Scale is important for a car company, and without scale it's impossible to be profitable, said Leapmotor's CEO.

Leapmotor would have to sell at least 400,000 units a year to break even, CEO says-CnEVPost

Leapmotor (HKG: 9863) has to sell 400,000 to 500,000 units per year to reach the break-even point, said Zhu Jiangming, founder, chairman and CEO of the new energy vehicle (NEV) maker, in an interview with local media.

For the full year 2022, the company has 111,168 deliveries. Zhu's words mean that Leapmotor will have to grow annual sales by at least 260 percent if it is to see profitability.

Leapmotor was founded in 2015 and is currently selling the minicar T03, the coupe model S01, the flagship SUV model C11, and the flagship sedan C01.

The T03 was first launched in 2020 and is currently priced below RMB 100,000 ($14,500) in China. The C11, which went on sale on September 29, 2021, and the Leapmotor C01, which went on sale on September 28, 2022, are its flagship models, targeting the RMB 150,000 to RMB 300,000 range.

Previously, Chinese residents bought vehicles mainly priced between RMB 100,000 and RMB 150,000, but now, with consumption upgrades, models priced in the RMB 150,000 to RMB 300,000 range are the most popular, Zhu said in an interview with Tencent News, according to the text of the interview released today.

Leapmotor would have to sell at least 400,000 units a year to break even, CEO says-CnEVPost

Leapmotor's models are positioned to compete with internal combustion engine (ICE) vehicle models priced in the RMB 200,000 to 500,000 range, he said.

Leapmotor's two C-series models -- the C11 and C01 -- compete with Mercedes-Benz, BMW and Audi products priced above RMB 300,000, Zhu said.

The company will launch B-series models in the future, priced around RMB 150,000, and they will compete with ICE vehicles priced above RMB 200,000, according to Zhu.

Zhu believes that the players that will eventually survive in China's NEV market will be those that have planned well in the early stages.

Competition in the auto industry is a long run, with a product taking more than 30 months from planning to mass production, and car companies need to prepare and invest in advance, he said.

"For example, if you start planning a product now, it won't be ready for mass production until after 2025 at the earliest. So you may not be able to catch up with that pace if you start late in the early stages," he said.

China's NEV makers are currently facing two challenges -- the state's purchase subsidies are out, while battery raw materials are still rising in price, he said.

Scale is important for a car company, and without scale, it is impossible to make a profit, he said, adding that it is also difficult for a car company to survive if vehicle sales do not bring profits.

Zhu said China's NEV industry is changing rapidly, but the trend toward electrification is constant and accelerating faster than most people expected.

"Even though battery prices have gone up so much, the market share of NEVs continues to rise," he said.

China's NEV market almost doubled in size in 2022 compared to 2021, and NEVs have gained consumer acceptance, according to Zhu.

In November, China's NEV penetration rate already exceeded 30 percent, and in cities like Hangzhou and Shenzhen, probably more than 50 percent of consumers are choosing NEVs, he said.

One good thing is that China sold 6.5 million NEVs in 2022, most of them from local brands. There is a big opportunity for Chinese car brands, both for new car makers and for traditional car companies, according to Zhu.

Leapmotor delivered 8,493 vehicles in December, up 8.79 percent from 7,807 a year earlier and up 5.54 percent from 8,047 in November, according to data released January 1.

In the fourth quarter, Leapmotor delivered 23,566 vehicles, up 37.90 percent year-on-year, but down 33.82 percent from the third quarter.

For the full year 2022, the company delivered 111,168 vehicles, up 157.80 percent from 43,121 vehicles in 2021.