Hello, everyone. Welcome to join Leapmotor Q1 call and today's host is Xin Shi, Chief Auto Analyst at CITIC Securities. Also online is Cong Kai, Auto Analyst of our team. Management representatives are Mr. Li Tengfei, CFO of Leapmotor, Mr. Wu Qiang, Co-President, and Mr. Shen Ke, Board Secretary. First, Mr. Shen Ke will announce the disclaimer.
Thank you. Distinguished investors, good evening. This call may contain certain forward-looking statements, specifically including but not limited to statements regarding the company's future financial positions, strategies, objectives, metrics, as well as the future market development that the company may participate in. These forward-looking statements are based on the company's current and future business development strategies, as well as our concerns about the future business environment. It's inevitable that there are known or unknown risks and uncertainties.
Factors beyond the company's anticipation and control may cause the company's actual performance and the performance of its industry to differ from the future performance expressly and implicitly indicated in these forward-looking statements. Therefore, we remind you, you shouldn't place undue reliance on these forward-looking statements. Discussed in this call, these statements only reflect the views of the company's management as of this call. The company has no obligation to update or revise any statements made during this call based on new information, future events, or other circumstances. The forward-looking events discussed in this call may also not occur due to various uncertainties and concerns. This disclaimer applies to all forward-looking statements mentioned in this call. I also remind shareholders and potential investors, nothing in this call constitutes investment advice, nor does it form the basis or evidence of any contract, commitments, or investment decisions.
All shareholders or potential investors should exercise rational judgment and act prudently when trading the company's shares. Next, let's invite Mr. Li Tengfei to share the company's performance in the first quarter of 2025.
Good evening. I'm Li Tengfei of Leapmotor. Next, I would like to report you on the Q1 2025 Leapmotor performance. First, financials in Q1. The revenue is CNY 12 billion with an annual increase of about 187%. Our gross profit in Q1 reached a record high of 14.9%. The number in Q4 2024 was 13.3%. That is because our increased sales and optimized the portfolio. That gave rise to a gross increase month-on-month. Right now, the net loss is about CNY 130 million. The number last year is about CNY 1 billion. The company has sufficient capital. Right now, there is CNY 25.7 billion in our accounts.
We are the new forces brand with the highest growth speed, and we rank top in Q1. In Q1, the cars' delivery volume reached about 60,000 units. We reached a milestone of delivering 700,000 units. The data was released on the 10th of April. As of today, it has already delivered over 10,000 units. We achieved a milestone of getting a sales of 18,000 units. As to our products, based on our Leap 3.5 architecture, it is equipped with advanced smart driving and Qualcomm 8650 chips and Qualcomm 8295 chips. We achieved advanced premium experience, setting a good example for premium cars at the price of RMB 250,000. It has got 12 awards, such as China's first car to get a green design reward. We also got a golden reward in a French design competition and got a reward in London design competition.
The E10 was released in Shanghai Auto, showing the latest pursuit of the young generation. It offers the optimal range and performance, providing a best option for the young generation among electric vehicles. It is equipped with the Leap 3.5 architecture. We also adjust the chassis together with the 220 kW equipment, providing better driving experience. According to the car test indicators, Leapmotor performs the best performance, including the driving experience. Deep CGT battery passed the national certificate, and we meet the GB standard one year in advance. All of our models passed the certificates and tests, and our performance is higher than GB in terms of RMB. On 10th of March, we integrated our software and hardware. We used the Qualcomm 8650 chips, realizing an integration of smart cockpit. Our control domain has been deployed and integrated, and we achieved upgrading of batteries and the thermal systems.
That highlights our competitiveness. We took only six months to integrate the Qualcomm 8650 chips into our 3.5 architecture. Our self-developed assisted driving together with the LiDAR and Qualcomm 8650 chips. We are able to achieve urban comprehensive assisted driving function. We will enhance investment in smart driving with anticipated investment of over RMB 800 million and introduce more talent. As of the end of March, there are 449 service stores across China covering 97 cities in China. Our N+1 models have been promoted in 2025 Q1. Our sales also increased by half. We will enhance our channels into second cities in China. It's expected that we will add over 80 cities of second level or below. We will speed up our implementation of city showrooms. In terms of retail sales in Q1, we continue to optimize our operating indicators. Compared with 2024, the efficiency increased 4%.
