Leapmotor Gets 67.44B Yuan Private Placement Approval, Applies for Fuel Vehicle Production License for PHEVs

Author | Hengxin Source | Bowang Finance

Recently, ZeroRun (Leapmotor) made two moves on the same day that have been widely discussed by the market.

On one hand, at the "2026 ZeroRun Technology Day," the MM-i multi-mode hybrid electric drive was unveiled. Chairman Zhu Jiangming confirmed that the relevant production lines are already in place, and ZeroRun is applying for domestic fuel vehicle production qualifications.

On the other hand, ZeroRun announced that it had received approval from the China Securities Regulatory Commission (CSRC) on September 10 for its targeted share issuance (Zhengjian Xuke [2026] No. 2434), clearing a key regulatory hurdle for its RMB 6.744 billion private placement.

When these two pieces of news are juxtaposed, the narrative quickly simplifies into a single headline: "Building fuel cars without a license."

However, when you examine the policy framework, technology roadmap, and balance sheet separately, two distinct judgments emerge: one concerns production capacity access under institutional rules, and the other concerns the use and cost of a large sum of money.

Together, they reveal ZeroRun's true current position—it is not "reversing back to oil," but rather prepaying an access cost for the plug-in hybrid (PHEV) track, while using equity financing to insure its R&D pace.

Why PHEVs Are Classified as "Fuel Vehicles": Rules Predate Products and Public Opinion

Let's first address the classification issue.

Plug-in hybrid vehicles are classified as new energy vehicles in China and qualify for green license plates—this is the traffic management policy. However, whether a company can build a factory to produce them falls under a separate set of production capacity access rules.

The current Automotive Industry Investment Management Regulations (NDRC Order No. 22, effective January 10, 2019) state in Article 5: Vehicle investment projects are divided into two categories based on drive power: fuel vehicles and pure electric vehicles. Those "driven by an engine," including traditional fuel vehicles, conventional hybrids, and plug-in hybrids, are all classified as fuel vehicle investment projects. Pure electric vehicle investment projects include pure electric (including range-extended) and fuel cell vehicles.

This distinction determines ZeroRun's reality. In April 2021, ZeroRun was included in the MIIT's list of vehicle manufacturers, obtaining qualifications for pure electric passenger vehicles (including range-extended), which do not cover PHEVs.

In its early days, the S01 and T03 were manufactured under contract by Hangzhou Changjiang Passenger Vehicles. After Changjiang's parent company went bankrupt in 2020, ZeroRun acquired 100% of Fujian New Fuda for approximately RMB 510 million and built complete production lines—stamping, welding, painting, final assembly, and three-electric systems—in Jinhua before achieving self-production.

In other words, ZeroRun suffered from this same structural barrier a decade ago, and now it has reappeared in a different form.

The fact that PHEVs are classified as fuel vehicles under investment policy does not mean they are no longer new energy products, nor does it mean ZeroRun is pivoting to pure fuel vehicles.

At the technology day, Zhu Jiangming repeatedly emphasized that "PHEV technology is actually quite suitable for the domestic market." ZeroRun's relevant executives confirmed that the MM-i will first be deployed in overseas models, produced by the ZeroRun International joint venture, which is not affected by domestic qualification requirements. Domestic qualifications are currently being applied for.

The headline "Building fuel cars without a license" conflates three separate things: investment project category, product attributes, and business intent.

What is truly worth discussing is the timing.

The PHEV path is not a spur-of-the-moment decision for ZeroRun. Since the launch of its first range-extended model in 2022, ZeroRun has introduced seven range-extended models. Zhu Jiangming estimates the global lifecycle of direct-drive PHEVs at 5 to 10 years, with continued demand particularly in areas with inconvenient charging infrastructure.

From a market perspective, Dataforce data shows that in the first half of 2026, Chinese-brand PHEVs sold approximately 208,000 units in Europe, capturing a 28.3% market share—double year-on-year. In June alone, the share rose to 34%. This is a rapidly growing export product segment, and since the EU's anti-subsidy tariffs on pure EVs currently do not cover PHEVs, the existence of this window is pushing companies to prepare early.

The risk also lies here.

Since 2019, policy has clearly stated "strictly control the addition of new traditional fuel vehicle production capacity." Although PHEVs are encouraged in Article 8, project filing and approval still require meeting conditions such as capacity utilization rates and R&D investment. Adding new fuel vehicle production capacity is significantly more difficult than for pure EVs.

Therefore, ZeroRun's pace in the domestic market depends not on technological readiness, but on approval results—a timeline it cannot compress on its own.

The RMB 6.744 Billion Private Placement: Time, Not Money, Is the Scarcer Resource

Now, let's look at the capital side.

This private placement consists of two transactions: On December 28, 2025, FAW Equity Investment (Tianjin) Co., Ltd. subscribed to 74.8322 million domestic shares at RMB 50.03 per share, contributing approximately RMB 3.744 billion. On January 6, 2026, Jinyi Gaoxin subscribed to approximately 59.964 million shares at the same price, contributing approximately RMB 3 billion.

Together, the two tranches issued approximately 135 million shares, raising about RMB 6.744 billion. After issuance, the new shares account for approximately 8.66% of the enlarged total share capital.

Regarding the use of funds, approximately RMB 4.721 billion will be allocated to R&D, and approximately RMB 2.023 billion will be used for working capital and general corporate purposes.

These figures need to be viewed in the context of the balance sheet to be meaningful.

