Source | Bohu Finance (bohuFN)

During the 2024 Paris Motor Show, Zhu Jiangming, CEO of Leapro (hereinafter referred to as "Leapro"), stated in a media interview that the domestic automotive market is fiercely competitive, and pure internal combustion vehicles may cease to exist in China within three years.

For Zhu Jiangming, who has an IT background, this may be the "hardest-hitting" statement of his career. In fact, as one of the most low-key members of the new-energy vehicle (NEV) force, Leapro prefers to prove itself with achievements.

In the recently released sales ranking of Chinese NEV brands in September, Leapro has risen to the top three among the new-energy vehicle startups, second only to Li Auto and Hongmeng Zhixing, and far ahead of NIO and Xpeng Motors.

Today, Leapro has grown into a "super dark horse" in China's NEV industry. In this highly competitive NEV sector, what has enabled its successful turnaround, and can this answer serve as a reference for other automakers?

01 Crossing the River by Feeling the Stones

Looking back at Leapro's history, its founder Zhu Jiangming can be considered an "outlier" among the "new forces." Unlike those with an Internet gene like Li Auto, NIO, and Xpeng Motors, or those with a traditional automaker gene like WM Motor and Aion, Leapro can be considered a cross-border player without a formal automotive background.

Zhu Jiangming is the co-founder of Dahua Technology, a leading security company. It is reported that during a trip, he saw small electric vehicles abroad and believed that Dahua Technology's accumulated expertise in electronic equipment, self-developed software and hardware, and other areas could empower vehicle manufacturing, thus embarking on his entrepreneurial journey.

From its inception, Leapro has possessed the "technological gene" of IT professionals, coupled with the technical support of Dahua Technology. It early on proposed a corporate technology path of "full-domain in-house research and development"—the entire intelligent driving system and intelligent electric drive system are entirely self-developed from hardware to software, including even some seat controllers and sunroof controllers. In contrast, other automakers primarily focus on software, with hardware largely reliant on third parties.

As a result, Leapro has become one of the few automotive manufacturers in the industry that insists on and masters electric powertrain, battery, and motor technology, as well as intelligent driving technology. This development path may seem familiar; initially, Leapro was indeed crossing the river by feeling the stones, following in the footsteps of BYD.

However, even with technological support, Leapro did not achieve overnight success. Its first model, the S01, was a high-end vehicle targeting Tesla. Although its launch price started at just RMB 119,900, sales were dismal, with only 2,708 units sold in 2019 after its launch. Consumers criticized its styling, quality, and range.

After the initial model's "failure," Leapro quickly adjusted its strategy and launched its second model, the T03, in 2020. This low-end market-oriented model offered a pure electric range of 400km and extensive intelligent driver assistance features at a price of around RMB 60,000.

In Zhu Jiangming's view, the T03 targets compact electric vehicles like the Hongguang MINI EV, suitable for commuting, grocery shopping, dropping off children, and other daily use scenarios. In that year, the Hongguang MINI EV sold over 110,000 units, ranking second in NEV sales behind only Tesla's Model 3.

After relying on the T03 for a turnaround, Leapro introduced the C11, a product that better meets mainstream market demand, fully competing with the Model Y in terms of product features.

In 2021, Leapro sold a total of 44,906 vehicles, successfully entering the top ten in NEV brand sales, temporarily securing its position. Subsequently, Leapro launched the mid-to-large sedan C01, SUV C10, MVP C16, and the compact SUV B10, which debuted at the Paris Motor Show recently.

In fact, starting with the C10 and C16 models, Leapro has straightforwardly positioned itself as an "affordable alternative" to Li Auto. Netizens believe that Leapro's models bear the influence of Li Auto in terms of styling, aesthetics, configuration, and more. Similarly positioned as "family cars," they also offer an extended-range version but at roughly half the price of Li Auto's models.

In response, Zhu Jiangming generously stated, "I don't see anything wrong with that." In earlier interviews, he mentioned, "Li Auto has always been at the forefront, and we aim to learn from them."

