China FAW Group to Acquire 5% Stake in EV Maker Leapmotor for RMB 3.7 Billion
China FAW Group has agreed to acquire a 5% stake in electric vehicle manufacturer Zhejiang Leapmotor Technology for RMB 3.74 billion (US$518 million), marking a significant capital alliance between one of China’s oldest state-owned automakers and a leading new-energy startup.
Under the terms of the subscription agreement announced on the Hong Kong Stock Exchange, Leapmotor will issue approximately 74.83 million domestic shares to FAW at a price of RMB 50.03 per share. The transaction provides the Hangzhou-based automaker with substantial liquidity to fund research and development while granting FAW a strategic foothold in the rapidly evolving smart EV sector.
Leapmotor’s management moved quickly to assure investors regarding governance, confirming that the founding team will retain actual control of the company despite the entry of a major state-owned shareholder. The deal follows a strategic memorandum of understanding signed earlier in 2025, signaling a deepening of operational ties between the two entities beyond simple equity participation.
The investment arrives as Chinese EV makers face intensifying consolidation pressures and a need for capital to fuel global expansion. By bringing FAW onto its capitalization table, Leapmotor secures not only funding but also a layer of stability and supply chain resources, potentially shielding it from the volatility affecting independent EV startups.
Capital Allocation and Valuation
The total proceeds from the subscription amount to RMB 3.74 billion (US$518 million). According to Leapmotor’s filing, the company plans to deploy the capital aggressively in technical advancement and market expansion. Approximately US$259 million, accounting for 50% of the total proceeds, is earmarked for R&D investment. The remaining funds will be split equally, with 25% allocated to working capital and general corporate purposes, and 25% dedicated to expanding the sales network and enhancing brand awareness.
The subscription price of RMB 50.03 per share represents a strategic valuation of the company's domestic equity. For context, Leapmotor’s Hong Kong-listed shares closed at HK$49.94 on December 24, 2025. Following the announcement, the stock price was trading around HK$51.90. The investment is being executed through FAW’s subsidiaries, FAW Equity Investment (Tianjin) and FAW Qixin Power (Changchun) Technology.
Governance and Control Structure
A central focus for investors has been the potential impact of state-owned ownership on Leapmotor's agility and governance. Zhu Jiangming, Leapmotor’s Founder, Chairman, and CEO, stated that the company’s controlling rights remain with the founding team. He indicated that the introduction of a major shareholder is intended to enhance corporate stability and facilitate strategic cooperation rather than alter the management structure.
Li Tengfei, Vice President of Leapmotor, reinforced this position, noting that investment agreements with both FAW and previous partners like Stellantis contain explicit stipulations regarding equity ratios to guarantee the founding team's controlling status. This structure allows Leapmotor to leverage the resources of a legacy automaker while attempting to maintain the decision-making speed characteristic of the "new force" EV makers.
Operational Synergies and Global Plans
The equity deal solidifies a partnership trajectory established in March 2025, when the two companies signed a Strategic Cooperation Memorandum of Understanding. The collaboration aims to combine FAW’s mature industrial capabilities with Leapmotor’s expertise in intelligent electric platforms.
Key areas of cooperation include the joint development of intelligent connected new energy vehicles and powertrain technologies, specifically plug-in hybrids (PHEV) and extended-range electric vehicles (EREV). On the international front, the partnership has already yielded tangible results. During the company's Q3 2025 earnings call, executives revealed that the first joint overseas vehicle project has been finalized, with mass production and market entry scheduled for the second half of next year.
Long-term Ambitions
The capital injection comes at a critical juncture for Leapmotor as it seeks to transition from a niche player to a high-volume manufacturer. At the company’s recent 10th-anniversary event, Zhu outlined an ambitious target of reaching annual sales of 4 million vehicles over the next decade.
The partnership with FAW provides Leapmotor with access to a robust supply chain and manufacturing expertise, which are essential for scaling production to meet these targets. Conversely, for FAW, the investment offers immediate exposure to Leapmotor’s verified technology stack and market agility, aiding the state-owned giant’s own transition toward electrification and intelligent mobility.