The world of electric vehicles is continuously evolving, and one of the standout stories has emerged from the rising Chinese automaker Leap MotorPositioned as an innovative leader in the automotive industry, Leap Motor has recently made waves in the market by unexpectedly announcing that it has turned a profit, making it the second new energy car manufacturer to achieve quarterly profitability, following Li AutoThis unexpected success has been attributed to the company's clear product positioning, stringent cost control measures, and rapid expansion of its sales channels, which have collectively facilitated a significant increase in vehicle sales.

In the aftermath of the third-quarter earnings report for 2024, Leap Motor's founder and chairman, Zhu Jiangming, revealed during the earnings conference that the company initially projected profitability for the second half of 2025. However, this timeline has notably accelerated, with Leap Motor achieving profitability as early as the fourth quarter of 2024. This announcement took many market observers by surprise, demonstrating Leap Motor's agility in responding to market demands and effectively leveraging its operational strategies.

Leap Motor's stock soared by 13% after the profit forecast was made public, with the company's market capitalization increasing by over HK$5 billion in just one dayThis positive response from the market clearly indicates that Leap Motor's achievement of profitability has exceeded expectations, reflecting a growing confidence among investors regarding the company's future prospects.

In the competitive landscape of new energy vehicle startups, Leap Motor's milestone is particularly noteworthyWhile Li Auto was the first to achieve profitability, Leap Motor's rapid ascent into the ranks of financially successful companies underscores the importance of strategic planning and execution in the industry.

Following the profit announcement, a report from Guotai Junan Securities suggested that Leap Motor's monthly sales in the first half of 2025 would continue to reach new highs, maintaining a strong upward trend in profitability for the upcoming quarters

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However, the firm also highlighted risks such as possible intensification of industry competition and underperformance in new model sales or overseas markets.

On the heels of this bullish outlook, Leap Motor set an ambitious sales target of 500,000 units for 2024, indicating a planned growth rate exceeding 70%. This aligns with the common theme among successful new energy vehicle manufacturers, all of whom have achieved profitability while maintaining robust sales volumesLeaders in the field, including BYD and Li Auto, showcase the crucial connection between scale and profitability within the industry.

The recent profit forecast from Leap Motor indicates that the company is poised for significant growthThe expected sales for 2024 of 293,700 units represents a remarkable 104% increase year-over-yearThis substantial growth will allow Leap Motor to generate an estimated revenue of at least RMB 30.5 billion, marking an impressive rise of over 80% compared to the previous year, driven by extensive sales growth and product optimization.

In 2023, Leap Motor also saw its gross margin exceed 8% for the entire year, reflecting effective cost management and enhanced product structureNotably, by the fourth quarter of 2024, the company achieved a positive net profit, a goal it had aimed to hit a year earlier than originally anticipated.

Despite previous losses, Leap Motor's financial statements show a significant narrowing of losses compared to the last two quartersIn the third quarter of 2024, the company's gross margin reached 8.1%, a considerable improvement from 1.1% in the first half of the year and 2.8% in the second quarterThis trajectory indicates that Leap Motor's financial health is rapidly improving, establishing a solid foundation for future growth.

In the face of operational challenges, Leap Motor had previously communicated its profit expectations

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The third-quarter report illustrated a revenue of RMB 9.86 billion, with a year-over-year increase of 74.3%. The losses recorded were significantly reduced compared to the previous year, highlighting the company's commitment to closing the profitability gap.

One of the core strategies driving Leap Motor's success is its commitment to producing cost-effective vehicles that resonate with customer demandZhu Jiangming has articulated a vision to position Leap Motor as the “Uniqlo of the automotive industry,” providing vehicles that offer high-quality features at competitive prices.

Leap Motor's approach centers around several key practices: first is the development of in-house components that account for 60% of production costsBy controlling the manufacturing process, the company is able to lower costs and pass these savings onto customers, resulting in a more attractive price point.

The second factor contributing to their success is their innovative approach in platforming componentsBy maximizing the quantity of shared parts throughout their models (with 88% of parts being interchangeable), Leap Motor is able to keep production efficient and costs down.

Thirdly, Leap Motor establishes pricing based on cost rather than brand perception, focusing on affordability without compromising on qualityThis commitment positions their cars in the sweet spot between RMB 100,000 and RMB 200,000, which data shows is the most lucrative segment of the automotive market.

The company's strong move towards this price range has been met with great consumer response, driving sales to unprecedented levelsHistorical data reveals that Leap Motor's deliveries rose rapidly from 43,700 units in 2021 to 114,200 units in 2022, then to 144,200 units in 2023, culminating in an impressive target of approximately 300,000 vehicles for 2024. As a direct result of its high-value offerings and supportive policies, Leap Motor has experienced sustained rapid growth in sales.

Currently, with only five models on sale, Leap Motor manages to maintain an impressive sales average of nearly 60,000 units per model

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Its best-selling C11 has surpassed 84,000 units, while the C01 model, despite being less popular, still achieved close to 22,000 salesThis demonstrates that every model in Leap Motor's lineup has found approval in the market.

The company has strategically focused on the 150,000 RMB-plus market segment, releasing models such as the C10 and C16, showing particularly strong sales momentumThe C16 model, which was introduced to target the 150,000 to 200,000 RMB market, achieved around 44,000 sales in just six months, with an average monthly sales figure exceeding 7,000 units.

By December 2024, Leap Motor had set multiple sales records over the course of eight months, firmly establishing itself as a leading contender among domestic new energy vehicle manufacturers in China, with its higher-priced C series models accounting for a significant 77% of total sales.

According to Haitong Securities, Leap Motor's gross margin is projected to reach at least 13% in the fourth quarter of 2024, reflecting a growth of over five percentage points and representing a historical maximum for the company.

These achievements can largely be attributed to Leap Motor's effective cost management, combined with its clear market positioningUnlike competitors such as NIO and Xpeng that have adopted direct sales models, Leap Motor has leaned into the dealership model, enabling rapid channel growthIn 2022, Leap Motor already had a sales network comprising 582 stores across 180 cities, with slight growth into 560 stores in 2023.

As reported by Founder Securities, Leap Motor has expanded to 860 stores across the nation by the end of 2024, with a total of 264 cities coveredMoreover, they have seen a 300-store increase from the previous year’s total, increasing their market presence.

Leap Motor's sales network is expressed through a “1+N” model, where one regional center store supports multiple display stores, effectively bridging improved service functionality with extensive local outreach.

Thus, the combination of strong demand for high-value vehicles and rapid growth in dealer networks has been essential in supporting Leap Motor's target of doubling its monthly sales from 20,000 to 40,000 units.

Furthermore, as companies increasingly explore overseas markets for growth opportunities, Leap Motor announced its collaboration with Stellantis, which invested around €1.5 billion for a 20% stake in Leap Motor in October 2023. This strategic partnership has facilitated Leap Motor's entry into various international markets.

Having begun sales in Europe and other regions in September 2024, Leap Motor has already established over 400 sales points across 13 European countries, with plans to expand that number to 500 by the end of 2025.

With such robust strategies in place, Leap Motor’s remarkable turnaround into profitability positions it as a noteworthy player in the new energy vehicle market

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