Despite an improved gross margin, Leapmotor’s losses continued to widen in the second quarter as the company made record investments in research and development.
Chinese electric vehicle (EV) manufacturer Leapmotor was able to increase its gross margin above zero again last quarter, while its net loss increased due to increasing investments in research and development.
Leapmotor reported second-quarter revenue of RMB 5.36 billion (US$747 million), up 22.62 percent from the same period last year and 53.73 percent from the first quarter, according to its unaudited financial report released yesterday.
Leapmotor delivered 53,286 vehicles in the second quarter, up 56.76 percent year-on-year and 59.49 percent from the first quarter, previously released data showed.
The company’s gross margin was 2.76 percent in the second quarter, an increase of 7.96 percentage points from -5.20 percent in the same period last year and 4.16 percentage points from -1.40 percent in the first quarter.
Leapmotor reported a positive gross margin for the first time in the third quarter of 2023 and maintained that trend in the fourth quarter of last year. However, the number fell below zero again in the first quarter of this year.
Despite the improvement in gross margin, Leapmotor’s losses continued to rise in the second quarter, which the company attributed to higher investments in research and development.
Leapmotor reported a net loss of RMB 1.2 billion in the second quarter, a new high since the fourth quarter of 2022, up 4.87 percent year-on-year and 18.35 percent from the first quarter.
The company invested a record 701 million RMB in research and development in the second quarter, an increase of 70.72 percent year-on-year and 34.87 percent over the first quarter.
During a conference call last night, Zhu Jiangming, founder and chairman of Leapmotor, said the company will continue to increase its investment in manpower, computing power and equipment in the field of intelligent driving.
Leapmotor has established a research institute for intelligent technologies in 2024 and plans to expand the current team from about 200 to about 500 employees. The focus will be on developing algorithms and technologies for intelligent driving, Zhu said.
The company aims to achieve NOA (Navigation on Autopilot) and end-to-end large-scale model algorithms for urban areas by 2025.
As of June 30, Leapmotor employed 10,844 full-time employees, of which 3,823, or 35.3 percent, were in research and development and 47.2 percent were in production.
For Leapmotor, sales are more important than gross margins and gross profits, Zhu said in the conference call.
Leapmotor’s strategy is to improve gross margins year after year, as planned. This year, the company is aiming for an average gross margin of 5 percent or even slightly more, he said.
The company’s goal is to increase gross margins to 10 percent in 2025, and gross margins should stabilize at around 15 percent in the long term, Zhu said.
Leapmotor reiterated its unchanged sales target of 250,000 units for the full year of 2024, which would mean an average of 28,200 deliveries per month for the remaining five months of the year.
The company delivered 22,093 vehicles in July, 54.12 percent more than the previous year and 9.83 percent more than in June.
(1 USD = 7.1718 RMB)
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