Strategic Analysis of Leapmotor's Subsidiary's 325% Capital Increase

Based on the collected information and data, I now provide you with a detailed analysis report.

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The registered capital of Zhejiang Leapmotor Sales Service Co., Ltd. has been significantly increased from RMB 200 million to RMB 850 million, representing a growth rate of 325%. Founded in 2018, this company is a wholly-owned subsidiary of Zhejiang Leapmotor Technology Co., Ltd. (Stock Code: 9863.HK), a Hong Kong-listed company [1][2]. Upon completion of this capital increase change, it will have a far-reaching impact on the company’s overall strategic layout, providing key support for the 2026 “1 million annual vehicle sales” target [3].

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Leapmotor founder Zhu Jiangming clearly stated in the 10th anniversary internal letter that the 2026 sales target is 1 million vehicles. Compared with the nearly 600,000 units delivered in 2025, a year-on-year growth of approximately 67% is required [4][5]. To achieve this aggressive target, a sound sales and service network is an indispensable carrier.

From the perspective of channel status, as of the end of 2025, the total number of Leapmotor’s domestic sales and service outlets has exceeded 1,000, building a full-domain network of “over 400 Leapmotor Centers, over 500 Experience Centers, and over 100 Service Centers”, covering 295 cities [6]. In January 2026, Leapmotor opened multiple new stores across the country, covering three types: Leapmotor Centers, Experience Centers, and Service Centers, with precise layouts in commercial cores, transportation hubs, and community surroundings in first-tier to fifth-tier cities [6].

This substantial capital increase in the sales and service subsidiary is precisely to provide financial support for the further expansion of the channel network. According to the plan, Leapmotor aims to expand its global sales and service outlets to more than 2,500 by the end of 2026 [7].

Leapmotor adopts a channel innovation model “centered on dealers”, namely the “1+N Model”: 1 regional center with 4S service functions supports multiple supermarket or urban exhibition halls in the region [6]. The core advantages of this model are:

• Service Quality Control
  : Maintain the direct-operated system’s management of service quality through regional centers
• Efficient Coverage
  : Achieve rapid market penetration with the help of dealers’ local resources
• Cost Optimization
  : Avoid the heavy asset burden of large-scale direct-operated systems

The capital increase will significantly enhance the capital strength and service functions of regional centers, strengthening the support capacity for multiple supermarket or urban exhibition halls in the region. 2025 operating data has verified the efficiency of this model: single-store efficiency increased by 30% year-on-year, and inventory turnover was only 15 days, far lower than the industry average [6].

In December 2025, FAW Group subscribed for 5% of Leapmotor’s shares with RMB 3.744 billion, becoming a strategic shareholder [8]. This capital increase can be regarded as an important measure for the collaborative development of both parties:

• FAW’s accumulated dealer network and after-sales service system in the traditional fuel vehicle field can form resource complementarity with Leapmotor’s sales service company
• FAW’s manufacturing experience and supply chain resources help improve the operational efficiency of Leapmotor’s sales service subsidiary
• The first jointly developed model by both parties is planned to be officially launched in 2026, which requires a more complete channel network for support [8]

Through cooperation with Stellantis Group, Leapmotor has expanded its overseas market to 35 countries and regions, with over 800 overseas stores [9][10]. In 2026, Leapmotor plans to achieve localized production in overseas markets, completing the Malaysia localization project in the first half of the year and the European localization project by the end of the year [11].

The substantial capital increase in the sales service subsidiary provides capital reserves and operational entity support for the construction of overseas sales and service networks.

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Upon completion of the capital increase, Leapmotor will further improve the three-level channel network of “core business district Leapmotor Centers + high-traffic supermarket Experience Centers + professional Service Centers” [6]:

Channel Type	Functional Positioning	Number by End of 2025	2026 Plan
Leapmotor Center	4S service functions, regional hub	400+	Continuous Expansion
Experience Center	Supermarket/urban exhibition hall, traffic entry	500+	Continuous Expansion
Service Center	After-sales maintenance, value-added services	100+	Continuous Expansion

Commercial cores, transportation hubs, and community surroundings in third- to fifth-tier cities will become key areas for channel expansion [6]. The substantial increase in registered capital means that the sales service subsidiary has stronger:

• Capital turnover capacity, supporting the establishment of more regional centers
• Risk resistance capacity, coping with fluctuations in local markets
• Resource allocation capacity, optimizing inventory and logistics between regions

