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 net profit for the year 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, up 103%; 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, up 46.9%. 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 problem 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, delegating operational decision-making and introducing profit sharing to incentivize sales, aiming to cultivate store managers earning over one million yuan annually and maintain its position as a top-tier high-end vehicle brand.

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 overall 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 overhaul.

In November 2025, Li Xiang announced the end of the past three years of professional manager management mode and returned to a startup-style approach.

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

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

While adjusting organizational and sales systems, Li Auto has expressed cautious expectations for 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, down 3.1% to 85,000 from the same period in 2024; total revenue is projected to be approximately 20.4 to 21.6 billion yuan, a decrease of 16.7% to 21.3% year-over-year.

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

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 have seen positive changes since the fourth quarter 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.”

In terms of capacity, Li Auto’s Changzhou and Beijing factories currently have a total capacity of about 700,000 units per year. To achieve the 1 million vehicle 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 call.

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 will be available in the second quarter and target the sub-600,000 yuan market. Industry insiders believe that revitalizing the Li Auto L series is key to Li Auto’s breakthrough in 2026. The Li Auto L9 has been on the market for over three years since its launch in 2022 and is in urgent need of a major upgrade to enhance its competitiveness.

On the pure electric side, 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, targeting the 200,000 to 300,000 yuan market, will compete with models like Tesla Model Y, Xpeng G6, and Xiaomi SUV.