Li Auto (NASDAQ:LI) used its fourth-quarter and full-year 2025 earnings call to outline a broad strategic reset centered on improving the effectiveness of its direct sales network, launching a new generation of flagship products, and continuing heavy investment in AI-related technologies. Management also provided fourth-quarter financial results and first-quarter 2026 delivery and revenue guidance.
Direct sales recalibration and “store partner” program
CEO Li Xiang said the company spent the past year in what he described as an important period of “strategic adjustment,” with a renewed focus on sales as a core capability. He said Li Auto identified a key issue: it had been applying a “dealership mindset” to manage a direct sales system, rather than running each storefront as a true operating unit.
Addressing a question on channel optimization, management disputed a media rumor that it planned to close up to 100 stores, calling it false. The company said it routinely phases out a small number of underperforming stores and reiterated that its channel strategy emphasizes “quality over quantity.” It expects to add new stores, prioritizing top-tier malls and premium auto locations, while shifting focus toward increased store density in higher-tier cities as battery-electric vehicle (BEV) sales ramp.
A key change is the store partner program, launched March 1. Management said the program keeps Li Auto committed to direct sales to ensure consistent service and unified national pricing, while delegating more operating autonomy and profit sharing to store managers. Store managers now have autonomy in customer acquisition, day-to-day operations, and team management, and are evaluated on store operating results rather than sales volume alone. Management said it aims to see “significant” sales and operational improvement beginning in the third quarter.
Product roadmap: new L9 in Q2 and expanding BEV lineup
Li said Li Auto will officially launch the all-new L9 lineup in the second quarter, positioning it as a bid to “regain leadership” in the flagship SUV segment through upgrades spanning the powertrain, autonomous driving, and chassis technologies. He said the new L9 will come standard with an 800-volt architecture and 5C ultra-fast charging, and will include the company’s next-generation in-house range extender system (range extender 3.0), intended to improve generation efficiency and output.
Management also highlighted NVH improvements and a proprietary EGR low-temperature start technology aimed at delivering BEV-like cabin quietness and driving experience, as well as better winter energy consumption. Li Auto also said it plans to debut an AI-powered engine oil maintenance system designed to extend service intervals up to three years or 30,000 kilometers.
For the top trim, the Li L9 Livis is priced at CNY 559,800, according to management. The company said this version will feature what it described as the world’s first mass-produced fully drive-by-wire chassis and an 800-volt fully active suspension system. It will also include two in-house developed 5-nanometer M100 chips, which management said provide six times the effective computing power of four Orin chips.
In the BEV portfolio, management said supply constraints for the Li i6 have been easing, and it plans to keep increasing capacity to shorten delivery lead times. It also pointed to improving user satisfaction metrics and order momentum for the Li L8, saying NPS increased by more than 20% compared to early post-launch levels and that orders increased 33% versus February and 179% versus January beginning in March.
Separately, President Donghui Ma said the company expects Li L6 to sustain monthly sales of around 20,000 units and deliver its current order backlog within one to two months. He said Li Auto will maintain an open battery partnership approach while retaining control over battery architecture design and quality standards. He added that starting in 2026, all Li Auto vehicles will be equipped with batteries from two brands: Li Auto’s own brand and CATL, and said all batteries must meet the company’s unified standards for performance, quality, and safety.
Looking ahead, management said it plans to launch a new flagship BEV SUV, the Li i9, in the second half of 2026.
AI strategy: R&D reorganization, in-house chips, and broader “embodied AI” ambition
Li Auto repeatedly framed 2026 as a pivotal year in its evolution toward what management calls an “embodied AI” company. Li said the company will maintain its AI investment strategy and emphasized two dimensions: “creating AI” to bring products to life, and “applying AI” to improve internal efficiency.
For 2025, Li said R&D spending totaled CNY 11.3 billion, with about 50% allocated to AI-related initiatives. CFO Tie Li later guided that 2026 R&D expense is expected to remain around CNY 12 billion, with AI-related initiatives again accounting for roughly half. He said this includes AI infrastructure such as in-house chip development and computing power, as well as AI product R&D, including autonomous driving systems.
Li also described a major internal R&D reorganization implemented in January, shifting away from traditional functional division toward teams organized around a “brain” (datasets, chips, operating systems, training infrastructure), “core software/applications” (agents, skills, memory systems), and hardware systems designed for embodied AI. He said the change improved model iteration speed in autonomous driving from roughly every two weeks to daily.
