Leapmotor (3Q25 Minutes): 2026 sales target of 1 million units, net profit target of 5 billion.

The following are the Minutes of the FY25Q3 earnings call organized by Dolphin Research for$LEAPMOTOR(09863.HK). For earnings interpretation, please refer to "Leapmotor: Facing Obstacles in Leading, How to Break Through?"

I. Review of Core Financial Information

II. Detailed Content of the Earnings Call

2.1 Key Information from Executive Statements

1. Sales and Delivery Performance

a. Quarterly Performance (Q3 2025): Total deliveries of 170,000 units. Total sales of 173,000 units, a year-on-year increase of 101%, and a quarter-on-quarter increase of 29%.

b. Monthly Performance (Rising Monthly): July 51,219 units; August 57,000 units; September 66,667 units; October 72,890 units, breaking the 70,000 mark for the first time.

c. Important Milestones: On November 15, the annual sales target of 500,000 units was completed ahead of schedule, with the full year expected to exceed 600,000 units. On September 26, the 1 millionth vehicle rolled off the production line, taking less than a year to go from 500,000 to 1 million. It became the first Chinese emerging brand to break the 70,000 monthly sales mark.

2. Products, Technology, and R&D:

a. Market Performance of Existing Models:

- C11 Series: Since its launch in 2021, cumulative sales have reached approximately 400,000 units, becoming a market phenomenon. October single-month sales exceeded 11,000 units.

- C01 Model: Monthly sales have reached 16,000 units.

b. New Product Line Layout:

- D Series (Flagship): The first model D19 was unveiled in June, targeting the 300,000 yuan luxury SUV market.

- A Series (Mainstream): The first model A10 will debut at the Guangzhou Auto Show on November 21, targeting the 100,000 yuan intelligent SUV market, and will be equipped with lidar for the first time.

- Global Models: Global models based on the Leap Motor 3.0 architecture were unveiled at the Munich Auto Show in September, with plans to enter the global market in Q2 2026.

c. Core Technology Releases:

- Super Range Extension: Equipped with a large battery, achieving 500 km pure electric range.

- High Voltage Platform: Industry's first 1000V pure electric platform, equipped with 5C super battery pack.

- Intelligent Driving: Utilizes dual-core Qualcomm 8797 chip, providing up to 1280 TOPS computing power.

- Chassis Technology: Flagship 2.0 architecture, equipped with high-performance tires.

- Health Cabin: Industry's first integration of vehicle-grade oxygen generator.

d. R&D and Testing:

- Summer Testing: Completed over 2,900 tests, with cumulative mileage reaching 1.15 million km, fully verifying product reliability in extreme high-temperature environments.

- OTA Upgrades: Continuous OTA upgrades for older models like C11 and C01, adding and optimizing nearly 20 functions.

3. Sales Channels and User Services

a. Channel Network Expansion (as of Q3): 866 sales stores and 493 service stores, covering 292 sales regions. From January to September this year, 120 new stores were jointly built with quality partners.

b. Operational Efficiency Improvement (Q3): Test drive rate: increased by 8.4 percentage points.

c. Service Experience Optimization: Launched "Smart Cloud Diagnosis" proactive service, achieving second-level fault diagnosis. Spare parts 48-hour delivery rate increased to about 92%, a year-on-year increase of 25 percentage points.

4. Global Strategy Progress:

a. Export Performance: Q3 export volume of 17,397 units. Cumulative exports in the first three quarters approximately 33,000 units, maintaining a leading position among emerging forces.

b. Overseas Market Penetration:

- European Market: In September, sales in Germany, Italy, France, etc., ranked among the top three Chinese new energy brands. October European user orders increased by over 100% month-on-month.

- Global Network: Established over 700 sales and service outlets in about 30 countries in Europe, Middle East, Africa, Asia-Pacific, etc.

c. Local Production: The manufacturing plant in the United States officially started production in September, aiming to reduce resource consumption and carbon emissions.

2.2 Q&A

Q: The company has completed the 2025 target of 500,000 deliveries ahead of schedule. Looking forward to 2026, what new products does the company plan to launch? Additionally, which existing products will be iteratively upgraded to consolidate market competitiveness?

A: Next year will be a year of intensive product releases for us. We will launch the first model based on the new D platform, and the D series will also have two other new products. On the A platform, the first model A10 will be launched in the first half of next year, becoming one of the new flagship products, and the A series will also launch the A5 model. Meanwhile, existing C series products (such as C10, C11, etc.) will also undergo upgrades and iterations. In summary, through the launch of new products in the D series and A series and the upgrade of C series products, we will further strengthen our product matrix and market competitiveness.

