Leapmotor's Three Axes.

Article by Zhou Changxian

Editor: Roomy

Obviously, Zhu Jiangming is not a good interviewee.

Compared with other new power founders, Zhu Jiangming, the chairman of Leapmotor, doesn’t have a silver tongue, nor does he have an impeccable logic. However, as an entrepreneur who started his second business, he has his own unique thinking on the strategic positioning and business logic of Leapmotor. This is also an important reason why Leapmotor, which was never highly regarded, has risen all the way up to the second tier.

This founder, who looks like an engineer, has a simple and stubborn personality.

He considers himself “a very conservative person” because he has been an entrepreneur for 30 years. “For me, the word ‘risk’ may be more stable in my mind than others.”

According to a public relations person who has served Leapmotor, Zhu Jiangming, who has been in the auto industry for less than three years, was stunned by his understanding of public relations. Once, when the marketing department spent over a million in a press conference, he was puzzled, “So much money?! When we were at Dahua, it only cost us tens of thousands for a press conference!”

Regarding the industry’s saying that Leapmotor is “the Xiaomi of the auto industry,” Zhu Jiangming bluntly said, “We are not Xiaomi or Huawei. We are Leapmotor in the auto industry. We want to complement each other’s strengths and weaknesses and hope to take a different path in the automotive field.”

This different path, in terms of methodology, is “full-stack self-research,” making a “no short board” iron barrel car; in terms of business logic, it is not pursuing high gross profit, but becoming “users’ OEM factory.”

Why Full-stack Self-research?

Judging from the sales in 2022, the 150,000-200,000 yuan interval is the main market for car consumption in China, and the proportion of insured cars is as high as 18%.

Zhu Jiangming believes that in the acceleration of the transition from oil cars to new energy vehicles, oil-electricity equivalence has become a signal to change tracks. Leapmotor chooses the 150,000-200,000 yuan price range as the entry point and proposes to redefine the value standard of 150,000-200,000 yuan level cars.

“Choose Leapmotor for reference value when buying a car.”

On March 1st, in Linping, Hangzhou, this somewhat confusing statement was displayed at the entrance of Leapmotor’s new product launch conference. Entering the hall, a series of products that had been self-researched by Leapmotor were displayed.According to LI’s official statement, the confidence to redefine the value standard for 150,000-200,000 yuan cars comes from their self-developed technology. By integrating the advantages of the IT and automotive industries and planning more efficient and practical R&D logic, LI is currently the only intelligent electric vehicle company in China’s new car-making forces with full self-research capabilities and the highest vertical integration of intelligent electric vehicles.

LI has established three powertrain R&D teams, which have independently developed and designed all core systems and electronic components of intelligent electric vehicles, and produced them in-house. They have built the Leapmotor Power System, Leapmotor Pilot System, and Leapmotor OS System.

Zhu Jiangming, the CEO of LI, said that the company has achieved a self-research and self-production capability of 70% of the vehicle’s total cost. Apart from purchasing battery cells and interior and exterior trim, and outsourcing the production of chassis and automotive electronic appliances, all other components are self-developed and self-produced. This has formed a defensive wall with full self-research and vertical integration capabilities.

The advantage of full self-research is that it covers a wide range and can reduce costs, improve the consistency of vehicle performance and the matching degree of parts, and better resist external risks.

At the new car launch event, the highlight was the release of LI C11 Range Extender. As the first model of LI’s pure electric + range extender dual-power layout, the C11 Range Extender has been highly anticipated since its debut on February 9.

Thanks to LI’s full self-research and development technology advantages, LI C11 Range Extender adopts a peak power of 88kW oil-cooled range extender generator system, which performs well in low noise, NVH, simple and reliable transmission structure, and has a comprehensive fuel consumption of only 0.73L/100km under WLTC conditions.

In terms of intelligent cockpit technology, LI C11 Range Extender adopts the latest Leapmotor OS 3.0 intelligent cockpit system, uses the third-generation Qualcomm Snapdragon SA8155P automotive-grade chip, and is equipped with iFLYTEK’s third-generation voice interaction system.

In terms of intelligent driving, LI C11 Range Extender is equipped with LEAPMOTOR PILOT intelligent driving assistance system, which has 28 intelligent perception hardware devices and 23 intelligent driving assistance functions. At the hardware level, it can support the highest level of L3 intelligent auxiliary driving and OTA iterative upgrade.From the technical perspective, Zhu Jiangming believes that range extender still has its market in the next 3-5 years. In some specific markets, such as the winter in the three northeastern provinces, range extenders have unique advantages and can solve problems such as heating, battery heating, and increasing activity.

Zhu Jiangming believes that the users faced by range extenders are not necessarily first-tier cities like Beijing and Shanghai. Range extenders may be more suitable for some sinking channels, such as third- and fourth-tier cities. “Because we are in the 150,000-180,000 price range, we hope to attract some gasoline car users, so we are more facing the national level.”

According to the plan, in addition to the A series of small cars with a range of three to five hundred kilometers as the main mode of transportation, each car in the B series and C series of Zero Run will have both range extender and pure electric versions in the future, which will be released synchronously and developed in a same platform to save costs.

