On March 3, China FAW and Leapmotor signed a "Memorandum of Understanding on Strategic Cooperation", and the two parties are deeply bound in new energy technology research and development and capital cooperation.
This cooperation is a key step for FAW to accelerate its transformation to new energy, and also reflects a direction of change in China's automobile industry: new car companies are transforming from "product manufacturers" to "technology ecosystem builders" through technology outsourcing, while traditional car companies are seeking breakthroughs with an open attitude, jointly promoting the industry's transformation from "going it alone" to "symbiosis and win-win".
On March 3, 2025, China FAW and Leapmotor held a signing ceremony for the "Memorandum of Understanding on Strategic Cooperation" in Changchun. The two parties will carry out strategic cooperation in the field of new energy vehicles, aiming to strengthen technological integration, pool advantageous resources, and jointly enhance product competitiveness.
As the "eldest son of the Republic" of China's automobile industry, FAW ranks at the forefront of the industry with sales of 3.2 million vehicles in 2024, but its sales of new energy passenger cars under its own brand are less than 20,000, and the penetration rate of new energy is only 10.6%, far below the industry average of 40%. Therefore, FAW urgently needs to break through the shortcomings of intelligence and cost efficiency. Leapmotor has its core competitiveness with the "four-leaf clover" electronic architecture and CTC battery chassis integration technology developed in the whole domain. It will deliver nearly 300,000 vehicles in 2024, but it is still weak and needs to find a stronger partner to support it. The cooperation between the two parties is essentially the complementarity of technical capabilities and industrial resources. FAW's annual production capacity of millions, supply chain network and high-end premium capabilities of the Hongqi brand provide soil for Leapmotor to land on a large scale, and Leapmotor's technology output helps FAW quickly make up for the shortcomings of intelligence and cost of new energy models.
In fact, the cooperation between Leapmotor and FAW is not an isolated case. Huawei has exported technologies such as intelligent driving and electronic and electrical architecture through the Hongmeng Intelligent Driving model, and has launched brands such as Wenjie and Zhijie in cooperation with automakers such as Seres and Chery, with a delivery volume of over 500,000 vehicles in 2024. The profit margin of its technology licensing far exceeds that of traditional OEM, and the cooperating automakers have quickly entered the high-end market with the help of Huawei's brand premium.
Leapmotor is also exploring the "Toyota model" of hardware outsourcing - its self-developed parts account for 60%, and modules such as electric drive systems and smart cockpits are exported to FAW through technical cooperation, with a gross profit margin of "more than twice the sales of the whole vehicle." Leapmotor CEO Zhu Jiangming said bluntly: "Our goal is to make self-developed parts become the industry standard like Aisin gearboxes."
The core logic of this model is to share R&D costs and accelerate the popularization of technology. The single R&D investment in technologies such as intelligent driving and electronic architecture is often tens of billions, and sharing by multiple car companies can reduce risks. The more than 1.2 billion kilometers of intelligent driving data accumulated by Huawei's ADS system are jointly borne by Hongmeng Zhixing's multiple brands for iteration costs; Leapmotor's CTC technology has been applied on a large scale in a car model, pushing products with a range of 1,000 kilometers from the high-end market to the lower end.
The reconstruction of the business model of technology outsourcing has allowed new forces to shift from "selling cars" to "selling technology + selling cars" dual-line operations, while traditional car companies have shortened the technology iteration cycle. Professor Ji Xuehong of North China University of Technology pointed out: "Technology outsourcing is a way for new forces to break through the price war, which can not only share costs but also enhance industry influence."
The rise of technology outsourcing is breaking the closed nature of the traditional automotive industry chain. However, this model also faces challenges. If Leapmotor opens up its technology too much, it may weaken the uniqueness of its products. In addition, the capital cooperation between FAW and Leapmotor has not yet disclosed the equity details. If FAW controls Leapmotor, it may trigger the risk of equity dilution of the Stellantis Group.
The "marriage" between Leapmotor and FAW, and the ecological expansion of Huawei's Hongmeng Intelligent Driving, jointly reveal the new survival logic of China's automobile industry: technology outsourcing is evolving from marginal exploration to industry rules. This model is not only a realization of R&D investment, but also may bring about a redistribution of the value of the industrial chain. In the future, whoever can formulate technical standards will hold the key to the next era.
