Li Auto's Strategic Turnaround: Can the Li i6 and Expanded BEV Portfolio Revive Growth?

Li Auto Inc. (LI) is at a pivotal crossroads. The company, once a leader in hybrid electric vehicles (HEVs), is now aggressively pivoting to battery electric vehicles (BEVs) as part of a strategic overhaul aimed at securing long-term relevance in a rapidly evolving market. With the launch of the Li i6 in September 2025 and the relaunched Li i8, Li Auto is betting on its expanded BEV portfolio to offset declining demand for its hybrid models and rekindle growth. However, the path forward is fraught with challenges, including intense competition, margin pressures, and a saturated EV market.

A Strategic Shift to BEVs

Li Auto’s transition to full electrification by 2027 is a bold but necessary move. The company’s first BEV, the Li i8, debuted in July 2025 with a 720 km CLTC range and 5C supercharging capabilities, but initial demand was tepid, with only ~6,000 firm orders in its first week [3]. A relaunch in August simplified trims and cut the price to RMB339,800, yet the model remains a niche product [4]. The Li i6, priced between RMB250,000 and RMB300,000, targets the mass-market mid-to-large SUV segment, offering a more accessible entry point to Li Auto’s BEV lineup [2]. This dual-pronged approach—luxury with the i8 and affordability with the i6—aims to broaden the company’s appeal while accelerating its BEV adoption.

Market Reception and Competitive Pressures

The EV market in China is fiercely competitive, with BYD dominating the new energy vehicle (NEV) segment with over 50% market share in H1 2025 [4]. Li Auto’s hybrid models, particularly the L-series extended-range electric vehicles (EREVs), have seen year-on-year declines of 40% to 53% in July 2025 deliveries [4], signaling waning demand for its HEV technology. The Li i8’s weak initial reception highlights the risks of transitioning to BEVs in a market where consumer preferences are still fragmented. Meanwhile, the Li i6’s September 2025 launch could prove critical, as its lower price point may attract buyers hesitant to commit to higher-cost BEVs [2].

Financial Resilience Amid Transition

Despite the challenges, Li Auto’s financials remain robust. Q2 2025 revenue reached RMB30.2 billion ($4.2 billion), with a 20.1% gross margin outperforming peers like BYD and Tesla [1]. However, BEVs inherently carry lower margins than hybrids, and the company’s Q3 2025 delivery guidance of 90,000–95,000 units—a 37.8%–41.1% year-on-year decline—underscores the difficulty of balancing profitability with market share [4]. The company’s infrastructure investments, including 3,028 supercharging stations and 535 retail stores by July 2025 [5], provide a foundation for long-term growth but require sustained capital allocation.

Long-Term Potential and Risks

Li Auto’s success hinges on its ability to execute its BEV strategy while mitigating margin erosion. The company’s OTA 8.0 update, set to introduce the VLA Driver large model and enhanced Li Xiang Tong Xue Agent, could differentiate its offerings through software innovation [2]. Additionally, its infrastructure expansion supports customer retention and brand loyalty. However, the BEV market is highly competitive, and Li Auto’s reliance on premium pricing for the i8 may limit its scalability. The Li i6’s performance will be a key indicator of whether the company can capture mass-market demand without sacrificing profitability.

Conclusion

Li Auto’s strategic turnaround is a high-stakes gamble. The Li i6 and expanded BEV portfolio represent a critical test of the company’s ability to adapt to market realities while maintaining financial health. While the transition poses short-term risks, including declining hybrid sales and margin pressures, the company’s infrastructure investments and product innovation could position it for long-term growth. Investors must weigh these factors against the broader EV landscape, where BYD’s dominance and regulatory shifts will shape the industry’s trajectory.

**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 Inc. August 2025 Delivery Update [https://ir.lixiang.com/news-releases/news-release-details/li-auto-inc-august-2025-delivery-update][3] Li Auto relaunches i8 after poor initial acceptance [https://cnevpost.com/2025/08/05/li-auto-relaunches-i8/][4] Li Auto Inc.'s August 2025 Delivery Update: Strategic and Financial Implications for Hybrid EV Market Leadership [https://www.ainvest.com/news/li-auto-august-2025-delivery-update-strategic-financial-implications-hybrid-ev-market-leadership-2509/]