How does Leapmotor Profit? We Found the Answer in Its Factory

The value of the Leapmotor model lies in verifying a possibility: In the industrial cycle where new energy vehicles return from "tech consumer products" to "manufacturing commodities," vertical integration and cost efficiency remain the core propositions that cannot be bypassed.

By Intelligent Driving Network / Zero Sauce‍‍

Edited by Langlang Mountain and Mingzhi Mountain

Starting from the 2025 Leapmotor 10th Anniversary event, Leapmotor founder Zhu Jiangming and the management team have been preparing for the Leapmotor Technology Day in September this year through subsequent public events and media exchanges.

As the most important "appetizer" of the Leapmotor Technology Day, Leapmotor opened its Huzhou Super Five-Electric Factory to the media for the first time one week before the event—a core component self-research and self-manufacturing cluster with a total construction area of about 500,000 square meters, covering five major factory zones: batteries, electric drives, domain controllers, headlights, and electronics/power.

Just one day before the factory opened, major domestic automotive enterprises including Leapmotor announced their August sales, and Leapmotor once again led the New Force automakers with a new car sales volume of 103,129. Combining with the Q2 financial reports of each company, it can also be found that while Leapmotor's sales continue to grow, it has also become the only New Force automaker to achieve profitability for three consecutive semi-annual periods.

With the industry profit margin compressed to 3%, why can Leapmotor still make money? Placing this profit accounting in the factory makes it clearer.

01.

The Cost Ledger: Location Economics

The cost logic given by Leapmotor can be summarized in one sentence: full-domain in-house R&D, deep manufacturing, eliminating supplier gross margin.

Since the brand's establishment, 18 component factories have been built, and 65% of vehicle costs are under the enterprise's independent control.

Calculating with the industry supplier's common 15% gross margin, the 65% self-research and self-manufacturing ratio can save about 10% of costs compared to the external procurement mode—65%×15%≈9.75%, this arithmetic is self-consistent.

The Huzhou Electric Drive Integrated Factory is a specimen of this logic.

It concentrates the four core processes of stator manufacturing, rotor manufacturing, controller manufacturing, and electric drive system final assembly into one factory zone, reducing the production links of 3 times packaging, 3 times transportation, and 3 times warehousing and delivery of stators, rotors, and controllers.

Leapmotor calculated that the transportation packaging inventory dimension for a single electric drive system can save about 50 yuan. Based on an annual production of 1 million sets, a total manufacturing cost of about 50 million yuan is saved. This process model also applies to battery and electronic control factories.

Saving 50 yuan per vehicle is indeed not a very significant number, but reducing physical transport saves "links", not "materials".

This means Leapmotor's cost reduction path is process efficiency, not lowering material standards. The two are two philosophies: the former builds "cheap" on management precision, while the latter builds "cheap" on sacrificing experience.

On the side of the Electric Drive Integrated Factory, there is even an undeveloped river transport route. During the visit, Leapmotor relevant personnel also revealed to the Intelligent Driving Network that this factor was indeed considered when the factory was built. If this route can be navigated smoothly subsequently, transportation costs can continue to decline.

This "Location Economics" can be expanded to Leapmotor's entire Huzhou factory area. It is revealed that Leapmotor chose Huzhou instead of Jinhua or Hangzhou to build the factory. The two core reasons given by the official are: first, local government policy support; second, Huzhou has a superior location and convenient transportation, capable of covering supply to core markets such as Anhui.

Subsequently, Leapmotor will continue to expand the scale of component self-manufacturing. Production lines such as compressors, on-board power supplies, and electronic oil pumps were put into production one after another last year and are still in the production ramp-up phase. With the expansion of production scale, there is still further space for manufacturing costs to decline.

This space will be further amplified by platform commonality rates. Leapmotor vehicle architecture has an 88% component commonality rate. Under the same platform, a large number of components such as chassis parts, interior and exterior trim parts, seats, etc., achieve sharing except for styling and body shells. This means R&D costs, mold costs, and procurement costs are amortized on a larger sales volume base.

These two numbers, 65% and 88%, directly influenced Zhu Jiangming's pricing strategy: "cost pricing".

This pricing model, which is not oriented by brand premium but based on its own cost capability, gives the space saved by vertical integration to consumers. This forms an essential difference from the industry common "competitive benchmark pricing" or "brand premium pricing".

