Leaprun IPO, when will the cakes be closed?

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Source: Zinc Finance

After “Wei Xiaoli”, the fourth new car-making force listed on the market is about to be born.

On September 20, Leap Motor announced on the Hong Kong Stock Exchange that it will conduct an initial public offering (IPO) on September 29. The number of shares to be offered globally is 131 million shares, and it is expected to raise nearly 7 billion yuan. CICC, Citigroup, JPMorgan Chase, and CCB International are the joint sponsors of the IPO.

For the purpose of fundraising, Leapmotor said that about 40% will be used for research and development; about 25% will be used to increase production capacity; about 25% will be used to expand sales and service networks and enhance brand awareness; about 10% will be used for operating funds and General corporate use.

Although it became the first listed company in the second echelon of the new force, Leap Motor did not bring any surprises. Unexpected revenue growth, loss expansion, and more models to be added in the future… These “template”-style content can be seen in almost any new energy vehicle company’s prospectus.

It is worth noting that Leapmotor quoted information from research institutions in its prospectus, claiming that it is the only emerging electric vehicle company in China that has the capability of self-research in all areas, but such a statement is more like a gimmick and may not bring much good. Effect.

At the same time, Leapmotor also pointed out that it should increase research and development and target the mid-to-high-end market. However, the total R&D investment in three years is less than 1.4 billion yuan. Leapcar, which has been surviving in the low-end market, is too late to expect to start its efforts after listing and financing.

Starting from the annual sales volume of 10,000 units of the first model, to the total sales volume of 800,000 units in 2025, and then to today’s “IPO declaration”, there are many goals. But so far, not only has the first goal not been achieved, but the gap is still huge. This can’t help but ask, when will the painting cake of Leapmotor Car stop?

Anxious to go public is really short of money

According to the prospectus, in 2019-2021, Leapmotor achieved revenue of 117 million yuan, 631 million yuan, and 3.132 billion yuan respectively; net losses were 901 million yuan, 1.100 billion yuan, and 2.846 billion yuan, respectively, three years of loss. The total amount reached 4.847 billion yuan. Continued losses are expected to continue in 2022.

As of March 31, 2022, Leapmotor had a working capital of 5.53 billion yuan, including cash and cash equivalents, restricted cash and wealth management products. In Leapmotor’s view, it has sufficient working capital to meet its needs for the next 12 months from the prospectus date.

In this regard, some analysts believe that although the new car-making forces are “burning money”, it is indeed short of money for Leap Motor to choose to go public at this time.

An investor told Zinc Finance that in general, the capital reserve is at least 1.5 times the loss to support the operation in the next year. According to Leapmotor’s loss of 2.846 billion yuan in 2021, the book capital will be at least about 4.3 billion yuan. According to the “burning money” trend of new energy vehicles, Leapmotor’s losses in 2022 may continue to expand. Therefore, the cash reserve of 5.53 billion yuan is not much.

In addition, according to the amount of financing, it is very dangerous to have the next round of financing when there is still 1/3 of the general funds left. It is reported that from January 2018 to August 2021, Leapmotor has conducted a total of 7 rounds of financing, raising a total of nearly 12 billion yuan. Therefore, from this aspect, the cash reserve of 5.53 billion yuan is also approaching the “critical point”.

In terms of models, since its establishment in 2015, Leapmotor has launched a total of 4 models, including S01, T03, C11, and C01. It pointed out in the prospectus that the company mainly focuses on the mid-to-high-end new energy vehicle market with a price of 150,000-300,000 yuan, which is where it can stop losses or even make profits in the future.

But the reality is that Leapmotor can only survive on the low-end, and sell one at a loss.

It is reported that in July 2019, Leapmotor’s first model S01 went on sale, and its price was 120,000-160,000 yuan. But the model has not been recognized by the market. Although Leap Motor did not directly mention the sales volume of S01 in the prospectus, according to the sales volume of T03 and C11 in 2021, it can be calculated that the sales volume of S01 in that year was very poor, with only 634 units.

In May 2020, Leapmotor launched the T03 with a price of less than 100,000, and it was the low-price strategy that changed the previously dismal situation. According to the prospectus, in the whole year of 2021, the cumulative delivery of Leapmotor will be 43,748, and the T03 will be 39,149, accounting for 89.5%.

In October 2021, Leapmotor’s mid-size pure electric SUV C11 was launched. The prospectus shows that by the end of 2021, 3,965 C11s will be delivered.

In May 2022, Leapmotor will launch its fourth model, the C01, but since deliveries only started in the third quarter of this year, there is no sales data yet.

On the whole, Leapmotor mainly relies on the low-end model T03 to dominate the world. Although it has driven the growth of sales, everyone knows that it is difficult to make profits at low prices. This is a problem faced by the entire domestic new energy vehicle.

According to Kuang Yuqing, the founder of Lens Company, a third-party research and consulting agency, the recent sales of Leap Motor vehicles have already entered the first camp. From this perspective, it is indeed a good time to be listed at this time. Because if sales decline later, the great opportunity will be missed.

However, Kuang Yuqing pointed out that judging from the loss of 2.846 billion yuan in 2021, only a small part of the share is paid in the middle. Therefore, the loss is still real and serious.

