Chinese NEV startups betting on new brands to chase sales growth

Chinese new energy vehicle startups are rolling out multi-brand strategies to expand market coverage and improve profitability, but industry experts warn the capital-intensive push carries massive financial risks, with failed new-brand ventures potentially burning billions of yuan.

Leapmotor Vice-President Li Tengfei confirmed plans for a second brand during an earnings call in mid-May. He revealed that the brand is expected to be unveiled at the end of this year or next year, with an official launch in the middle to latter half of 2027.

The brand will target products priced above 300,000 yuan ($44,125) and operate a standalone sales network, as part of Leapmotor's broader push to upgrade its brand image and expand profit margins, local media reports.

The brand comes as Leapmotor grapples with mounting profitability pressure. The automaker swung to a net loss of 390 million yuan in the first quarter of 2026, reversing a 360 million yuan net profit recorded in the fourth quarter of 2025, dragged primarily by falling gross profit. Despite this, it delivered 110,000 vehicles in Q1, keeping it among the top NEV startups by deliveries.

Leapmotor's current product portfolio, covering its A, B, C, D series and the Lafa 5 model, spans sedans, SUVs and MPVs across the 50,000 to 250,000 yuan price bracket. Its long-standing reliance on cost-effective, mass-market models has fueled strong sales volume but kept per-vehicle profit margins thin.

Yale Zhang, managing director of Shanghai-based consulting firm Automotive Foresight, said Leapmotor's low-end brand positioning has become a ceiling for profit growth and it should spin off a new brand with separate marketing, channels and services to build its premium market presence.

In contrast to Leapmotor's upward moves, Xiaomi's multibrand layout extends downward into more affordable mass-market segments.

Local media reports that Xiaomi will launch its second brand, Skynomad, with a range-extended SUV, in the second half of 2026.

Skynomad will focus on family-oriented range-extended SUVs, forming a clear strategic distinction from Xiaomi's auto brand, which focuses on pure electric, tech-driven, and sporty vehicles.

The new brand will also aid Xiaomi's global expansion with range extender tech for overseas markets that lack charging infrastructure.

Skynomad is expected to target prices below 200,000 yuan, filling the market gap beneath Xiaomi's existing vehicle lineup, which is mainly priced from 200,000 to 300,000 yuan.

Zhang said similar to Nio's multi-brand layout, a second brand allows Xiaomi to cover the segment below 200,000 yuan and rapidly expand market share.

"In theory it works, but execution determines success or failure," Zhang said. "A new brand — from platform R&D to marketing and sales — involves huge investment, easily billions of yuan. If it fails, those billions are gone."

Fu Yuwu, honorary president of the China Society of Automotive Engineers, also pointed out that the auto industry is a high-investment and capital-intensive sector. New brand building requires full-scale reconstruction of sales channels, marketing systems and organizational structures, amplifying startups' financial strain.

"Whether to adopt a multibrand strategy depends on the company's assessment of the market and its own capabilities," Fu said.

"Whatever the choice, the automaker must build a solid brand foundation, persist over the long term and continuously strengthen it to establish an irreplaceable position in consumers' minds."

Among China's NEV startups, Nio pioneered the multi-brand strategy. Its second brand, Onvo, launched in 2024 and delivered over 100,000 units across several models in 2025. Its third brand, Firefly, also has found a niche in the high-end pure electric small car segment.

But the initial fully independent operation of Onvo and Firefly incurred exorbitant costs. In May 2025, Nio integrated these sub-brands into its group management. This unified R&D, sales and service to share technology, supply chain and battery swap resources, reducing procurement costs by 15-20 percent.

When viewed from a broader perspective, multi-brand strategies in the auto industry have followed a cyclical pattern, Zhang said.

For instance, during the 2008-09 global financial crisis, US automaker Ford implemented its "One Ford" strategy, selling off Volvo to stay afloat. Similarly, Chery discontinued its Rely and Riich brands, and later introduced Jetour and Exeed as the company expanded.

"It's akin to the rise and fall of empires; long divided, long united," he said. "When a company gets too sprawling, it consolidates. When the main brand scales up and needs high-low differentiation, it splits again."

caoyingying@chinadaily.com.cn