Li Auto Inc. (LI) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Total Revenues RMB 27.4 billion, decreased 36.2% year-over-year and 9.5% quarter-over-quarter. The decline was mainly due to lower vehicle deliveries, partially offset by a higher average selling price due to a different product mix.
Vehicle Sales Revenue RMB 25.9 billion, decreased 37.4% year-over-year and 10.4% quarter-over-quarter. The decline was mainly due to lower vehicle deliveries.
Cost of Sales RMB 22.9 billion, down 32% year-over-year and 5.3% quarter-over-quarter.
Gross Profit RMB 4.5 billion, down 51.6% year-over-year and 26.3% quarter-over-quarter.
Vehicle Margin 15.5% versus 20.9% in the same period last year and 19.4% in the prior quarter. The year-over-year decrease was mainly due to estimated Li MEGA recall cost and higher per unit manufacturing cost from lower production volume. Excluding recall costs, vehicle margin would have been 19.8%.
Gross Margin 16.3% versus 21.5% in the same period last year and 20.1% in the prior quarter. Excluding recall costs, gross margin would have been 20.4%.
Operating Expenses RMB 5.6 billion, down 2.5% year-over-year and up 7.8% quarter-over-quarter.
R&D Expenses RMB 3 billion, up 15% year-over-year and 5.8% quarter-over-quarter. The increase was mainly due to the pace of new vehicle programs, increased investments in expanding product portfolio and technology, and expenses from product configuration adjustment.
SG&A Expenses RMB 2.8 billion, down 17.6% year-over-year and up 1.9% quarter-over-quarter. The year-over-year decrease was mainly due to the recognition of share-based compensation expenses regarding the CEO's performance-based awards in the third quarter of last year.
Loss from Operations RMB 1.2 billion versus RMB 3.4 billion income from operations in the same period last year and RMB 827 million income from operations in the prior quarter.
Operating Margin Negative 4.3% versus 8% in the same period last year and 2.7% in the prior quarter.
Net Loss RMB 624.4 million versus RMB 2.8 billion net income in the same period last year and RMB 1.1 billion net income in the prior quarter.
Diluted Net Loss per ADS RMB 0.62 versus diluted net earnings of RMB 2.66 in the same period last year and RMB 1.03 in the prior quarter.
Net Cash Used in Operating Activities RMB 7.4 billion versus RMB 11 billion provided in the same period last year and RMB 3 billion used in the prior quarter.
Free Cash Flow Negative RMB 8.9 billion versus RMB 9.1 billion in the same period last year and negative RMB 3.8 billion in the prior quarter.
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Operating Highlights
Embodied AI Robots: Li Auto is focusing on transforming cars into embodied AI robots, emphasizing automation and proactive services. This includes features like autonomous driving, parking, and personalized assistance.
Vehicle Deliveries: The company expects deliveries between 100,000 and 110,000 vehicles in Q4 2025.
Organizational Model Shift: Li Auto is reverting to an entrepreneurial management model to better adapt to rapidly changing technologies and market conditions.
Financial Performance: Q3 2025 revenues were RMB 27.4 billion, a 36.2% year-over-year decrease. Gross margin was 16.3%, impacted by recall costs. Excluding these, gross margin would have been 20.4%.
Focus on Embodied AI: Li Auto is prioritizing the development of embodied AI systems, including advancements in perception, modeling, and hardware to enhance autonomous driving and user experience.
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Risk or Challenges
Supply Chain Challenges: The company faced supply chain issues that negatively impacted operations and deliveries in Q3 2025.
Product Life Cycle Challenges: Challenges related to product life cycles were mentioned as a factor affecting operations and deliveries.
Public Relations Challenges: PR challenges were cited as having a negative impact on the company's operations.
Changing Policies: The company faced challenges due to changing policies, which affected operations and deliveries.
Organizational Model Transition: The transition from an entrepreneurial model to a professional management model over the past three years was described as unsuccessful, leading to inefficiencies and a diminished version of the company.
Vehicle Recall Costs: The company incurred recall costs for the Li MEGA vehicle, which negatively impacted vehicle margins and gross margins.
Lower Vehicle Deliveries: A decline in vehicle deliveries contributed to reduced revenues and financial performance.
Higher Manufacturing Costs: Higher per-unit manufacturing costs due to lower production volumes negatively impacted vehicle margins.