Q: Given the company's success in the European market in 2025 and the significant growth in export volume, how does management view the growth trend of overseas markets in 2026? Can you provide specific sales targets, volume guidance, and corresponding profit expectations for next year's overseas market?

A: We are experiencing explosive growth. Following the substantial growth in overseas sales in the third quarter, overseas orders in October and November continue to be booming, with October orders reaching 12,000 units, and November expected to exceed 15,000 units. As we fully promote the B10 platform in Europe and enhance brand awareness, we are confident that sales will continue to rise. Looking forward to 2026, we will make great strides based on the current strong growth momentum and accelerate the exploration of new markets such as the Middle East, Central Asia, and South Africa. Based on the current strong growth and accelerated global layout, our overseas market sales target for 2026 is set at 100,000 to 150,000 units.

Q: Could you forecast the gross margin performance and sales expectations of the D series models? Additionally, will the company's marketing and sales channel strategy be adjusted to match its high-end positioning?

A: Our company's long-term gross margin target for the vehicle business is to maintain around 15%. For high-end products like the D series, we do not pursue extremely high margins but hope to stabilize them in the 15% to 20% range. The specific level will fluctuate based on market conditions and model configurations. In terms of marketing, we will adopt more innovative and high-end strategies. For example, hiring Mr. Fei Xiang as the spokesperson for the C series was a huge success, gaining high attention from the industry and users. For the D series, which is currently the most high-end product line, we will adopt more breakthrough ideas and methods in brand promotion, channel strategy, and user reach, surpassing existing products.

Q: Could you share the detailed planning of next year's overseas business and how the domestic market will support the globalization strategy? More importantly, considering the complexity of overseas operations, how does the company view and plan the profitability of overseas markets, and can it dispel doubts about the profitability of overseas business?

A: In 2026, we will focus on advancing two overseas localization projects. The first is the Malaysia project, expected to start local team building in the first half of next year, using the C10 model as the entry point. The second is the European localization project, planned to start with the B series. These two projects will strongly promote our deep development in local markets.

In the first three years of entering international markets, to prioritize market expansion and scale growth, we will actively maintain a relatively low gross margin level. Therefore, it can be expected that the overseas business gross margin in 2026 will be roughly the same as this year's level, without pursuing short-term high profits. Our core goal is to establish a foothold first and then seek long-term development.

Q: With the adjustment of the new energy vehicle purchase tax subsidy to 5% and the reduction of trade-in subsidies, what strategies will the company adopt to respond to policy changes in the segment market where prices are around 200,000 yuan and users are sensitive to subsidies, to ensure the goal of reaching one million domestic users?

A: Currently, the specific adjustments to next year's subsidy and purchase tax policy are not clear, but I personally judge that the policy will not undergo drastic changes, and the impact on the total market volume will be limited. Looking back at the decline of national subsidies in 2023, the market did not experience significant fluctuations. I believe that as China's new energy vehicle industry matures, the competitiveness of the product itself has become the core driving force for users to purchase cars, rather than subsidies. Therefore, the key is how to effectively convert user demand into actual sales.

For Leapmotor, on the one hand, we will closely monitor policy dynamics and adopt response strategies; on the other hand, more importantly, we will hone our internal skills: continuously optimize product configurations, upgrade technology, and leverage our full-domain self-research advantages to maintain competitiveness. Therefore, we are confident in achieving the goal of one million domestic sales next year. Since we have already announced this goal to the market, there is no turning back, and we must go all out to achieve it.

Q: Looking ahead, will the company's strategic focus be more on the domestic market or the overseas market? Also, can you clarify again when the company plans to launch its first locally produced model in the overseas market?

A: For emerging forces like Leapmotor, whether domestic or overseas, the market space is large enough. Our strategy is not a choice between one or the other, but a dual-line approach. We need to leverage the advantages of emerging forces and learn from traditional car companies to make up for shortcomings.

This is the strategic significance of our cooperation with FAW (First Automobile Works). By cooperating with traditional giants like FAW, which have deep accumulation in technology, R&D, production, and supply chain, we can achieve complementary advantages and progress together. Currently, both parties have conducted in-depth exchanges and communication in multiple fields, which is a very good start. Regarding specific cooperation results, we signed a memorandum of understanding in March this year, and the first overseas model of the cooperation is expected to be officially released in the second half of next year, followed by mass production and sales. I believe you will soon see substantial progress in our cooperation.

Q: Could you share the specific sales revenue data of the company in the European market for the third quarter?

