Li Auto's Q3 2025: Contradictions Emerge on Product Launches, Autonomous Driving Timelines, and Expansion Strategies

Date of Call: November 26, 2025

Financials Results

• Revenue: RMB 27.4 billion, decreased 36.2% YOY and 9.5% quarter-over-quarter
• EPS: Diluted net loss per ADS RMB 0.62, versus diluted net earnings RMB 2.66 in the prior year and RMB 1.03 in the prior quarter
• Gross Margin: 16.3%, versus 21.5% in the same period last year and 20.1% in the prior quarter (would be 20.4% excluding recall costs)
• Operating Margin: Negative 4.3%, versus 8.0% in the same period last year and 2.7% in the prior quarter

Guidance:

• Q4 2025 deliveries expected between 100,000 and 110,000 vehicles.
• Q4 2025 total revenues expected between RMB 26.5 billion and RMB 29.2 billion.
• Monthly Li i6 production capacity targeted to reach ~20,000 units from early 2026 via dual battery suppliers.
• Li Auto's 5C ultrafast batteries to enter mass production next year.
• Target ~4,800 supercharging stations by 2026 (35% highway locations).
• Company expects 2026 NEV penetration ~55%–60% and will offer purchase-tax protection for some 2025 orders.

Business Commentary:

• Revenue and Earnings Decline:
• Li Auto reported total revenues of RMB 27.4 billion in Q3 2025, which was a 36.2% year-over-year decrease and 9.5% quarter-over-quarter decline.

• The decrease was primarily due to lower vehicle deliveries and the impact of a Li MEGA recall cost.

• Operating and Net Loss:

• The company's operating margin was negative 4.3% in Q3, compared to 8% in the same period last year, with a loss from operations of RMB 1.2 billion.
• The net loss was RMB 624.4 million, compared to a net income of RMB 2.8 billion in the same period last year.
• The loss was attributed to lower vehicle deliveries and operational challenges.

• Cash Flow and Financial Management:
• Li Auto's free cash flow was negative RMB 8.9 billion in Q3, compared to a positive RMB 9.1 billion in the same period last year.
• The decline in cash flow was due to significant operating cash outflow and shortening of payment cycles to suppliers.

• Product Strategy and Technology Investment:
• Li Auto is focusing on AI and embodied intelligence, introducing its in-house developed M100 chips in 2026 to enhance user experience.
• Investments in AI and technology are aimed at transforming cars into proactive and automated machines, which are expected to significantly improve user experience over the next decade.

Sentiment Analysis:

Overall Tone: Positive

• Management acknowledged near-term operational and recall headwinds (RMB 27.4bn revenue, down 36.2% YOY; net loss RMB 624.4m) but emphasized a strategic pivot to an entrepreneurial model, multi-year investment in embodied AI (M100 chip, 3D Vision Transformer), and confidence in product rollouts (i-series ramp, 5C batteries mass production, 4,800 chargers), signaling constructive long-term outlook and commitment to regain leadership.

Q&A:

• Question from Yingbo Xu (Citic Securities Co., Ltd., Research Division): What technology or product progress can we expect in 2026 and how long until we see jumps? Also, how are you preparing for BEV transition and supply chain for BEV?
  Response: Will launch in-car AI system based on in-house M100 next year to deliver embodied-AI user value; BEV prep focuses on in-house electric drive, 5C ultrafast batteries (mass production next year), and electronic control with combined in-house/external procurement.

• Question from Tim Hsiao (Morgan Stanley): Update on orders/deliveries and supply bottlenecks for Li i8/i6 and normalized sales; and why operating/free cash outflow widened and outlook for cash flow?
  Response: i-Series is ramping with regional traction; dual battery-supplier strategy for i6 starting November and monthly i6 capacity expected to reach ~20,000 units early next year; cash outflow driven by lower deliveries reducing revenue and a shortened supplier payment cycle (60-day settlements).

• Question from Ming-Hsun Lee (BofA Securities): With trade-in subsidy changes and EV purchase tax rising to 5%, what's your 2026 sales strategy? Also, what to expect from the 2026 new-generation Li i and L series?
  Response: Expect a Q1 2026 pull-forward dip but long-term NEV penetration of ~55%–60%; measures include purchase-tax protection for some 2025 orders, adoption of 800V platform and 5C batteries, 4,800 chargers by 2026, and a major generational L-Series upgrade with simplified SKUs and 5C supercharging standard.

• Question from Paul Gong (UBS Investment Bank): Why was the MEGA recall booked in Q3, how was the amount determined and sharing with suppliers, impact on Q4 GP and recall/order status? Also update on VLA/large model development and user feedback.
  Response: Recall was accrued in Q3 as a subsequent event per accounting rules; company prioritized replacing battery packs which reduced 2025 MEGA deliveries; VLA Driver rolled out fleetwide in September with positive user feedback (smoother longitudinal control), OTA 8.1 in early December and architecture upgrades by year-end compatible with M100.

