By Sherry Qin


Zhejiang Leapmotor Technology's shares rose sharply as investors cheered the electric-vehicle startup's first annual positive gross profit margin since it was founded in 2015.

The Chinese electric-vehicle maker's shares surged as much as 12% early Tuesday before paring their gain to 8.4% at 25.85 Hong Kong dollars (US$3.30).

The Stellantis-backed EV maker posted a 2023 gross profit margin of 0.5%, a substantial improvement from 2022's negative 15.4%, after reporting positive margins for two consecutive quarters, it said in an exchange filing after the market closed Monday. The company attributed the turnaround to an improved product mix, cost reductions and enhanced efficiency.

Management said they have cut the cost per vehicle by over one third with technology upgrades and may further slash its per-vehicle cost by 10,000 yuan (US$1,387) to CNY15,000, Citi analysts led by Jeff Chung said.

Its sales in the first two months of 2024 more than quadrupled compared with the same period a year earlier to18,843 vehicles, after delivering 144,155 vehicles in 2023. Leapmotor aims to sell 250,000-300,000 units in 2024 by expanding its dealer network and with a wave of new products.

Thanks to its stringent cost reduction efforts and stronger sales, Leapmotor's 2023 net loss narrowed 17% to CNY4.22 billion.

Management is confident that its gross margin could further improve to 5%-10% in 2024, driven by improved scale for sales and cost reductions via technological innovations, Citi said.

Deutsche Research analyst Bin Wang noted that Leapmotor could be a major beneficiary of China's upcoming vehicle trade-in subsidy thanks to its lower-priced products.

However, an aggressive price war across the sector could hurt its gross margin despite its vertically integrated supply chain and falling battery prices, Wang added.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

03-25-24 2342ET