LEAPMOTOR has invited the "Key Gentleman"

At the beginning of the year, the new force LEAPMOTOR, which experienced a decline in sales but quickly rebounded, welcomed a "key figure".

Recent market news has shown that Zeng Lintang, former Vice President of Toyota China, has joined LEAPMOTOR as an assistant and advisor to Chairman Zhu Jiangming. LEAPMOTOR has confirmed this information to Wall Street News and stated that Zeng Lintang will mainly be responsible for assisting the overall strategic development of the company and improving daily operational efficiency.

After more than ten years of absence from the automotive market, Zeng Lintang's return has added a lot of imagination to LEAPMOTOR. As an automotive expert with his own "three-pronged approach" in sales, Zeng Lintang is highly regarded by Zhu Jiangming.

Zeng Lintang, who entered the industry as early as 1980, is an old hand in the automotive industry. And his most well-known label is the "pioneer" of Lexus in China. In 2005, Zeng Lintang became Vice President of Toyota China and launched Lexus' business in China. Under his leadership, Lexus' annual sales in China increased from 5,000 units in that year to over 50,000 units in 2010. The key to this achievement lies in his management and expansion of the Lexus dealer network.

The dealer training and service established by Zeng Lintang, as well as the standards and processes for dealer entry, helped Lexus overcome the cold winter of the automotive market 14 years ago. He is also known as the person who "understands dealers and channels" the most in the industry. This is exactly what LEAPMOTOR urgently needs to learn.

In the first half of the year, with "differentiation" as the main theme, LEAPMOTOR was fortunate to be part of the upward trend, but this was mostly due to product strategy adjustments.

In the first two months of this year, LEAPMOTOR's sales were still hovering between 1,000 and 3,000 units. However, in June, LEAPMOTOR delivered 13,200 new vehicles, reaching a historical high. It ranked ninth in the new energy vehicle sales list of the China Passenger Car Association, surpassing NIO, Xpeng, and Li Auto, and was only second to Ideal among new forces.

The key to the rebound lies in LEAPMOTOR's return to the cost-effective route in terms of products.

In March, LEAPMOTOR reshaped its product structure. The C-series models adopted the "extended range + pure electric" dual-power mode and shifted the main battlefield to the price range of 100,000 to 200,000 yuan. Among them, the prices of the new pure electric models C11, C01, and T03 have been reduced by nearly 10,000 to 60,000 yuan compared to the old models, with prices dropping to 155,800 yuan, 149,800 yuan, and 59,900 yuan, respectively.

From the sales results, the repricing has been favored by consumers. Investors have also "voted with their feet" for LEAPMOTOR, with its stock price rising from HKD 30 at the beginning of the year to a high of HKD 48.25 in early July, an increase of more than 60%.

The success of the product strategy is the surface factor behind LEAPMOTOR's "counterattack". Its extensive dealer network has laid the foundation for the recovery of LEAPMOTOR's sales. Unlike other new forces' direct sales models, LEAPMOTOR focuses on dealerships. According to the financial report, as of the end of 2022, LEAPMOTOR's dealers accounted for 86% of the total of 582 stores nationwide. According to Guoyuan International Securities, in the LEAPMOTOR sales model, the dealer channel contributes to about 90% of the sales, mainly due to the lower operating costs of the distribution channel. Considering that LEAPMOTOR's main product is in the 100,000 yuan price range, the dealer model also benefits LEAPMOTOR in expanding sales channels in third- and fourth-tier markets and reaching the target user group.

LEAPMOTOR stated to Wall Street News that currently, the majority of its channels are still through dealerships, "relatively fewer direct stores." With the help of dealerships, LEAPMOTOR has rapidly expanded to over 180 cities in China, which is an important factor in increasing its product volume.

However, as a newcomer in the automotive industry, LEAPMOTOR's relationship with dealers is not yet stable.

In April of this year, a LEAPMOTOR dealer in Jinan, Shandong "defected" and publicly disclosed problems with sales data and other aspects. Subsequently, LEAPMOTOR issued an official announcement stating that the dealer spread false information and initiated legal proceedings to protect its rights. Both sides have different claims, exposing the cracks in the relationship between LEAPMOTOR and its dealers.

Zhu Jiangming also understands the principle of "water can carry a boat, but also capsize it." How to reshape and maintain good relationships with dealers has become a crucial question for LEAPMOTOR. For LEAPMOTOR, which is currently in a critical period of growth, this is also the most important aspect of its organizational capacity building.

According to LEAPMOTOR's plan, it aims to achieve a positive gross profit margin within this year. In the first quarter of this year, LEAPMOTOR's gross profit margin was -7.8%, narrowing from the full-year figure of -15.4% last year, but there is still a long way to go before achieving positive results.

LEAPMOTOR needs to further leverage its scale to improve its profitability through economies of scale. According to Zhu Jiangming's plan, LEAPMOTOR aims to achieve an annual sales target of 200,000 units this year. However, LEAPMOTOR's cumulative sales in the first half of the year were only 44,500 units, still falling short of the annual target.

Therefore, in addition to focusing on product development and launching more popular models among consumers, LEAPMOTOR still needs to rely on dealers to expand its market presence. With the support of Zeng Lintang, LEAPMOTOR may be able to run faster and more steadily.

Zhang Xiang, a guest professor at Yellow River Technology Institute, stated to Wall Street News that, just like Xiaopeng Motors bringing in Wang Fengying, the "marketing master" from Great Wall Motors, Zeng Lintang's addition can bring more management experience and network resources for LEAPMOTOR's dealers, enabling targeted measures to drive sales growth.

Cui Dongshu, Secretary-General of the China Passenger Car Association, also believes that traditional automakers and new forces each have their own advantages and disadvantages, and integrated development is the general trend. Especially since new forces are not familiar with the operating rules of the traditional automotive market, introducing management talents from traditional automakers can help them better grasp the market.

However, after more than a decade since leaving the industry, the current Chinese auto market is already vastly different. Can Zeng Lintang's past "magic touch" bring new opportunities for LEAPMOTOR? In the fiercely competitive and rapidly evolving automotive market, once you're thrown out of the game, it's difficult to make a comeback. Zhu Jiangming also frankly stated, "If LEAPMOTOR's sales don't improve in 2023, then there won't be much hope left."

Asking Zeng Lintang to make a comeback is Zhu Jiangming's last-ditch effort. Zhu Jiangming also hopes to stay in the game and emerge as the winner in this "elimination match" with the help of this "key player."