• Question from Tina Hou (Goldman Sachs Group, Inc., Research Division): Progress on in-house SoC, operating system, open-source efforts and future development?
  Response: Halo OS has been open-sourced and a technical steering committee formed; M100 controller/chip is in large-scale system testing with expected commercial deployment next year and is co-designed with model/compiler to target ~3x performance-to-cost vs current high-end chips.

Contradiction Point 1

Product Launch and Supply Chain Management

It involves differing statements about the supply chain challenges and the resulting impact on product launches, which directly affects consumers' expectations and company operations.

Update on Li i8 and i6 orders and delivery status, and how to address supply chain bottlenecks? - Tim Hsiao (Morgan Stanley)

2025Q3: We're still in the midst of the supply chain challenges, kind of lingering a bit longer than we expected. - Xiang Li(CEO)

Where is the sales system adjustment currently at, and how might it impact short-term sales and new model launches? - Tim Hsiao (Morgan Stanley)

2025Q2: Our supply chain performance has improved, and we do expect to see more stability in the overall production capacity. - Donghui Ma(President)

Contradiction Point 2

Autonomous Driving Technology and Development Timeline

This contradiction highlights differing perspectives on the timeline for the development and deployment of Li Auto's autonomous driving technology, which is a crucial aspect of their product innovation and market competitiveness.

When was the Li MEGA recall cost recorded, and how does it affect Q4 margins? What are the latest developments with the AI system? - Paul Gong (UBS Investment Bank)

2025Q3: For AI, the VLA system has improved user experience, especially in longitudinal control and route selection. Upgrades will focus on safety and language behavior interaction. - Tie Li(CFO)

Can you provide an update on Li Auto's self-developed chips? - Tim Hsiao (Morgan Stanley)

2025Q2: We will continue to make progress on our next-generation autonomous driving system, AD MAX, with production validation of the L8 new car aiming for 2025 delivery. - Donghui Ma(President)

Contradiction Point 3

BEV Market Strategy and Product Launch Timeline

It highlights discrepancies in the company's strategy and timeline for entering the BEV market, which is crucial for understanding Li Auto's competitive positioning and future growth prospects.

Update on Li i8 and i6 orders/deliveries and plans to address supply bottlenecks? Why did operating and free cash outflows increase in Q3? - Tim Hsiao (Morgan Stanley)

2025Q3: Li i8 and i6 are ramping up, with dual supplier strategy starting in November. - Xiang Li(CEO)

When does Li Auto plan to introduce sedans, and will the company adopt dual powertrain strategies (EREV and BEV) for sedans to expand their customer base? - Tim Hsiao (Morgan Stanley)

2025Q1: Li MEGA, the Li range extended SUV series, is expected to reach up to RMB300 billion in revenue. After reaching this scale, Li Auto will consider launching sedan models and MPV models, covering a more affordable price range, to be offered in China, Asian markets, and European markets. - Xiang Li(CEO)

Contradiction Point 4

Expansion and Market Strategy

This contradiction involves differing statements on Li Auto's expansion strategy and market focus, which are critical for understanding the company's growth and competitiveness in the global market.

How will Li Auto adapt to 2026 subsidy and tax policy changes, and what are its plans for new product generations? - Ming-Hsun Lee (BofA Securities)

2025Q3: Policy changes mark a shift from policy-driven to market-driven adoption. Li Auto expects a pull-forward effect in Q1 2026. - Xiang Li(CEO)

Could you clarify the i6's product positioning, launch timeline, and marketing strategy? What is Li Auto's current strategy for overseas expansion? - Paul Gong (UBS)

2025Q2: We also expanded our reach in Europe, with the company's U.S. development center completed and operational. We now have a team of more than 50 engineers working at the center. - Donghui Ma(President)

Contradiction Point 5

Long-term Vehicle Sales Growth Expectations

It involves differing expectations for long-term vehicle sales growth, which is crucial for investors to understand the company's growth trajectory and market positioning.

How will Li Auto address 2026 subsidy and tax policy changes, and what are its plans for new product development? - Ming-Hsun Lee (BofA Securities)

2025Q3: Li Auto expects growth to double the rate of the RMB200,000 above NEV market in 2025. - Xiang Li(CEO)

Will Li Auto set a clear sales target for this year? Has there been any adjustment to market size due to recent trends? What is Li Auto's midterm sales target for the domestic mid-to-high-end SUV and family car markets? - Jing Chang (CICC)

2025Q1: Li Auto expects growth to double the rate of the RMB200,000 above NEV market in 2025. - Xiang Li(CEO)