It is worth noting that Leapmotor's vertical integration is not a BYD-style full-chain heavy asset model. Leapmotor adopts an "invest in equipment only, not factories" light asset strategy. Among the 18 component factories, it focuses on high-value-added core components, while traditional interiors, tires, wheels, etc., are still resolved through external procurement or joint ventures.

This "selective vertical integration" allows it to achieve a specific balance between fixed asset investment and cost control.

02.

The Technology Ledger: Quality Economics

At the technical level, the five factories in Huzhou of Leapmotor constitute a complete chain of evidence: with micron-level even nanometer-level manufacturing precision as input, and PPM-level defect rate and 100% inspection coverage as output, ultimately realized as product failure rates below the industry average and promising lifetime warranties.

Electric Drive Integrated Factory: From Rotor Dynamic Balancing to 40PPM

Quality hazards in the electric drive system often arise in transport and assembly links. Leapmotor concentrates the four core processes in the same factory zone, eliminating intermediate transport loss, but this is only physical integration; what truly determines the yield is precision control within the process.

In the rotor dynamic balancing link, Leapmotor controls the positive and negative electrode calibration error at ≤100mg, far better than the industry common standard of 200—500mg, with the minimum remaining unbalance ≤0.1gmm/kg, equivalent to the rotor working center of gravity eccentricity ≤0.1μm. This precision directly determines the NVH performance and energy loss of the electric drive system—the larger the unbalance, the stronger the vibration induced by periodic centrifugal force, and the more energy the motor consumes to overcome vibration resistance. The electric control assembly link adopts a high-precision intelligent servo press, with pressure precision ≤0.5%FS and displacement precision ≤10μm, doubled compared to the industry mainstream standard. The direct benefit of precision improvement is ensuring the integrity of sealing rings and avoiding high-voltage insulation failure caused by water vapor intrusion. In the EOL testing link, NVH measurement system accuracy is ≤2dB (industry mainstream 3dB), and 100% off-line detection and speed/torque range test coverage are achieved.

The cumulative result of these technical investments is: Leapmotor oil-cooled electric drive 3mis quality average is 40PPM, less than one-ninth of the industry average 360PPM. As a comparison, Leapmotor promises a lifetime warranty for the electric drive system—the confidence of this commitment is not marketing rhetoric, but a loss probability calculation supported by 40PPM quality data.

SMT Factory: Chip-Level Environment Control and 99.995% Welding Yield

Domain controllers are the "brains" of intelligent electric vehicles. A circuit board the size of an A4 paper integrates about 8,000 electronic components. If any one is misaligned by 10μm or has a poor solder joint, it may lead to infotainment lag, function malfunction, or even safety hazards. Leapmotor's SMT factory raises the manufacturing environment to chip-level: temperature fluctuation ±0.5°C, humidity ±1%RH, cleanliness 100,000 grade, full-domain electrostatic protection voltage <100V. The purpose of this environment control level is to reduce the three quality control risks of poor welding, refusal of welding, and electrostatic breakdown from the production source.

In terms of process precision, the ultra-high speed precision placement link placement precision reaches ±15μm, better than the industry mainstream 25—30μm level; 3D optical reinspection precision is also ±15μm, process capability CPK ≥ 2.0, reaching top industry quality control standards; nitrogen vacuum reflow welding achieves welding yield > 99.995%. Three inspection links achieve 100% off-line full inspection, defective products automatically sorted and isolated. In May 2026, Leapmotor intelligent driving domain controller installation volume was 34,822 sets, ranking 5th in the industry, and promised an electronic control lifetime warranty. High welding yield and full coverage detection mean the base of after-sales repair rates is significantly compressed, and software OTA iteration efficiency is no longer dragged down by hardware defective products.

Battery Factory: 10nm Cleaning and 99.9% Welding Yield

The safety and consistency of power batteries depend on the "marching together" ability of hundreds of cells. Leapmotor battery factory module line automation rate reaches 90%, planned and designed independently by Leapmotor. The core logic is using machine certainty to replace human intervention uncertainty.

Cell nanoscale plasma cleaning raises cleanliness to 10nm, 10 times the industry average 100nm precision. Cleanliness directly determines coating adhesion and cell performance consistency. Spider arm cell stacking shortens single cell processing speed to 1 second, 20% higher than the industry traditional mechanical hand, but speed is not at the cost of precision. Ring spot Busbar welding reduces spatter by more than 99%, process yield rate reaches 99.9%, fundamentally reducing cell short circuit and thermal runaway risks. Airtightness test differential pressure sampling resolution 0.1Pa, reaching industry head standards, ensuring battery pack airtightness. Battery capacity test through high-precision SOX model controls SOC deviation at <3%, better than the national standard ≤5% requirement, reducing "hidden power" and the wooden bucket effect.

