Li Auto’s Strategic Shift to BEVs: Can the Li i6 Turn the Tide?

Li Auto Inc. (LI) is at a pivotal crossroads as it transitions from hybrid electric vehicles (HEVs) to battery electric vehicles (BEVs). The company’s recent financial performance and strategic moves, including the launch of the Li i6, highlight both its resilience and vulnerabilities in a fiercely competitive Chinese EV market. While Li Auto’s Q2 2025 revenue of RMB30.2 billion ($4.2 billion) reflects a 16.7% quarter-on-quarter increase, the 4.5% year-on-year decline underscores the challenges of shifting to BEVs amid waning demand for its hybrid models [1]. The L-series extended-range electric vehicles (EREVs) saw year-on-year deliveries drop by 40–53% in July 2025, signaling a loss of market leadership in the hybrid segment [3].

The Li i6, set to launch in September 2025, is Li Auto’s most ambitious BEV to date. Priced between RMB250,000 and RMB300,000, the mid-to-large SUV targets the mass-market segment, aiming to compete with models like the Xiaomi YU7 and Tesla Model Y [2]. Its CLTC range of 660–720 km and premium features, such as a 3,000mm wheelbase, position it as a family-oriented alternative to existing BEVs. However, the Li i6’s success hinges on Li Auto’s ability to overcome structural challenges, including margin erosion and aggressive pricing by rivals. BEVs inherently carry lower profit margins than hybrids, and Li Auto’s Q2 2025 vehicle margin of 19.4%—while strong—faces pressure from competitors like BYD, which dominates the new energy vehicle (NEV) market with over 50% share in H1 2025 [4].

The company’s infrastructure investments, including 3,190 supercharging stations and 543 retail stores by August 2025, provide a foundation for BEV adoption [2]. Yet, these assets require sustained capital allocation, and the Li i8’s tepid reception—only ~6,000 firm orders in its first week—demonstrates the risks of premium pricing in a saturated market [3]. Li Auto’s relaunch of the Li i8 with a price cut to RMB339,800 and simplified trims highlights the company’s struggle to balance profitability with competitiveness.

Li Auto’s strategic shift also faces execution risks. The Q3 2025 delivery guidance of 90,000–95,000 units—a 37.8%–41.1% year-on-year decline—reflects the difficulty of transitioning to BEVs without cannibalizing its hybrid segment [4]. Competitors like Xiaomi, with its YU7 model securing 200,000 pre-orders, and BYD’s aggressive price cuts on 22 models in 2025, further complicate Li Auto’s path [5]. The company’s reliance on premium pricing for the Li i8 and i6 may limit scalability, particularly as consumer demand shifts toward affordability.

Despite these challenges, Li Auto’s OTA 8.0 update, which introduces the VLA Driver large model and enhanced Li Xiang Tong Xue Agent, could differentiate its offerings through software innovation [2]. The company’s focus on vertical integration in technologies like silicon carbide power chips and NMC battery packs also aims to reduce dependency on third-party suppliers and improve long-term profitability [3]. However, the BEV market’s intense competition and regulatory uncertainties—such as the expiration of government subsidies—pose ongoing threats to Li Auto’s margins and growth trajectory [1].

In conclusion, the Li i6 represents a critical test for Li Auto’s BEV strategy. While the company’s infrastructure and software capabilities offer a competitive edge, its ability to navigate margin pressures, execute on pricing, and capture mass-market demand will determine whether the Li i6 can turn the tide. Investors must weigh Li Auto’s resilience against the structural headwinds of a saturated market and the dominance of rivals like BYD and Xiaomi.

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 Strategic Turnaround: Can the Li i6 and Expanded BEV Portfolio Revive Growth [https://www.ainvest.com/news/li-auto-strategic-turnaround-li-i6-expanded-bev-portfolio-revive-growth-2509/]
[3] Li Auto Inc.'s August 2025 Delivery Update: Strategic and ... [https://www.ainvest.com/news/li-auto-august-2025-delivery-update-strategic-financial-implications-hybrid-ev-market-leadership-2509/]
[4] Li Auto's Strategic Transition to BEVs and Its Impact on Long-Term Growth Potential [https://www.ainvest.com/news/li-auto-strategic-transition-bevs-impact-long-term-growth-potential-2508/]
[5] Platform or Price War? Xiaomi's Double-Edged Drive Into EVs [https://techbuzzchina.substack.com/p/platform-or-price-war-xiaomis-double]