We provide consulting services, and the number reached 15,000 tons. Our Leapmotor improved in volume and quantity in terms of services. We are committed to providing the best customer services, improving standard customer service standards, and restoring parts originated from the factory. We also provide digital metrics in Q1. We get significant achievements. We provide fast service response. Our response rate in 15 minutes reached about 19.4%, a significant increase. Our parts delivery in 48 hours also increased a lot. We also expand our operation overseas. We export the volume of exports of Leapmotor ranked top one among new forces overseas. We set up over 500 networks with the function of sales and repairs, with a month-on-month increase of over 50%. Together with Stellantis, we will use Stellantis' existing factories in Malaysia. By the end of 2025, we will realize the localized assembling and manufacturing in Malaysia.
We will also facilitate the localized manufacturing in Europe. In terms of social and environmental management, for two years, we got SMI Gas G International certificates. It shows our performance in environment, society, and governance, and at the leading position in the industry. We are driven by technology and science. We commit ourselves to integrating technological innovation and social service. We donated CNY 5 million to institutes in Zhejiang Province to improve the livelihood of people, enabling people to enjoy a better life abroad by advanced technology. We will respond to sustainable developments around the world, creating long-term benefits to shareholders and parties interested. That is our revenue. Our revenue is about CNY 10.02 billion. Due to better sales, other indicators also improved. Our sales cost and gross profit margin. The sales cost is CNY 8.53 billion. Reduced by 26.9% compared to Q4 last year.
That's because of the off-season due to Spring Festival. Our Q1 margin is 14.9%. The improvement has been achieved due to higher sales and scale effects. We also optimized our portfolio. In terms of expenses, R&D expense is about RMB 800 million, an increase of about 52%. The year-on-year increase is because of greater investment in labor and the R&D cost. Our sales expense also decreased. The year-on-year increase is due to our seasonal marketing investments. Also, due to more administrative persons, this related expense also increased. The loss in Q4 2024 was about RMB 14 million. Q4 2024, the loss was about JPY 1 billion. The reduction of gross profit margin is larger than the reduction of sales. The net cash is RMB 340 million. Q4, the net cash is about JPY 2.24 billion. In Q1, it increased because of better management of operating cash.
The month-on-month decline is because of our better management. Free cash in Q1 also increased.
Thanks very much for your sharing. Next is the Q&A. If you have any questions, you press the star button in the phone and then tell your questions in text format. If you join it by phone, you press the star button and then enter 1. If you join us by live broadcast, you can raise your hand. You can press the raise your hand button. As a moderator, we have two questions. We've seen in Q1, gross profit margin and other financial indicators are much higher than expectations. Based on it, what's our expectations of performance and gross profit margin in Q2? What's whether you will raise your annual expected gross profit margin?
In Q1, our performance is robust, especially compared with Q1 2024. There is a significant improvement.
The overall sales reached 87,000 units, but in 2024, the overall sales in the first six months almost was 87,000 units. Of course, our gross profit margin is higher than last year, year-on-year. We also mentioned why we achieved such a high gross profit margin in Q1. One of the reasons is our strategic cooperation is to complete vehicle. Our gross profit margin in Q1 compared with Q4 last year, there is a minor adjustment. Our expectations for Q2. In Q2, we launched a new model on the 10th of April. Next month, we will launch a new model of C16, and our C11 updated model will also be released very soon. We are facing the shift from old models to new models. Therefore, compared with Q1, I think gross profit margin in Q2 will decline slightly as to the sales in Q2. We expected to maintain the robust.
In Q1, the sales expected to reach from 130,000 to 140,000. It is very positive. In Q2, we will try our best to realize break-even in Q2. As to our annual targets, we also gave our annual guidance in the beginning of the year. The sales is about 500,000-600,000 units, and the gross profit margin will close 10%. We will try our best to realize annual break-even. Based on our performance in Q1, we are more confident that we will be able to achieve our annual objectives. We are confident that we will be able to do that and try our best. Right now, we do not have the intention of adjusting our annual objectives and guidance.
Thank you very much. I am Cong Kai, auto analyst of CITIC Securities. Thanks very much for introducing your eye-catching and robust performance.
I would like to ask what's the percentage of revenue due to strategic cooperation, and what's your revenue from spare parts, and do you have guidance as to our strategic cooperation?
We signed agreements with our partners, so it's not convenient for me to tell you specific data.
