In-Depth Analysis of Leapmotor's Gross Margin Improvement Potential

Based on the collected data, I now provide you with a detailed analysis report on Leapmotor’s gross margin improvement potential.

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Leapmotor’s gross margin has experienced significant improvement over the past few years, gradually rising from its early difficult period to the current healthy level[1][2].

Time Period	Gross Margin	Remarks
Full Year 2023	0.5%	In a loss-making state
Full Year 2024	8.4%	Significant year-on-year improvement
Q4 2024	13.3%	Record high since the company’s establishment
H1 2025	14.1%	Continuous improvement
Q3 2025	14.5%	79% year-on-year growth[2]

• Operating Revenue: RMB 19.45 billion, up 97.3% year-on-year[2]
• Net Profit: RMB 150 million, maintaining profitability for multiple consecutive quarters[2]
• Delivery Volume: 173,852 units, up 101.8% year-on-year[2]
• Cash on Hand: RMB 33.92 billion, ample cash flow[2]

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Based on 2024-2025 industry data, there is a certain gap between Leapmotor’s gross margin and that of its main competitors:

Automaker	Gross Margin	Time Node	Gap Analysis
Li Auto	20.5%	Full Year 2024	Leapmotor lags by approximately 6 percentage points
XPeng Motors	20.1%	Q3 2025	Leapmotor lags by approximately 5.6 percentage points
NIO	14.7%	Q3 2025	Nearly the same as Leapmotor
Leapmotor	14.5%	Q3 2025	—

As can be seen from the figure above, Li Auto ranks first in the industry with a gross margin of 20.5%, XPeng Motors exceeded the 20% mark for the first time in Q3 2025, while Leapmotor remains in the 14%-15% range[3][4].

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Zhu Jiangming, Founder and Chairman of Leapmotor, clearly stated: “Leapmotor’s gross margin will always stay within 14% to 15%, and the remaining portion will be passed on to users.”[4]

This is not a limitation on gross margin growth, but rather the company’s

:

• Cost Pricing Strategy
  : Leverage technological advantages to benefit consumers instead of pursuing high premiums
• Market Positioning
  : Focus on the mass consumer market of RMB 100,000 to 200,000
• Value Proposition
  : Provide users with “cross-tier configurations”, offering B-class car experience at the price of an A-class car

Product Positioning	Gross Margin Characteristics	Leapmotor’s Situation
High-end Models (RMB 300,000+)	High gross margin	Leapmotor has not yet focused on deployment
Mid-range Models (RMB 150,000-300,000)	Medium gross margin	Leapmotor’s C-series as main models
Mass-market Models (Below RMB 150,000)	Low gross margin	Leapmotor’s entry-level models such as T03

Leapmotor’s product matrix is mainly focused on the mass market below RMB 150,000, which is an important structural factor for its relatively low gross margin[4].

Leapmotor adopts a “Full-Self R&D” strategy, with huge early-stage R&D investment:

• Self-Development Rate
  : Self-developed rate of core components exceeds 65%, covering 65% of the cost of core new energy vehicle technologies[5]
• R&D Investment
  : R&D expense ratio was approximately 7.7% in 2024, and is expected to remain at 5%-5.1% in the later period[6]
• Factory Layout
  : 17 major component factories, 3 highly automated battery pack factories

• Short-term compression of profit margins
• Long-term formation of technological barriers and cost advantages
• Marginal cost decreases after the release of scale effects

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Indicator	2025	2026 Target	Improvement Potential
Sales Volume	596,600 units	1 million units	67.6% growth
Capacity Utilization	Improving	Continuous optimization	Dilution of unit fixed costs
Parts Sharing Rate	88%	Further increase	Enhanced procurement bargaining power

According to forecasts from BOCOM International, as sales volume grows, scale effects will drive gross margin from 8.4% in 2024 to 14.4% in 2025, 15.0% in 2026, and is expected to reach 15.9% in 2027[1].

• Vertical Integration
  : Self-built 17 types of key component production bases to reduce dependence on external suppliers[5]
• Platformized Production
  : LEAP3.5 technical architecture achieves 88% parts commonality across models
• “Invest Only in Equipment, Not in Factory Buildings”
  : Asset-light operation, total fixed asset investment controlled within RMB 7.17 billion[5]

• Through technological iteration and bulk procurement, BOM (Bill of Materials) cost is expected to be continuously optimized
• Overseas localized production (such as the Zaragoza plant in Spain) will further reduce export costs[2]

Indicator	2025	2026 Forecast
Overseas Export Volume	60,000 units	146,000 units[6]
Number of Overseas Markets	35	Continuous expansion
Overseas Stores	800+	Continuous expansion

• With the Stellantis channel network, the unit vehicle revenue from overseas is approximately RMB 13,000-14,000 per unit[6]
• The unit vehicle revenue from overseas sales (Leapmotor holds 49% equity) is approximately twice that of domestic sales
• Localized production avoids tariff barriers and improves comprehensive gross margin

Leapmotor launched its D-series flagship product line at its 10th Anniversary Brand Ceremony in 2025:

• D19
  : Luxury SUV
• D99
  : Luxury MPV

The launch of high-end product lines will

, and it is expected that the gross margin of models in the RMB 300,000 category can reach over 20%[4].