As of June 30, 2026, ZeroRun held a total of RMB 38.59 billion in cash and cash equivalents, restricted cash, financial assets at fair value through profit or loss, and bank time deposits. Net cash from operating activities was RMB 2.17 billion, and free cash flow was RMB 140 million. In the first eight months, ZeroRun delivered 561,000 vehicles, up approximately 70% year-on-year, achieving about 56% of its full-year target of 1 million vehicles.

On the surface, it is not in a position where it urgently needs equity financing.

However, gross margin is signaling pressure. In the first half of the year, revenue was RMB 38.11 billion, up 57.2% year-on-year, with net profit of RMB 210 million—the third consecutive half-year of profitability. The gross margin for the period was 11.7%, down 2.4 percentage points year-on-year, with Q1 at 9.4% and Q2 recovering to 12.6%.

ZeroRun CFO Li Tengfei lowered the annual net profit target from the initial RMB 5 billion to approximately RMB 3 billion during the earnings call. R&D expenses for the period were RMB 2.32 billion, up 22.8% year-on-year, while selling expenses were RMB 1.99 billion, up 41.1% year-on-year.

Connecting these numbers: sales are rising, per-unit profit is thinning, and R&D investment and channel spending are accelerating. Free cash flow dropped from RMB 860 million in the same period last year to RMB 140 million, primarily due to inventory buildup and capital expenditure of RMB 2.03 billion for production line introduction.

In other words, the role of this RMB 6.744 billion is not "emergency rescue," but rather to isolate the R&D pace and capacity ramp-up for a密集 launch of new products in 2027 from operating cash flow, using equity capital as a buffer.

From One-Way Investment to Two-Way Collaboration: The Supply Chain Calculus Beyond the RMB 6.7 Billion

On September 17, the day after the CSRC approval was finalized, FAW Group and ZeroRun signed an agreement in Huzhou, Zhejiang.

FAW's wholly-owned subsidiary, QiXin Power, signed a letter of intent with ZeroRun, under which ZeroRun plans to participate as a strategic investor in QiXin Power's Series A financing. The two parties will pursue strategic collaboration and resource sharing in hybrid engines, electric drive systems, range extenders, and other powertrain products.

On the same day, Zhongqi Xinneng and ZeroRun signed a technology cooperation agreement to jointly research and develop solid-state batteries, lithium-rich manganese-based batteries, sodium-ion batteries, and LFP ultra-fast charging technologies, while promoting standardized battery cells.

This is the part of the story most easily obscured by headlines: the capital relationship has evolved from "FAW invests in ZeroRun" to a two-way street, and the first point of collaboration happens to be hybrid powertrains.

QiXin Power's hybrid engines are already supplying ZeroRun's global models, and the first jointly developed model is about to enter production. Combined with ZeroRun's MM-i plan—product deployment in 2027, with the first A0-class model launching overseas in the first half of next year—a clear line emerges: the technology source for PHEV engines, the path to resolving qualification issues, and the pace of overseas expansion all point to collaboration with the FAW system.

This also explains why the "building fuel cars" label does not apply to ZeroRun. It has neither a traditional fuel vehicle product line nor the corresponding brand and channel investment. The other two core achievements from Technology Day—the LEAP 5.0 vehicle architecture and the CTC 3.0 high/low-voltage integrated battery—are both iterations at the pure EV architecture level.

For ZeroRun, PHEVs represent a product portfolio complement and a structural opportunity in overseas markets, not a strategic pivot.

But structural challenges have not disappeared.

According to its plan, ZeroRun's overseas sales target for 2026 is 100,000 to 150,000 units, with actual estimates reaching 200,000 units. The 2027 target is 350,000 to 400,000 units, with a long-term goal of achieving a production structure where domestic production accounts for 40% and overseas production accounts for 60%.

Overseas capacity relies on Stellantis and localized factories (the B10 is planned for CKD production in Zaragoza, Spain, in Q4 2026). This path bypasses domestic qualification restrictions. However, once domestic PHEV models need to enter mass production, the approval cycle for new fuel vehicle production capacity becomes an uncontrollable variable.

If the two timelines become misaligned, the window of opportunity gained from overseas-first strategy could be partially offset by delays in domestic launches.

On the other side, the capital value of the private placement also depends on whether it can truly translate into technological barriers.

The RMB 4.721 billion allocated to R&D corresponds to the concentrated launch of new product categories under the second brand, the LEAP 5.0 architecture, and three core technologies in 2027.

If the rollout goes smoothly, this capital will significantly reduce ZeroRun's own R&D and production risks. If end-market price competition continues to compress margins, and vehicle launches encounter qualification or approval delays, then the dilution from the additional 8.66% of shares will become a pure equity cost.

Conclusion: A Simultaneous Prepayment of "Institutional Costs" and "Capital Costs"

Putting the two events together, ZeroRun's current actions can be summarized as a simultaneous prepayment: using equity to secure certainty in R&D and expansion, and using time to wait for production capacity access under the policy framework.

So the headline "Building fuel cars without a license" wins in communication but loses in explanatory power.

What ZeroRun is building has never been fuel cars. It is building a product system capable of covering three routes—pure electric, range-extended, and plug-in hybrid—along with a balance sheet that leaves room for maneuvering between policy, costs, and overseas expansion pace.

Whether this room is sufficient will not be answered in the announcement, but in the approval progress and vehicle launch cadence over the next twelve months.

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