Leapmotor “leads” in losses

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Written | Edited by Qian Qian | Li Xinma

Source: DoNews

Seven years after its establishment and three years after the official delivery of vehicles, Leapmotor, which has grown rapidly, has been shortlisted for the second echelon of new car-making forces.

On September 20, Leapmotor officially released an announcement on The Stock Exchange of Hong Kong Limited (hereinafter referred to as: Hong Kong Stock Exchange). The announcement stated that Leap Motor will conduct an IPO from September 20th to September 23rd. The number of global offering shares is 130.8 million shares, of which the number of Hong Kong offering shares is 130.8 million shares, and the rest is the number of international offering shares, with a face value of H per share. 1 yuan per share.

The price per share of Leap Motor is in the range of HK$48-62. It is expected to be released on September 29. The trading code is 9863. Calculated at HK$62, it is expected to raise a maximum of HK$8.11 billion, with a market value of about HK$70.8 billion.

On March 17 this year, Leapmotor submitted its listing application for the first time, and it was not until August 29 that it officially passed the listing hearing.

Compared with the “speed of light” that Luckin Coffee and Foxconn took from submitting an application to an official IPO in just over a month, Leapmotor’s listing process was slightly slower.

Founded in 2015, the full name of Leapmotor is Zhejiang Leapao Technology Co., Ltd. It was jointly invested by Zhejiang Dahua Technology Co., Ltd., Zhu Jiangming, Fu Liquan and others. In the energy vehicle market, the first pure electric vehicle S01 will be officially delivered in July 2019, the T03 will be delivered in May 2020, the SUV C11 will be delivered in May 2021, and the medium and large sedan C01 will be launched in May 2022, maintaining one new car a year The rhythm of mass production and delivery.

The prospectus disclosed that about 40% of the funds raised by Leapmotor IPO will be used for research and development, about 25% will be used to improve production capacity, further increase vertical integration and operational efficiency, and about 25% will be used for business expansion and improvement. About 10% of brand awareness is used for working capital and general corporate purposes.

According to the prospectus, Leapmotor obtained Pre-A1 and Pre-A2 rounds of financing in January and March 2018, respectively, with an additional registered capital of RMB 8.9297 million. In November 2018 and August 2019, the A1 and A2 rounds of financing were completed, and the registered capital was increased to 580 million yuan; the B1 and B2 rounds of financing were completed in January 2021, and the registered capital was increased to 789 million yuan; completed in August and November of the same year C1, C2 rounds of financing, the registered capital increased to 1.012 billion yuan.

According to Tianyancha data, since 2016, Leap Motor has successively conducted eight rounds of financing, with a total public transaction amount of 8.1 billion yuan. The investors are from Sequoia China, Dahua, Shanghai Electric, CRRC, and Zhejiang Financial Holdings. and other well-known investment institutions.

If Leapmotor is successfully launched on September 29, it will become the fourth new car-making company to be listed after “Weixiaoli”. At the same time, unlike the overseas red-chip structure adopted by “Weixiaoli”, Leap Motor uses a domestic structure in China to issue H shares in Hong Kong.

Although the delivery volume of Leapmotor vehicles continued to hit new highs after Q2 this year, and the total delivery volume from January to August surpassed Weilai and Ideal, from the perspective of its business model, operating conditions and product positioning, Leapmotor Motors has not gotten rid of the new car-making model. The predicament of the forces of “burning money for growth” and “selling more and losing more”.

01.

It is hard to escape the “curse” of burning money

The prospectus shows that in 2019, 2020, 2021, and 2022, Leap Motor will achieve revenue of 117 million yuan, 631 million yuan, 3.132 billion yuan, and 1.992 billion yuan, respectively, with net losses of 901 million yuan and 1.1 billion yuan, respectively. , 2.846 billion yuan, 1.042 billion yuan, adjusted losses were 810 million yuan, 935 million yuan, 2.629 billion yuan, 969 million yuan, a total of 5.343 billion yuan.

