China Leapmotor Targets 1 Million Sales in 2026 as Overseas Expansion Offset Margin Pressure
Leapmotor, the Chinese electric vehicle maker backed by Stellantis NV, reported fourth-quarter earnings that beat net income expectations despite ongoing pricing pressures in its home market. The company is now pivoting toward an aggressive global expansion strategy to counter domestic headwinds, targeting a near-doubling of sales to 1 million units in 2026.
The Hangzhou-based automaker posted a net profit of RMB 360 million yuan (US$49.7 million) for the three months ended in December, surpassing market estimates by RMB 120 million yuan (US$16.6 million). While the average selling price of its vehicles continued to slide due to promotional discounts and a shift toward lower-priced models, gross margins surprisingly ticked up 0.5 percentage points to 15%, defying management’s earlier guidance of a flat performance.
Looking ahead, Leapmotor faces a challenging start to 2026. The expiration of government subsidies and reinstated purchase taxes in China have dampened first-quarter demand, with January-February sales averaging just 30,000 units per month. However, the company is betting on a rapid acceleration of its international business—facilitated by its partnership with Stellantis—to drive growth. Exports already accounted for nearly 15% of sales in the fourth quarter and are projected to reach between 100,000 and 150,000 units for the full year of 2026.
The results highlight a divergence in the Chinese EV sector: while domestic competition remains cutthroat, forcing price wars, automakers with established export channels are finding relief in higher-margin overseas markets. "The certainty of Leapmotor's overseas expansion is strong among new forces," analysts noted, citing the company's localized production plans in Europe and Southeast Asia as a key differentiator against rivals who face steeper trade barriers.
Cost Discipline Defies Pricing Pressure
Despite an environment where selling prices are falling, Leapmotor demonstrated significant operational discipline. The company’s revenue for the quarter rose 56% year-over-year to RMB 21 billion yuan (US$2.9 billion), in line with expectations. The unexpected improvement in gross margin to 15% was driven by three factors: sustained cost reductions through in-house manufacturing, economies of scale from higher volumes, and a doubling of high-margin carbon credit revenue linked to increased exports.
The average selling price per vehicle dropped to RMB 105,000 yuan (US$14,500) in the fourth quarter, a decrease of RMB 7,000 yuan from the previous quarter. This was attributed to aggressive end-of-year promotions and a product mix shift toward the cheaper B-series and T-series models. However, the cost of goods sold per vehicle fell by the same amount, maintaining profitability per unit. This ability to lower costs in lockstep with price cuts underscores the effectiveness of Leapmotor's vertical integration strategy, where it currently self-manufactures components accounting for 65% of vehicle costs.
Operating expenses showed a mixed picture. Sales and marketing expenses surged to RMB 1.3 billion yuan (US$179 million) as the company aggressively expanded its sales network and advertising. Conversely, research and administrative expenses were tightly controlled, with R&D spending actually dipping slightly to RMB 1.19 billion yuan (US$164 million) despite ongoing development of autonomous driving technologies and new vehicle platforms.
2026 Outlook: The Million-Unit Moonshot
Leapmotor has set an ambitious target to sell 1 million vehicles in 2026, a leap that would require growth of roughly 70-80% from 2025 levels. Management indicates that hitting this volume target could propel net profit to RMB 5 billion yuan (US$690 million). To achieve this, the company plans to launch four new models and two facelifts this year, including the "A10" compact SUV aimed at the mass market and the "D19" full-size SUV targeting the premium segment.
However, the path to 1 million sales is fraught with hurdles. The first quarter is expected to be weak due to the withdrawal of purchase tax exemptions and reduced "trade-in" subsidies, which have particularly impacted the sub-RMB 150,000 yuan segment where Leapmotor is strongest. The company’s gross margin is expected to remain under pressure in early 2026 as the sales mix continues to favor the lower-margin T03 compact car.
Market skepticism centers on three main risks: a tighter policy environment in China, intensifying competition from giants like BYD and Geely Automobile Holdings in the RMB 100,000-200,000 price band, and the sheer mathematical difficulty of doubling sales on an already high base.
The Stellantis Advantage
The "wild card" in Leapmotor’s favor remains its strategic alliance with Stellantis. Unlike other Chinese EV startups struggling to build independent distribution networks abroad, Leapmotor is leveraging Stellantis’s global footprint. By the end of 2025, the company had established approximately 900 overseas sales outlets, 800 of which are in Europe.
Localization is moving swiftly to mitigate tariff risks. A CKD (Completely Knocked Down) factory in Europe is scheduled to begin production of the B10 model in October 2026, supported by a battery pack facility slated for mass production in July. Additionally, a KD plant in Malaysia is progressing, and the company is evaluating production capacity in South America using existing Stellantis infrastructure.
Furthermore, the partnership opens new revenue streams. Leapmotor International, the joint venture, already turned a profit in 2025, contributing investment income to the parent company. Analysts also point to the potential for technical licensing revenue—similar to the deal struck with Volkswagen by XPeng as a future driver of high-margin growth, transforming Leapmotor from a pure hardware manufacturer into a technology provider.
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