Core Viewpoint - Li Auto reported a net loss of RMB 625 million (approximately USD 89.286 million) in Q3 2025, marking the end of 11 consecutive profitable quarters, primarily due to a recall of 11,400 vehicles [1] Financial Performance - Vehicle sales revenue in Q3 2025 was RMB 25.9 billion (approximately USD 3.7 billion), a decline of 37.4% from RMB 41.3 billion (approximately USD 5.9 billion) in Q3 2024 [2] - Total revenue for Q3 2025 was RMB 27.4 billion (approximately USD 3.914 billion), down 36.2% from RMB 42.9 billion (approximately USD 6.129 billion) in Q3 2024, and down 9.5% quarter-over-quarter from RMB 30.2 billion (approximately USD 4.314 billion) in Q2 2025 [3] - Total deliveries were 93,211 units, reflecting a 39.0% year-over-year decrease [2] Market Challenges - Li Auto is expected to face a continued decline in Q4 2025, with projected vehicle deliveries between 100,000 to 110,000 units, representing a year-over-year decrease of 37.0% to 30.7% [5] - The company is experiencing intensified competition in the new energy vehicle market, with rivals like Tesla and NIO having established significant advantages [6][7] - Li Auto's transition to battery electric vehicles (BEVs) is lagging, and the company must enhance its production capacity and technology deployment to remain competitive [8] Production and Supply Chain Issues - New BEV models i6 and i8 have received positive market responses, with orders exceeding 100,000 units; however, supply chain challenges have limited their deliveries to only 18% of total deliveries in Q3 [9] - Li Auto is attempting to increase production capacity through a dual-supplier system but faces urgent supply chain stability issues [9] Strategic Expansion and Consumer Engagement - Despite challenges in its core vehicle business, Li Auto has begun diversifying into new lines, launching AI smart glasses, although market response has been lukewarm [10][11] - Li Auto's app user engagement remains high, indicating a strong core consumer base, which is crucial for any potential turnaround [12] Q4 Outlook - For Q4 2025, revenue is forecasted at RMB 26.5 billion (approximately USD 3.786 billion), representing a 40% year-over-year decline [14]

Core Viewpoint - Li Auto is experiencing demand contraction and sales underperformance, leading to revised sales volume and earnings forecasts for 2025-26 due to increased competition and margin compression from new BEV models [1][2][4]. Sales Performance - In 1H25, Li Auto's sales lagged behind the broader market, with a market share decline of 2 percentage points in China's NEV market [2]. - Weekly sales have dropped from 8-9k units to below 6k units, indicating deteriorating demand dynamics [2][3]. - The company anticipates a potential year-over-year sales decline exceeding 30% in 3Q25 due to inadequate delivery of new models [4]. Margin and Earnings Outlook - Despite a vehicle margin of around 19% in 2Q25, margin compression is expected from the increased sales mix of i-series BEVs, which have higher BOM costs [1][3]. - Non-GAAP net income forecasts have been reduced by 37%-47% to RMB6.2 billion and RMB10.1 billion for 2025 and 2026, respectively [4]. Competitive Landscape - Li Auto faces intensified competition as rivals introduce lower-priced models with similar features, challenging its market position [5]. - The company has been criticized for its slow response to competitors and for not sufficiently innovating its product offerings [5][6]. Strategic Focus - The company needs to pivot its strategic focus to expand its BEV reach while maintaining relevance in the EREV market through effective product iteration [6]. - A shift back to P/S multiples for valuation is preferred due to near-term profitability volatility and the industry trend among NEV counterparts [7].