Li Auto Inc. (LI) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong vehicle delivery growth, market share leadership, and strategic product launches. The Q&A session reveals positive developments in chip technology, sales system reorganization, and overseas strategy. Despite some concerns about cash flow and management's unclear responses on certain issues, the strong cash position, consistent gross margin outlook, and aggressive expansion plans support a positive sentiment. The expected delivery and revenue growth, coupled with strategic initiatives, suggest a likely stock price increase in the near term.
Key Financial Performance
Total Revenue RMB 30.2 billion, down 4.5% year-over-year and up 16.7% quarter-over-quarter. The year-over-year decrease was mainly due to lower average selling price caused by product mix changes, customer interest subsidies, and higher sales incentives, partially offset by increased vehicle deliveries.
Vehicle Sales Revenue RMB 28.9 billion, down 4.7% year-over-year and up 17% quarter-over-quarter. The year-over-year decrease was mainly due to lower average selling price caused by product mix changes, customer interest subsidies, and higher sales incentives, partially offset by increased vehicle deliveries.
Cost of Sales RMB 24.2 billion, down 5.2% year-over-year and up 17.3% quarter-over-quarter.
Gross Profit RMB 6.1 billion, down 1.8% year-over-year and up 14.1% quarter-over-quarter.
Vehicle Margin 19.4% versus 18.7% in the same period last year and 19.8% in the prior quarter. The year-over-year increase was attributable to lower average cost of sales mainly due to cost reduction, partially offset by lower average selling price caused by product mix changes, customer interest subsidies, and higher sales incentives.
Gross Margin 20.1%, versus 19.5% in the same period last year and 20.5% in the prior quarter.
Operating Expenses RMB 5.2 billion, down 8.2% year-over-year and up 3.8% quarter-over-quarter.
R&D Expenses RMB 2.8 billion, down 7.2% year-over-year and up 11.8% quarter-over-quarter. The year-over-year decrease was primarily due to decreased employee compensation. The sequential increase was mainly impacted by the pace of new vehicle programs and higher expenses to support product portfolio expansion and technology advancement.
SG&A Expenses RMB 2.7 billion, down 3.5% year-over-year and up 7.4% quarter-over-quarter. The year-over-year decrease was primarily due to decreased employee compensation, partially offset by increased marketing and promotion activities. The sequential increase was mainly due to increased marketing and promotion activities.
Income from Operations RMB 827 million, up 76.7% year-over-year and 204.4% quarter-over-quarter.
Operating Margin 2.7% versus 1.5% in the same period last year and 1% in the prior quarter.
Net Income RMB 1.1 billion, down 0.4% year-over-year and up 69.6% quarter-over-quarter.
Diluted Net Earnings per ADS RMB 1.03 in the second quarter, versus RMB 1.05 in the same period last year and RMB 0.62 in the prior quarter.
Cash Position RMB 106.9 billion as of June 30, 2025.
Cash Used in Operating Activity RMB 3 billion versus RMB 429.4 million in the same period last year and RMB 1.7 billion in the prior quarter.
Free Cash Flow Negative RMB 3.8 billion in the second quarter versus negative RMB 1.9 billion in the same period last year and negative RMB 2.5 billion in the prior quarter.
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Operating Highlights
Li MEGA Home: Launched in April 2025, achieving approximately 3,000 units sold monthly. It became the best-selling MPV priced above RMB 500,000 since May 2025 and the top-seller among all BEVs in the same price range since June 2025.
Li i8: Officially launched on July 29, 2025, with deliveries starting on August 20. It combines off-road versatility, luxury sedan handling, and MPV comfort. Test drive satisfaction rate exceeded 97%, and cumulative deliveries are expected to surpass 8,000 units by the end of September 2025.
Li i6: A 5-seat BEV planned for launch and delivery by the end of September 2025, aimed at expanding the product lineup to a broader audience.
Market Share: Captured a 13.4% market share in the RMB 200,000 and above NEV market in China in Q2 2025, maintaining a top 3 position despite sales fluctuations.
Charging Network: Operates over 3,100 charging stations with 17,000+ charging stalls, covering major highways and urban areas. Plans to expand to 4,000 stations by the end of 2025.
Sales and Service System: Undergoing restructuring to enhance sales and delivery capabilities, build an end-to-end marketing system, and improve sales team morale.
