Leapmotor: Aiming for 1mn Units, Is GPM the First to Slip?

$LEAPMOTOR(09863.HK) released its 2026 Q1 results after the HK close on May 15 Beijing time. The print marked a departure from Leapmotor's usual operating steadiness: sales held up reasonably well for an off-season and opex discipline was acceptable, yet both revenue and GP missed. Notably, per-vehicle GP fell well short of market expectations.

Revenue miss; ASP fell on a deeper mix shift to lower-price models: Q1 revenue was RMB 10.82bn (+8% YoY), below consensus. The rising mix of lower-priced B/T/A series materially dragged ASP, which is the core reason auto GP per unit missed by ~40% vs. expectations.
GPM fell 550bps YoY; even stripping out ~RMB 200mn of strategic-collab GP uplift in Q1, GPM still declined 390bps YoY. The market has largely priced in the following factors:

1) Management had guided for a QoQ decline due to Q1 seasonality on the Q4 earnings call. 2) Mix moved further downmarket, with T03 share rising to 22% in Q1 from 11% in Q4 (+11ppt QoQ), and the A10 ramp from Mar added more low-price volume, weighing on ASP.

On COGS per unit, broadly In-line vs. consensus. Incremental color from the company pointed to higher unit manufacturing costs on lower production, mainly because:

a) Q1 sales scale was smaller, lowering utilization of capacity and parts inventory; b) raw material prices rose in Q1 2026, while early stocking in Q4 2025 limited the immediate impact. That said, Dolphin Research believes battery raw-material inflation remains hard to fully avoid.

3. Q2 guidance is upbeat: Leapmotor guided Q2 sales of 240k–250k units; with 71k units in Apr, this implies an Avg. monthly run-rate of ~87k in May–Jun, a strong volume outlook. Export guidance was raised to 150k+ units for the year, broadly in line with expectations on overseas. Most importantly, GPM is guided to recover to 12%–13%, a strong confidence boost as lower-tier models scale.

Dolphin Research View

Overall, Q1 auto GP at Leapmotor is concerning from an expectations perspective, as the miss stemmed from revenue (ASP/mix) rather than costs. We expect costs to rebound quickly as seasonal effects fade, given Leapmotor's strong cost control (cf. 4Q25 analysis).

On revenue, the mix shift down requires the two D-platform models to lift ASP. However, with price cuts as new models enter a crowded battlefield, it is unclear whether price pressure will remain merely seasonal. The good news is that management provided clear volume and margin guidance on the call, which aligns with our long-term view.

In Q1, Leapmotor entered a product cycle with A10 and D19 launching sequentially, and market reactions diverged. A10, a pillar for the 1mn-unit ambition, has clear scaling visibility and lifted the stock on launch. D19, aimed at moving the brand upmarket, saw the stock slip post-launch due to insufficient differentiation, with the market focused on further mix shift down and its erosion of ASP.

In the product pipeline, four new models are slated for this year; A10 (Mar) and D19 (Apr) are already on sale. Management raised full-year volume guidance to 1.05mn units on stronger-than-expected preorders. However, with 180k cumulative deliveries in Jan–Apr, monthly deliveries in May–Dec must Avg. nearly 110k, implying considerable pressure.

A10: Positioned as a high-volume small SUV, A10 garnered 40k+ firm orders in its launch month, with 14,372 units delivered in Apr, or 20% of Apr deliveries. Despite competing in the sub-RMB 100k red ocean, its product strength is compelling, especially as the top trim brings lidar below the RMB 100k price band for the first time.

- Entry trim: Solid materials and build quality, positioned with a lower price point. Advanced driving features serve as a core selling point.

- Top trim: Leveraging vertical integration, Leapmotor and BYD are currently the only two automakers pushing lidar down to the RMB 80k–90k band. Versus BYD Seagull's comparable trim, A10's top version is priced less than RMB 1,000 higher yet offers a larger footprint and stronger e-powertrain specs. With capacity ramping, we expect A10 monthly deliveries to surpass 30k.

D19: As the first model on Leapmotor's flagship D platform, it is key to upgrading the model mix. Preorders topped 10k in seven days, broadly in line with expectations, with the RMB 240k six-seat range-extended 'Premium' as the volume driver at ~50% mix.

While the volume trim is cheaper vs. direct rivals at the same price band (range-extended AWD) such as Galaxy M9 and Fengyun T11, with a larger battery and longer range, it also suffers slower acceleration, higher energy use, and weaker chip compute. The product advantage is not decisive.

On pricing, the RMB 220k–270k range is more than double the current overall ASP, but mix continues to drift down (the higher-positioned C series has seen its share fall for six straight quarters, -32% YoY). Without sub-brand separation, pushing brand positioning higher may be tougher for Leapmotor. We conservatively expect D19 to contribute 80k units for the year (Avg. 10k/month, in line with management), with limited uplift to group ASP.

Longer term, we reiterate Leapmotor's strong cost-down capability and overseas scale-up (high visibility; overseas share rose 22.5ppt QoQ to 37%) as the core support for stable auto GP. This should offset part of the margin erosion from mix downgrades and competitive/seasonal promotions. In addition, with the upside from technology licensing revenues, valuation multiples could still have room to re-rate.

Accordingly, we make a small cut to last quarter's scenario assumptions. Under a relatively conservative case (Assumption 1: 2026 total deliveries of 800k units, +34% YoY, including 150k overseas, doubling YoY, and 650k domestic, +23% YoY; Assumption 2: ASP reduced to RMB 90k to reflect mix pressure), and applying a 0.8x–1.0x P/S, we derive a fair value range of RMB 63.2bn–79.0bn for Leapmotor. These assumptions reflect a cautious stance on mix and pricing.

Based on the current market cap of ~RMB 55.7bn, the implied upside is 14%–42%. This suggests that even under a conservative case below management's aggressive targets, Leapmotor offers attractive optionality and margin of safety at current levels, supported by overseas expansion, strong cost control, and diversified profit streams.

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