Li Auto Inc Earnings - Q1 2026 Analysis & Highlights

Li Auto's Q1 2026 earnings call focused on the company's return to growth trajectory, successful launch of flagship products with proprietary AI technology, margin pressures from product mix, and ambitious international expansion plans.

Key Financial Results

Total revenues in Q1 2026 were RMB 23 billion, down 11.4% year-over-year and 20.1% quarter-over-quarter.

Vehicle sales revenue totaled RMB 21.5 billion, down 12.7% year-over-year and 21% quarter-over-quarter.

Gross profit was RMB 1.8 billion, down 66% year-over-year and 64.8% quarter-over-quarter.

Vehicle gross margin was 6.1% compared to 19.8% in the same period last year and 16.8% in the prior quarter.

Overall gross margin was 7.9% versus 20.5% in the same period last year and 17.8% in the prior quarter.

Operating loss was RMB 3 billion versus RMB 271.7 million income from operations in the same period last year and RMB 442.6 million loss from operations in the prior quarter.

Operating margin was negative 13% versus 1% in the same period last year and negative 1.5% in the prior quarter.

Net loss was RMB 2.3 billion versus RMB 646.6 million net income in the same period last year and RMB 20.2 million net income in the prior quarter.

Diluted net loss per ADS was RMB 2.26 versus diluted net earnings of RMB 0.62 in the same period last year and RMB 0.01 in the prior quarter.

Business Segment Results

Li i6 BEV model monthly sales have stabilized at 20,000 units per month, ranking top three among all BEV SUVs.

Li L9 Livis secured over 10,000 orders within two weeks of launch with transaction prices exceeding RMB 500,000.

Li L9 order pattern shows the Livis version accounts for over 90% of all orders, while the Ultra version accounts for less than 10%.

Li L9 deliveries in Q2 are expected to reach approximately 8,000 units between mid-May and end of June during the production ramp-up period.

From January to April, Li Auto returned to the top position in sales among Chinese brands in the Chinese new energy vehicle market priced at RMB 200,000 and above.

Capital Allocation

The company announced a $1 billion share repurchase program in March.

To date, the company has repurchased a total of 17.5 million Class A ordinary shares, including 7.3 million ADS, for a total consideration of $148.1 million.

Cash position remained solid with a quarter-end balance of RMB 94.3 billion.

Industry Trends and Dynamics

Chinese new energy vehicle market in the RMB 200,000 and above segment shows strong demand for premium vehicles.

The RMB 500,000 and above NEV SUV market represents a high-end segment where Li Auto expects to maintain over 20% market share.

The RMB 400,000 to RMB 500,000 NEV SUV market is targeted for 20% market share capture starting in June.

Competitive Landscape

Li Auto management views mid to high-end vehicle segment competition over the next three to five years as fundamentally a competition of embodied AI.

The highest technical barrier and core determinant of long-term success will be deeply integrated chip and large foundational model capabilities.

Li Auto's in-house developed MAHE M100 chip and MindVLA model provide competitive advantages through vertical integration between hardware and software, making traditional competitive approaches ineffective.

The company's in-house M100 chip delivers triple the computing power of the previous generation platform at half the cost, while similar cost brings six times higher effective computing power.

Li Auto's goal is to match the performance of Tesla's FSD v14 in the United States in the second half of this year.

Macroeconomic Environment

The year-over-year revenue decrease was mainly driven by lower average selling price due to different product mix.

The sequential revenue decrease was mainly attributable to reduced vehicle deliveries due to seasonal factors related to the Chinese New Year holiday and lower average selling price.

Rising raw material costs were mentioned as a concern regarding the company's path to profitability.

Growth Opportunities and Strategies

All-new Li L9 launched on May 15 with deliveries starting May 17, featuring two trims priced at RMB 509,800 (Livis) and RMB 459,800 (Ultra).

All-new Li L8, a five-seater flagship SUV, will launch in late June as a complete overhaul from the previous generation.

Li Auto deployed its proprietary MAHE M100 chip and MindVLA model in mass production, becoming the first company in China to deliver full functionalities on a brand-new chip in its first ever on-vehicle deployment model.

The MAHE M100 chip is a 5 nanometer automotive grade AI inference chip built on an AI-native dynamic data flow architecture.

The MindVLA model has tenfold increase in parameters compared to the previous version.

A dedicated software and AI launch event is planned for June to provide an in-depth walkthrough of advancements in in-cabin interaction, foundation model, autonomous driving, system agent, and MAHE chip.

Store partner program has shifted store managers from executors to business operators with genuine decision-making authority and profit-sharing rights.

Internationalization strategy includes entering Middle East and Central Asia markets in Q3 with an overseas-dedicated all-new Li L9.

The company will gradually enter Southeast Asia markets including Macau, Cambodia, Laos, and Myanmar starting in May.

All-electric Li i6 will be introduced in Europe in the second half of this year.

Right-hand drive version of Li MEGA will launch in key Asia Pacific markets including Hong Kong, Singapore by end of this year.

The company is implementing a precise regional customization approach with all upcoming models incorporating compliance with overseas regulations from early R&D stages.

Financial Guidance and Outlook

For Q2 2026, the company expects deliveries between 95,000 and 100,000 vehicles and quarterly total revenue between RMB 24.1 billion and RMB 25.4 billion.

Management maintains a full-year sales growth target of 20%.

Gross margin is expected to recover about 10% in Q2 with the launch and delivery of the all-new L9.

Looking at the full year, as the company completes its model refresh cycle and optimizes its production lineup, continued improvement in gross margin is expected.

May and June will be the ramp-up period for L9 and L8 with monthly production capacity between 4,000 and 5,000 units per month.

After full ramp-up in Q3, the company is confident that the all-new generation L9 will reach a delivery level exceeding the previous generation L9.

Operating expenses in Q1 were RMB 4.8 billion, down 4.8% year-over-year and 13.8% quarter-over-quarter.

Net cash used in operating activities in Q1 was RMB 6.1 billion versus RMB 1.7 billion used in the same period last year and RMB 3.5 billion provided in the prior quarter.

Free cash flow was negative RMB 7.4 billion in Q1 versus negative RMB 2.5 billion in the same period last year and RMB 2.5 billion in the prior quarter.

Product Development and Technology

The MAHE M100 chip with integrated hardware and software design delivers three times the effective computer power per unit cost.

ADAS 9.0 version powered by the in-house MAHE M100 chip shows significantly improved performance with more human-like control both longitudinally and laterally, and smoother, more comfortable driving experience.

ADAS 9.0 is described as already one of the best in the highly competitive market, but represents just the beginning of autonomous driving capabilities.

The new platform allows sensors to collect data at higher precision and higher frame rates, while the M100 chip's powerful compute enables running larger and better algorithms.

Input frame rate has tripled with even greater increase in inference frame rate under the same model.

Future autonomous driving improvements will focus on scaling up input data and precision models, improving cognitive capabilities especially for short-term cause and effect relationships, and better execution stage with more compute latency optimizations.