What I can tell you is the gross profit for complete vehicle in Q1, except the strategic cooperation, the level is very similar to that in 2024. It's slightly declined. The overall sales in Q1 is lower than Q4 in 2024. In Q1 2024, our C series was promoted by optimizing cost. This promotion cost was set up. In Q1 2025, our gross profit margin maintains the trend in 2024. As to our strategic cooperation, I can tell you that our cooperation has been conducted smoothly. Our strategic projects have been conducted successfully and smoothly.
Other future corporate strategic cooperation is under discussion. Thank you very much. My second question. You mentioned in Q2 there will be release of new models such as C11, C16. Right now, the cost is aggressive. We want to ask after the release of those models whether gross profit margin will increase. Upgraded model of C series, for instance, patent has already been released. We enhanced its functions, but price has been reduced. Our range has been increased. We also realized the 800-voltage high-pressure charging. Our price has been reduced considerably. This is in line with our mission. We want to benefit the customer while maintaining our gross profit margin. We want to keep our development philosophy as to annual gross profit margin. This practice enhanced we can achieve our annual gross profit margin. This price is based on our annual gross profit margin target.
There is a certain cycle for gross margin. The term was released several months ago in Q2. Affected by the release of new models, gross profit margin may be lowered, but in the long term, the gross profit margin will be raised to the level we anticipate. Okay, thanks very much for your answer. I hope that our gross profit margin will be better and better. Thanks very much. Our assistant will see what's the online questions. The call. I'm understanding from CITIC Securities.
Thanks very much for your introduction. I have two questions. First is Mr. Kang mentioned whether Mr. Li Tengfei can tell us more what's the strategic corporation, what's the content. Okay, Q1 gross profit margin is much higher than our expectations, but what's the gross profit margin for exported cars? Okay, thanks. As to your first question about our strategic corporation, what's the project specifically?
In Q1, we got feedback from the market. According to our strategic agreement, it's clear that at this stage, our strategic projects are jointly developing products with our partners, leveraging our distinctive advantages, building a more competitive product. That is mainly our cooperation projects which have positive impact on our gross profit margin in Q1. As to gross profit margin for exported business, according to our agreement, in the early stage, we pursue higher sales volume. Shareholders from both sides agree that we want to increase sales volume instead of gross profit margin. That is why gross profit margin in this early stage is not very high, but we will maintain certain gross margin to share the burden of R&D investments. Thank you very much. Second is about smart driving. You mentioned greater investment will be made to smart driving. I would like to know the market feedback.
Our competitors also offer more subsidies and discounts to smart driving function. Whether we will update our version of smart driving in the future. As to smart driving. In B10. We got a large number of smart driving orders. Customers are highly anticipated to our smart driving function. When we launched this model, we also said that our smart driving products will be released by the end of May or the beginning of June. Right now, we do not get many feedbacks. As to smart driving used in our previous existing products, feedback are positive. Right now, we need to ensure the safety and the maturity of smart driving. On top of it, we want to enable customers to use smart driving while ensuring safety. As to pricing, our strategy is consistent. We would not be affected by our competitors.
Of course, we will keep a close eye on the strategy of our competitors. For the promoter, we uphold our logic and keep consistency in pricing. We do not have the intention of adjusting price of smart driving right now.
Okay, thank you very much. Okay, next question. I am mainly from Miming Securities. First, I would like to know the product strategy. They can say C11, C16. It has total advantage in SUV market. How can we optimize the cost and enhance overall sales volume to the maximum level? That is my first question. Thank you. They turned C11, C16. In 2024, when C16 was launched to the market, now there are three models in the market. We have seen certain feedbacks from the market. These three models in April 2024, monthly sales all exceeded over 10,000 units.
We realized the performance of one plus one plus one plus one higher than three. It is three SUV models. Our target audience is different. Our promotion marketing strategies also are different for these three models. Each model focuses on separate markets. Three of them are leading, one of the best performing models in each respective market. The sales of these three models rank among the top level in each segment. I do not think that is something we need to worry about. The second question is about overseas market. I would like to invite you to share progress in overseas products in the face of tariffs. Please introduce briefly what is the price of overseas products. Right now, it is a little bit aggressive in 2025 and 2026. We can be more conservative because the priority for the models is to see market first.
Sorry, I didn't hear you clearly due to poor internet connection. Could you repeat your question? Your second question?
Yeah. My second question is about your overseas factory and how would you combat the tariff. Leapmotor International. Whether your priority is to see the market first. Okay, thanks very much.