CTO Yan said the M100 chip has entered mass production and is expected to increase effective compute and reduce latency from sensor input to vehicle actuation to about 200–300 milliseconds through tighter integration with the company’s software stack and vehicle systems. Yan also said the in-house chip and related architecture can reduce cost, including by eliminating a prior controller and saving more than 1,000 RMB per vehicle.
When asked about embodied AI beyond vehicles, Li said the company will invest fully in shared underlying technologies (chips, models, operating systems, and training workflows), while exploring new commercial products cautiously using a “startup model,” citing initiatives such as AI glasses and robots.
Fourth-quarter financial highlights and Q1 2026 guidance
CFO Tie Li limited his prepared remarks to fourth-quarter figures. Total revenue was RMB 28.8 billion, down 35% year-over-year and up 5.2% sequentially. Vehicle sales revenue was RMB 27.3 billion, down 36.1% year-over-year and up 5.4% quarter-over-quarter, with the year-over-year decline attributed mainly to lower deliveries and the sequential increase tied to higher deliveries partially offset by a lower average selling price due to mix following the start of Li i6 deliveries.
Gross profit was RMB 5.1 billion, down 42.8% year-over-year and up 14.8% quarter-over-quarter. Vehicle margin was 16.8% versus 19.7% a year earlier and 15.5% in the prior quarter. Gross margin was 17.8% versus 20.3% a year earlier and 16.3% in the prior quarter.
Operating expenses were RMB 5.6 billion, up 5.8% year-over-year and down 1.3% sequentially. R&D expense was RMB 3.0 billion, up 25.3% year-over-year, which the company attributed mainly to AI and other programs supporting product expansion and technology. SG&A was RMB 2.6 billion, down 14% year-over-year, primarily due to decreased employee compensation.
Li Auto reported a fourth-quarter loss from operations of RMB 442.6 million, compared with operating income of RMB 3.7 billion in the prior-year period, and a RMB 1.2 billion operating loss in the prior quarter. Net income was RMB 20.2 million, compared with net income of RMB 3.5 billion a year earlier and a net loss of RMB 624.4 million in the third quarter.
The company ended 2025 with cash of RMB 101.2 billion. Operating cash flow was RMB 3.5 billion in the quarter, and free cash flow was RMB 2.5 billion, compared with negative RMB 8.9 billion in the prior quarter. Li Auto said it had 30,728 employees at year-end 2025.
For the first quarter of 2026, Li Auto guided for deliveries of 85,000 to 90,000 vehicles and total revenue of RMB 20.4 billion to RMB 21.6 billion.
Other topics: 2026 growth goal, cost inflation response, and buyback commentary
During Q&A, management said its overall goal is to achieve 20% year-over-year growth in 2026, acknowledging that it expects the competitive environment to be intense, with many new vehicles launching in the CNY 200,000-and-above segment while overall market growth remains limited. Management described a “3 + 2” approach, citing the sales system, the new L-series launch, and BEV ramp as three pillars, alongside AI investment and an overseas strategy.
On raw material cost inflation, President Ma said the company is responding with supply chain collaboration and long-term agreements to lock in pricing and volumes, securing allocation for tight components such as memory, and pursuing end-to-end cost optimization through platformization and higher parts commonality. He also said the company will take a “more rational and steady” approach to pricing for new models, aiming to bring new-product gross margins back to what it called a healthy range.
Asked about media reports regarding share repurchases, CFO Tie Li said the company recognizes buybacks as a potential tool for enhancing shareholder value but said it had no additional information to disclose at present.
About Li Auto (NASDAQ:LI)
Li Auto Inc is a Chinese automotive company that develops, manufactures and sells smart electric vehicles, with an early focus on range-extended electric SUVs designed for family use. The company is headquartered in China and serves the domestic market through a combination of online channels and a network of retail/showroom locations. Li Auto was founded to address range-anxiety in electric vehicle buyers by integrating a small internal-combustion engine as a range extender alongside a large battery, enabling longer driving range while retaining electric driving characteristics.
The company’s product lineup centers on multi‑occupant SUVs that combine electric propulsion, advanced in‑vehicle connectivity and driver‑assistance features.
