Executive Summary
Lantu Auto, a subsidiary of Dongfeng Motor Group, has submitted its application for an initial public offering on the Hong Kong Stock Exchange, marking a critical step in its journey as a standalone entity in the competitive electric vehicle market.
- Lantu achieved profitability in the first seven months of 2025, reporting a net profit of RMB 4.34 billion, driven by robust sales growth and strategic partnerships.
- The company faces significant challenges, including heavy reliance on government subsidies and a high dependence on its Dreamer MPV model for the majority of its sales.
- Accounts payable have surged to over RMB 110 billion, raising concerns about cash flow management and supplier relationships amid industry-wide efforts to shorten payment cycles.
- A collaboration with Huawei has boosted recent sales, but potential internal competition within Dongfeng could dilute long-term benefits.
- Investors should monitor Lantu’s ability to transition from policy-driven growth to self-sustaining profitability and navigate intense market competition.
A Pivotal Moment for China’s New Energy National Team
As Lantu Auto, a prominent member of China’s new energy national team, prepares for its Hong Kong IPO, the move symbolizes a strategic shift for both the company and its parent, Dongfeng Motor Group. Founded in 2020 during a transformative period for China’s automotive industry, Lantu was tasked with leading Dongfeng’s transition into the high-end electric vehicle segment. With sales climbing from 19,400 units in 2022 to 80,116 units in 2024, Lantu has demonstrated growth potential, but its journey to the public markets unveils both opportunities and vulnerabilities. This IPO represents not just a fundraising endeavor but a test of Lantu’s ability to thrive independently in a capital-intensive and highly competitive sector.
The new energy national team concept underscores China’s strategic push to dominate the global EV market, with state-backed players like Lantu at the forefront. However, as Lantu steps into the spotlight, it must confront investor scrutiny over its financial health, market positioning, and long-term viability. The outcome of this IPO could set a precedent for other state-affiliated EV makers seeking to tap international capital markets.
Sales and Financial Performance
Lantu’s financial metrics reveal a story of rapid expansion and improving efficiency. From 2022 to 2024, the company’s revenue grew from RMB 6.052 billion to RMB 19.36 billion, while net losses narrowed significantly from RMB 1.538 billion to RMB 90.45 million. In the first seven months of 2025, Lantu reported a profit of RMB 4.34 billion, signaling a potential turnaround. Gross margins have also strengthened, rising from 8.3% in 2022 to 21.3% in early 2025, reflecting better cost control and economies of scale.
Key data points include:
- Vehicle sales increased from 19,400 units in 2022 to 80,116 units in 2024, with 66,700 units sold in the first seven months of 2025.
- The average selling price per vehicle has declined from approximately RMB 277,500 in 2022 to RMB 220,900 in early 2025, indicating competitive pricing pressures.
- Lantu’s valuation estimates range from RMB 36.79 billion to RMB 41.88 billion, based on price-to-sales and enterprise-value-to-sales multiples.
Spin-off from Dongfeng Motor Group
Dongfeng Motor Group’s decision to spin off Lantu through a share distribution to existing shareholders and pursue a separate listing is a tactical move to unlock value. Dongfeng’s overall sales declined by 10.8% year-over-year in the first seven months of 2025, to 1.26 million vehicles, lagging behind rivals like BYD, which sold 2.49 million units. By isolating Lantu, Dongfeng aims to shield the EV subsidiary from the parent’s operational weaknesses and allow it to command a premium valuation as a pure-play new energy company.
This strategy highlights the growing importance of the new energy national team in revitalizing traditional automakers. As Lantu gains independence, it must demonstrate its ability to sustain growth without the safety net of Dongfeng’s resources, a challenge that will be closely watched by investors globally.
Profitability Challenges and Subsidy Dependence
While Lantu’s recent profitability is a positive development, a deeper analysis reveals a concerning reliance on government support. In the first seven months of 2025, government subsidies totaled RMB 6.03 billion, a fivefold increase from RMB 1.2 billion in the same period last year. Without this additional subsidy of RMB 4.8 billion, Lantu would have struggled to achieve profitability, as its pre-tax profit stood at only RMB 4.73 billion.
This dependence raises questions about the sustainability of Lantu’s business model. Government incentives have been instrumental in fueling China’s EV adoption, but as the market matures, companies must transition to self-sustaining operations. For Lantu, reducing subsidy reliance is critical to convincing investors of its long-term viability as part of the new energy national team.
Impact of Subsidies on Financial Health
Subsidies have played a pivotal role in offsetting Lantu’s operational costs and supporting its R&D investments. However, this support masks underlying weaknesses in core profitability. For instance, in 2024, Lantu’s net loss would have been significantly higher without subsidies, highlighting the gap between top-line growth and bottom-line performance. As China phases out certain EV incentives, Lantu must accelerate its path to organic profitability through cost efficiencies and product innovation.
Data from the Ministry of Industry and Information Technology shows that EV subsidies are gradually being reduced, pushing manufacturers to focus on market-driven demand. Lantu’s ability to adapt will be a key determinant of its success post-IPO.
Market Position and Competitive Landscape
Lantu operates in a crowded and fast-evolving EV market, where it competes with both established players and agile newcomers. Despite its growth, Lantu’s sales volumes trail behind leading EV makers like Nio, Xpeng, and Li Auto, each of which sold over 130,000 units in the first seven months of 2025. Xiaomi and AITO, meanwhile, exceeded 180,000 units, underscoring the intense competition.
