Li Auto Inc Earnings - Q4 2025 Analysis & Highlights
Li Auto's Q4 2025 earnings call focused on strategic organizational restructuring toward embodied AI, direct sales model optimization, new product launches featuring advanced autonomous driving technology, and navigating an increasingly competitive premium EV market while maintaining profitability.
Key Financial Results
Q4 2025 total revenues were RMB 28.8 billion, down 35% year-over-year and up 5.2% quarter-over-quarter.
Vehicle sales revenue reached RMB 27.3 billion, down 36.1% year-over-year and up 5.4% quarter-over-quarter, with the year-over-year decrease primarily due to lower vehicle deliveries.
Gross profit in Q4 was RMB 5.1 billion, down 42.8% year-over-year and up 14.8% quarter-over-quarter.
Vehicle margin in Q4 was 16.8% versus 19.7% in the same period last year and 15.5% in the prior quarter, with the year-over-year decrease mainly due to different product mix.
Gross margin in Q4 was 17.8% versus 20.3% in the same period last year and 16.3% in the prior quarter.
Operating loss in Q4 was RMB 442.6 million versus RMB 3.7 billion income from operations in the same period last year and RMB 1.2 billion loss from operations in the prior quarter.
Operating margin in Q4 was negative 1.5% versus 8.4% in the same period last year and negative 4.3% in the third quarter.
Net income in Q4 was RMB 20.2 million versus RMB 3.5 billion net income in the same period last year and RMB 624.4 million net loss in the prior quarter.
Diluted net earnings per ADS was RMB 0.01 in Q4 versus RMB 3.31 in the same period last year and RMB 0.62 diluted net loss in the prior quarter.
Cash position remained solid with year-end balance of RMB 101.2 billion.
Net cash provided by operating activities in Q4 was RMB 3.5 billion versus RMB 8.7 billion provided in the same period last year and RMB 7.4 billion used in the third quarter.
Free cash flow was RMB 2.5 billion in Q4 versus RMB 6.1 billion in the same period last year and negative RMB 8.9 billion in the prior quarter.
Total employees at year-end 2025 were 30,728.
Business Segment Results
Li i8 BEV model NPS increased by over 20% compared to the early post-launch period as owners accumulated miles on their vehicles, with satisfaction particularly strong in driving, charging experience and autonomous driving.
Li i8 ranked number one in NPS among all large SUVs in the Lang Road second half of 2025 survey.
Li i8 daily orders in early March were up nearly 180% versus January, reflecting strengthening market demand fueled by strong word of mouth.
Li i6 successfully moved past the most challenging phase of production ramp-up and is now in the stable delivery phase, with all supply chain bottlenecks fully resolved.
Li i6 is expected to sustain steady monthly sales of around 20,000 units, with the company on track to efficiently deliver the current order backlog within the next one or two months.
Li i6 success demonstrates that Li Auto's brand appeal has successfully extended from the EREV segment into the BEV segment.
Capital Allocation
R&D expenses in Q4 were RMB 3 billion, up 25.3% year-over-year and 1.4% quarter-over-quarter, with the year-over-year increase mainly due to costs related to AI and other programs supporting product portfolio expansion and technology advancements.
2025 total R&D spending was RMB 11.3 billion, with approximately 50% allocated to AI-related initiatives.
Expected 2026 R&D expenses to remain around RMB 12 billion with AI-related initiatives accounting for about half of the cost, including investment in AI infrastructure such as in-house chip development and computing power.
SG&A expenses in Q4 were RMB 2.6 billion, down 14% year-over-year and 4.4% quarter-over-quarter, with the year-over-year decrease mainly due to decreased employee compensation.
Regarding share buybacks, the company currently does not have additional information to disclose, though management recognizes share repurchases as one tool to consider for enhancing shareholder value.
Industry Trends and Dynamics
2026 will see more new cars released in the RMB 200,000 and above market than all previous years combined, while overall market growth remains very limited.
The NEV market is experiencing intensifying competition, requiring companies to strengthen their technology moat and complete transformation from smart EV companies to embodied AI companies.
Supply constraints on key components like batteries and memory chips have impacted unit vehicle costs, with particular tightness in AI-related components.
Competitive Landscape
Li Auto's new L9 will build its core advantage through technology rather than primarily through smart product definition as the previous generation did.
The new Li L9 aims to create a clear step change in user experience versus competing models and regain leadership in the flagship SUV segment.
Li Auto's full stack hardware and software integration is expected to create structural advantages similar to the gap between Apple and Android in the cellphone market, with advantages that keep widening over time.
Management emphasized that Li Auto's quality has never depended on any single supplier but is defined by full stack in-house R&D, rigorous quality control systems, and core values upheld from day one.
