Author: Xu Min

Without fancy technology and marketing gimmicks, Zeroox founder Zhu Jiangming said very directly and down-to-earth at the company’s first press conference this year, “We are the user’s OEM factory and only make money as an OEM factory.”

Or to put it even more simply, it is to build a car at the standard of 300,000-400,000 yuan and sell it at 150,000-200,000 yuan. This is the future standard of Zeroox manufacturing.

At this press conference, Zeroox launched four new models for its 2023 lineup, focusing on configuration upgrades and price reductions.

Among them, the starting price of the pure electric sedan C01 has been lowered from the original 193,800 yuan to 149,800 yuan, a decrease of nearly 60,000 yuan. The starting price of the pure electric version of C11 has been reduced from the original 185,800 yuan to 155,800 yuan, a decrease of 30,000 yuan. The starting price of the newly added extended-range version of C11 is 149,800 yuan. The starting price of the A0-level compact car T03 has also been lowered from 82,500 yuan to 59,900 yuan.

The entire lineup of main models is maintained in the 150,000-250,000 yuan range, with the product matrix covering the 50,000-250,000 yuan market. From high cost-performance to technology egalitarianism, the image of Zeroox cars is firmly rooted.

It is not difficult to see that the biggest price cut is still on the C01, which was once expected to lift the brand. After all, when top companies like Tesla open the pricing war, no one can stand alone.

This is the era of cost supremacy

On March 1, Musk said at the Tesla Investor Day that the manufacturing cost of the next generation of models would be reduced by 50%, and the total cost of the next generation platform car would be lower than that of all the company’s current cars. And he said directly: “We don’t think any other car manufacturer can approach our cost.”

This also means that as long as Tesla wants to strike more car companies, it only needs to aggressively attack production capacity and make even larger price cuts.This is something Zhu Jiangming is well aware of. If he doesn’t revolutionize himself, he will certainly be revolutionized by others. At the post-conference press interview, he stated, “So next, we must eliminate false brand premiums and price based on cost.”

For example, when the Leapmotor C01 was launched, the price ranged from 193,800 yuan to 286,800 yuan, with competitors including the Model 3, BYD Han, Sea Lion, and XPeng P7. Now, with a direct price cut of 60,000 yuan, although profits have greatly decreased, it has avoided fierce competition and expanded its survival space.

For users who originally budgeted around 200,000 yuan, a new price of 170,000 yuan for the Leapmotor C01 may still be somewhat attractive. Zhu Jiangming also stated, “Even if you don’t buy, we welcome you to compare and use Leapmotor as a reference for value.”

Looking at the product configuration of the C01, the CTC battery chassis integration structure with the opposite technology route of Nio’s battery swap brings benefits such as a lighter body and a larger interior space (a complaint from ET5 car owners). In terms of the Qualcomm SA8155P chip, intelligent cockpit, and voice interaction, the C01 has basically achieved first-class level.

Although a price reduction does not necessarily mean an increase in sales, it can at least send a signal to the industry. Leapmotor is willing to take risks to seize market share.

In terms of product strategy, Zhu Jiangming stated that all models this year, except for A0 commuter cars, will be launched in the form of dual-motors, namely pure electric + extended range, including the upcoming B-model car in Munich.

Combined with the previous Ideal & Weichai’s popularity in the extended range field, Leapmotor naturally cannot avoid being viewed as envious and choosing the extended range route. In the press interview, some media asked about the competitive relationship that exists between Leapmotor and Ideal.Zhao Jiangming said: “We are totally different from Ideal, and we have never had a direct competition. Ideal does not make cars that cost 200,000 RMB, so we target different customer groups, and there is no competition.”

As for why they are making extended-range electric vehicles, Zhao Jiangming answered that on the one hand, the current environment for electric vehicles has not yet reached optimization. In the next 3-5 years, there will still be many users who have concerns about charging and range anxiety.

In addition, in some specific markets, such as the winter in the three northeast provinces of China, extended-range electric vehicles have unique advantages in solving problems such as heating, battery heating, and increasing activity, which can bring a series of benefits.

Based on user demand, it seems reasonable for Leapmotor to choose dual-power of pure electric and extended-range. Moreover, extended-range vehicles also have a cost advantage in vehicle cost, especially in battery cost, which is more friendly to the enterprise.

At the brand level, Leapmotor insists on full-stack self-research from the early high cost-performance to the self-proclaimed contract factory today. One reason is the technical background of Zhao Jiangming himself. Another reason is that technological innovation can bring efficiency and cost savings to Leapmotor.

Zhao Jiangming cited the example of the 8155 chip. Other car manufacturers may only use it in the cabin, but Leapmotor has also added a 360-degree camera and audio tuning, which saves more than 1,000 RMB in costs.

Different product series in the future will also be developed on the same platform, combined with battery architecture platformization, to achieve cost reduction through economies of scale.

As for the title of contract factory, Zhao Jiangming said with a smile, “No one will look down on Foxconn and Luxshare Precision. Their scale is also large enough to live comfortably.”

Conclusion

In February of this year, Leapmotor delivered 3198 cars, an increase of more than 180% compared to the previous month. The data is impressive, but it is also necessary to admit the gap with the first-tier automakers. Is it easy to make money in such a low-margin contract factory? How will Leapmotor break the low-margin situation, keep the advantage of their extended-range products at the same price, and where will their focus be? These are some questions that were not asked during the interview.For Leapmotor, the new business model is to act as a contract manufacturer for users, earning money as a contract manufacturer. This means that Leapmotor will have stricter control over sales channels in the future, and every car’s profit will be scrutinized.

For users, it’s currently a win-win situation. The space of available products on the market has increased, and the quality of cars enjoyed has improved. Most importantly, there is a clear value system to refer to, making Leapmotor a fair market participant.

People often say that Wei Xiaoli and others have raised the prices of Chinese independent brands, and BYD has captured the city of joint venture brands. So where should Leapmotor go, caught in the middle?

I think it’s still the sentence they said themselves, whether to buy Leapmotor or not is not important, what’s important is that there is a reference for value.

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.