Li Auto’s Strategic Transition to BEVs and Its Impact on Long-Term Growth Potential

Li Auto’s strategic pivot to battery electric vehicles (BEVs) has entered a critical phase, marked by the launch of the Li i8 and the upcoming Li i6. These models, built on a new high-voltage BEV platform, represent a departure from the company’s earlier RAV4-based hybrids and underscore its commitment to full electrification by 2027 [1]. The Li i8, priced at RMB339,800, combines a 720 km CLTC range, a 5C super charging battery pack, and LiDAR-powered Li AD Max assisted driving, positioning it as a premium family SUV [2]. Meanwhile, the Li i6, set to launch in September 2025, targets the mid-to-large SUV segment with a starting price of RMB200,000, broadening Li Auto’s appeal to mass-market buyers [3].

However, the company’s Q3 2025 delivery guidance—projected at 90,000–95,000 units, a 37.8%–41.1% year-over-year decline—has raised concerns about near-term execution risks [4]. This follows a 16% quarter-over-quarter drop in deliveries, driven by market saturation, aggressive price competition, and the expiration of government subsidies [5]. Despite these headwinds, Li Auto’s operational efficiency remains a key differentiator. The company achieved a 20.1% gross margin and 19.4% vehicle margin in Q2 2025, outperforming peers like NIO and XPeng [6]. Cost optimization efforts, including an 8.2% year-on-year reduction in operating expenses, have preserved profitability even as revenue fell 4.5% year-over-year to RMB30.2 billion [7].

The company’s infrastructure investments further bolster its long-term growth potential. By July 2025, Li Auto operated 3,028 supercharging stations and 535 retail stores across 153 cities, addressing range anxiety and enhancing customer retention [8]. Additionally, its open-sourcing of the Li Halo OS aims to reduce development costs and foster third-party innovation, aligning with its ESG-driven strategy [9]. These initiatives, coupled with R&D investments exceeding RMB6 billion in AI and autonomous driving, position Li Auto to compete in the premium BEV segment [10].

For investors, the key question is whether Li Auto’s product innovation and cost discipline can offset near-term delivery declines. While the Q3 guidance suggests a challenging quarter, the company’s strong margins and strategic infrastructure expansion provide a buffer against margin compression. Analysts have set a target price of $33.16, reflecting confidence in its ability to re-rate its stock through execution on its BEV roadmap [11]. However, risks remain, including intensified competition from Xiaomi and BYD and the potential for further price erosion in the premium segment [12].

In conclusion, Li Auto’s transition to BEVs is a calculated bet on long-term growth, supported by premium product offerings, operational efficiency, and infrastructure scalability. While Q3 delivery challenges are evident, the company’s financial resilience and innovation-driven strategy position it to navigate the crowded EV market and potentially re-rate its stock in the medium term.

Source:
[1] Li Auto Inc. Announces Unaudited Second Quarter 2025 Financial Results [https://ir.lixiang.com/news-releases/news-release-details/li-auto-inc-announces-unaudited-second-quarter-2025-financial]
[2] Li Auto's Q2 2025 Performance: A Model of Resilience [https://www.ainvest.com/news/li-auto-q2-2025-performance-model-resilience-nev-market-turbulence-2508/]
[3] Li Auto Inc. Launches Li i8, a Six-Seat Battery Electric Family SUV [https://ir.lixiang.com/news-releases/news-release-details/li-auto-inc-launches-li-i8-six-seat-battery-electric-family-suv]
[4] Li Auto Inc. Q3 2025 Earnings Guidance: Deliveries Down ... [https://www.ainvest.com/news/li-auto-q3-2025-earnings-guidance-deliveries-41-1-37-8-revenues-42-1-38-8-2508/]
[5] Li Auto's Q2 2025 Earnings Outlook: Can Innovation and ... [https://www.ainvest.com/news/li-auto-q2-2025-earnings-outlook-innovation-cost-discipline-sustain-profitability-crowded-ev-market-2508/]
[6] Li Auto's Q2 2025 Earnings and Q3 Outlook [https://www.ainvest.com/news/li-auto-q2-earnings-q3-outlook-navigating-revenue-declines-investor-sentiment-2508/]
[7] Li Auto Inc. Announces Unaudited Second Quarter 2025 Financial Results [https://ir.lixiang.com/news-releases/news-release-details/li-auto-inc-announces-unaudited-second-quarter-2025-financial]
[8] Li Auto Inc. July 2025 Delivery Update [https://ir.lixiang.com/news-releases/news-release-details/li-auto-inc-july-2025-delivery-update]
[9] Li Auto's Strategic Turnaround: Can Innovation Overcome Market Headwinds [https://www.ainvest.com/news/li-auto-strategic-turnaround-innovation-overcome-market-headwinds-2508-95]
[10] Li Auto's Q2 2025 Earnings Outlook: Can Innovation and ... [https://www.ainvest.com/news/li-auto-q2-2025-earnings-outlook-innovation-cost-discipline-sustain-profitability-crowded-ev-market-2508/]
[11] Li Auto Inc. Announces Unaudited Second Quarter 2025 ... [https://ir.lixiang.com/news-releases/news-release-details/li-auto-inc-announces-unaudited-second-quarter-2025-financial]
[12] Li Auto's Q2 Earnings and Q3 Outlook [https://www.ainvest.com/news/li-auto-q2-earnings-q3-outlook-navigating-revenue-declines-investor-sentiment-2508/]