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Year	Gross Margin Forecast	Core Assumptions
2025	14.4%	Sales growth, release of scale effects
2026	15.0%	Overseas volume growth, contribution from D-series
2027	15.9%	Will fully enter the profitable period

: Maintained at 5-6 percentage points (reasonable range)

If high-end products such as the D-series are successful, and the proportion of overseas business increases to more than 20%:

Year	Gross Margin Forecast	Improvement Factors
2025	15%	Trial launch of high-end products
2026	17%	Dual contributions from high-end and overseas business
2027	18-19%	Resonance of scale, high-endization, and overseas expansion

: Narrowed to 2-3 percentage points

Dimension	Current Status	Theoretical Upper Limit	Improvement Potential
Comparison with Li Auto	14.5%	20.5%	Approximately 6 percentage points
Comparison with XPeng	14.5%	20.1%	Approximately 5.6 percentage points
Historical Peak	14.5%	Theoretical 20%+	Approximately 5.5 percentage points

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Risk Type	Risk Description	Sensitivity Impact
Price War	Forced price cuts due to intensified industry competition	Gross margin may be compressed by 1-2 percentage points
Raw Material Costs	Price increases of raw materials such as lithium carbonate	Directly affects unit vehicle cost by 3-5%
R&D Investment	Higher-than-expected investment in intelligent driving, etc.	Short-term suppression of net profit margin
Exchange Rate Fluctuations	RMB appreciation affects exports	Decline in profit margin of overseas business

Driving Factor	Potential Contribution	Probability of Achievement
Overseas Sales Explosion	2-3% increase in unit vehicle revenue	High
High-End Product Breakthrough	2-3% increase in comprehensive gross margin	Medium-High
Technology Licensing Revenue	Increase in the proportion of service revenue	Medium
Scale Effect	5-8% decrease in unit cost	High

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1. Leapmotor’s gross margin level is the result of strategic choice
   , not a capability defect. The company actively chose the “Technology Inclusiveness” route, adopting cost pricing to benefit consumers[4].

2. Improvement potential exists but is limited
   :
   • Theoretical upward potential: 5-6 percentage points (reaching Li Auto’s level)
   • Reasonable expected potential: 2-3 percentage points (reaching 17-18% in 2027)

3. Clear improvement path
   : Four pillars of scale effect, high-endization, overseas expansion, and technology-driven cost reduction

Indicator	2024	2025E	2026E	2027E
Gross Margin	8.4%	14.4%	15.0%	15.9%
Net Profit Margin	Negative	Turned positive	2%	3.4%
Net Profit (RMB 100 million)	-28.2	6.3	17.3	37.3[1]

BOCOM International uses the sum-of-the-parts method, giving Leapmotor a price-to-sales ratio of 1.6x/2.0x for 2025 auto sales/service revenue, with a target price of HK$83, representing a 22% potential upside from the current stock price[1].

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[1] BOCOM International Research Report - Leapmotor (9863.HK): Q2 Profit Turns Positive Again, Full-Year Sales Guidance Raised (August 19, 2025)

[2] Caifuhao - Secured RMB 3.7 Billion from FAW, How Far is Leapmotor from “Leading the Pack”? (December 29, 2025)

[3] Cailianshe - 2025 Year-End Review | Breaking the Curse of “The More You Sell, The More You Lose”? New Energy Vehicle Startups See the Dawn of Profitability in Their “Adolescent” Year (December 29, 2025)

[4] Huxiu - Rejecting Premiums, Sticking to 15% Gross Margin: Leapmotor’s “Counter-Cyclical Growth” Flywheel (December 23, 2025)

[5] NetEase Account - Following Xiaomi, Another Domestic Automaker Rises! Captured 35 Markets in 14 Months (January 2026)

[6] Sinolink Securities - In-Depth Research on Hong Kong Listed Companies: Leapmotor Adheres to the Development Strategy of “Full-Self R&D + Vertical Integration” (July 2024)

[7] Sina Finance - 2025 New Energy Vehicle Startup Upheaval: “Hong-Leap-Xiaomi” Changes the “NIO-XPeng-Li Auto” Landscape (January 6, 2026)