On August 20th, FAW Group responded to inquiries from China Business Journal regarding reports about its potential acquisition of a 10% stake in Leapmotor, stating that relevant departments within the group had 'no knowledge' of the matter.

Multiple media outlets, citing insider sources, have reported that FAW Group is indeed interested in investing in Leapmotor, with preliminary plans to acquire approximately 10% of its shares. The proposal is reportedly already moving forward within FAW Group's internal channels.

If finalized, this acquisition would represent the first significant capital partnership between a central state-owned enterprise (SOE) and a new energy vehicle (NEV) startup in China.

Industry observers aren't particularly surprised by these reports, as the groundwork for collaboration between the two companies was established earlier this year.

In early March, FAW Group and Leapmotor signed a Memorandum of Understanding (MoU) for strategic cooperation, specifically agreeing to joint R&D development, component collaboration, and exploration of capital cooperation. The agreement outlined a two-pronged approach: first, leveraging both companies' technical expertise to co-develop new energy passenger vehicles and collaborate on components; second, pursuing capital-level cooperation to achieve synergies across the entire industrial chain through equity relations. At the time, FAW Group stated that the MoU marked a 'new beginning' for their partnership and would establish the foundation for future implementation.

Just 20 days after establishing this strategic cooperation, tangible progress emerged. On March 26th, information disclosed on FAW Group's electronic procurement platform revealed that Zhejiang Leapmotor Technology Co., Ltd. had been awarded the technical development contract and platform licensing for the Hongqi brand's G117 product. This confirmed Leapmotor's role in the technical development of the Hongqi G117 project. Reports indicate the Hongqi G117 is scheduled to enter overseas markets in the second half of 2026 through FAW Group's distribution channels.

Notably, Leapmotor's interim performance announcement for 2025, released on August 18th, confirmed that the first collaborative vehicle development project between FAW Group and Leapmotor has already launched, with follow-up work actively progressing. The two parties have also stated they will further explore deeper capital cooperation to achieve full industrial chain resource synergy.

Yang Jigang, a researcher specializing in the automotive 'New Four Modernizations' industry and partner at Beijing Zhixing Strategy Management Consulting Co., Ltd., previously suggested that any future capital cooperation between FAW Group and Leapmotor might resemble Stellantis's investment model in Leapmotor. Such a capital partnership could provide Leapmotor with substantial financial support for production expansion and R&D investment, while allowing FAW Group to leverage Leapmotor's innovation capabilities to enhance its own NEV product portfolio.

Strategic Transformation Needs

Industry analysts believe that both the strategic MoU and the potential stake acquisition are driven by FAW Group's urgent need to accelerate its NEV transformation.

Compared to other major automotive groups, FAW Group currently has less influence and market presence in the NEV sector. While FAW Group achieved total sales of 3.2 million vehicles in 2024, its NEV sales amounted to only 339,000 units, representing a penetration rate of 10.6%. This figure lags behind Changan Group's 27% and Dongfeng Motor Group's 34%, and falls significantly short of the national average NEV market penetration rate of 40.9%.

The NEV sector is experiencing increasingly intense competition. A McKinsey report released in late January emphasized that the industry's elimination phase is entering its final countdown: automakers unable to launch competitive intelligent electric vehicles within the next year or two will likely 'fall by the wayside.' This brutal market reality is forcing central state-owned automakers to accelerate their transformation efforts.

Additional pressure comes from China's State-owned Assets Supervision and Administration Commission (SASAC), which is closely monitoring the NEV transformation of central state-owned automakers. In March 2024, SASAC Director Zhang Yuzhuo publicly addressed the three major central SOE automakers—FAW Group, Dongfeng Motor, and Changan Automobile—stating that their NEV businesses would be assessed based on technology development, market share, and future growth potential.

Driven by these factors, FAW Group has intensified its efforts, resulting in improved NEV sales performance. In July 2025, FAW Group's proprietary NEV sales exceeded 28,500 units, representing a significant year-on-year increase of 129.03%.

In late July, FAW Group announced it would implement an 'All in' NEV strategy, accelerating investment in the sector, expediting the launch of NEV products, and comprehensively transitioning toward intelligent connected electric vehicles across all business units.

Ambitious Growth Plans

According to its latest strategic plan, by 2030, FAW Group aims to achieve total vehicle sales exceeding 5 million units, with NEV sales exceeding 3 million units. The company targets proprietary brand sales exceeding 2 million units, proprietary brand NEV sales exceeding 1.5 million units, and overseas market sales exceeding 700,000 units. Clearly, improving NEV sales performance represents both a major and urgent priority for FAW Group.

Industry insiders note that an investment in Leapmotor would provide significant advantages to FAW Group. First, it would help address gaps in NEV technology and product portfolio. Although FAW Group brands like Hongqi and Bestune already participate in the NEV sector, their capabilities in developing platforms for intelligent electric vehicles remain relatively limited. Leapmotor possesses self-developed electric drive systems, electronic control units, intelligent cabin solutions, and autonomous driving technologies, particularly for B-segment and C-segment EV platforms, which could complement FAW Group's offerings and accelerate its transformation.

Second, Leapmotor's existing partnership with Stellantis aims to accelerate its global expansion. FAW Group, as a central SOE, has established advantages in distribution channels and manufacturing resources. Equity cooperation could help the two companies leverage complementary strengths in overseas markets.

Finally, through strategic investment, FAW Group could not only share in Leapmotor's growth but also achieve closer collaboration across the industrial chain, including jointly developing new platforms, sharing supply chain resources, and enhancing overall cost competitiveness.

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