Li Auto Inc Earnings - Q2 2026 Analysis & Highlights
Li Auto's Q2 2026 earnings call focused on product portfolio expansion, in-house technology development, margin pressures from commodity costs, and strong positioning in the premium NEV market despite near-term operational headwinds.
Key Financial Results
Total revenue in Q2 2026 was RMB 25.7 billion, down 15.1% year-over-year and up 11.7% quarter-over-quarter.
Vehicle sales revenue was RMB 24.1 billion, down 16.7% year-over-year and up 11.8% quarter-over-quarter, with the year-over-year decrease driven by reduced vehicle deliveries and lower average selling price due to different product mix.
Gross profit was RMB 2.8 billion, down 53.3% year-over-year and up 56.9% quarter-over-quarter.
Vehicle margin was 9.4% versus 19.4% in the same period last year and 6.1% in the prior quarter, with changes mainly due to different product mix.
Gross margin was 11% versus 20.1% in the same period last year and 7.9% in the prior quarter.
Operating loss was RMB 2.3 billion versus RMB 827 million income from operations in the same period last year and RMB 3 billion loss from operations in the prior quarter.
Operating margin was negative 9% versus 2.7% in the same period last year and negative 13% in the prior quarter.
Net loss was RMB 1.7 billion versus RMB 1.1 billion net income in the same period last year and RMB 2.3 billion net loss in the prior quarter.
Diluted net loss per ADS was RMB 1.69 in Q2 versus diluted net earnings of RMB 1.03 in the same period last year and diluted net loss of RMB 2.26 in the prior quarter.
Business Segment Results
Li Auto remained the top selling Chinese automotive brand in the RMB 200,000 and above NEV market in the first half of 2026.
EREV and BEV product mix is balanced at 50% each of total sales, with the company expecting BEV share to rise further as new models launch later in the year.
Li L series has been fully refreshed with all models (L9, L8, L6) transitioned to the latest platform including MACH M100 chip, 5C range extension, and drive-by-wire chassis, covering the RMB 200,000 to RMB 500,000 range-extended SUV market.
L9 Livis version accounts for over 85% of L9 sales since launch, with users willing to pay for fully drive-by-wire chassis and high-end ADAS systems.
L8 Ultra version has been a key sales driver with very good conversion ratios in storefronts.
New generation L6 has successfully retained the user base from the previous generation which delivered almost 400,000 units, with management hopeful of 10,000 units per month demand level going forward.
Li i6 has been one of the top three selling models priced over RMB 200,000 for six consecutive months, with Li i6 and L6 being top sellers in their respective segments.
Li i8 rear-wheel drive long range version launched in late July with added features such as power trunk and zero-gravity seats, resulting in notable sales uplift.
Capital Allocation
Share repurchases totaled $631.5 million for 91.7 million Class A ordinary shares, including 23.7 million ADS.
Quarter-end cash position was RMB 87.5 billion, providing flexibility to invest in product and technology innovation while returning value to shareholders through share repurchase.
Full-year CapEx expected to be around RMB 6 billion, including investments in R&D and the super charging network.
Net cash provided by operating activities in Q2 was RMB 15 million versus RMB 3 billion used in the same period last year and RMB 6.1 billion used in the prior quarter.
Free cash flow was negative RMB 1.3 billion in Q2 versus negative RMB 3.8 billion in the same period last year and negative RMB 7.4 billion in the prior quarter.
Industry Trends and Dynamics
Li Auto has maintained top selling position in the RMB 200,000 and above NEV market amid intense market competition and complete product refresh.
The company expects to maintain a top three position among all brands in China's passenger vehicle market priced above RMB 200,000 with new models launching and ramping up in the second half of 2026.
Cyclical fluctuations in upstream raw materials and core components have created temporary cost pressures for both the industry and the company, impacting gross margin.
AI sector developments have driven demand for chips and PCBs, pushing prices up, with memory chip prices also rising.
Lithium carbonate prices have experienced cyclical fluctuations this year.
Competitive Landscape
Li Auto has solidified leadership in the RMB 400,000 to RMB 500,000 family SUV market through the L9 Livis version with fully drive-by-wire chassis and high-end ADAS systems.
Li Auto leads in the RMB 200,000 to RMB 300,000 SUV market with Li i6 and L6 as top sellers in their respective segments.
5C supercharging has become a prerequisite in user purchase decisions and the proprietary supercharging network stands as a key competitive advantage.
In-house battery development completes the final piece of the electric powertrain puzzle, following electric motors and control units, with integrated design delivering industry-leading performance in quality, safety and service life.
