Leapmotor, the Chinese electric-vehicle maker backed by Stellantis, has become the only profitable startup among China's major EV newcomers, but its first-half results reveal a razor-thin margin under pressure from rising costs and a model lineup in transition. According to a report by the Chinese outlet Huxiu, the company posted revenue of 38.11 billion yuan (about $5.37 billion) in the first half of 2026, up 57.2% year-on-year, and delivered 356,487 vehicles, a 60.8% increase.
Gross profit reached 4.445 billion yuan, with a gross margin of 11.7%, down 2.4 percentage points from a year earlier. Adjusted net profit was 270 million yuan, a net margin of just 0.7%. The company cut its full-year net profit target from 5 billion yuan to 3 billion yuan, with CFO Li Tengfei saying on an earnings call that the original goal was "very difficult to achieve."
Costs and model transition squeeze margins
Leapmotor's profitability was hit by a triple whammy: a surge in raw material prices, the phase-out of purchase subsidies, and a gap between declining sales of older models and the ramp-up of new ones. The price of lithium carbonate rose over 130% in the first half, and automotive-grade memory chips jumped 150% to 300%, adding 3,000 to 7,000 yuan to the cost of each vehicle, according to the report. The subsidy cuts disproportionately affected Leapmotor, which sells mostly lower-priced cars.
The company's best-selling model, the A10 small SUV, has a median retail price of just 76,000 yuan (about $10,700), yet it includes an 800-volt electrical architecture—hardware that was typical of 250,000-yuan vehicles two years ago. While consumers benefit from this "spec inflation," it compresses Leapmotor's margins. Average revenue per vehicle fell slightly to 107,000 yuan, down 1.83% year-on-year.
Leapmotor's strategy of in-house manufacturing and vertical integration—covering about 65% of vehicle cost—means it carries heavy inventory and fixed-asset depreciation. Inventory turnover stood at 36.95 days, and operating cash flow fell 77.7% sequentially to 2.17 billion yuan. The company also faces potential write-downs if price wars intensify or old inventory cannot be cleared quickly.
Overseas expansion adds pressure
Exports surged 372.6% to 96,000 vehicles in the first half, but the long shipping times—30 to 45 days by sea—tie up capital and inflate inventory on the balance sheet. Leapmotor's capital expenditure was 2.03 billion yuan, and its dealer network grew 32% to 1,064 stores.
Despite the pressures, Leapmotor's operating expenses remain lean: R&D spending was 2.317 billion yuan (6.1% of revenue), sales expenses 5.2%, and administration 2.6%. This "extreme operational discipline" contrasts with peers like Nio and Xpeng, whose combined expenses often exceed 25% of revenue. The company's ability to keep costs low is what allowed it to stay barely above breakeven while rivals bled cash.
Looking ahead, Leapmotor expects full-year gross margin of 13% to 14%, but achieving that will require a significant improvement in the second half. The company's new A and D series models aim to cover both entry-level and higher-end segments, but the transition has created a "generation gap" in sales. With the second-half net profit target of about 2.8 billion yuan—13 times the first half's result—analysts and investors remain cautious about Leapmotor's near-term earnings trajectory.