Your question basically covers the most important issue for our overseas business. I think as to our overseas factories in Malaysia, together with Stellantis Malaysian factories, I see one old project has already been initiated. Results will be seen by the end of this year in Europe. Projects are about to be initiated. It's expected that in the middle of next year, we will realize mass production in Europe. Thanks to our partner Stellantis, localization overseas is far faster than our domestic competitors. Second, tariffs, how we handle increased tariffs. That's not an issue faced by Leapmotor alone.
All companies that export their NGV to Europe face the same issue. We follow the rule of market. Based on fluctuations of market price, we determine our own price. Our pricing in Europe is basically based on Leapmotor's position in the overseas market, based on how fierce competition is in the overseas market. On the one hand, we consider Leapmotor profits, but also we want to expand our overseas markets quickly and build our reputation. Price overseas relies on our overall strategy and position. Price will be determined by Leapmotor's position overseas. In the beginning of Leapmotor International, we do not expect that we can make a lot of money in the early stage. What we want is we use the profit to further expand market, to accelerate our efforts to take more shares and enhance our sales volume globally, enhance our awareness and reputation.
This year and next year, return of investment of Leapmotor International would not be significant. Thank you. Next question. I'm joining from Guotai Hai Tong. Congratulations on your great performance in Q1. I have two questions about overseas business. First, in April, performance of Leapmotor International is also very strong. The sales is about 6,000 units. I would like to ask if you have any data about the end market. In April, the wholesale volume is about 5,000-6,000 units. It is impacted by certain factors. In April, our REEV version of Z10 was sold to overseas market. We have sales for other models. Globally, our end sales is about 3,000 units overseas. 3,000, I mean, end sales. And that is for April alone. Okay, thank you. The global auto market varies from country to country. Infrastructure, user habits, and other situations are different across different countries.
I would like to ask in several different markets where we adjust our models to better adapt to the local environment. Yes, of course, there will be differentiated features in different markets. We face different rules and regulations in different markets. We are talking about a global model. It does not mean we only focus on the European market. We also look at markets in the Middle East, in South Africa, and Asia-Pacific region. We will adjust our models according to the features of markets. There are no significant changes. Based on specific requirements of the local market and specific rules and regulations, we will make minor changes. For instance, in the Middle East, air conditioning efficiencies and effects will be adjusted according to the local law. In Brazil, we will adjust our REEV in terms of emissions to better meet the local regulations requirements.
There would not be significant changes. From Z10 to B10, we already gained experience in developing global models. Therefore, we are more experienced in adjusting models to better adapt to the local environment. Thanks to Stellantis support, they are deeply rooted in different markets. In terms of R&D, Stellantis can tell us what the local requirements and demands are. They help us to better adapt to the local markets at a faster pace.
Thank you very much. Next question. Thanks very much. I am leaving from Guoshen. Congratulations on your strong performance. I would like to follow up our strategic partner. What type of products are jointly developed by your strategic partners? Can you tell us the products?
Due to confidentiality, I am not able to disclose too much information. Okay, understand. We also see cooperation from competitors with a high gross profit margin.
Can you provide a range of gross profit margin? You mentioned in the future, strategic cooperation will be enhanced at Leapmotor. We can benchmark with others' good gross profit margin. Thank you. I do not think it is meaningful for us to benchmark with others' strategic cooperation. Purpose and methods of strategic cooperation are different. That would significantly impact gross profit margin yield from strategic cooperation. We would not refer to competitors in this industry because we do not know what is the purpose of their strategic cooperation. We can only know our purpose and the directions of strategic cooperation. We choose Stellantis and some domestic partners. We make decisions in a cautious way. We believe that cooperation is win-win. Only when it is win-win, our partnership can be long-term. Whether it is with dealers, contractors, and developers, we must achieve win-win results.
Probably, gross profit margin yield from cooperation isn't as high as you expect. What we focus on is in-depth and long-term cooperation, which then complement each other, leverage our distinctive advantages for better competitiveness. Therefore, all of us can better adapt to the market. Therefore, gross profit margin from the perspective of cooperation isn't close to that from our competitors. Thanks very much. Next question. I'm also from Zhongjin Auto. Congratulations on your strong performance in Q1. First question. What's your target of channel stores? There is significant improvement in sales and efficiency. Also, you introduced how to develop your channels. I would like to ask more details about your management and encouragement of end channels. Second, production arrangements. B10 has a lot of sales. We face the supply pressure of batteries, etc. And right now, there is B10. So you will release more models.