Retail Network: Expanded to over 550 retail stores across 150+ cities, with 50 new stores added since the end of 2024.
AI and R&D Investments: Investing over RMB 6 billion in AI and R&D in 2025, focusing on intelligence, electric drive technology, and 5C supercharging. Introduced VLA Driver large model and MindGPT-powered intelligent agent for enhanced user experience.
Autonomous Charging: Testing autonomous charging robots and launched a pass-through supercharging station in Changzhou to redefine smart charging.
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Risk or Challenges
Sales Fluctuations: The refreshed Li L series experienced sales fluctuations since June due to sales and service system adjustments and other market factors. This poses a risk to maintaining consistent revenue and market position.
Sales and Service System Restructuring: The company is undergoing restructuring of its sales and service systems, which includes enhancing sales and delivery capabilities, building an end-to-end marketing system, and boosting sales team morale. This transition could disrupt operations and impact short-term performance.
Market Dynamics: The company faces challenges in responding effectively to market dynamics, which could impact its ability to maintain its competitive position.
R&D Investment: Li Auto plans to invest over RMB 6 billion in AI and other R&D initiatives. While this is aimed at innovation, it represents a significant financial commitment that could strain resources if returns are not realized as expected.
Product Mix and Pricing Pressure: Lower average selling prices due to product mix changes, customer interest subsidies, and higher sales incentives have impacted revenue and vehicle margins.
Free Cash Flow: The company reported negative free cash flow of RMB 3.8 billion in Q2 2025, which could limit its financial flexibility for future investments and operations.
Economic and Market Conditions: The business outlook for Q3 2025 anticipates a decline in vehicle deliveries and revenue compared to Q2, reflecting potential economic and market challenges.
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Guidance & Outlook
Vehicle Deliveries: The company expects deliveries to be between 90,000 and 95,000 vehicles in the third quarter of 2025.
Revenue Projections: Quarterly total revenues are expected to be between RMB 24.8 billion and RMB 26.2 billion for the third quarter of 2025.
AI Investments: Li Auto plans to invest over RMB 6 billion in AI this year, focusing on infrastructure, product, and technology development.
Product Launches: The company plans to launch the Li i6 and commence deliveries by the end of September 2025.
Charging Network Expansion: Li Auto aims to reach 4,000 charging stations by the end of 2025, up from the current 3,100 stations.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How does management plan to achieve the full-year sales volume target despite the declining sales of the L series?
A:Management plans to solidify their market position in the EREV segment through intelligence and major upgrades in assisted driving, such as the VLA system. For BEVs, they aim to release new models like Li MEGA and Li i8, ramp up production, and launch the Li i6. They will adopt tailored marketing strategies for different regions, optimize store locations, and increase store density in lower-tier cities through the Star Plan.
Q:What updates can management provide on their self-developed chips?
A:The self-developed chip successfully taped out and returned earlier this year. It is undergoing vehicle testing and is expected to be deployed in flagship models next year. The chip offers 2x performance for GPT-like models and 3x for vision models. It features a novel data flow architecture and a hardware-software co-design approach, making it highly efficient and scalable for large neural networks.
Q:What is the progress and rationale behind the adjustments to the auto sales system?
A:The sales system underwent a major reorganization in August, with headquarters directly managing 23 regions and new departments established for sales, service operations, and marketing. The rationale is to align with frontline needs, improve income, provide growth opportunities, and enhance efficiency. The changes aim to strengthen the direct sales model, improve user experience, and support new model launches without affecting the timeline.
Q:What is the future strategy for product and SKU configurations?
A:Management plans to reduce the number of SKUs, focusing on single, competitive SKUs to maximize value for customers. They aim to iterate faster on technological platforms and products to stay ahead of competitors. By 2026, they expect to have a stronger lead in vehicle products and AI compared to 2022.
Q:What is the gross margin outlook for the third quarter?
A:The gross margin is expected to remain at about 19%, consistent with the first and second quarters.
Q:What are the details regarding the Li i6 product positioning, launch timetable, and marketing plan?
A:The Li i6 is positioned as the most competitive product in the large 5-seater SUV market, offering unique design, industry-leading space, comfort, and long range. It will feature the VLA Driver large model and superior handling. The marketing plan focuses on user-centric communication, effective training for sales teams, and proactive PR defense. The launch is scheduled for September.
