Zhejiang Leapmotor Technology Co., Ltd. (9863) Earnings Call Transcript & Summary

Hello, everyone. Welcome to Leapmotor 2026 Interim Results Conference Call. We have CFO, Mr. Li Tengfei of Leapmotor; as well as Co-President, Mr. Wu Qiang; as well as the Board Secretary, Mr. Shen Ke. First of all, may I invite Mr. Shen Ke to announce the disclaimer. Thank you.

Ladies and gentlemen, good evening. I'm Board Secretary, Shen Ke. Before we proceed, please note the following important legal and regulatory disclosures. The conference call and accompanying materials may contain forward-looking statements, including, but not limited to projections regarding revenue, profitability, growth and strategic plans as well as future market conditions. These statements are based on the company's current expectations, estimates and assumptions and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from these expressed or implied in such statements. Therefore, we would like to remind you not to rely too much on these forward-looking messages because these messages reflects our opinion as of now. The company undertakes no obligation to update, revise or otherwise modify any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Investors are cautioned not to place undue reliance on these forward-looking statements. Other than that, the information and materials presented in this call are not suggestions of investment. Therefore, shareholders and potential investors needs to make investment decisions prudently. Thank you. Now I'm going to invite Mr. Li Tengfei to report the interim results. Thank you.

Distinguished guests, I am Li Tengfei from Leapmotor. I am going to brief you the interim results of the first half of the year. In 2026, H1, our net profit is CNY 210 million. In the first half of the year, our total delivery is 356,000 units, an increase of 60.8% year-on-year, ranking first in China's EV startup. In July, our sales volume created -- exceeded 100,000. And this is the first time we exceed over 100,000 units in 1 month. We are the first EV startup company to achieve these results. And Leapmotor is a leader. In the first half of '26, our export is 96,294 units, up by 72%, exceeding the year total export of 2024. And in July, our export exceeds 17,000 unit and overseas market has become our important growth curve. D19 was launched in April. The sales volume has been increasing, monthly average exceeds 7,000. And in July 2026, the sales volume exceeds 10,000, ranking first for large SUV with the price range below CNY 400,000. And then in terms of financial revenue, we achieved CNY 38.11 billion, up by 57.2% year-on-year and GP margin is 11.7%, down by [ 2.4% ] versus 14.1% of the same period in 2025. And in Q2, our GP margin is 12.6%, up by [ 3.2% ] year-on-year. And by June 30, 2026, well, net profit owned by our shareholders also increased. Adjusted net profit is CNY 270 million. By the end of June, our cash flow is CNY 270 million. The same period of 2025 is CNY 2.86 billion. Our free cash flow is CNY 140 million, while the same period last year, it's CNY 860 million. By the end of June, our cash and cash equivalents are CNY 38.59 billion. In terms of sales volume, our sales volume has increased by 60.8%. And Leapmotor ranked #4 among all global EV brands. And in July 2026, our sales volume exceeded by -- increased by 102%, becoming the only EV startup with monthly delivery exceeding 100,000 units. And our total export has grown by [ 37.3%, ] exceeding the yearly export total in 2025. In July 2026, our export exceeds 17,000 units. And from January to July 2026, the total shipment has exceeded [ 1.13 million ] units. In terms of product, by the end of the first half of 2026, we have fulfilled A, B, C, D series launch and covering all the mainstream price range. And for all our models, they are leaders in their different sectors. We have created a very complete product lineup and has created synergy among different model lines. In March, we launched our A10 series. For the first time, we actually make this model with LiDAR as well as high-end autonomous driving systems available within CNY 100,000. And then together with the latest technology of CLTC -- long CLTC as well as smart technologies, providing a new mobility choice for -- after launch of A10, it is a great success. By August 7, we managed to produce the 100,000 units. This creates a new record of creating 100,000 units from May to July 2026. For 3 consecutive months, it has become the sales champion for SUVs in China, becoming a new popular product. And it also ranked very top in various kinds of tests. In April 16, 2026, the first D model, D19 was also launched in the market. After years of technology accumulation together with the product advantage, D19 is a great success. Order number has been a great success as well as it's, say, [ bus ] created among the consumers. For 2 months in a row, it has become the champion for large SUV sales rank. And also in the health ranking of EV models, D19 was ranking -- was ranked top as the most recommended models. And then for the range extended models, it has this new 80.3 kilowatt batteries. And then for the pure electric model, it used a battery of 111-kilowatt hours with CATL battery cells, together with the Qualcomm's 8797 chips with the TOPS reaching 1,280. So this is true flagship models in this sector, providing a very comprehensive comfort for both driving and passenger experience. On April 24, we also launched this new model of Lafa, providing a new sedan choice for the customers. In terms of the sports packages, quality as well as materials, there are major breakthroughs, addressing various needs of the younger generation, not only providing the top technology but also the emotional value with a very affordable price range of [ CNY 100,000 to CNY 150,000. ] So after this Lafa series launched at the end of 2025, the total sales volume has exceeded 40,000 units. In the future, this new model will continue to tap into this blue sea market. In June 16, our C10, C11 and C16 were also launched in the market. This is an upgrade of this C-series, focusing on the customer needs, new, say, upgrade of the style, range, smart technology, covering CNY 120,000 to CNY 180,000 price range. For these 3 facelift models, the popular -- the result of the market was very optimistic. And in June, the sales volume exceeded 30,000 units. C10 is a really benchmark of this segment. For C11, after launch in 2021, the total sales volume has exceeded 350,000 units. And C16 is also a sales leader in this segment. For C-series, we have accumulated over 