In terms of vehicle deliveries, Leapmotor will deliver 1,037 vehicles in 2019; 8,050 vehicles will be delivered in 2020, an increase of 676.3% over 2019; 43,748 vehicles will be delivered in 2021, an increase of 443.5% over the previous year; 21,579 vehicles will be delivered in Q1 in 2022, an increase over the same period of time 409.5%, a total of 74,414 vehicles. In the first half of 2022, 51,994 vehicles were delivered, an increase of 265.3% over the same period last year, and a total of 104,829 vehicles were delivered.

This is equivalent to a net loss of 72,000 yuan per car sold.

Compared with the first half of this year, Xiaopeng lost 64,000 yuan when selling a car, ideally selling a car at a loss of 11,000 yuan, Weilai selling a car at a loss of 90,000 yuan, and Leapmotor lost at a high level of the three.

From the perspective of gross profit margin, we can also compare the gap between Leapmotor and “Wei Xiaoli”.

In 2019, 2020, 2021, and 2022, the gross profit margin of Leapmotor in Q1 was all negative, which were -95.7%, -50.6%, -44.3%, and -26.6%, respectively. The gross profit margins of the three “Weixiaoli” companies all turned from negative to positive in 2019. The gross profit margins of Weilai in 2020, 2021, and the first half of 2022 were 11.52%, 18.88%, and 13.8%, respectively; the ideals were 16.38%, 21.33%, 22.09%; Xiaopeng 4.55%, 12.5%, 11.55% respectively.

This shows that Leapmotor is selling at a loss.

In terms of vehicle price, Leapmotor’s official website shows that the S01 model starts at 129,900 after subsidies; the T03 starts at 79,500; the C11 starts at 179,800; and the C1 starts at 180,000-270,000.

Li Auto is selling two cars – Li Li L9 and Li Li ONE, the official price is between 350,000-460,000 yuan; Xiaopeng’s G3i, P5, P7, and G9 are on sale, priced between 170,000-310,000 yuan; Weilai has the most models on sale, ES6, ES8, EC6, ET7, ET5, ES7 six models, priced between 320,000-590,000.

Leapmotor models and pricing range are below the mid-range.

In terms of R&D investment, Leapmotor’s Q1 R&D expenditures in 2019, 2020, 2021, and 2022 were 358 million yuan, 289 million yuan, 740 million yuan, and 243 million yuan, totaling 1.63 billion yuan. Among them, the proportion of R&D expenditure to total revenue was 306.4%, 45.8%, 23.6%, and 12.2%, decreasing year by year.

In contrast, the three “Weixiaoli” R&D investment in a single quarter exceeds the total R&D investment of Leapmotor for more than three years. Weilai will invest 2.149 billion yuan in Q2 R&D in 2022; Xiaopeng will invest 1.265 billion yuan; and Ideal will invest 1.53 billion yuan.

As of June 30, 2022, Leapmotor has a R&D team of 1,869 people, accounting for 32.7% of the total number of employees. As of the end of 2021, Weilai, Ideal, and Xiaopeng R&D personnel were 4,809, 3,415, and 5,271, accounting for 32.06%, 28.7%, and 37.7%, respectively. The proportion of R&D personnel of Leapmotor is roughly the same as that of “Weixiaoli”.

From 2019 to 2022 Q1, the gross loss of Leapmotor Motors continued to increase. The prospectus disclosed that the gross loss increased from 112 million yuan in 2019 to 320 million yuan in 2020, and increased to 1.388 billion yuan in 2021. 530 million yuan, an increase of 286.9% compared with 137 million yuan in the same period last year.

Leapmotor said the increase in gross loss is due to the fact that it is in the early stage of sales of smart electric vehicles, and the cost of sales is high in order to accelerate production and achieve economies of scale. Q1 2022 is also due to the high cost of purchasing automotive battery raw materials.

The prospectus shows that Leap Motor’s sales revenue mainly comes from channel partner stores. In Q1 of 2019, 2020, 2021 and 2022, the revenue from channel partner stores will be 75 million yuan, 521 million yuan, 2.526 billion yuan, 1.668 billion yuan, accounting for 64%, 84.6%, 82.6%, and 83.7% of the total revenue from sales of automobiles and parts, respectively, and the rest is the revenue of directly-operated stores.

Leapmotor stores are usually located in high-traffic business districts. As of July 31, 2022, the sales and service network covers a total of 443 stores in 151 cities in China. Among them, there are 49 directly-operated stores and 394 channel partner stores.