Thanks to these products, Leapro's sales have soared, with record sales figures achieved this year. Judging from the current weekly sales ranking in October, Leapro is expected to surpass 40,000 units in sales for the month.

Throughout its journey, Leapro has indeed been "crossing the river by feeling the stones," but its success lies not only in emulating Li Auto but also in flexibly adjusting its market positioning. Continuously mimicking and drawing inspiration from other successful brands, from initially positioning as an "affordable Tesla alternative" to targeting the Hongguang MINI EV and then boldly embracing the "family car" niche, Leapro has consistently stayed at the forefront of market trends. This is the first of its "three axes" for its successful turnaround.

Of course, from a consumer perspective, Leapro may seem to lack a clear brand positioning, which has also been a long-standing criticism of Xpeng Motors. While it's not difficult to launch a comprehensive product matrix, the key is to enable consumers to clearly perceive the differences between different product series and develop brand recognition based on product positioning.

02 "Engineer's Mindset" in Car Manufacturing

In a way, Leapro shares some similarities with Xpeng Motors, both being highly focused on technological advancements. However, in terms of brand recognition, neither excels at cultivating brand tonality like NIO nor targeting core user groups as precisely as Li Auto.

Currently, this approach has caused Xpeng Motors much hardship. Will Leapro follow in Xpeng's footsteps, devoting itself solely to technological research while neglecting product layout?

In reality, the two companies are not entirely comparable. While Xpeng Motors has emerged as a leader in intelligent driving technology, Leapro leans more towards "hardware + software" technological development. Perhaps it may not be the strongest in software development or vehicle manufacturing among new-energy vehicle startups, but it understands traditional industrial manufacturing better than them and software collaboration better than traditional automakers.

This is also the core of Leapro's "full-domain in-house research and development" approach. By enhancing supply chain control capabilities, it aims to create differentiated competitive advantages, increase gross margins, and, more importantly, enable rapid response. Whenever a successful model emerges in the market, Leapro can quickly follow suit.

However, if Leapro merely replicates competitors' products, it can only achieve "adequacy," where consumers pay half the price for a product with only half the functionality, failing to significantly stimulate their excitement. Therefore, Leapro must also strive for "usability," offering more value than competitors at market prices.

For instance, compared to Li Auto's L6 Pro, Leapro's C10 Intelligent Driving Edition is not only cheaper but also equipped with an additional LiDAR from Hesai Technology.

Moreover, based on its reference points, Leapro creates new selling points tailored to its user base. Although targeting Li Auto, Leapro clearly defines its user persona as young families.

Taking the C10 as an example, it is equipped with 12 high-performance speakers, combined with digital DSP and self-developed AI audio effects, catering to young users' in-car audio-visual needs. Additionally, the C10 features a baby storage and operation platform, offering large-diameter cup holders and suction cup bowl placement areas, easily accommodating baby bottles, thermoses, and more.

With Li Auto's successful precedent, all automakers can draw inspiration from it. However, only Leapro has managed to stand out because it not only achieves "adequacy" but also "usability" and "delight" in its emulation.

This aligns with Zhu Jiangming's frequently mentioned concept of "value-for-money ratio," emphasizing not just "cost-effectiveness" but also "quality," striving for a win-win in both price and quality. This constitutes the second and third axes of Leapro's successful turnaround.

To achieve both, Leapro's "full-domain in-house research and development" continues to play a vital role, enabling more flexible supply chain integration, component standardization, and core technology innovation.

For instance, Leapro's main C-series models belong to the same platform, sharing over 88% of components, even surpassing Tesla's sharing rate by 13%, significantly reducing production costs.

Furthermore, through "full-domain in-house research and development," Leapro continually explores optimal solutions for in-house development, directly addressing user experience. For light-asset software and hardware directly related to user experience, Leapro chooses in-house development. For heavy-asset technologies not directly related to user experience, it opts for outsourcing.