MACH M100 chip shipments have exceeded 50,000 units with an excellent quality track record, maintaining competitive advantage in autonomous driving.
Management emphasized that developing in-house chips and batteries does not diminish respect for competitors like NVIDIA and CATL, but rather reflects a strategy to hold key components of competitiveness similar to Apple and Huawei.
Macroeconomic Environment
Commodity cost inflation has created margin pressure, with the company experiencing increased costs for chips, PCBs, memory, and lithium carbonate.
The company has early volume commitments and long-term procurement agreements that limit price impact compared to industry average.
Management noted uncertainties around the geopolitical environment and market regulations as challenges for overseas expansion.
Growth Opportunities and Strategies
New generation Li MEGA scheduled for launch on September 2 with improved chassis and handling experience including rear-wheel steering, drive-by-wire system and active anti-roll bars, upgraded intelligent platform with MACH M100 chips, and improvements in cabin and details for family MPV positioning.
All-new flagship BEV SUV Li i9 will launch in mid-September as a large family six-seater SUV with 800-volt 5C high-voltage charging platform, MACH M100 ADAS chip, and latest Qualcomm cabin chip, complementing MEGA and completing coverage of RMB 200,000 to RMB 500,000 high-end NEV market.
5C supercharging network expansion with 4,141 charging stations and over 22,800 charging stalls as of end of July, covering nine-by-nine grid with 18 national-level highways and more than 300 cities.
In-house battery deployment across all models with Li Auto branded batteries rolling out across all vehicles starting in the second half of 2026, with in-house development of cells, pack, BMS and thermal management system.
MACH VLA autonomous driving model improvements with OTA 9.1 delivering 20% overall performance improvement and nearly doubled user mileage penetration, October OTA 9.2 enabling full 3D vision transformer adoption, and year-end OTA 9.3 scaling model parameters exponentially.
Building embodied AI vehicles as core strategy through full stack in-house development across hardware and software with continuous iteration, with vision that vehicles become true intelligent agents.
Overseas expansion strategy with launches in Kazakhstan and Uzbekistan in July, Dubai in September for Middle East, Li i6 launching at October Paris Motor Show for Europe, and Li MEGA and right-hand drive Li i6 launching in Hong Kong SAR and Singapore by year-end.
Strategic partnership with Allur, a leading local car group in Kazakhstan to drive local assembly of vehicles.
Cost reduction through more efficient operations and full stack in-house technology to build long-term structural cost advantages.
In-house development and manufacturing of electric motors, controllers and silicon carbide chip modules to ensure control over critical components.
Financial Guidance and Outlook
For Q3 2026, the company expects deliveries between 95,000 and 100,000 vehicles and quarterly total revenue between RMB 26.6 billion and RMB 28 billion.
From Q3 onwards, the company expects to maintain stable operating cash flow on a quarterly basis with ample cash on hand providing strong support for product innovation and technology breakthroughs.
For the full year, achieving positive operating cash flow and free cash flow will likely depend on Q4 deliveries, with overall cash flow performance expected to be stronger than last year.
Long-term gross margin target is between 15% to 20% with the main driver being raw material cost.
Management will not pass commodity price increases to customers but instead will leverage integrated design and supply chain, deepen in-house R&D, deploy batteries to make systems more self-sufficient, and build better cost control capabilities.
Autonomous Driving and Technology Development
MACH M100 chip began mass production with all-new L9 in Q2 and is now deployed across all-new L9, L8 and L6 with sufficient production capacity to meet market demand.
ADAS system powered by MACH M100 chip has been delivered to customers with the all-new Li L9 since May.
OTA 9.1 further reduced end-to-end latency and introduced two new speed performance modes (efficient and comfort) for MACH VLA model.
Upcoming OTA 9.2 represents major architecture upgrade with full 3D vision transformer architecture featuring three times the parameter count and 4.6 times the compute.
Q4 goals include longer range perception exceeding 250 meters, higher perception accuracy within 5 centimeters for key objects, and stronger scene understanding to reduce unnecessary stand-stills and hesitations by more than 20%.
ADAS mileage penetration in urban scenarios has nearly doubled from previous levels on MACH platform, with all-scenarios MPI increasing by 25% in recent months.
MACH VLA 2.0 for NVIDIA Orin and Thor platforms will launch in early September.
Close integration of in-house chip and full-stack system capabilities drives rapid progress in intelligent driving through streamlined organizational structure, optimization of data and training, and system-level optimization through in-house Halo OS.
Vehicle equipped with dual MACH M100 chips can run fully multimodal foundation model entirely on device supporting voice, language and video inputs for general purpose problem understanding and task planning.