The production line achieves 100% full inspection and data traceability. The final result is: Leapmotor battery failure rate is about 30% of the industry average level, and promises a battery lifetime warranty. For users, this means slower range degradation and higher vehicle resale value; for enterprises, this means the probability distribution of after-sales battery replacement costs is significantly shifted left.

Headlight Factory: Grade 100 Cleanliness and 4-Camera 100% Visual Full Inspection

Headlight manufacturing seems far from "safety core", but Leapmotor's headlight factory technical standards are not downgraded due to this.

The factory has the industry's first 100% fully automated injection molding dark factory. The core area cleanliness reaches Grade 100 (chip-level), 10 times the sterile operating room cleanliness. Vacuum aluminum plating thickness is controlled at 0.1μm, reaching top industry standards, directly determining reflectivity and durability—the higher the reflectivity, the better the night lighting effect; the more uniform the plating, the stronger the thermal shock and aging resistance.

In the visual inspection link, four 20 million pixel high-definition industrial cameras are used to perform 100% beam pattern inspection and missing/leak installation inspection from four angles. Compared to the industry's usual two-camera configuration, it achieves double inspection redundancy. The direct benefit of this technical investment is to prevent defective products from flowing out, avoiding driving safety hazards and after-sales claims for users caused by headlight beam pattern deviation or assembly defects.

Electronics & Power Factory: 10μm Assembly Precision and Aerospace/Military Grade Standard

The Electronics & Power Factory is responsible for the manufacturing of three core components: electronic oil pumps, on-board power supplies, and heat pump compressors. Among them, Leapmotor electronic oil pump production line automation rate reaches 100%, leading the industry.

In the outer rotor assembly link, the production line achieves intelligent positioning through visual guidance, combined with high-precision sensors to control face dimension precision at 10μm—this level is better than the industry precision pump 15μm conventional standard, reaching aerospace/military grade requirements. The precision of face gap directly determines the volumetric efficiency of the pump: if the gap is too large, oil leakage increases and volumetric efficiency drops; if the gap is too small, friction resistance rises and mechanical losses intensify. 10μm precision control is to find the optimal balance point between leakage and friction.

In the on-board power supply signal board installation link, the production line uses 2D vision cameras to guide robots to complete automatic assembly, assembly precision also reaches 10μm, reaching the industry high-end level.

The heat pump compressor executes 100% online finished product insulation dielectric strength test. Test voltage is 2500V, higher than the industry common 2000V standard; test precision is controlled at ±3%, better than industry ±5% error level. Higher test voltage and stricter precision standards mean the missed inspection probability of insulation failure is further suppressed, and product reliability obtains substantial improvement.

The technical parameters of the five factories are not isolated. They all point to a quantifiable cost reduction result:

High technology brings not vanity on the spec sheet, but product stability supported by high yield, and loss reduction converted by stability—including manufacturing cost loss, after-sales repair loss, and brand trust loss.

Leapmotor dares to promise a lifetime warranty for the three core systems of electric drive, electronic control, and battery. Its underlying logic lies here: when manufacturing precision compresses the failure rate to 1/3 or even 1/9 of the industry average, the lifetime warranty is no longer risk gambling, but a cost-controlled service经过精算 (actuarially calculated).

Serving users, and serving customers.

03.

The Business Ledger: Tier 1 Economics

Among the information released in this open day, the component external supply is the most significant.

According to Leapmotor official news, the Huzhou headlight factory is Leapmotor's first headlight manufacturing factory facing external customers, and has reached cooperation with Stellantis and FAW, supplying full category lighting fixtures for different vehicle models;

Subsequently is the electric drive. Leapmotor's wholly-owned subsidiary LingSheng Power signed an agreement with Peugeot-Citroen (under Stellantis) to provide electric drive assembly development, factory prototypes, and special testing services for it. This means external supply jumps from finished components to the joint development stage.

Higher up is the vehicle architecture. Opel brand under Stellantis plans to adopt Leapmotor's latest pure electric architecture and core components of battery technology, retaining Opel's own design, chassis, and cockpit systems. Cooperation upgrades from "selling parts" to "selling platforms".