850,000 customers. The word of mouth has been proven over the years. In June 26, D99 was launched the market. It is a flagship MPV model. It is the flagship of the D-series, providing great technology, range, safety and also the smart technology as well. So D99 fills the void of Leapmotor, and it is a model in the MPV market. The average selling price exceeds CNY 300,000 after its launched market. The market performance has been a great success improving our premiumization strategy. In July 16, 2026, we also launched 2 B platform upgrade models with a very long range. B10 and B01. These are 2 models proving our strategy of democratizing technology. So for B01 and B10. We use the 800-volt technology as well as zero gravity seats as well as large central control. All this address the pain points of the market with affordable price range within CNY 100,000, providing the technologies and experience of CNY 200,000 price range. And then in August 2026, A05 was launched in the market with 5 different versions, and the price starts with CNY 63,900. With our years of technology expertise, we provide the best-in-class quality. A very good choice within the price range of CNY 100,000. In terms of R&D, LEAP 4.0 was first used in D19 based on 8797 chips, smart technology is further improved. This architecture support single or double 8797 chip platforms. Based on different use cases, the chip's performance can be adjusted accordingly. GPU/CPU, together with NPU, can fully utilize the hardware resources. At the same time, the data can be better shared between the passenger cabin as well as the driving system. And the smart technology condition can also be synchronized at the central dashboard. At the same time, the response is within milliseconds, providing a very good handling experience. At the same time, city autopilot has also been available in all A series, B, C, D series. In September 2026, we're going to launch a brand new autonomous driving solutions, providing further upgrade of the driving experience, covering all our product range from A-Series to D-series. In terms of channel, by June 30, our sales network has covered 298 cities, covering 87.4% of the city. We have 1,064 stores as well as 562 services stores. Compared with 2025, we have increased 258 sales outlet as well as 101 service stores. We also launched our brand-new multifunction stores, which can provide demo, test drive, delivery as well as aftersales services. Currently, our flagship store in Shanghai and Shenzhen is in operation. This is going to further enhance the customer experience and channel operation. Retail wise, H1 2026, we continue to focus on the customers' lifestyle management, refine our operation. By the end of 2026, in terms of NEV market, our market share has increased to 5.71%, which is an increase versus 4.22% at the end of Q1. The conversion rate in the first half of the year has achieved 4.3%. In terms of channel and store management, we continue to upgrade our service so that we can create synergy among different stores, creating new benchmark. In terms of service in 2026, the company focused on serving our customers as our top priority, addressing customers' needs as much as we can so that we can really create a better word of mouth. Our service NPS reached 57.8%, up by 39.6%. In the first half of 2026, we practice our full service commitment and also upgraded our service standard. At the same time, we also have owner events to further optimize the experience of Leapmotor's owners. For globalization, from January to July, our total export has exceeded [ 1.13 million ] units. Throughout the year, we can exceed 150,000 units. In the first half of 2026, our export was 96,294 units and especially in Italian market, our market share has exceeded 25% in the EV pure electric sector. In June 2026, we are also becoming the #1 EV brand, Chinese EV brand in German market. In U.K., we are #3 in China's EV brand. So all this means our globalization strategy has taken effect. By end of June 2026 in Europe, South America, Africa as well as 45 countries, we have established over 1,000 stores. In Europe, over 900. Asia Pacific, 50. Safety South America, over 30. And North America -- South America over 30. And in Q2, we entered Mexico market we have established our channel network there. Leapmotor right now is also localizing our production. In Southeast Asia, our assembly plant in Malaysia has achieved great success. And also, our SOP for C10 models in Malaysia has also been fulfilled. For B10 in Q3, we're going to start mass production and market launch. In Europe, say, in Spain, we have fulfilled our factory together with Stellantis. In 2027, we plan to officially produce B05. In South America, together with Stellantis, we have selected Stellantis' Brazilian factory as a localized assembly plant. This is going to take the lead in locally assembled B10, and the production is projected to start in the second half of 2027. In terms of environment, social and governance, in the first half of 2026, we have launched our fourth independent annual report, demonstrating our sustainability practice. Our sustainability practice has gained recognition. We got 2 accreditations. For 3 years in a row, we were MSCI accredited. And in a new round of [ EcoVadis ] accreditation, we have become silver from copper, and our ranking also became the top 15% from the previous top 35%. As for digitalization in the first half of 2006, we have launched our AI product, which is developed in-house and also upgraded to version 2.0. This is going to ensure that AI technology can be fully integrated into our R&D, marketing and internal use. We continue to utilize AI in various processes, centering around very complex business cases. We are improving our innovation, risk detection, customer service as well as operational efficiency in R&D, focusing on styling AIGC and voice recognition, knowledge management. We're also trying to improve our design innovation, diagnosis of problems as well as the problem response. In supply chain, we are also better analyzing the risks and decision-making. In marketing, focusing on customer, say, defects, description, smart scoring, we can also improve customer insights. By doing so, we can improve our customer service. As well in the administrative area, we are also using AI for smart translation and document treatment. By integrating AI capability in our key business processes, we are also scaling up the use of AI technologies, paving the way for high-quality development in the future. Thank you very much. Now we will open the floor for questions.