Q:What is the company's overseas strategy?
A:The overseas strategy will formally begin in 2025, focusing on global markets and electric vehicles. Development centers have been established in Germany and the U.S., and efforts are underway to build overseas sales and after-sales organizations. Products launching in 2026 will comply with global regulations, with a focus on markets in the Middle East, Central Asia, and Europe.
Q:What is the reason for the negative operating cash flow in the second quarter, and what is the outlook for future cash flow?
A:The negative operating cash flow in Q2 was due to paying off payables from late 2022 and early 2023. Payment terms have been adjusted to 60 days, and cash flow is expected to improve in Q4 with better sales volume guidance.
Q:How does management address recent changes in the autonomous driving team and regulatory tightening?
A:Management acknowledges some departures in the autonomous driving team but highlights a clear organizational structure, a strong talent pipeline, and new leadership with international experience. They are advancing VLA product delivery and adapting to stricter regulations, which they see as beneficial for capable companies. They emphasize safety, compliance, and iterative development to maintain progress.
Q:Will Li Auto's charging stations be open to other brands, and how will this affect user experience?
A:Li Auto's 2C and 4C charging stalls are open to other brands, but Li Auto vehicle owners will have the best experience due to seamless integration with the charging stations. The charging network offers extensive coverage, fast charging, user-friendly design, and cost benefits for Li Auto owners.
Q:What is the development direction for autonomous driving technology after VLA?
A:The development will focus on achieving Level 4 autonomous driving by 2027. VLA will evolve through reinforcement training, model scaling, and increased computing power. The goal is to achieve driving safety 10x that of human drivers within two years, with significant advancements in AI and autonomous driving capabilities.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the potential short-term adverse effects of the sales system adjustments on sales performance and new model launches. They also did not provide specific details on how they plan to overcome challenges in the overseas market expansion.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AD model
AI capability
Agent delivery
Auto BEV
Auto ability
BEV MEGA
BEV commence
BEV offering
BEVs brand
BEVs price
Bank Research
BofA Securities
CEO Senior
CTO
Driver model
EREVs
Executive Director
MEGA Home
Mr Xiang
Research Division
VLA Driver
achievement
battery
charging
decision
ecosystem
energy
focus
function gas
house
journey
kilowatt
life
power
production
restructuring
service system
system sale
test
tier city
LI Transcript
Li Auto Inc. (LI) Q1 2026 Earnings Call Transcript
Positive5-28
The earnings call reveals strong financial performance, with a 96.9% revenue increase YoY and a significant turnaround to net income. Despite increased R&D and SG&A expenses, the improved gross margin and strong vehicle deliveries indicate operational efficiency and market demand. The lack of strategic updates and forward-looking guidance, however, tempers the sentiment slightly. Overall, the financial results and market position suggest a positive short-term stock price movement, potentially in the 2% to 8% range.
Li Auto Inc. (LI) Q4 2025 Earnings Call Transcript
Unknown3-12
Despite some positive developments like the launch of new products and technological advancements, the financial performance shows significant declines in key metrics such as net income and operating margin. The Q&A session reveals strategic plans and improvements, but uncertainty about share buybacks and cost management strategies may dampen enthusiasm. Overall, the mixed signals from earnings and strategic outlook suggest a neutral market reaction.
Li Auto Inc. (LI) Q3 2025 Earnings Call Transcript
Unknown11-26
The earnings call revealed weak financial performance, with significant losses and cash flow issues. Despite positive product developments and strategic plans, the negative financial metrics and lack of clear guidance on future profitability overshadowed these aspects. The Q&A section highlighted management's avoidance of key details, adding to uncertainties. Given these factors, a negative stock price reaction is expected.
Li Auto Inc. (LI) Q2 2025 Earnings Call Transcript
Positive8-28
The earnings call summary indicates strong vehicle delivery growth, market share leadership, and strategic product launches. The Q&A session reveals positive developments in chip technology, sales system reorganization, and overseas strategy. Despite some concerns about cash flow and management's unclear responses on certain issues, the strong cash position, consistent gross margin outlook, and aggressive expansion plans support a positive sentiment. The expected delivery and revenue growth, coupled with strategic initiatives, suggest a likely stock price increase in the near term.
LI Report
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