A sound channel network builds a closed-loop operation system from “potential user traffic generation — sales conversion — after-sales service support” [6]. The capital increase will enhance the capabilities of all links in this closed-loop:

• Traffic Generation Link
  : More Experience Centers mean higher brand exposure and customer acquisition capabilities
• Conversion Link
  : Capital support for regional centers contributes to flexible business policies
• Support Link
  : Expansion of Service Centers improves customer satisfaction and repurchase rates

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According to Leapmotor’s announcement, the RMB 3.744 billion from FAW’s strategic investment has a clear plan [8]:

Usage Direction	Percentage	Estimated Amount
R&D Investment	50%	Approximately RMB 1.87 billion
Supplementary Working Capital	25%	Approximately RMB 940 million
Expanding Sales Service Network and Brand Building	25%	Approximately RMB 940 million

This 325% capital increase in the sales service subsidiary is the specific implementation of the funds for “expanding the sales service network”.

As of Q3 2025, Leapmotor has abundant funds in hand, reaching RMB 33.92 billion, maintaining positive operating cash flow and free cash flow [8]. The company’s financial health status is as follows:

Financial Indicator	Value	Evaluation
Gross Profit Margin	14.5%	Significant year-on-year increase
Net Profit (Q3)	RMB 150 million	Consecutive quarterly profitability
Current Ratio	0.92	Slightly below 1, short-term solvency requires attention
Cash Reserves	RMB 33.92 billion	Sufficient

: The increase in registered capital does not mean a one-time cash expenditure, but a reallocation of internal company resources. However, to support channel expansion, it will inevitably involve:

• New store rent and renovation investment
• Capital occupation for inventory vehicles
• Sales personnel and related operating costs

: The improvement of the channel network will bring scale effects, reducing per-vehicle sales costs and improving capital turnover efficiency. The 2025 data showing a 30% increase in single-store efficiency and inventory turnover of only 15 days indicates that efficient channel operations can significantly improve cash flow status [6].

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Zhu Jiangming emphasized in the internal letter: “Standing at the starting point of the new decade, transitioning from following to leading requires us to no longer position ourselves as a ‘new force’, but to demand ourselves as a sustainable, respected world-class automobile enterprise.” [4][5] The capital increase in the sales service subsidiary is an important support for this strategic transformation:

• Foundation for Scale Leap
  : Annual sales of 1 million vehicles require coverage of a broader market and user groups
• Carrier for Brand Upgrade
  : A more complete channel network is a prerequisite for enhancing brand awareness
• Platform for User Operation
  : Touchpoints directly connecting with users determine the quality of user experience

Leapmotor has completed the full layout of the four product series A, B, C, and D [7]:

Series	Positioning	Representative Models
A Series	Entry-level, under RMB 100,000	A10
B Series	Compact, RMB 100,000-150,000	B10, B01
C Series	Mid-size, RMB 150,000-250,000	C10, C11, C16
D Series	Mid-to-large, over RMB 300,000	D19 (Flagship)

The improvement of the product line requires the support of a channel network, and the capital increase ensures that each series of products gets sufficient display and sales opportunities in each regional market.

Leapmotor’s overseas deliveries are expected to exceed 60,000 units in 2025, leading the new force overseas track with the first export volume [11]. As of September 30, 2025, Leapmotor International has established over 700 outlets with both sales and after-sales service functions in approximately 30 international markets including Europe, the Middle East, Africa, and the Asia-Pacific region [11].

The sales service subsidiary after the capital increase can provide more mature operation templates and resource support for overseas markets, helping to achieve the 2026 overseas sales target.

In the new stage where the new energy vehicle industry enters stock competition and global breakthrough, channels have become a key carrier connecting enterprises and users [6]. The strategic significance of the capital increase is also reflected in:

• Coping with Price Wars
  : A sound channel network can reduce customer acquisition costs and maintain price competitiveness
• Enhancing Service Barriers
  : The density of the after-sales service network is an important guarantee for user loyalty
• Building a Moat
  : An efficient channel system is difficult for competitors to replicate quickly

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The leap from 600,000 to 1 million vehicles is an extreme stress test for the enterprise’s full-system operational capabilities in R&D, supply chain, production, sales, and service [7]. Rapid channel expansion may face:

• Challenges in management refinement
• Guarantee of service quality consistency
• Reserve and cultivation of talent teams

Although Leapmotor is expected to achieve annual profitability in 2025, its “cost-based pricing” strategy keeps the gross profit margin at the 14%-15% level [7][8]. Maintaining profitability in the fierce price war while promoting brand upgrading (the D series breaking through the RMB 300,000 ceiling) is a major issue facing Leapmotor.