Zhu Jiangming mentioned in an interview with LatePost that Leapro's self-production rate exceeds 70%, with in-house development standards based on what the company can achieve and offers substantial gross margins. For instance, the development of intelligent driving chips has been suspended due to an unfavorable cost-benefit ratio.

At the launch of Leapro's C16 this year, Cao Li, Leapro's Senior Vice President, revealed to reporters that Leapro's per-vehicle cost is comparable to that of BYD, with some models even costing less.

03 How Far Can Leapro Go?

When discussing Leapro's differences from other NEV brands, users may think of labels like "IT guy making cars," "affordable Li Auto alternative," and "budget BYD." More specifically, it could be labeled the "King of Competition" in the automotive industry.

Of course, if Leapro wants to sustain its brand development, the "King of Competition" label may not be the best brand perception. However, Zhu Jiangming has stated that he doesn't care about this at the moment because to survive, the company must offer lower prices and higher quality than its peers.

Early in his entrepreneurial journey, Zhu Jiangming expressed his goal of becoming the "Xiaomi of the automotive industry," adhering to cost-based pricing rather than brand-based pricing, always adding a small margin above costs.

Judging from market response, Leapro's strategy is effective. Among various marketing tactics, "price cuts" are always the most stimulating for consumers. Xpeng Motors' MONA M03 became a hit for this very reason. High-end electric vehicles equipped with LiDAR and advanced intelligent driving systems usually cost over RMB 200,000, but Xpeng Motors reduced the price to the RMB 150,000 range.

However, faced with such an extreme "pricing strategy," how far can Leapro go? This has become a concern for outsiders. In the first half of this year, Leapro achieved revenue of RMB 8.845 billion, up 52.2% year-on-year, with a net loss of RMB 2.212 billion, slightly narrower than the RMB 2.276 billion loss in the same period last year.

Regarding increased sales but also increased losses, Leapro attributes this to increased R&D investments. Financial reports show that Leapro's R&D expenses in the first half of this year were RMB 1.221 billion, up 48.4% year-on-year.

Nevertheless, in today's NEV industry, losses and R&D investments are common topics. Everyone hopes to "burn money for scale," accepting short-term unprofitability but requiring profitability in the long run. Therefore, Leapro's gross margin is even more concerning.

In the first half of this year, Leapro's gross margin was just 1.1%, compared to 14% for Xpeng Motors, 12.2% for NIO, 19.5% for Li Auto, and an impressive 25.04% for Thalys. In this key indicator of automaker profitability, Leapro lags far behind its peers.

According to Leapro executives' product plans, the company will introduce B-series models priced between RMB 100,000 and RMB 150,000, including Leapro's first global model, the B10, with a domestic starting price of around RMB 100,000. Additionally, high-end B-series models will also feature LiDAR and intelligent driving chips.

If Leapro wants to further enhance its intelligent driving capabilities, R&D investments are inevitable. However, finding room for R&D expenses within tight cost constraints poses a challenge for the company.

Fortunately, Leapro's production scale has surpassed 500,000 units, and it is actively expanding into overseas markets, hoping that new markets will help it generate more profits through economies of scale. Last year, Stellantis, an automotive group, became one of Leapro's major shareholders through investment and jointly established "Leapro International," responsible for Leapro's exports, sales, and manufacturing in all other global markets.

Recently, Xin Tianshu, CEO of Leapro International, stated that Leapro International already has over 200 dealers in 13 European countries and is rapidly expanding, aiming to establish 500 sales points in Europe by the end of 2025. The company plans to expand its business to Asia-Pacific, the Middle East, Africa, and South America starting from the fourth quarter of 2024.

Although Leapro has maintained a low profile in the automotive industry, its market-focused strategy and cost advantages from "full-domain in-house research and development" have paved its unique path, steadily advancing to the "top three." However, to claim a spot in the "first tier" of the automotive industry, Leapro needs longer-term performance to validate its achievements. Let's hope Leapro can go even further, validating this "Leapro-style" development path with its strength.