A: In the third quarter, we generated approximately 250 million yuan in revenue through carbon credits. As the overall sales volume in the fourth quarter is expected to be higher than in the third quarter, we anticipate that carbon credit revenue in the fourth quarter will further increase, possibly reaching about 500 million yuan. As for inventory, the overall inventory level in Europe is very healthy and relatively low. As of the end of October, our dealers' inventory was only between 1,000 and 1,500 units, and we are working with dealers to further optimize. Considering the transit time for shipping and customs clearance, the actual spot inventory in Europe is quite low.

Q: Given the good performance of the first model in Europe, what does the company expect the future sales growth trend in the European market to be?

A: We have indeed noticed fluctuations in upstream battery raw material prices. However, according to our communication with suppliers, the current raw material prices are only slightly fluctuating and have not seen significant increases, so the overall procurement cost of battery cells is not greatly affected.

More importantly, Leapmotor has its own cost control advantages:

1. Scale Effect: As our overall sales continue to rise, the demand for batteries also increases, enhancing our bargaining power.
2. Platformization and Standardization: Although our sales this year are expected to be at the 500,000-unit level, due to our highly standardized battery platform design, the types of battery packs required (SKU) are far fewer than competitors. This greatly facilitates the production and supply of suppliers, reduces their manufacturing costs, and allows our production line to operate efficiently.
3. Self-research and Manufacturing Cost Advantages: We have self-research capabilities and manufacturing cost advantages in the battery field.

Considering these factors, we are confident that the comprehensive cost of batteries will further decrease next year, without negatively impacting our gross margin.

Q: You mentioned that our carbon credit revenue in the third quarter was about 250 million yuan. Besides carbon credit sales, do we have other types of revenue, such as income generated from technology authorization or transfer to FAW (First Automobile Works)?

A: In the third quarter, apart from carbon credit revenue, no other business (such as technology authorization) revenue was confirmed.

Q: Could you specifically explain the main investment directions and key areas of the company's R&D expenses (R&D Expense) in the future?

A: The company will continue to focus on three core areas: first, continuous iteration and upgrade of product lines and new model development, with plans to launch multiple new products in 2027; second, significant investment in forward-looking technologies such as intelligent driving and intelligent cabins, promoting the evolution of the self-research technology platform from 3.0 to higher versions; third, continuous deepening of self-research capabilities in the "three electrics" field of electric drive, battery, and electric control.

Q: The competition in the pure electric and range-extended markets is fierce, and many competitors are also launching highly cost-effective range-extended models (EREV). What strategy will the company adopt next year to respond to this competitive landscape, especially in the field of pure electric models?

A: The company's core strategy is "focus on oneself, make good products," insisting on mastering cost and technology iteration through full-domain self-research. The company's core advantage lies in strong platform capabilities and the resulting extreme "quality-price ratio." In the future, the company will adhere to the principle of "technology benefit," applying advanced technology to all models, and leveraging cost and efficiency advantages to continuously create high-value products for users. Whether in the 100,000 yuan level or the 300,000 yuan level market, the company will uphold the original intention of "benefiting users," allowing every car owner to feel Leapmotor's sincerity.

Q: What is the trend of the company's management expenses? Will it increase or decrease year-on-year or quarter-on-quarter?

A: Management expenses are expected to grow normally with the expansion of the company's scale, but there will not be a significant increase.

Q: What are the expectations for the company's profitability in the fourth quarter?

A: The overall profitability in the fourth quarter will be roughly the same as the third quarter. Although we hope for significant growth in sales by the end of the year, considering the gradual withdrawal of local subsidy policies, market sentiment remains cautious. The company will introduce corresponding strategies to respond to market changes. Overall, we expect to maintain a similar level of profitability in the fourth quarter as in the third quarter.

Q: You mentioned on the previous investor day that R&D expenses will increase. Can you share how these investments will translate into future new products? Can you specifically introduce the development progress and release rhythm of new models?

A: We have completed the strategic planning of new models and clarified the brand and channel direction, and the related products are currently being developed in an orderly manner. I apologize for not being able to disclose too many details at this stage, but I can share that this will be a disruptive, unprecedented new product, completely different from any existing models in the domestic and international markets. It creates a new category, internally referred to as "new species," and is a truly innovative product. We are full of expectations for it, and it is expected to be released between 2026 and 2028.

Q: The company has proposed a sales target of 1 million units domestically next year. How is this ambitious target broken down internally? For example, have specific sales targets been set for different model series or segments?

A: Since the achievement of this target is closely related to our overall new car release rhythm in China and overseas markets in the future, involving many dynamic variables, I do not have specific, detailed breakdown data to share at the moment.

Q: Next year, state subsidies may further decline, and market competition is expected to be unprecedentedly fierce. What specific measures will the company take internally to reduce costs for itself and the supply chain to ensure profitability? Additionally, how will the company flexibly respond to dynamic adjustments in national policies?