Along with the component penetration, there is continuous binding at the capital and equity level. In October 2023, Stellantis invested in Leapmotor for about 1.5 billion euros, obtaining about 20% equity (later increased to about 21%). In May 2024, both parties established a joint venture Leapmotor International, Leapmotor holds 49% equity, Stellantis holds 51% equity and leads it, responsible for sales and channels in markets outside Mainland China. In May 2026, both parties intend to further expand cooperation to joint procurement and shared production lines.

"Partnering to go global" at the channel level is the direct product of this binding. Leapmotor utilizes Stellantis's existing production capacity and channel networks in Malaysia, Spain, Brazil, etc., achieves local production in CKD/SKD mode, avoids trade barriers while reducing capital investment. This forms a sharp contrast with the heavy asset path of most Chinese automakers building overseas factories independently. Leapmotor International achieved profitability just two years after establishment, with overseas gross margin stable at 18%—20%, higher than the domestic level.

This "reverse technology export" has symbolic significance in the history of China's automotive industry.

In the past 40 years, China's automotive industry was dominated by the narrative "market for technology"; while the model of Leapmotor and Stellantis—Chinese automakers provide core technology, international giants provide brand and channels—is rewriting this narrative.

But Tier 1 business is not only for shareholders. Besides Stellantis, Leapmotor's component business has obtained cooperation from more than ten domestic and foreign automakers. Among them, FAW has reached cooperation with Huzhou headlight factory, supplying full category lighting fixtures for different vehicle models.

FAW's addition shows that external supply is an open business facing mainstream Chinese automakers. Leapmotor summarizes it as "Vehicle + Tier 1" dual-wheel drive.

"Vehicle + Tier 1" is not without precedent: BYD's FinDreams series external supply, CATL budded from ATL power battery department, are all paths verified on China's automotive industry chain.

Leapmotor's difference lies in the path sequence: first rely on self-supply to scale, then seek external supply.

Monthly sales of 100,000 units are the "order basic platform" of these component factories. External supply is incremental amortization, not a last resort. This model is coherent, but whether it can be established depends on whether external supply customer quantity and revenue proportion can be disclosed with data, whether internal and external supply pricing is fair, and whether external customers are willing to place orders with a vertical system of whole-vehicle peers for the long term.

It needs to be noted that vertical integration is not a consensus in the intelligent electric vehicle era. Most automakers choose "in-house R&D + external procurement" to maintain flexibility in technology generation switching.

But Leapmotor's self-manufacturing scope is actually selective: it does high value, high coupling components—domain controllers, electric drives, battery packs, headlights, electronics/power; while cell links etc. are not fully self-manufactured. This selective vertical integration is both different from "closed in-house R&D", and exactly the reason it dares to open orders to external customers.

Final Thoughts:

Of course, any business model has its applicable boundaries. Leapmotor's "full-domain in-house R&D + deep manufacturing" model is no exception.

First is scale dependency.

The cost reduction effect of vertical integration highly relies on sales volume to amortize fixed costs. Zhu Jiangming once publicly stated that new energy vehicle startups need "1 million annual sales to survive". Leapmotor's target for 2026 is to sprint to 1 million vehicles. Once the scale growth slows down, the capacity utilization rate of 18 component factories will decline, and its cost advantage will be quickly eroded by fixed costs.

Second is the "glass ceiling" of technical depth.

Leapmotor still has obvious boundaries at the core material level: cells come from external procurement (such as CATL), chips come from suppliers such as Qualcomm, NVIDIA, Leapmotor does not do wafer-level in-house R&D. This means during periods of raw material price volatility in batteries and chip supply tightness, Leapmotor's cost control capability will still be subject to pressure from upstream transmission.

Finally is the uncertainty of overseas policy. The EU's countervailing tariffs on Chinese electric vehicles, Malaysia's mandatory export quota requirements for new whole-vehicle factories, and the difficulty of building local supply chains in Europe all lay down variables for Leapmotor's global path.

Can the Leapmotor model be replicated? The answer is likely negative.

Its founder team comes from Dahua Technology, with deep electronics manufacturing genes; its "cost pricing" strategy requires extremely strong strategic firmness, which is not common in the capital-seeking new energy track; its "partnering to go global" global path relies on deep interest binding with international giants like Stellantis, having irreproducible contingency.

But the value of the Leapmotor model does not lie in becoming a template, but in verifying a possibility: In the industrial cycle where new energy vehicles return from "tech consumer products" to "manufacturing commodities," vertical integration and cost efficiency remain the core propositions that cannot be bypassed.

Monthly sales of 100,000 is just the visible result above the iceberg. Below the iceberg is a systemic capability reconstruction about how to build a good car.