Li Auto's Q2 2025: Contradictions Emerge on Product Marketing, AI Strategy, Assisted Driving, Overseas Expansion, and In-House Chip Development

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: RMB30.2 billion, down 4.5% YOY and up 16.7% sequentially
• EPS: RMB1.03 per ADS, vs RMB1.05 prior year and RMB0.62 prior quarter
• Gross Margin: 20.1%, compared to 19.5% in the prior year and 20.5% in the prior quarter
• Operating Margin: 2.7%, compared to 1.2% in the prior year and 1.0% in the prior quarter

Guidance:

• Q3 2025 deliveries expected between 90,000 and 95,000 vehicles.
• Q3 2025 total revenue expected between RMB24.8B and RMB26.2B.
• Q3 gross margin expected to be about 19% (roughly in line with Q1–Q2).
• Li i8 cumulative deliveries expected to exceed 8,000 by September; aiming to challenge 10,000.
• Li i6 launch and deliveries scheduled for September.
• Charging network targeted to reach 4,000 stations by year-end 2025.
• 2025 AI investments expected to exceed RMB6 billion.

Business Commentary:

* Record Deliveries and Market Share: - Li Auto delivered over 110,000 vehicles in Q2 2025, capturing a 13.4% market share in the RMB200000 and above NEV market in China. - This performance was supported by the strong sales of Li Mega Home and Li i8, which achieved high sales volumes and top positions in their respective segments.

• Growth in Charging Infrastructure:
• As of July, Li Auto operated more than 3,100 charging stations with over 17,000 charging stalls across China.

• This expansion is part of Li Auto's strategy to empower new energy vehicle users with a hassle-free experience and maintain its leadership in charging infrastructure.

• Investment in AI and Autonomous Driving:

• Li Auto expects its AI investments to exceed RMB6 billion in 2025, focusing on infrastructure development and product technology.

• The company's AI capabilities are being integrated into its vehicles, such as the proprietary VLA large model driver and agent, enhancing user experience in advanced driver assistance systems.

• Sales and Service Network Expansion:

• The company operates over 550 retail stores across more than 150 cities nationwide, with plans to strategically front-load store expansion this year.
• This expansion is part of Li Auto's strategy to reach more user cohorts and support the launch of new BEV models like Li i6 and Li i8.

Sentiment Analysis:

• Revenue fell 4.5% YOY but rose 16.7% QoQ; operating margin improved to 2.7%. Management cited sales fluctuations and a major sales reorganization, with Q3 revenue guided to RMB24.8–26.2B (below Q2). They expect GM ~19% and highlighted new model launches (Li i8, Li i6) and AI/charging investments.

Q&A:

• Question from Tina Howe (Goldman Sachs): How will you recover sales given declining L Series volumes, and what is the update on self-developed chips?
  Response: Drive EREV demand via VLA-assisted driving upgrades and accelerate BEV ramp (Li Mega, Li i8, Li i6) alongside stronger marketing/channel execution; in-house AI chip taped out, vehicle testing ongoing, planned for flagship models next year with 2–3x performance vs leading chips.

• Question from Tim Hiziao (Morgan Stanley): What is the progress, rationale, and impact of the sales-system reorganization, and could it affect near-term sales and launches?
  Response: Reorg completed with HQ-led regional model and frontline empowerment; short-term adjustments possible, but launches unchanged—Li i8 deliveries >8,000 by September (aiming 10,000) and Li i6 on schedule.

• Question from Yingbo Zhu (Citi): What is the future product/SKU strategy and how should we view gross margin under Q3 guidance?
  Response: Simplify to fewer SKUs and accelerate product/tech iteration; expect Q3 gross margin around 19%, similar to Q1–Q2.

• Question from Paul Gong (UBS): Please share Li i6 positioning/timing/marketing plan and your latest overseas strategy.
  Response: Li i6 targets large five-seat SUV with standout design, space, range, and VLA; user-centric marketing and stronger training/PR; 2025 is the start of global push with R&D in US/Germany, overseas org build-out, 2026 products designed for global regs, focusing on Middle East, Central Asia, and Europe.

• Question from Jing Cheng (CICC): Why did operating cash outflow expand in Q2, how to view cash flow ahead, and what about AD team changes and regulation impact?
  Response: Q2 outflow from settling older payables and shifting supplier terms to 60 days; operating cash outflow likely larger in Q3, improving in Q4 with better volumes; AD team remains strong despite limited departures, VLA rollouts in Sept/Oct proceed under stricter but beneficial regulation.

• Question from Ming Sun Li (Bank of America): Will you open your 5C supercharging network to other brands, and what is the AD path after VLA?
  Response: 2C/4C stalls open to other brands but best, prioritized experience retained for Li Auto owners across coverage, speed, UX, and value; VLA with world-model and reinforcement learning underpins path to L4 by 2027, requiring larger models and significantly more compute.