Li Auto Inc. (LI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Total revenues RMB 28.8 billion, down 35% year-over-year and up 5.2% quarter-over-quarter. The year-over-year decrease was mainly due to lower vehicle deliveries.
Vehicle sales revenue RMB 27.3 billion, down 36.1% year-over-year and up 5.4% quarter-over-quarter. The year-over-year decrease was mainly due to lower vehicle deliveries, while the sequential increase was due to an increase in vehicle deliveries, partially offset by lower average selling price due to the different mix following the commencement of the i6 deliveries.
Cost of sales RMB 23.6 billion, down 33% year-over-year and up 3.3% quarter-over-quarter.
Gross profit RMB 5.1 billion, down 42.8% year-over-year and up 14.8% quarter-over-quarter.
Vehicle margin 16.8% versus 19.7% in the same period last year and 15.5% in the prior quarter. The year-over-year decrease was mainly due to different product mix, while the sequential increase was due to the estimated Li MEGA recall cost booked in the prior quarter, partially offset by lower average selling price due to different product mix following the commitment of the i6 deliveries.
Gross margin 17.8% versus 20.3% in the same period last year and 16.3% in the prior quarter.
Operating expenses RMB 5.6 billion, up 5.8% year-over-year and down 1.3% quarter-over-quarter.
R&D expenses RMB 3 billion, up 25.3% year-over-year and 1.4% quarter-over-quarter. The year-over-year increase was mainly due to the cost related to AI and other programs to support product portfolio expansion and technology advancements.
SG&A expenses RMB 2.6 billion, down 14% year-over-year and 4.4% quarter-over-quarter. The year-over-year decrease was mainly due to decreased employee compensation.
Loss from operations RMB 442.6 million, versus RMB 3.7 billion income from operations in the same period last year and RMB 1.2 billion loss from operations in the prior quarter.
Operating margin Negative 1.5% versus 8.4% in the same period last year and negative 4.3% in the third quarter.
Net income RMB 20.2 million versus RMB 3.5 billion net income in the same period last year and RMB 624.4 million net loss in the prior quarter.
Diluted net earnings per ADS RMB 0.01 in the fourth quarter versus RMB 3.31 diluted net earnings in the same period last year and RMB 0.62 diluted net loss in the prior quarter.
Net cash provided by operating activities RMB 3.5 billion versus RMB 8.7 billion provided in the same period last year and RMB 7.4 billion yields in the third quarter.
Free cash flow RMB 2.5 billion in the fourth quarter versus RMB 6.1 billion in the same period last year, a negative RMB 8.9 billion in the prior quarter.
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Operating Highlights
Launch of new L9 lineup: The new L9 lineup will be launched in Q2 2026, featuring upgrades in powertrain, autonomous driving, and chassis technology. It includes an 800-volt architecture, 5C ultra-fast charging, and a next-generation range extender 3.0 system. The flagship model, Li L9 Livis, priced at RMB 559,800, will feature advanced AI-powered systems and drive-by-wire chassis.
BEV models ramp-up: Efforts to increase capacity for BEV models like Li i6 and i8 are ongoing. The Li i8 has seen a 33% increase in orders since March compared to February, and 179% compared to January. The Li i9, a new flagship BEV SUV, will launch in H2 2026.
Market positioning in premium segment: Li Auto aims to strengthen its position in the premium SUV segment with the new L9 lineup and BEV models. The Li i8 ranked #1 in NPS among large SUVs, and its orders have significantly increased.
Storefront management improvements: Li Auto has optimized its direct sales model by improving store rollout quality, relocating sales teams to high-traffic areas, and introducing a store partner program to enhance productivity and profitability.
AI integration in operations: AI is being used to improve organizational efficiency and decision-making, reversing slowdowns in information flow and enabling a more dynamic organization.
Transition to embodied AI company: Li Auto is evolving from a smart EV company to an embodied AI company, with 50% of its 2025 R&D spending (RMB 11.3 billion) allocated to AI-related initiatives. This includes developing AI capabilities across chips, models, and software.
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Risk or Challenges
Direct Sales Model Challenges: Li Auto has identified inefficiencies in managing storefronts under a direct sales model, previously using a dealership mindset. This has necessitated strategic adjustments, including improving store rollout quality, strengthening operations, and upgrading incentives and training.
Underperforming Locations: The company faced issues with site selection, leading to the closure and replacement of underperforming locations. Sales teams were moved from low-traffic areas to higher-potential locations to improve productivity.
Supply Constraints: Supply constraints on the Li i6 model have impacted production and delivery timelines, though efforts are being made to increase capacity and resolve these issues.
Gross Margin Pressure: The phaseout of purchase tax subsidies and initial sales policies for the Li i6 have pressured gross margins, though these factors are expected to improve in the future.
Competitive Pressures in NEV Market: Intensifying competition in the NEV market requires Li Auto to strengthen its technology moat and transition into an embodied AI company to maintain its competitive edge.
R&D Spending and Financial Strain: High R&D spending, particularly on AI-related initiatives, has contributed to financial strain, with a loss from operations reported in the fourth quarter.