The shortcomings of R&D are very obvious

Another flaw of Leapmotor is that the R&D investment is too low. According to the prospectus, in 2019-2021, its research and development expenses will be 358 million yuan, 289 million yuan, and 740 million yuan respectively, and the three-year total will be less than 1.4 billion yuan. And “Weixiaoli” now invests more than 3-4 billion yuan in research and development every year.

In this regard, Leapmotor said that this is a reasonable cost range under efficient planning.

However, some analysts believe that the loss of R&D investment is small, but it can only mean that the money is spent elsewhere, or the cost of selling cars is high, and the explanation of Leap Motor is difficult to make sense.

According to the prospectus, Leap Motor is expected to raise nearly 7 billion yuan. Of the funds raised, about 40% (nearly 2.8 billion yuan) will be used for research and development, the highest proportion. 2 times the sum of 3 years.

It is too late to start paying attention to the listing. It is more like a story deliberately told to the capital market. And behind this, it can only show that Leap Motor needs money.

Some analysts believe that Zhu Jiangming, chairman of Leap Motor, was also one of the founders of Dahua, a security leader. Relying on his background and resources, Leap Motor should have no shortage of money. But the current new energy car companies either have strong alliances with technology manufacturers or rely on traditional car companies. Which one has no background and resources? Even so, “burning money” still gives everyone a headache.

Zhang Yi, CEO of iiMedia Research, told Zinc Finance that according to the current situation, even financing 10 billion yuan is a drop in the bucket. In the face of huge market consumption, all new energy vehicle companies have great operational risks. As for research and development, it depends on the benefits and results, and the leadership of products and technologies is the most important.

As mentioned in the prospectus, according to Frost & Sullivan’s information, Leapmotor is the only emerging electric vehicle company in China that has the capability of self-research in all areas, and it is also one of the few new energy vehicle companies in the Chinese market. A company of this capability. The so-called global self-research capability refers to the ability of new energy vehicle companies to develop and produce all key software and hardware in core systems and electronic components, namely battery systems, electric drive systems, autonomous driving systems and smart cockpits.

At present, most domestic new energy vehicle companies are talking about full-stack self-development. From the perspective of Leapmotor, full-stack self-development is only the software part, not hardware. So, does it seem that the larger scope of self-research can bring more leadership to Leapmotor? The answer is: not necessarily.

An automotive professional told Zinc Finance that, in general, car companies that have reached a certain scale can do self-research in the whole field, but there is no need to do it by themselves, and suppliers are more professional in quality control, and everyone performs their own duties. Unless they have a relevant business layout and the volume is large, car companies will do it themselves, which can achieve the purpose of reducing costs. “From the perspective of Leap Motor’s low R&D investment, almost the entire vehicle engineering development will be spent. How can we still develop software? Global self-research is more like the concept of Leap Motor’s own construction.”

A lot of goals but hard to achieve

Leapmotor mentioned in its prospectus that it will continue to rapidly expand and upgrade its diversified product portfolio to further penetrate China’s mid-to-high-end mainstream new energy vehicle market. In the future, it plans to launch 7 new pure electric models at a rate of 1-3 models per year by the end of 2025, covering sedans, SUVs and MPVs of various sizes. These seven models will also focus on the mid-to-high-end market.

Almost every new energy car company is talking about adding new models, but looking back on the development history of Leap Motor, it is still unknown whether this plan can be realized by then.

As early as the beginning of the delivery of the first model S01, Zhu Jiangming said that the annual target for 2019 is 10,000, and by 2022, it will reach 200,000. But the reality is that its annual sales are only 634 units.

Since then, perhaps seeing the improvement of T03, Zhu Jiangming also shouted that the overall sales volume should reach 800,000 units by 2025.

According to the sales volume of Leapmotor over the years, no data was released in 2019, but it was reported that there were less than 700 vehicles; a total of 8,050 vehicles were delivered in 2020; a total of 43,748 vehicles were delivered in 2021; and 76,563 vehicles were delivered from January to August this year. Therefore, in total, there are less than 130,000 vehicles in total. It is conceivable that in the next three years, Leapmotor must make a big leap in order to achieve its goals.

A senior automotive media person told Zinc Finance that Leap Motor’s approach seems to be following Wuling’s example, first relying on low-price strategies to increase sales in the prefecture-level market, and then thinking about the next step. But it should be noted that in the era of fuel vehicles, it is easy to create a “sofa on four wheels”, but in the era of new energy vehicles, especially smart cars, it is not so easy to create a “computer on four wheels” Yes, without technological innovation and R&D investment, it is difficult to survive for a long time.

At least for now, no matter in terms of brand power, product competitiveness, R&D investment, etc., Leapmotor does not have obvious specialties. On the contrary, the slogans that are shouted again and again cannot be completed, but it is like a variety of paintings.

In the opinion of industry critic Zhang Shule, if there is no historical accumulation, no backing company in related fields, and only relying on money to become a new energy car company, the so-called background is only the gold owner, the gasoline that drives it, not the engine.

However, how far can the remaining gasoline drive the Leapcar? unknown. But the listing has only begun to exert force, and it can only be said that it is more like a show.


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