Macroeconomic Environment
Raw material cost inflation is concentrated on key components like batteries and memory chips, which has impacted unit vehicle costs.
The company is addressing cost pressure through strengthening supply chain collaboration to stabilize pricing while securing supply, including signing long-term agreements with core suppliers to lock in pricing and volume for key raw materials.
Where contracts include clear pricing terms and adjustment mechanisms, the company strictly adheres to these terms, while in other cases working hand-in-hand with suppliers to share cost pressure and navigate the cycle together.
Growth Opportunities and Strategies
The company will officially launch the all-new L9 lineup in Q2 2026 with comprehensive upgrades from powertrain, autonomous driving to chassis technology.
The new Li L9 will come standard with 800-volt architecture and 5C ultra-fast charging, featuring the next-generation full stack in-house developed range extender 3.0 system.
The top-of-the-line Li L9 Livis priced at RMB 559,800 will feature the world's first mass-produced fully drive-by-wire chassis and 800-volt fully active suspension system.
The L9 Livis will be powered by two in-house-developed 5-nanometer M100 chips, delivering 6 times the effective computing power of Thor-U.
Li Auto will launch the Li i9, a new flagship BEV SUV, in the second half of 2026, further expanding the BEV portfolio to meet a wider range of customer needs.
The company implemented a Store Partner Program starting March 2026, making each store the basic operating unit with store managers having real operating decision power and profit sharing.
The goal is to develop store managers who can earn over RMB 1 million per year and enable top performers to make 3 times the industry average.
Store managers now have autonomy in three areas: customer acquisition, day-to-day operations, and managing their own teams, with performance measured on operating results rather than just sales volume.
The company expects to see significant sales and operational improvements from Q3 2026 following the implementation of the Store Partner Program.
Li Auto's 2026 strategy includes a 3+2 approach: three pillars (sales system, L series launch, and BEV ramp-up) and two additional elements (AI-related investments and overseas strategy).
The company is committed to an open partnership approach for batteries, working closely with industry leaders while retaining control of partnerships and battery architecture design.
Starting in 2026, all Li Auto vehicles will be equipped with batteries from only two brands: Li Auto brand and CATL, marking a deeper level of integration with core partners.
The company underwent a major organizational restructuring in January 2026, completely revamping hardware and software functions with a shared goal of building a silicon-based digital human being.
The R&D organization was reorganized into three specialized teams: brain (datasets, chips, operating system), applications (software tools, agents, skills, memories), and hardware (energy, electric drive, controllers).
After the reorganization, the autonomous driving team improved iteration speed from every two weeks to every one day, a 14-time improvement.
The company is developing capabilities and attracting top talents across interface chips, foundation models, software and hardware to build core capabilities required of an embodied AI company.
Financial Guidance and Outlook
For Q1 2026, the company expects deliveries between 85,000 and 90,000 vehicles and quarterly total revenues between RMB 20.4 billion and RMB 21.6 billion.
The company's total goal is to reach 20% year-on-year growth for all of 2026.
The company aims to bring gross margins of new products back to normal to a healthy range, with pricing reflecting a balanced consideration of raw materials volatility, R&D investment and user value.
The company is confident that by combining supply chain collaboration, long-term agreements, platformization, proprietary technologies and rational pricing, it can effectively contain the impact of raw material price increases and maintain stable gross margin and operational quality.
Product and Technology Innovation
The new Li L9 will feature the world's first AI-powered engine oil maintenance system, enabling long service intervals of up to three years or 30,000 kilometers.
The new L9 offers cabin quietness and driving experience comparable to BEV, along with improved winter energy consumption through proprietary EGR low temperature start technology.
The M100 chip delivers significantly higher effective compute than previous generations, allowing the company to run VLA models with about 6 times the parameters and 10 times the compute while still achieving higher frame rate and faster inference.
The M100 chip enables end-to-end latency from sensor input to vehicle actuation of around 200 to 300 milliseconds, directly improving the driving experience.
The M100 chip brings significant cost advantages, with BOM cost per chip much lower than external solutions and savings of over RMB 1,000 per vehicle by replacing the XU controller.
The company's autonomous driving team now iterates models every one day instead of every two weeks following the organizational restructuring.
The company is developing a VLA (Vision Language Action) model that uses language to understand and behave in the physical world rather than simply interpreting video.
The new autonomous driving paradigm moves from two-dimensional cameras to three-dimensional vision transformers to better understand the 3D world.
The new L9 will be equipped with a fully drive-by-wire system including drive-by-wire steering, four-wheel steering, electrical/mechanical brake, and 800-volt fully independent active suspension.