[Operator Instructions] Next question. Please identify yourself.

I am [indiscernible] from CICC. Congratulations on the very good interim results. I have two questions. The first question goes to Mr. Li Tengfei. Can you break us down your revenue contribution of carbon credit as well as R&D services in Q2? The second question. Looking into the second half of the year, do you see any changes, cost-wise? And are you going to update the profitability guidance? Any change of the guidance of the GP margin?

Well, for H1, our carbon credit revenue is CNY 800 million to CNY 900 million. In Q2, it's around CNY 500 million. When we're looking at our carbon credit revenue, Leapmotor has achieved a lot in European market. However the price of carbon credit, as we mentioned in Q1, the selling price dropped versus the previous year. So that is why the overall carbon revenue is not growing as fast as the absolute ratio. As for R&D services, in the first half of the year, you probably have a notice that with G -- FAW and Stellantis in R&D service, we have continued, and I'm sure that you will hear the announcement very soon. So please stay tuned for the good news. As for the second question, the profitability guidance. You mean throughout the year 2026, right?

Yes.

Throughout the year -- at the beginning of the year, we set this CNY 5 billion net profit guidance. Now judging from the current condition, CNY 5 billion is very challenging. This is mostly due to reasons that is known to all because of the price uplift of raw materials, which actually affected our GP margin. According to the current condition, we expect the GP margins -- NP margins throughout the year is around CNY 3 billion. As for GP margin, which is around 13% to 14%.

