Leapmotor, China's Top NEV Startup, Won't Spike Prices Despite Cost Surge

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Leapmotor Technology, the leading new energy vehicle startup in China, currently does not plan to increase prices despite facing significant operational challenges from rising raw material costs, according to its founder. The company has managed to absorb costs caused by higher prices for lithium carbonate, copper, aluminum, and other raw materials through supplier negotiations and internal cost-saving measures. However, the founder indicated that if raw material prices continue to climb, there might be a need to adjust vehicle prices downward in the future.

The company’s large-scale manufacturing has helped distribute some expenses, but the surge in raw material costs has already impacted its profitability. Its gross margin declined to 9.4% in the recent quarter from 14.9% a year earlier. Although the second-quarter gross margin may not be ideal, it is still considered manageable.

Last year, the company delivered approximately 596,600 new energy vehicles, including 67,000 units abroad, making it the top-selling NEV startup in China in both categories. The company achieved its first net profit in the second quarter of the previous year and remained profitable for the following two quarters, posting an annual profit of about 540 million yuan ($74 million). However, it returned to losses in the first quarter of this year, with a net deficit of around 390 million yuan.

To ensure quality and control costs, the company works with top-tier suppliers and operates 17 in-house component plants. Its extensive in-house research and development capabilities cover key systems such as power batteries, drive motors, electric controls, intelligent cockpits, and smart driving technologies, which also help share costs.

Pricing is generally aligned with production expenses, the founder emphasized. While the new flagship model, the D99, offers a higher profit margin than the entry-level models, its pricing remains within a cost-based framework.

Initially, the company invested minimally in smart driving technology and followed a reactive approach. However, it now anticipates significant improvements in this area, with detailed updates scheduled for next quarter.

This year, the company targets selling one million units, including between 100,000 and 150,000 units overseas, and aims for a net profit of 5 billion yuan ($686 million). From January to May, it sold 263,100 vehicles, with 75,000 of those sold internationally.

European automotive giant Stellantis owns a 19% stake in the company. The two firms established a joint venture, responsible for sales outside mainland China, in which Stellantis holds a 51% stake.