As a member of the new energy national team, Lantu benefits from state backing, but it must differentiate itself through technology and brand appeal. The company’s product portfolio includes models like the FREE, Dreamer, Chasing Light, and Zhiyin, covering SUVs, MPVs, and sedans. However, its reliance on the Dreamer MPV for over 55% of cumulative sales since 2022 points to a lack of diversification, which could limit growth in other segments.
Sales Performance and Model Diversification
The Dreamer MPV has been Lantu’s standout performer, consistently ranking among the top-selling新能源 MPVs in China. From 2022 to July 2025, the Dreamer accounted for 120,867 of Lantu’s 217,030 total vehicle sales. In contrast, the Chasing Light sedan saw sales drop to 1,768 units in the first seven months of 2025, down from 4,977 units in 2024, indicating challenges in expanding beyond the MPV niche.
To bolster its market position, Lantu has prioritized partnerships and new launches. The recent success of the FREE+ model, equipped with Huawei’s technology, demonstrates the potential of strategic alliances. However, achieving a balanced product mix is essential for reducing dependency on single models and capturing broader consumer demand.
Pricing Trends and Brand Positioning
Lantu’s declining average selling price—from RMB 277,500 in 2022 to RMB 220,900 in early 2025—reflects both competitive pressures and a strategic push to reach wider audiences. While this may boost volume, it could erode brand equity in the premium segment. Maintaining a balance between affordability and premium features will be crucial for Lantu as it vies for market share against rivals like Tesla and BYD.
Cash Flow and Supplier Management
Lantu’s financial statements reveal mounting pressure in accounts payable, which surged to RMB 110.27 billion by August 2025, more than double the RMB 96.9 billion recorded at the end of 2024. This increase contributed to an improvement in operating cash flow, which turned positive at RMB 14.2 billion in the first seven months of 2025, compared to a negative RMB 12.4 billion in the same period last year. However, the trade payables turnover days stood at 141.2 days, significantly longer than the industry’s recommended 60-day payment cycle.
The China Association of Automobile Manufacturers has advocated for shorter payment terms to alleviate supply chain strains, making Lantu’s extended cycles a potential red flag. Efficient working capital management will be vital for sustaining operations and fostering strong supplier relationships post-IPO.
Accounts Payable and Liquidity Concerns
High accounts payable can indicate robust supplier credit but also signal liquidity risks if not managed properly. Lantu’s招股书 acknowledges the need for substantial investments in R&D, capacity expansion, and retail networks, which could strain cash reserves. For example, the company plans to open full-function user centers, flagship stores, and delivery hubs, requiring significant capital outlays.
Investors should monitor Lantu’s ability to balance growth investments with financial stability, especially as it navigates the capital-intensive EV landscape. A failure to optimize cash flow could hinder its competitiveness within the new energy national team.
Strategic Partnership with Huawei
Lantu’s collaboration with Huawei, formalized in a January 2024 strategic agreement, has emerged as a key growth driver. The FREE+ model, launched in July 2025 with Huawei’s Qiankun ADS 4 advanced driver-assistance system and Harmony OS 5 cockpit, achieved strong initial sales of 5,239 units in August. Priced between RMB 219,900 and RMB 249,900, it competes in the mid-to-high-end SUV segment, leveraging Huawei’s technology to enhance appeal.
This partnership underscores the synergy between traditional automakers and tech giants in advancing the new energy national team’s objectives. However, Lantu may face internal competition, as Dongfeng is also developing a separate joint project with Huawei under the DH initiative, slated for a 2026 launch. This could divert resources and attention, potentially limiting Lantu’s access to cutting-edge Huawei technologies.
Huawei’s Role in Sales Boost
The integration of Huawei’s smart driving and cockpit systems has resonated with consumers, driving demand for Lantu’s FREE+ model. Features like 192-line LiDAR and seamless connectivity have positioned it as a strong contender in the 200,000-300,000 RMB SUV category. According to market data, the FREE+ ranked among the top three models in its segment alongside Xiaomi’s YU7 and Li Auto’s L6.
Despite this success, Lantu must ensure that the benefits of the Huawei partnership are sustainable. As Huawei expands its collaborations within Dongfeng and beyond, Lantu needs to secure its stake in the alliance to maintain a competitive edge.
Future Prospects and Internal Competition
The upcoming DH project between Dongfeng and Huawei, which may feature a high-end smart SUV, could overshadow Lantu’s efforts. Reports suggest this new brand will receive extensive Huawei support, potentially making it a higher priority within Dongfeng’s portfolio. Lantu must therefore strengthen its unique value proposition and innovate independently to avoid being sidelined in the race for EV dominance.
Navigating the Path Forward for the New Energy National Team
Lantu Auto’s Hong Kong IPO represents a defining moment for China’s new energy national team, blending promise with palpable risks. The company has made strides in sales growth and profitability, but challenges like subsidy dependence, cash flow pressures, and market competition loom large. Its partnership with Huawei offers a temporary boost, but long-term success hinges on diversifying its product lineup, enhancing operational efficiency, and reducing reliance on external support.
For investors, Lantu’s journey underscores the complexities of betting on state-backed EV players in a dynamic market. As the new energy national team expands, stakeholders should prioritize companies with robust fundamentals and clear paths to sustainable growth. Monitor Lantu’s post-IPO performance closely, and consider how its strategies align with broader trends in China’s automotive sector. The time to act is now—evaluate Lantu’s potential as a cornerstone of your EV investment portfolio, but proceed with caution amid evolving market dynamics.