How a Mini Electric Hatchback Became One of China's Hottest Electric Vehicles
Zhejiang Leapmotor Technologies Ltd. has more than last week's disastrous trading debut in Hong Kong to worry about. While the electric-vehicle maker's T03 mini car is outselling the likes of Nio Inc. and Xpeng Inc. in China, it isn't making a profit.
Sales of the compact four-seater EV are central to Leapmotor's success, accounting for almost three-quarters of the startup's total deliveries since inception.
In September, Hangzhou-based Leapmotor delivered 11,039 vehicles, a 200% jump from a year earlier, to rank third among China's homegrown EV startups, behind Hozon New Energy Automobile Co. and Li Auto Inc.
But despite its popularity, the affordable T03, which starts from 79,500 yuan ($11,200), is a loss leader, with Leapmotor's gross margin for the second quarter coming in at negative 25.6%, versus around 11% to 21.5% for peers.
Leapmotor is trying to move up the value chain. Its C11 SUV and new C01 sedan have prices ranging from 180,000 yuan to 290,000 yuan and that larger, high-end EV market is the segment forecast to show the fastest growth in 2023, according to Frost & Sullivan.
“Starting from so low a market position, I doubt it's sustainable for Leapmotor,” said Jochen Siebert, managing director at JSC Automotive. “They have to go higher. That's the only way they can survive.”
Boosting production won't be easy. Leapmotor has just one 200,000-unit plant in Jinhua, while a second factory in Hangzhou won't start production until late 2023.
The company's path to scale hinges on near-flawless coordination between product design, supply chain and production, with little wiggle room for unforeseen delays, according to Bloomberg Intelligence analysts Steve Man and Joanna Chen, who also see direct competition
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