Now, eight quarters later, the second profitable new force has emerged.

On January 13, Zhejiang Leapmotor Technology Co., Ltd. released a profit forecast showing that the company will achieve positive net profit in the fourth quarter of 2024, achieving the single-quarter profit target one year ahead of schedule. The profit forecast shows that the positive net profit in the fourth quarter of 2024 is mainly due to the company's continued sales growth in the fourth quarter, with monthly average sales exceeding 40,000 units; the company's product structure optimization, with the sales of the higher-priced C series models accounting for more than 77%; and the company's effective cost control and operational efficiency.

While others are pushing prices, Leapmotor is making profits

Unlike the industry's common "hurt the enemy 1,000, hurt yourself 800" type of price involution, Leapmotor adopts a self-driven, benign development involution. From the first positive gross profit margin in the third quarter of 2023 to the first positive net profit in the fourth quarter of 2024, Leapmotor's road to profitability has been steady and decisive.

As the saying goes, if the direction is wrong, the harder you work, the further away you are from success. As a serial entrepreneur, Zhu Jiangming, chairman of Leapmotor, has keen insights that span cycles and industries, and a strong sense of direction. As an engineer himself, he is highly committed to technology. Under his leadership, Leapmotor has always insisted on full self-research, and all core components of the vehicle are independently developed and manufactured, including the three-electric and intelligent systems. Since its establishment in 2015, Leapmotor has never taken a detour in its strategic grasp of the direction of technology, and the leaders of the six core technology modules of full self-research have not changed. This is rare in the new power circle where frequent changes in organizational structure are common.

On the other hand, Leapmotor's self-production rate of parts exceeds 60%, and it has achieved full self-development in electronic parts. Leapmotor has also further reduced transportation and production costs by cooperating with world-leading suppliers such as Faurecia to build factories.

The gap created and the cost saved in each link ultimately helped Leapmotor achieve "high cost-effectiveness".

With a solid foundation and a good sense of direction, profit becomes a natural thing.

Sales data from the China Association of Automobile Manufacturers in 2024 showed that the largest consumer range for new energy vehicles in China is the 150,000-200,000 yuan range, with a volume of 3.375 million vehicles, an increase of 19.2%; the second is the 100,000-150,000 yuan range, with a volume of 2.224 million vehicles, an increase of 101.7%.

This is highly consistent with Leapmotor's current product layout and future product planning. Leapmotor's current C series is in the price range of 150,000-200,000 yuan, with three SUVs, C16, C11, and C10, with an average monthly sales of about 10,000 units each. Leapmotor's new B series, which will be launched in 2025, will focus on the price range of 100,000-150,000 yuan. While gaining a foothold in the largest market segment, it is actively deploying in the fastest-growing market segment, which fully reflects Leapmotor's forward-looking vision.

Moreover, through platform-based operation and a high rate of self-production, the commonality rate of parts in the Leapmotor C series currently reaches 88%, which can not only meet the needs of different market segments, but also avoid the need for each vehicle to go through the design and procurement process from 0-1, thus reducing costs and forming strong competitiveness.

With the product strength of "people-friendly price and high-end configuration", Leapmotor's sales have been rising steadily, with 38,177 units delivered in October, 40,169 units delivered in November, and 42,517 units delivered in December, with a year-on-year growth of more than 100% for three consecutive months. It has ranked in the top two among new forces for three consecutive months, crossing the first-tier threshold of "40,000 units". The sharp increase in sales has directly brought about economies of scale, which has diluted the fixed cost of each unit product and further reduced production costs.

0.99 raised to the power of 365 is 0.03, while 1.01 raised to the power of 365 is 37.7. This formula used by investment managers to explain the "compound interest effect" is perhaps the most suitable formula for Leapmotor. This new force, which is about to celebrate its 10th birthday, is achieving great success through correct choices and successful products.

Stick to the "good quality but not expensive" strategy and follow Toyota's lead

In the outside world's stereotype, selling cost-effective models means "small profits but quick turnover", and selling luxury cars can achieve "high profits". However, objective data proves that this is not the case.

In contrast, Toyota, the "king of affordable cars", is still the "double champion" in terms of sales volume and profitability. Public data shows that Toyota achieved a net profit of approximately RMB 221.5 billion in 2023, becoming the world's most profitable automobile company.

