Li Auto Earnings Call: Tech Wins, Margins Squeezed

Li Auto, Inc. ((LI)) has held its Q1 earnings call. Read on for the main highlights of the call.

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Li Auto’s latest earnings call painted a cautiously optimistic picture, as cutting‑edge technology milestones and robust new product demand clashed with sharply weaker near‑term financials. Management stressed confidence in its product roadmap, AI capabilities and ample cash reserves, but acknowledged that margins, profitability and cash generation are under heavy pressure until fresh models reach scale.

Li L9 launch sparks high‑end SUV momentum

Li Auto highlighted the all‑new Li L9 launch on May 15, with deliveries starting just two days later and early demand described as very strong. The Li L9 Livis secured more than 10,000 orders in two weeks at transaction prices above RMB 500,000, and the company is targeting over 20% share of the RMB 500,000‑plus NEV SUV market, with a further 20% share goal in the RMB 400,000–500,000 band for the Ultra variant.

i6 BEV stabilizes as volume backbone

The pure‑electric Li i6 has become the workhorse of the lineup, with monthly sales stabilizing at around 20,000 units and ranking among the top three BEV SUVs. This model contributed nearly 60% of total vehicle sales in the quarter, underpinning overall volume even as it weighed on average selling prices and profitability.

In‑house MAHE M100 chip fuels AI edge

Management showcased the mass production and first on‑vehicle deployment of its proprietary MAHE M100 5nm automotive AI inference chip, paired with the MindVLA model. They claimed roughly three times the effective computing power per unit cost versus the prior platform, enabling larger AI models, higher precision training and faster progress in autonomous driving development.

New L8 launch and AI event extend roadmap

Looking ahead, Li Auto plans to launch the all‑new Li L8 five‑seater flagship in late June, sharing the same platform and range‑extender technology as the L9. The company is also preparing a dedicated software and AI event in June to highlight its software stack, foundation models and embodied AI features, reinforcing its positioning as a tech‑driven automaker.

Sales growth target held despite weak quarter

Despite a tough first quarter, Li Auto reiterated its full‑year sales growth target of 20%, signalling confidence that new launches and stabilizing demand will offset recent softness. Management framed Q1 as a transitional period marked by product refreshes and mix shifts, rather than a structural demand problem for the brand.

Cash hoard supports strategy and buyback

The company closed the quarter with a sizable RMB 94.3 billion cash balance, giving it firepower to fund heavy R&D and model rollouts. Li Auto also continued its USD 1 billion share repurchase program, having bought back 17.5 million Class A shares, including 7.3 million ADS, for USD 148.1 million so far.

Flexible capacity for L9 and L8 ramp

Operationally, the Changzhou manufacturing base will produce both the L9 and L8 on flexible lines, allowing the company to shift output as demand evolves. During the ramp‑up phase, Li Auto expects monthly production capacity of 4,000–5,000 units for the new models and is targeting around 8,000 L9 deliveries between mid‑May and the end of June.

Store partner program streamlines retail network

Management pointed to early benefits from its store partner program, which aims to improve frontline accountability and incentivize long‑term investment by store owners. The initiative has helped clear inventory of prior‑generation L Series models and improved user satisfaction in pilot markets, potentially boosting sales efficiency over time.

International push targets Middle East and Europe

Li Auto is accelerating its global expansion, having signed distribution deals in Saudi Arabia and the UAE with market entry planned for the third quarter in the Middle East and Central Asia. The company also plans gradual rollouts in Macau and several Southeast Asian markets, while preparing to bring the Li i6 to Europe in the second half and a right‑hand‑drive Li MEGA to key Asia‑Pacific countries by year‑end.

R&D spending climbs to back tech ambitions

Research and development expenses rose 8.3% year on year to RMB 2.7 billion in the first quarter, reflecting the company’s commitment to software, chips and autonomous driving capabilities. Management framed this elevated R&D spend as critical to sustaining Li Auto’s technological edge, even as it pressures margins in the short term.

Revenues slide on seasonal and mix pressures

Financially, the quarter was notably weak, with total revenue dropping 11.4% year on year to RMB 23.0 billion and down 20.1% sequentially. Vehicle sales fell 12.7% versus a year ago and 21.0% quarter on quarter to RMB 21.5 billion, as the Chinese New Year period and product mix shifts drove volatility in deliveries.

Gross profit plunges as margins compress

Gross profit collapsed to RMB 1.8 billion, down about 66% year on year and nearly 65% from the prior quarter, underscoring the severity of the margin squeeze. Vehicle margin shrank to 6.1% from 19.8% a year earlier, while overall gross margin fell to 7.9% from 20.5%, pressured by a higher i6 mix, model refresh discounts and broader pricing competition.

Operating and net results swing to deep losses

The company reported a RMB 3.0 billion operating loss, reversing from an operating profit of RMB 271.7 million in the same period last year and a smaller loss in the prior quarter. Net income also swung to a RMB 2.3 billion loss, compared with a RMB 646.6 million profit a year ago, and diluted earnings per ADS turned to a loss of RMB 2.26 from positive RMB 0.62.

Cash burn intensifies with negative free cash flow

Cash generation deteriorated sharply, with net cash used in operating activities reaching RMB 6.1 billion, versus RMB 1.7 billion used a year earlier and positive RMB 3.5 billion in the previous quarter. Free cash flow was negative RMB 7.4 billion, deeper than the negative RMB 2.5 billion in the prior year period, reflecting higher costs and investment amid softer profitability.

Cost and supply headwinds limit near‑term upside

Cost of sales rose 2.7% year on year to RMB 21.2 billion, adding to the margin squeeze, while supply constraints for certain Li L9 two‑tone colors and unique parts extended wait times. Management noted that Livis wait times stretched to roughly 9–11 weeks, which may cap near‑term deliveries even as demand stays strong during the ramp‑up.

Lower i6 ASP mix drags profitability

A heavy reliance on the lower‑priced i6, which accounted for nearly 60% of vehicle sales, significantly reduced the average selling price and compressed margins. Management also cited higher raw material costs and the impact of model refreshes, leaving the timing of a sustained profitability inflection uncertain despite expectations for some margin recovery in the next quarter.

Buyback capacity largely unused for now

Investors watching capital returns may note that the company has deployed only a small portion of its USD 1 billion buyback authorization so far. With just USD 148.1 million spent on repurchases by quarter‑end, the program remains underutilized relative to its headline size, leaving room for more aggressive buybacks if management chooses.

Guidance signals gradual recovery but ongoing volatility

For the second quarter, Li Auto guided deliveries of 95,000–100,000 vehicles and revenue of RMB 24.1–25.4 billion, with gross margin expected to recover to around 10%. Management reiterated its 20% full‑year sales growth target and pointed to strong L9 order intake and planned capacity of 4,000–5,000 monthly units for L9 and L8, but acknowledged that mix, costs and ramp‑up dynamics will keep near‑term results choppy.

Li Auto’s earnings call underscored a classic transition story, where heavy investment and rapid model turnover are straining the income statement even as technological capabilities and product traction improve. For investors, the key questions now are how quickly margins can rebound as new SUVs scale and whether the company’s strong balance sheet and AI‑driven strategy will translate into sustainable, profitable growth in an increasingly crowded NEV market.

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