Follow-up question. In H1, in R&D service, there is no revenue contribution?

Well, there is some, but it's not significant. When we have our business officially launched, we're going to announce that.

And GP margin, 13% to 14%, what is the GP margin for vehicle sales then?

Vehicle sales, the margin is around 10% to 11%.

Next question.

I'm Wu Pingyue from Citic auto team. I also have two questions. The first question is about Leapmotor and Stellantis cooperation. We know that Stellantis announced its technology partnership for the electric models. So can you share with us how can you say -- how do you expect to benefit from this partnership? And any possibility for range extender on the second model? And also, we noticed that for localized procurement, European Union has some new requirements. And Leapmotor International, can you use the Stellantis supply chain? So that's my first question. The second question is for overseas sales. Can you update next year's target for overseas sales and the breakdown in different regions?

First question, our partnership with Stellantis. In fact, in the previous question, we have mentioned that we expect that recently, we're going to announce some new -- good news to launch the new partnership. Well, this is based on our very, very sophisticated supply of parts and components. We hope that we can benefit our partners by using this strength from Leapmotor. This is a direction for the partnership. And the benefit for us from this partnership, well, for this part, I want to share more information with you when our partnership has been announced. As for your second question, local procurement, and we use Stellantis' supply chain. Stellantis Group has existing supply chain, which is a very important resource for us. When we are selecting supply chains, Stellantis will provide support for Leapmotor, Leapmotor International. However, we will not rely completely on Stellantis' local supply chain because our pursuit is better quality, better cost, and this is going to be the criteria when we select supply chain together with Stellantis. But of course, with Leapmotor International's local supply chain as a foundation, I think our work can be more efficient. The cost control will be more efficient. As for overseas target next year, this year, our overseas sales target is 100,000 to 150,000 units. It seems that this year, we can fulfill this target of 150,000 units. We expect the overseas sales can reach 200,000 units. As for next year's target, we are very confident about next year's overseas sales. Our overall target is 350,000 to 400,000 units for next year. This next year, together with Stellantis, we hope that we can fulfill 400,000 units. As for sales distribution in different regions, which is not going to vary too much from this year's distribution. The main market is Europe. South American market will be a very important part of our overseas sales together with Asia Pacific as well as Australian market.

Next question. Again, please identify yourself and your institution.

Two questions. First, your production capacity in overseas market has been growing very fast. Looking to next year, in Europe, Spain and Latin America, what is your planned capacity? The first question. And the second question, we know that for Stellantis, they were saying that for the first 3 years, the profitability is not the main target. So I want to know for the actual sales revenue per vehicle, what is the profit margin?

First, capacity question. Right now in Europe and South America, we are using our partner's production capability. Together with Stellantis Group, we have discussed very thoroughly and they have been very supportive in Europe, North -- South America. Our partners are doing everything they can to provide Leapmotor's capacity needs. You all know that in Europe, South America, Stellantis has sufficient production capability. Therefore, production capacity is our strength. We have such a strong partner. There is no concern production capacity-wise. And we also have a very good plan working together with Stellantis. We believe that the production capacity can fulfill our needs in those regions. As for the second question, profitability. From Leapmotor's perspective, Leapmotor International is a JV company. We own 49% of the share. They own 51%. Therefore, GP margin for us is before we sell to Leapmotor International. For the first 3 years, we have mentioned that our overall GP margin will remain very low because that is not our top priority, 3 years passed very quickly. For both sides of this partnership, we will sit down and continue the discussion. For the first 3 years, our corporation has achieved a lot. You can see the sales volume and Leapmotor International last year managed to be profitable. And this year, Leapmotor International's operation is also very good. We have been growing very fast. So now it's time for us to sit down and continue the discussion of the operation of Leapmotor International. From our perspective, right now, our top priority is still the sales volume in overseas market because we're in a faster-growing period. That is why we still need to grab more market share in those regions. We, of course, value the importance of profitability, but sales volume is our top priority right now.