A: We have noticed that most competitors' trade-in subsidies are only valid this year. We are very confident that through scientific and reasonable sales planning, we will further reduce dealer inventory in December and deliver more vehicles to end users. At the same time, we will also introduce similar measures to help users cope with policy changes, so we are not overly worried about this issue.

We have noticed that the national level has begun to pay attention and introduce policies to curb excessive "price wars" and other irrational competitive behaviors in the industry, and we firmly support this. We believe these policy adjustments will not have a negative impact on the long-term healthy development of the industry.

Leapmotor's pricing and competitive strategy always prioritize ensuring its own profitability. We will not adopt unsustainable, extremely aggressive competitive methods, as this is not conducive to the long-term development of the enterprise. All our decisions are based on our strong product strength and cost control capabilities, and we believe that under the premise of ensuring profitability, Leapmotor's products, prices, and services remain highly competitive in the market.

In summary, we have sufficient predictions and preparations for next year's policy changes and market environment, and will flexibly adjust strategies based on our capabilities.

Q: We have noticed that the European new energy market is growing rapidly, and Leapmotor's cooperation with Stellantis is a key layout in this regard. Recently, there seems to be management changes within the Stellantis Group. Will this affect the progress of cooperation between the two parties?

A: As you mentioned, Stellantis Group's own new energy transformation requires strong products to support it, which is precisely the core reason why they highly value cooperation with Leapmotor. Stellantis' CEO and other senior executives expect Leapmotor's rapid development in Europe to inject strong momentum into their group's new energy strategy.

Specifically, Stellantis is leveraging its deep experience and resources in the European market to empower our joint venture company in multiple ways. They have not only invested professional teams and a large amount of human and material resources to jointly develop the European sales network and potential markets with us, but also help us promote local production and improve operational efficiency in Europe, Southeast Asia, and even the South African market we are investigating.

More importantly, after a year of cooperation, Stellantis management has gained a deep understanding of Leapmotor's value far beyond expectations. To show their importance, Stellantis Group CEO will personally lead a team to Hangzhou in December to attend Leapmotor's tenth anniversary celebration. This fully demonstrates the closeness and strategic importance of international cooperation between the two parties.

Q: What is the company's channel expansion plan for next year? How many new sales stores are expected to be added? Additionally, what are the company's expectations for average sales or transaction volume per store next year?

A:In terms of quantity: By the end of this year, our sales outlets are expected to exceed 1,000; by the end of next year, this number will further exceed 1,500. With the hot sales of new products such as A-class and B-class cars, our channel network will continue to sink, accelerating penetration into fourth- and fifth-tier cities, preparing for the sales of more new products next year.

In terms of quality: We adhere to the "1+N" channel strategy and have established a strong channel team to continuously optimize channel capabilities. Our core management philosophy is centered on dealer profitability. A healthy indicator is that as of October this year, the overall profitability of our dealer channels has exceeded 80%. We believe that only by allowing dealers to continue to profit and maintain healthy inventory will they be more motivated to invest resources and improve services, thus growing with us.

In terms of efficiency: Next year, we will launch four new cars, and single-store sales growth is inevitable. We will optimize the entire process experience from entering the store, test driving to transaction to improve conversion rates, thereby achieving higher single-store efficiency and sales growth while controlling costs.

Q: Entering the new year, has the company updated its goals in terms of profitability? For example, are there new guidelines for gross margin or net profit?

A: For next year, we have set very clear goals: based on 1 million units of sales, we strive to achieve approximately 5 billion yuan in net profit.

Q: Regarding the company's first high-end model entering the 200,000-300,000 price range, we have seen some market feedback. What does management think is the biggest challenge in pricing this car? In future strategies, how will the company balance "price" and "sales"? Will it stick to the price positioning, or is it willing to sacrifice some price if necessary to ensure the achievement of sales targets?

A: First of all, since its release in October, the market feedback for this new car has far exceeded expectations, and the growth rate of orders in the same period has surpassed any of our previous models, fully proving the market and users' high recognition of it. We are full of confidence in this product.

Secondly, when discussing the balance between "price" and "sales," we must emphasize "value." This new car is positioned in the 300,000 yuan market, and we believe it is the most cost-effective model in its class. You may find cars with lower prices, but their configurations, technology, and experience cannot be compared with our products. For example, we use advanced battery technology, with a range of over 500 km, while some competitors use a hundred kilometers of hybrid range to lower prices, which is an unfair comparison.

Our pricing strategy is based on a comprehensive consideration of technology, configuration, experience, and cost, and we have set a gross margin target of 15%-20%. We believe that when this product is finally fully presented to you, you will be surprised and amazed by its excellent product strength. We are confident that it will become a pioneering, breakthrough product in this market.

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