Li Auto's net profit declined significantly

On March 12, Li Auto (02015.HK) released its Q4 and full-year 2025 financial reports. The financials show that the company’s total annual revenue was 112.3 billion yuan, a 22.3% decrease year-over-year, with gross profit margin declining from 20.5% in 2024 to 18.7%. Due to reduced revenue scale and a slight increase in R&D expenses to 11.3 billion yuan, the company recorded an operating loss of 521 million yuan, compared to an operating profit of 7 billion yuan in 2024.

However, thanks to interest income and gains from fair value changes in investments, the company’s full-year net profit was 1.1 billion yuan, a significant 85.8% decline year-over-year, but still maintaining profitability for three consecutive years.

As of the end of 2025, the company’s cash reserves reached 101.2 billion yuan, ranking first among Chinese new energy vehicle companies, and becoming the only domestic new force carmaker to achieve over 100 billion yuan in revenue for three consecutive years while remaining profitable.

A Challenging Year for Sales

Sales fluctuations directly impact financial performance.

In 2025, Li Auto delivered a total of 406,300 new vehicles, an 18.8% decrease year-over-year. The annual sales target completion rate was 72.6%, while the overall growth rate of the Chinese new energy vehicle market was about 28% during the same period.

In terms of industry ranking, among new force carmakers in 2025, Leap Motor (09863.HK) delivered 596,600 units, a 103% increase; Xpeng Motors (09868.HK) delivered 429,400 units, up 126%; Xiaomi Auto delivered over 350,000 units; and NIO (09866.HK) delivered 326,000 units, a 46.9% increase. Hongmeng Zhixing surpassed Li Auto in sales in 2025, topping the new force sales chart. Li Auto fell from the top position in 2024 to fifth place.

To boost sales, Li Auto has made adjustments to its sales system.

Founder, Chairman, and CEO Li Xiang stated at the earnings call that the biggest issue in the past was managing the direct-sales system through dealerships. Since the third quarter of 2025, the company has been exploring how to better manage its stores.

In March this year, Li Auto launched a store partner program, decentralizing operational decision-making and introducing profit sharing to incentivize sales. The goal is to cultivate store managers earning over one million yuan annually, ensuring product sales remain in the top tier of premium vehicles.

Regarding rumors of Li Auto closing 100 stores, co-founder, executive director, and president Ma Donghui denied this, stating that while some underperforming stores have been optimized, the total number of stores will still increase this year, focusing on prime shopping malls and high-quality auto cities. As pure electric vehicle sales grow, the company plans to add more stores.

Li Auto Store (Image source: official brand)

The Battle for the Million-Unit Goal

Beyond sales system adjustments, Li Auto’s organizational structure also underwent a major change.

In November 2025, Li Xiang announced the end of the management model based on professional managers over the past three years, returning to a startup-style approach.

This was followed by a series of personnel changes. Since August 2025, several core executives have left, including key roles in intelligent driving, product, chips, and supply chain, among them Huawei-affiliated executives Zou Liangjun and Li Wenzhi.

Additionally, Li Auto restructured its product line organization at the start of 2026, reducing from three to two product lines based on price segments. Ma Donghui stated that in 2026, the Li Auto L series will return to a simplified SKU model, balancing market coverage and supply chain efficiency.

While organizational and sales adjustments are underway, Li Auto remains cautiously optimistic about recent market performance.

The financial report indicates that the company expects vehicle deliveries of 85,000 to 90,000 units in the first quarter of 2026, a 3.1% decrease from the same period in 2024; total revenue is projected to be approximately 20.4 to 21.6 billion yuan, down 16.7% to 21.3%.

Based on monthly data, Li Auto delivered 27,600 units in January and 26,400 units in February. To meet the quarterly target, the company needs to deliver about 31,000 to 36,000 units in March.

For the full year 2026, Li Auto set a sales target of 1 million units, requiring approximately 146% year-over-year growth. During the earnings call, Li Xiang said, “After proactive strategic adjustments in 2025, we’ve seen positive changes since Q4 in organizational efficiency, supply capacity, and sales systems, including improved store efficiency, alleviation of capacity issues with the Li Auto i6, and a rebound in i8 sales.”

Regarding capacity, Li Auto’s Changzhou and Beijing factories currently have a combined annual capacity of about 700,000 units. To reach the 1 million units target in 2026, further expansion or contract manufacturing will be necessary. The management did not disclose the latest progress on contract manufacturing partnerships during the earnings presentation.

Regarding future product plans, Li Auto is pursuing a dual strategy of extended-range and pure electric models.

The extended-range series will focus on high-end family users, launching the all-new Li Auto L9, which is scheduled to debut in the second quarter and target the sub-600,000 yuan market. Industry insiders believe revitalizing the L series is key to Li Auto’s breakthrough in 2026. The L9 has been on the market for over three years since its 2022 launch and is in urgent need of a major upgrade to enhance competitiveness.

In the pure electric segment, the capacity bottleneck for the Li Auto i6 has been broken through. The financial report shows that in February, affected by the Spring Festival holiday, the i6 delivered 16,000 units, with monthly capacity expected to rise to 20,000 units in March. By the end of 2025, cumulative orders for the i6 and i8 exceeded 100,000 units. The i6, priced between 200,000 and 300,000 yuan, will compete with models like Tesla Model Y, Xpeng G6, and Xiaomi SUV.