Increased R&D Expenses: R&D expenses increased due to new vehicle programs, product portfolio expansion, and product configuration adjustments, impacting financials.
Negative Free Cash Flow: The company reported negative free cash flow of RMB 8.9 billion in Q3 2025, reflecting financial strain.
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Guidance & Outlook
Deliveries: The company expects deliveries to be between 100,000 and 110,000 vehicles for the fourth quarter of 2025.
Revenue: Quarterly total revenues are expected to be between RMB 26.5 billion and RMB 29.2 billion for the fourth quarter of 2025.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What technology or product progress can be expected by 2026, and how long will it take to see a significant technology or product jump?
A:By 2026, Li Auto will launch its AI system based on internally developed M100 chips, enhancing user experience by transitioning from passive to proactive machine services. Significant changes in AI systems are expected as key issues are solved and bottlenecks are improved, leading to unimagined advancements over the next decade.
Q:What are the challenges in transitioning from EREV to BEV, and how is the company preparing for this transition?
A:Li Auto focuses on three key in-house BEV-related technologies: electric drive, battery systems, and electronic control. They have developed a full chain in-house capability for electric drive technology, ultrafast charging batteries, and electronic control systems. The company is also implementing a dual strategy of external procurement and in-house development for supply chain preparation.
Q:What is the latest update on orders and deliveries of Li i8 and i6, and how will the supply bottleneck be addressed?
A:Li i8 and i6 are steadily ramping up production and delivery. Starting in November, a dual supplier strategy for Li i6 batteries will be implemented to increase production capacity to 20,000 units per month by early next year. The company is working to address supply chain constraints and accelerate production and delivery.
Q:Why did Li Auto experience a significant drop in cash reserves, and what is the outlook for cash flow in the coming quarters?
A:The drop in cash reserves was due to decreased deliveries impacting revenue and operating cash flow, as well as a shortened payment cycle to suppliers. The company values its supply chain partnerships and has adjusted its settlement period to 60 days. Future cash flow will depend on delivery performance and operational adjustments.
Q:What is Li Auto's sales strategy for 2026 in response to changes in subsidy policies and EV purchase tax?
A:Li Auto plans to offset policy impacts through technology advancements, such as adopting 800-volt high-voltage platforms and 5C ultrafast batteries. They aim to operate 4,800 supercharging stations by 2026 and will implement a peace of mind purchase program to cover purchase tax differences for certain customers. The company will also focus on product innovation and supply chain localization.
Q:What can be expected from the new generation of Li i and Li L series in 2026?
A:The new generation will feature major upgrades based on user feedback and technological advancements. Changes include simplified SKU configurations, premium design upgrades, and standard 5C supercharging. The company aims to reclaim leadership in the EREV market with these innovations.
Q:Why was the MEGA recall booked in Q3, and what is the impact on Q4 GP margin?
A:The MEGA recall was booked in Q3 as a subsequent event per accounting standards. The recall has impacted 2025 MEGA deliveries as battery packs are prioritized for replacements. The Q4 GP margin impact was not explicitly detailed.
Q:What is the latest development of VLA, large model, and user feedback?
A:The VLA Driver was rolled out to all AD Max vehicles, showing improvements in user experience, including smoother operation and better route selection. OTA updates will enhance perception capabilities and introduce new features like defensive driving and automated parking. The system will integrate with the M100 chip for further advancements.
Q:What is the progress of Li Auto's in-house developed SoC, operating system, and open-source initiatives?
A:Li Auto's in-house designed controller hardware and operating system have reduced development time and costs. The Halo OS has been open-sourced for collaborative development. The M100 chip is undergoing testing and is expected to achieve a 3x performance-to-cost ratio improvement. Development of the next-generation platform and chip has already begun.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the Q4 GP margin impact of the MEGA recall and the exact timeline for achieving significant technology or product jumps in the future.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI problem
AI product
AI system
AI world
Cars
Vision Transformer
body
car robot
challenge
choice
company model
computation power
conversation
cycle
device
door
embodied AI
enterprise
entrepreneur
environment
eye
foundation decade
founder
founding
frequency
issue
kind
language model
life
millisecond
model computation
movie
nerve
perception model
robot car
stack
suspension
type
value user
year model
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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