Vehicle Margin Decline: Vehicle margins have decreased year-over-year due to a different product mix and lower average selling prices.
Economic and Market Conditions: Lower vehicle deliveries and reduced revenues year-over-year highlight challenges in market demand and economic conditions.
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Guidance & Outlook
Product Launches: The company will officially launch the all-new L9 lineup in the second quarter of 2026, featuring upgrades in powertrain, autonomous driving, and chassis technology. The new L9 will include an 800-volt architecture, 5C ultra-fast charging, and a next-generation range extender 3.0 system. It will also debut an AI-powered engine oil maintenance system and a fully drive-by-wire chassis.
BEV Portfolio Expansion: The company plans to launch the Li i9, a new flagship BEV SUV, in the second half of 2026 to expand its BEV portfolio and meet diverse customer needs.
AI Investment: In 2026, the company will maintain its R&D investment strategy, with approximately 50% of its spending allocated to AI-related initiatives. This includes developing capabilities in interface chips, foundation models, software, and hardware.
Vehicle Deliveries and Revenue: For the first quarter of 2026, the company expects vehicle deliveries to range between 85,000 and 90,000 units, with total revenue projected between RMB 20.4 billion and RMB 21.6 billion.
Market Positioning: The company aims to transition into an embodied AI company by 2026, leveraging AI to enhance product vitality and organizational efficiency. This includes integrating AI into vehicles to create intelligent agents and improving operational agility.
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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 are the company's plans and progress regarding channel optimization and the store partner mechanism?
A:The rumor about closing 100 stores is false. Li Auto conducts routine optimization of underperforming stores as part of normal operations. The core strategy is quality over quantity, focusing on top-tier shopping malls and premium auto parks. The new store partner program, launched on March 1, delegates decision-making power and shares profits with store managers, aiming for significant improvements by Q3.
Q:Could you shed light on the launch timeline, pricing strategy, product competitiveness, and vehicle profitability for the all-new L9 and L9 Livis?
A:The all-new Li L9 Livis will launch in Q2, equipped with in-house developed MAC 100 chips. It features advanced autonomous driving capabilities, 3D vision transformers, and a fully drive-by-wire system. The vehicle aims to set a new standard in agility and intelligence, with significant technological advancements.
Q:What is the 2026 sales volume target, and how will the company balance volume, market share, and margins?
A:The 2026 target is a 20% year-on-year growth. The strategy includes a direct sales model, the L Series launch, BEV ramp-up, AI-related investments, and overseas expansion. The company aims to balance growth with sustainable profitability.
Q:What is the company's strategy to address raw material cost inflation?
A:Li Auto is strengthening supply chain collaboration, signing long-term agreements to lock in pricing and volumes, and driving end-to-end cost optimizations. The company is also focusing on platform-based development and proprietary technologies to manage costs effectively.
Q:Are there any plans for share buybacks?
A:Currently, there is no additional information to disclose regarding share buybacks.
Q:What is the guidance for R&D expenses in 2026, and what portion will be AI-related?
A:R&D expenses are expected to remain around RMB 12 billion, with AI-related initiatives accounting for half of the cost. Investments include in-house chip development, computing power, and AI products like autonomous driving systems.
Q:Could you provide details about i8 and i6 orders, sales, and production ramp-up?
A:Li i8 has seen rising user satisfaction and strong order momentum, with daily orders in March up nearly 180% compared to January. Li i6 has moved past production challenges and is in a stable delivery phase, with monthly sales expected to reach 20,000 units. The company has resolved supply chain bottlenecks and introduced subsidies to support sales.
Q:What are the details about the in-house MAC 100 chips, including cost savings and efficiency gains?
A:The MAC 100 chips are in mass production and offer higher compute efficiency, enabling advanced autonomous driving capabilities. They reduce BOM costs, eliminate the need for traditional controllers, and improve end-to-end latency. The chips are part of a vertically integrated system that enhances performance and user experience.
Q:What is the strategic plan for embodied AI over the next 1-2 years?
A:Li Auto will invest heavily in shared technological and product areas like inference chips, foundation models, and operating systems. Commercially, the company will adopt a startup model for new initiatives like AI glasses and robots, focusing on careful exploration.
Q:Has the R&D restructuring been completed, and what is the progress in autonomous driving?
A:The R&D restructuring was completed in January, reorganizing teams into brain, application, and hardware functions. This has significantly improved efficiency, with autonomous driving model iteration now occurring daily instead of bi-weekly. The restructuring has also enabled young leaders to take on key roles, preparing the company for the next decade.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding share buybacks, stating only that there is no additional information to disclose.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Auto
AI addition
AI competition
AI dimension
AI engine
AI phase
AI side
AI slowdown
AI technology
AI tool
AI vitality
Auto AI
Auto Full
Auto evolution
Auto period
Full Conference
NEV
NPS
agent
chassis
core capability
decision
flagship SUV
frontline
life efficiency
location
platform
portfolio
power
productivity
sale model
speed
stack
start
store manager
storefront
suspension
team
tier
volt
way
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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