This achievement is due to Toyota's excellent cost control ability and efficient production model, as well as its extensive global market layout. In addition, Toyota has also demonstrated strong adaptability in the face of market changes. For example, despite the challenges in the field of new energy vehicles, Toyota still maintains strong profitability with its advantages in the field of hybrid vehicles.

In 2023, Toyota's sales of electrified vehicles will reach 3.68 million, accounting for 35.7% of total sales. Among them, HEV sales account for 92.9% of electrified vehicle sales, and are not affected by the wave of technology. On the other hand, Toyota's mainstream price range is between 100,000 and 300,000 yuan, making it a "people-friendly" brand.

Why analyze Toyota? Because Leapmotor's style is similar to Toyota's, and both follow the "Uniqlo of the car industry" route - through "good and inexpensive" products, highly vertically integrated direct supply chain, low-key and pragmatic image, and unique insight into the market, Leapmotor has formed its own unique style and car-making philosophy in the car industry. In our opinion, Leapmotor's style of sticking to its own pace and playing to its strengths in its own areas of expertise is closer to Toyota. Two years ago, when the industry criticized "Toyota's slow electrification", Toyota Motor's third-generation head Akio Toyoda always insisted on a diversified technology path, rather than standing on the vent of the trend with all his might.

The same is true for Leapmotor. It started with pure electric vehicles and then added extended-range products, which seemed to be "catering to" the trend, but after a detailed analysis, it was found that among Leapmotor's main C series models, extended-range models only accounted for 25%-30%.

It is not difficult to find that the idea held by both is "have but not rely on".

Let's look at the car-making concepts of the two. Akio Toyoda has a "mantra" - environmental protection technology can only contribute to the environment if it is popularized. This was said in an environment where the power infrastructure was poor and the cost of electric vehicles was high, while HEVs and other hybrid vehicles were convenient to use and could truly achieve energy conservation.

The underlying logic of this sentence still holds true today - that is, new technologies can only benefit mankind if they are popularized on a large scale.

Zhu Jiangming, chairman of Leapmotor, has also been adhering to this philosophy for a long time. He said: "In the end, cars must be durable consumer goods and means of transportation. It may be more advantageous to use cars as means of transportation to do this industry. Our brand positioning is to provide users with higher configuration, better quality, good and inexpensive products. No matter how great the temptation is, how high the gross profit is, or how big the space is, Leapmotor will always insist on treating cars as mass consumer goods."

At the manufacturing level, the two still have similarities. Toyota has achieved on-time, on-demand, waste reduction, and improved efficiency and quality through lean production and the manufacturing concept of Just in Time. At the same time, through direct suppliers such as Aisin, Denso, Toyota Boshoku, and Tokai Rika, a close supply chain family has been established, achieving full process control from parts manufacturing to vehicle assembly. This model not only ensures the quality and supply stability of parts, but also reduces costs through economies of scale.

Leapmotor also conducts self-development and manufacturing of a large proportion of its parts. This strategy enables Leapmotor to achieve cost control, improve production efficiency and product quality through vertical integration and modular design, just like Toyota.

Leapmotor Central Integrated Electrical and Electronic Architecture

Toyota and Uniqlo both focus on the product itself and do not engage in excessive marketing. Leapmotor's low-key and pragmatic image is exactly the same. As for Uniqlo, there is a saying in the industry that "everyone from ordinary people to celebrities loves to wear it." It can be seen that brands that focus on providing real value to consumers will have a wider path.

at last

By 2024, Leapmotor will have delivered nearly 300,000 vehicles, making it a truly "large-scale" automaker. Its vision is no longer limited to the small-scale competition in the new power circle, but it is looking to the world and becoming an international automaker.

While joining hands with the Stellantis Group is certainly a powerful weapon for it to conquer the European and even global markets, its greater confidence still comes from its own strong technological reserves and industrial layout.

From being unpopular to entering the "finals", Leapmotor has experienced nine years of decline and rise. Its phased success not only proves to its peers that there is not only one way to win, but also proves to the world that China's automobile overtaking is not a false proposition manipulated by capital, but a real transformation and sublimation.