Pure electric vehicle sales in core markets such as Europe have fluctuated, and there are variables in geopolitics and trade policies [7]. Although supported by Stellantis, the implementation of localized production and the construction of supply chains in non-Chinese regions require time and huge investment.

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Leapmotor’s substantial 325% capital increase in Zhejiang Leapmotor Sales Service Co., Ltd. is a key measure to support its 2026 1 million sales target and its 10-year strategic vision of 4 million vehicles. The strategic intent of this capital operation can be summarized into four dimensions:

1. Channel Infrastructure Construction
   : Providing financial support for the rapid expansion of the sales and service network
2. Operational Capability Enhancement
   : Strengthening the regional center function of the ‘1+N’ channel model
3. Strategic Collaborative Implementation
   : Aligning with resource integration and collaborative development following FAW’s strategic investment
4. Pre-layout for Globalization
   : Providing operational support for deepening overseas markets

From a financial perspective, the company’s RMB 33.92 billion in hand funds and continuous positive cash flow provide solid support for this expansion. From a strategic perspective, the business model of “full-domain self-research + cost-based pricing + efficient channels” has been verified in 2025, laying a foundation for replication and scaling.

Of course, to leap from a “dark horse among new forces” to a “world-class automobile enterprise”, Leapmotor still needs to continue its efforts in system capabilities, profit quality, and brand upgrading. 2026 will be a crucial year to test its strategic execution capabilities.

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[1] NetEase News - “Leapmotor’s Zhejiang Subsidiary Increases Capital to RMB 850 Million, a 325% Increase” (https://www.163.com/dy/article/KJUT1JOD0519QIKK.html)

[2] Sina Finance - “Leapmotor’s Zhejiang Subsidiary Increases Capital to RMB 850 Million, a 325% Increase” (https://cj.sina.cn/articles/view/1426584470/5507f39602001qc9c)

[3] We Are Iowa News - “Zhejiang Leapmotor Sales Service Co., Ltd. Significantly Increases Capital to RMB 850 Million” (https://www.weareiowa.com/article/news/local/plea-agreement-reached-in-des-moines-murder-trial/524-3069d9d4-6f9b-4039-b884-1d2146bd744f?y-news-25037516-2026-01-09-zhejiang-lingpao-qiche-xiaoshou-fuwu-gongsi-zengzi-zhi-85-yi-zengfu-325)

[4] Ifeng Auto - “Farewell to ‘New Force’, Leapmotor Challenges Annual Sales of 1 Million Vehicles” (https://auto.ifeng.com/c/8pMsiHrby4k)

[5] Sohu Auto - “Leapmotor: Targeting 1 Million Sales, Saying Goodbye to the New Force Label” (https://www.sohu.com/a/969633314_120341130)

[6] Sina Finance - “Leapmotor’s ‘Good Start’: Multiple Stores Opened Across the Country in January 2026” (https://finance.sina.com.cn/roll/2026-01-14/doc-inhhhnwm4955354.shtml)

[7] Gasgoo - “‘Slow Runner’ Sprinting to Top 10 Globally: The Steep Slope for Leapmotor’s Next Decade” (https://auto.gasgoo.com/news/202601/13I70442429C109.shtml)

[8] Eastmoney - “Supported by FAW’s RMB 3.7 Billion, How Far is Leapmotor from ‘Leading’?” (https://caifuhao.eastmoney.com/news/20251229143730924393850)

[9] Gasgoo - “How Do New Force Automobile Companies Fight the ‘Channel War’?” (https://auto.gasgoo.com/news/202601/23I70444128C501.shtml)

[10] 36Kr - “Billionaire Zhu Jiangming (RMB 8.5 Billion): Embarking on a New Journey with Ambition” (https://eu.36kr.com/zh/p/3616651108282884)

[11] 36Kr - “Changes in the New Force Pattern: Sales Leaping from 400,000 to 600,000 Vehicles” (https://eu.36kr.com/zh/p/3626399807013894)