I would like to ask how you would arrange your production. As to your first question, our target of channel, our sales channel, the number will exceed 1,000 stores in Q1. There are about 800 stores, very close to our target of 1,000. In terms of channels, Leapmotor upholds the idea of win-win. We must achieve a win-win result with dealers. Profit of dealers is one of our priorities. We must ensure that in Q1, profit for dealers are at a leading position in the industry. Our dealership is also very active. We also need to consider the layout of channels and the quality. That is why we did not speed up very fast. We ensure speed and quality at the same time. We will definitely achieve the target of having 1,000 stores. As to the production arrangement, we are going digital.
Right now, we also have a full life tracking from getting customers online to test the drive to experience it in stores, etc. Right now, we leverage digital tools to help us track the whole process and enhance our end retail service quality. We achieved some significant progress. Performance of new stores is very good, and their sales volume enhanced very quickly. For your second question about production, you also mentioned B10. There is a certain pressure of battery supply, but this will be addressed by the end of May. We also face the production arrangement issues, but all of them will be addressed by the end of May. In June, there will be sufficient supply of batteries. You also mentioned B01. Due to supply of materials, batteries, and other spare parts, right now, there is no concern. Although the supply is sufficient. Yeah.
I would like to ask if the sales are very different in Tier 1, Tier 2, Tier 3 cities. Overall, it's very similar. Our channels right now concentrate on Tier 3 and Tier 4 cities or above. We are also penetrating into lower-tier cities. Relatively, sales volumes are very similar. Performance of stores in different tiers of cities is also very good. Our purpose is making profits in each dealership. That's our target. Limited by time.
We will have two online questions. The last two questions from online audience. If you have any questions, if you enter it by video call or by phone, you can press the star button and enter one. If you join us online, you can press the visual hand button and then tell us your question. If you join us by phone, you can press the star button and press one.
If you join us online, you can press your hand button. Hello? Can you hear me? Thanks. Zhong Siting from Huaxi Auto. Congratulations on your good performance. I would like to ask the regulations and rules in Europe, whether it's launched or not.
We do not get paper documents about this law in Europe due to U.S. and China-U.S.-EU relations. Many things are changing. We pay a lot of attention to related rules and regulations. Our partner, Stellantis, has a professional team in Europe. They have professional teams responsible for legal issues. If there is any update, they will tell us. We will launch strategies accordingly. It will impact on parts produced in China. It will impact not only Chinese brands, but also European companies who produce in China and export overseas. We can get support from our partners. Therefore, we can get related information better and faster.
We believe that when we enter the overseas market, whether it's Europe, Asia-Pacific, or South America, the final solution is localization. That's our overseas strategy, something we will uphold in the future. Whatever the changes, localization is a must-choice when we enter the overseas market. Together with our partners in the joint venture, we've achieved this consensus. As you can see from our layout of overseas business and our arrangement of localization, we are making more efforts to realize localization. Thank you very much. Next question. Thank you. Wang Yiyu from Zhongjin Auto. I would like to ask, in Leap 3.5 architecture, compared with Leap 3, how much cost can be saved? 3.5 architecture has higher integration, which can reduce the number of parts required. 3.5 architecture also offers better driving assistance and smart driving. We use 8650 chip in 3.5 architecture, realizing more robust functions.
Cost has been lowered. Cost has been reduced by about 30%-40%. Also, Leapmotor International, I would like to ask what's the gross profit margin and the R&D investment. Leapmotor International is a sales company. At this stage, it's a sales company. In the future, Leapmotor International may integrate sales and manufacturing. It's not an R&D company. Business model of Leapmotor International can be referred to domestic joint ventures such as Volkswagen's joint venture in China. It's more about manufacturing and sales, not include R&D. Gross profit margin of Leapmotor International. Since September last year, as we started selling, our margin maintained positive. Our gross profit margin is small but maintains positive. Our gross profit margin has achieved a certain level at Leapmotor International. We want to use the money and profits we make to invest it in marketing and helping us to get more market shares.
We don't expect to earn a lot of money from Leapmotor International. We hope that Leapmotor International can help us to promote our reputation and we can have a sharp increase in our global sales. Leaving a high point in global NDV market, that's our first strategy and target. If we can realize it, I think high gross profit margin wouldn't be a problem in the long run. Thanks very much.