Li Auto Inc Earnings - Q3 2025 Analysis & Highlights
Li Auto's Q3 2025 earnings call highlighted a strategic shift back to an entrepreneurial model, focusing on embodied AI, and addressing challenges in BEV development and supply chain management. The call also covered financial results, including revenue decline and a net loss, while providing Q4 2025 guidance.
Key Financial Results
Total revenues in Q3 2025 were RMB 27.4 billion, a 36.2% decrease year-over-year and 9.5% decrease quarter-over-quarter.
Vehicle sales contributed RMB 25.9 billion, reflecting a 37.4% year-over-year decrease and 10.4% quarter-over-quarter decrease.
Gross profit was RMB 4.5 billion, a 51.6% decrease year-over-year and 26.3% decrease quarter-over-quarter.
Vehicle margin was 15.5%, compared to 20.9% in the same period last year and 19.4% in the prior quarter.
Net loss in the third quarter was RMB 624.4 million, versus RMB 2.8 billion net income in the same period last year.
Diluted net loss per ADS attributable to ordinary shareholders was RMB 0.62 in the third quarter.
Net cash used in operating activities in the third quarter was RMB 7.4 billion.
Free cash flow was negative RMB 8.9 billion in the third quarter.
Cash position remains strong with a quarter-ended balance of RMB 98.9 billion.
Business Segment Results
The primary business segment discussed was vehicle sales, with a focus on the Li i8 and Li i6 models.
Li Auto is transitioning from EREV to BEV, which presents challenges.
i Series has successfully entered core BEV markets such as Beijing, Shanghai, Jiangsu, and Zhejiang, with orders in these areas starting to increase significantly from September.
Capital Allocation
R&D expenses in the third quarter were RMB 3 billion, up 15% year-over-year.
SG&A expenses in the third quarter were RMB 2.8 billion, down 17.6% year-over-year.
Industry Trends and Dynamics
The company is focused on building embodied AI products, viewing cars as robots.
The company believes the auto industry is transforming from policy-driven adoption to organic, market-driven adoption.
The company expects to see a pull-forward effect, namely as customers rush to lock in their incentive at the end of 2025 that will naturally lead to a substantial dip in the deliveries in Q1 2026.
In 2026, the NEV penetration rate in the domestic Chinese market will probably reach between 55% to 60% with the rate of - in the premium segment exceeding 60%.
Competitive Landscape
Li Auto faces competition in the electric vehicle market, with an emphasis on avoiding an "arms race" in specifications.
The company aims to differentiate itself through embodied AI and creating automated and proactive vehicles.
The company emphasizes the importance of user value and efficiency in a competitive environment.
Growth Opportunities and Strategies
Organizational Model: The company is reverting to an entrepreneurial model, emphasizing conversations, user value, efficiency, and problem-solving.
Product Strategy: Li Auto is focusing on developing cars as "embodied AI" or robots, rather than just electric vehicles or smart devices.
Technology Strategy: The company is investing in a full-stack AI system tailored for the physical world, including perception, modeling, operating system, and computing power.
BEV Development: The company is focusing on electric drive, battery systems, and electronic control technologies for its BEV models.
Dual Supplier Strategy: Starting in November, to address production ramp-up challenges, the company will officially start to begin a dual supplier strategy for its batteries on Li i6.
Model Iteration: The company must accelerate model iteration and accelerate further.
Peace of Mind Purchase Program: The company has a Peace of Mind Purchase Program, covering the purchase tax difference for i6 customers who locked in their orders in 2025 but take deliveries in 2026.
The company aims to operate about 4,800 supercharging stations by 2026, 35% of which will be on highway service stations.
Financial Guidance and Outlook
For the fourth quarter of 2025, the company expects deliveries to be between 100,000 and 110,000 vehicles.
Total revenue is expected to be between RMB 26.5 billion and RMB 29.2 billion for Q4 2025.
The company expects monthly Li i6 production capacity to steadily increase to about 20,000 units starting from early next year.
Technology and Innovation
The company will be launching its AI system based on its internally developed M100 chips in 2026.
The company is fully adopting 800-volt high-voltage platform and 5C ultra-fast batteries to enhance efficiency and reduce energy consumption in 2026.
The company rolled out its VLA driver to all of its AD Max vehicles in September.
The company will release OTA 8.1, which further enhances VLA perception capabilities for more precise and responsible behavior in early December.
By year end, the company will deploy an architecture upgrade to strengthen language VLA behavior interaction and streamline the decision-making process, which will be compatible with its upcoming in-house developed M100 chip.
The company open-sourced the Halo OS, enabling collaborative development with its partners and ecosystem.
The company established the Halo OS Technical Steering Committee in September.