Leapmotor plans to launch seven pure electric models by the end of 2025, covering sedans, SUVs and MVPs of various sizes. In terms of overseas market strategy, Leap Motor is also the same as “Weixiaoli”. Leap Motor said that it will expand the global market in a planned way. First, it will enter the world’s second largest electric vehicle market, the European market, which is expected to be completed in 2023. The first overseas flagship store.

Leapmotor is burning money while selling wildly. In fact, it has not taken a different road of differentiation from “Weixiaoli”, let alone a new business model. Harvesting the market through cost-effectiveness is a double-edged sword. At the same time, whether NIO Leapmotor can develop sustainably and maintain its leading sales volume depends on both product support and sufficient financial support. .

02.

Continued “leading” suspense

According to statistics from the China Passenger Transport Association, from January to August 2022, Leapmotor delivered a total of 76,600 vehicles, ranking 11th, second to Xiaopeng Motors, and ahead of Ideal and NIO. In August, Leapmotor delivered 12,500 vehicles, entering the top ten and ranking ninth, surpassing “Wei Xiaoli”.

Leap Motor’s prospectus disclosed that in 2021, new energy vehicles priced in the price range of 150,000-300,000 yuan will account for 36.2% of China’s total sales of new energy vehicles. It is expected that in 2022, this price range segment will become China’s new energy vehicles. It is the largest and fastest growing market in the market, with an annual growth rate of 59.6%. It is estimated that in 2026, the total market share of this segment will reach 49.1%, becoming the main driving force for the growth of China’s new energy vehicle market.

Leapmotor is targeting this part of the market.

Zhang Xiang, dean of the New Energy Vehicle Technology Research Institute of Jiangxi New Energy Technology Vocational College, told DoNews: “In 2021, Leapmotor T03 models will account for nearly 90% of sales, indicating that Leapmotor sales will be dominated by models below 100,000 yuan. It belongs to the pyramid structure, and the economical car market has a large capacity and high sales volume, which is different from ‘Weixiaoli’. Also because it is dominated by economical cars, Leapmotor’s revenue and profits are lower than that of ‘Weixiaoli’ .”

Leap Motor’s prospectus disclosed that in 2019, 2020, 2021, and 2022, the net operating cash flow outflows recorded by Leap Motor in Q1 were 676 million yuan, 732 million yuan, 1.019 billion yuan, and 385 million yuan, respectively. It is caused by production, research and development, sales, marketing costs and expenses. Significant net losses and operating cash outflows are expected in 2022.

However, Leap Motor believes that it can reduce net losses and operating cash outflows by improving gross profit margin, expanding volume and increasing income, working capital efficiency, especially improving operating leverage, such as reducing R&D expenses, sales expenses, and administrative expenses.

Zhang Xiang expressed doubts about this: “Now is the stage of fierce competition among new car-making forces, and it is necessary to continuously develop new models to maintain the company’s survival and market position. Leapcar has fewer models than Weilai and is higher than ideal. Everyone In increasing R&D investment, at this time, Leaprun reduces investment, and after the model update speed slows down, it may affect the market ranking and market position, and in serious cases, it will affect survival.”

It is foreseeable that the money-burning mode of new car-making forces will continue.

At present, the new energy vehicle market industry is still changing. From 2020 to 2022, the subsidy standards for the purchase of new energy vehicles will be reduced by 10%, 20%, and 30% on the basis of the previous year. On December 31, 2022, the subsidy policy for new energy vehicles will be terminated. In the past two years, affected by the epidemic, car companies have faced a shortage of chip supply and rising prices, which affected the delivery cycle of complete vehicles and brought more costs to the production and sales of car companies.

At present and in the future, Leapmotor needs to improve the current negative gross profit margin and make a comprehensive layout of high-end and low-end product lines. “Leapmotor attaches great importance to sales and sells cars at a loss. If car companies want to change the status quo of negative gross profit margins, they must make an all-round layout of their products. For example, Tesla products cover 200,000 to 1 million models. At present, Leapmotor’s sales volume Concentrating on low-end models, we must deploy high-end models to make up for shortcomings.” Zhang Xiang said.

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