Full-stack independent research and development, a pseudo-proposition

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Leapmotor, which has always had a low profile, has recently also been busy refuting rumors.

There are rumors that Leapmotor plans to spin off its intelligent team, and the new team will form an independent company.

Leapmotor responded: Not true. It has only integrated and upgraded relevant departments into an Intelligent Technology Research Institute and stated that it will continue to increase investment in intelligent driving.

What does that mean? Is Leapmotor also going to compete in intelligent driving?

Trading price for volume, Leapmotor leads new energy vehicle sales

Leapmotor has always been known for its cost-effectiveness, which has also earned it good sales performance.

On September 1, Leapmotor released its latest delivery data, reporting 30,305 deliveries in August 2024, making it the third new energy vehicle manufacturer to exceed 30,000 monthly deliveries.

What does this mean? It means Leapmotor sold more vehicles in August than two Xpeng Motors combined.

Impressive indeed!

So how did Leapmotor achieve this? It's related to its "Uniqlo" positioning.

Leapmotor positions itself as the "Uniqlo of the automotive industry," emphasizing good quality at an affordable price.

Take the Leapmotor C16 as an example. Priced close to 150,000 yuan, it offers a 6-seater mid-to-large SUV, standard intelligent cockpit and large TV-sized seats, and both extended-range and pure electric versions. It's a "hexagonal warrior" in its price range, achieving instant popularity with over 10,000 pre-orders in its first month.

However, while sales have increased, Leapmotor is still incurring losses.

Looking at its financial statements, Leapmotor reported a net loss of 2.2 billion yuan in the first half of 2024, and its gross margin has always been low, according to the 2023 financial report.

How low?

Only 0.5%! In comparison, Xiaomi's automotive gross margin, which just entered the market this year, is 15.4%.

It's not unreasonable to say that Leapmotor is "losing money to make a noise."

Why is Leapmotor doing this?

Generally speaking, it can be summarized in two points: economies of scale and intelligent networks.

Economies of scale refer to spreading costs over higher sales volumes. As sales increase, costs are amortized, leading to an overall improvement in profit margins. This is a necessary battle for automakers to survive, one they must fight through tears.

Intelligent networks treat each vehicle as a smart terminal, forming a network effect that drives intelligent development.

Theoretically, this is a grand strategy. Unfortunately, for Leapmotor, the latter part – intelligent networks – has yet to materialize.

In terms of intelligence, it's hard to say that Leapmotor has a significant advantage.

The once-effective follow-the-leader strategy in intelligent driving is no longer working

Judging from public information, Leapmotor has not been as urgent about intelligent driving as it has been about sales.

Founder Zhu Jiangming has stated that the intelligent strategy is to "follow," implying a lack of ambition to lead.

As of the end of 2023, Leapmotor's intelligent driving team comprised approximately 200 people.

While 200 people may seem substantial, first-tier automakers typically have teams of around 1,000 people, highlighting the difference in priority.

Interestingly, based on Leapmotor's recent statements, the intelligent team integration and upgrade will expand the intelligent driving team to approximately 1,000 people, and a separate end-to-end R&D team has been established, mirroring Lixiang One.

Zhu Jiangming also stated, "We aim to have Leapmotor's intelligent driving capabilities enter the first tier by the end of 2025."

Leapmotor suddenly seems eager for intelligence. From initially following the trend to now aiming to catch up with the first tier by 2025, what has changed?

Ah, upon closer inspection, it becomes clear. This year's market dynamics have likely prompted Leapmotor to take action.

First, Xpeng has begun targeting the low-price market with the MONA M03, priced at just 110,000 yuan and equipped with standard intelligent cockpits and advanced intelligent driving systems, popularizing intelligent driving.

Another concerning factor is that Leapmotor's competitor SL03 has deviated from convention by integrating Huawei's intelligent driving technology.

What does this mean? Within the 200,000 yuan price range, there wasn't much difference in intelligence, and it wasn't a key selling point. However, the landscape is changing, with intelligent driving becoming increasingly important.

In other words, falling behind in intelligence may directly impact sales.

As a result, Leapmotor is adjusting its strategy.

From this perspective, we can say that Leapmotor remains a sales-driven company, willing to go all out for sales.

Is full-stack independent research and development a bold move or an obsession?

Interestingly, despite Leapmotor's significant room for improvement in intelligent driving technology, it is keen to establish a technological label for itself.

Just search online, and you'll find plenty of content about Leapmotor's full-stack independent research and development.

This is intriguing.

Independent research and development is understandable, as it requires technical reserves and can save costs. But why go all-in on full-stack independent research and development? Take intelligent driving as an example. If Leapmotor waits for its self-developed technology to mature before integrating it, and there's also a process for car owners to accept it, is Leapmotor confident it can keep up with market competition during this period?

At least for now, this question remains uncertain. As a competitor in the same league, SL03 has already integrated Huawei's intelligent driving technology. Is Leapmotor confident it can compete with Huawei in this field?

Of course, this isn't meant to discourage Leapmotor's R&D efforts but, from a practical perspective, is this a financially viable decision? It's worth pondering. Even Huawei makes strategic choices and doesn't touch entire vehicles.

If you think this isn't convincing enough, let's do some math to clarify things further.

Leapmotor's R&D expenses for the first half of this year were 1.221 billion yuan, an increase of 48.4% from the same period in 2023.

How about other automakers?

Lixiang One spent 2 billion yuan per quarter.

NIO spent 2.86 billion yuan per quarter.

Xpeng Motors spent less, at 2.82 billion yuan for the first half of the year.

We don't need to look at Huawei's figures.

With this level of R&D investment, it's hard to say these automakers' intelligent driving technologies are absolutely ahead of the game. Leapmotor's relatively limited funds are spread across full-stack development, raising doubts about the depth of its R&D.

In this context, Leapmotor's high-profile claim of full-stack independent research and development is intriguing.

It gives off a sense of grandeur, but the undertone is nuanced.

Of course, we must also acknowledge Leapmotor's achievements.

At least, it has the courage to invest in technological research and development, rather than blindly pursuing trade and technology. This spirit is admirable.

This may be directly related to Founder Zhu Jiangming.

Before founding Leapmotor, Zhu had already achieved financial freedom through his successful career in technology. Now, he has chosen the challenging but correct path of independent research and development in the automotive industry, demonstrating his entrepreneurial passion and drive. This is a valuable quality in any entrepreneur.

Zhu has publicly stated, "I enjoy researching and designing new things, finding a sense of achievement in a particular field." This has been the driving force behind Dahua Technology and continues to inspire Leapmotor, a testament to his enduring entrepreneurial spirit.

While Leapmotor still has a long way to go in terms of technological prowess, and its sales success is under increasing pressure as intelligent driving becomes more critical, it's hard not to wish success upon a company with such a strong technological vision.

May Leapmotor find its own path and excel.