“Iron Bucket Car” and “User OEM Factory”

In addition to targeting the price range of 150,000-200,000 yuan and developing parallel pure electric and range extender models, Zero Run also proposed two interesting concepts: “Iron Bucket Car” and “User OEM Factory”.

Zhou Ying, the market general manager of Zero Runs technology, revealed that when the C11 was just launched, many media said it was a water bucket car and had no shortcomings. At the beginning, the internal of Zero Run also said it was a water bucket car, but they felt that this statement was too bland, so they packaged it as the concept of “Iron Bucket Car.”

Zhu Jiangming said that the so-called “Iron Bucket Car” is to achieve the ultimate. Chinese consumers have the most simple and practical demands. They may not need the most talented one but need a comprehensive development of morality, intelligence, physical education, art and labor. In other words, for Chinese consumers, everyone needs a good car without shortcomings.

In the face of increasingly fierce competition, industry competition and internal competition, Zhu Jiangming is also considering the business model of Zero Run, which can also be called the “way of survival”.

Last year, he repeatedly stated in public that Zero Run wants to be the “User OEM Factory”. Zhu Jiangming believes that breaking the high brand premium and giving users enough sincerity can maintain the core competitiveness of the market in the face of fierce competition.”This is innovation in business model. We price based on cost instead of brand, which is the strategy we keep implementing and executing. Newcomers cannot play by the rules, otherwise, there will be no advantages. We must think outside the box, or we cannot succeed,” he solemnly stated.

“Leapmotor aims to challenge the fuel vehicle market and the old market pattern with differentiated strategies. Only this way, can we possibly succeed,” Zhu Jiangming believes. Price has become the last window paper, and users demand increasingly strong for oil-electric vehicles at the same price. The success of Leapmotor C11 pure electric version has proved this point very well.

“Price is Leapmotor’s key to win customers,” Zhou Ying said. “We hope to let more users see Leapmotor with a very sincere price.”

In the industry, Ideal Auto is called “cost-cutting factory.” In fact, Leapmotor’s cost control ability is also quite impressive.

“These new car manufacturers have a seven or eight-year entrepreneurial history, but Leapmotor has spent the least money and suffered the least losses so far,” Zhu Jiangming said proudly. “Because we have experience in business operations, and we control the investment in product research and development, as well as the cost on the market side, more restrainedly.”

In brief, Leapmotor’s optimization cost law has three methods:

Firstly, through technology accumulation, the ability to systematize and scale will become stronger and stronger. The investment efficiency in research and development will become higher and higher, and the investment in this area will decrease, and the money will be used to subsidize products. Meanwhile, the ability to reduce overall costs brought by economies of scale. Third, continuously lowering product costs through more innovation.

According to Zhu Jiangming, Leapmotor’s innovation includes two aspects: one is innovation in cost optimization, and the other is Leapmotor’s unique inventions like Face ID to obtain core competitiveness.

For instance, many car manufacturers use the 8155 chip, but only for one function like the cabin. However, Leapmotor has fully tapped the functions of the chip, which can be used for a 360-degree surround-view with four cameras and audio tuning. “We immediately saved more than 1,000 yuan than others. This is through technological innovation to comprehensively reduce some costs to gain competitive advantages.”“`markdown
Zhu Jiangming knows that there are many criticisms of Leapmotor products in the market. He admits that as a new force, from the first car to the second car to the third car, whether it is admitted or not, it must be a process of accumulating experience, making fewer mistakes, and launching better products.

“I think the first generation must be better than the previous one.”

Final Thoughts:

On March 1st, Leapmotor officially released the latest monthly sales data. The data shows that in February 2023, Leapmotor delivered a total of 3,198 new cars. Compared with the monthly sales volume of nearly 10,000 units last year, Leapmotor’s overall sales are still quite sluggish.

Regarding this, Zhu Jiangming explained, “We have been relatively quiet for the past two months and don’t want to say too much, because this is a process of product transformation. We want our partners and stores to prepare for selling new cars starting from March.”

Cao Li, Senior Vice President of Leapmotor Technology, added that the reason for the poor sales is twofold. Firstly, after the subsidies were reduced last year, we did not want the old inventory to become a burden; secondly, we needed to prepare for fully promoting new models this year.

“It’s just a tactical squatting.” In response to the explanations of the two executives, Zhou Ying vividly compared it.

Regarding this year’s work plan, Zhu Jiangming revealed, “We not only need to reduce and optimize our costs, but also pursue greater quantities. We sold 8,000 units in 2020, 43,000 units in 2021, and 110,000 units in 2022. I think we should at least achieve a significant growth this year. This is our goal.”

Although Leapmotor, which is in the second-tier camp in this long-distance race of car manufacturing, does not currently face survival crises and has products known as “iron bucket cars”, its core competitiveness still has shortcomings. For example, the lack of brand power and the long-term lag in market work.

At the media communication meeting, Zhu Jiangming jokingly said, “After last year’s adjustments, our market work has also begun to shine. Maybe our media friends can feel that our marketing has improved a bit compared to before. “

Upon hearing the boss’s words, Zhou Ying smiled happily on the side.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.