Li Auto Inc. Q2 FY2025 earnings call

• CEO Xiang Li mentioned second quarter delivery of over 110,000 vehicles, total revenue of RMB 30.2 billion, 13.4% market share in RMB 200,000 and above NEV market in China, and cumulative deliveries exceeding 1.36 million vehicles by end of July.
• Li MEGA Home sales exceeded expectations, Li L series adjusted sales and service systems while maintaining top 3 position, Li i8 launched with positive market feedback.
• Charging network has over 3,100 stations and over 17,000 stalls, AI investment over RMB 6 billion this year, VLA large model driver and Li Xiang Tong Xue Agent rolled out.
• Sales and service network adjusted with store optimization, lightweight store model in lower-tier cities, and focus on localization and digital marketing.

In the second quarter of 2025, Li Auto delivered over 110,000 vehicles, with total revenues reaching RMB 30.2 billion. Vehicle sales contributed RMB 28.9 billion. Li MEGA Home launched in April 2025 has seen monthly sales of approximately 3,000 units, becoming the best-selling MPV priced above RMB 500,000 since May 2025 and the top-selling BEV in the same price range since June 2025. The refreshed Li L series faced sales fluctuations due to sales and service system adjustments but maintained top 3 position in the RMB 200,000 and above NEV market. Li i8 was launched on July 29 with deliveries starting on August 20, and it's expected to have cumulative deliveries exceeding 8,000 units by the end of September. The charging network has more than 3,100 charging stations with over 17,000 charging stalls, and AI investments this year are expected to exceed RMB 6 billion. The VLA large model driver and Li Xiang Tong Xue Agent were rolled out with the delivery of Li i8, and the VLA Driver large model will be deployed on all AD Max models by OTA updates by mid-September.

The company expects vehicle deliveries in the third quarter of 2025 to be between 90,000 and 95,000 units and quarterly total revenues to be between RMB 24.8 billion and RMB 26.2 billion.

Possible risks include market competition, policy regulations affecting autonomous driving development, and potential supply chain risks. For example, regulatory tightening on autonomous driving could impact the iteration and deployment of new VLA factors, and payment term changes led to negative operating cash flow in the second quarter.

Q: Regarding our sales volume because this year, we're seeing the L series, their sales volume has been declining. So how does management plan to achieve our full year target through product marketing as well as channel strategies going forward? And then the second question is regarding our self-developed chips, can management give us some update on this front?

A: Donghui Ma answered from EREV and BEV perspectives. On EREV, enhance product competitiveness through assisted driving upgrades with VLA system. On BEV, Li MEGA and Li i8 contribute to sales, and marketing and channel strategies include tailored marketing for different markets, store optimization, and lightweight store model in lower-tier cities. Yan Xie mentioned in-house design chip successfully tapered out, ongoing vehicle testing, expected deployment on flagship models next year.

Q: What's the current progress of the adjustment to the auto sales system. Could you comment on the rationale behind the adjustment and the result you expect to achieve? In the meantime, could this change is adversely affect short-term sales performances and the pace of the new model launches?

A: Donghui Ma said in August, major reorganization of sales team is fully operational. The 4-step approach addresses frontline experts' income, growth opportunities, and efficiency. The transformation is proactive, and new model launches like Li i8 and Li i6 proceed as scheduled, with sales system transformation providing support.

Q: i8 has adjusted some of the configurations. What's our future strategy for the product and SKU for future models? And my second question is that, how do we see the gross margin level under the consumption of the third quarter sales and revenue guidance?

A: Xiang Li said will reduce SKUs to focus on competitive single SKU, iterate faster. Tie Li said expects to maintain gross margin at about 19% in the third quarter.

Q: Regarding i6. Within the allowed scope. Can you please share more regarding the product positioning, the launching timetable as well as the marketing plan? My second question is regarding your overseas strategy. I'm not sure what is our latest thoughts. And I would appreciate if you can share more color on this?

A: Xiang Li said Li i6 will be competitive in large 5-seater SUV market, with user-centric marketing. Donghui Ma said 2025 is initial year of global strategy, with R&D centers in Germany and US, building overseas sales and after-sales organization, and focusing on Middle East, Central Asia and Europe.

Q: We have seen that our operating cash flow or net cash flow outflow further expand in the second quarter. So may you explain what's the main reason? And how should we view the subsequent cash flow situation in the future? And the second question is about the autonomous driving. So we can see some [Technical Difficulty] changes in our autonomous sector. And also, we see the regulatory tightening on autonomous driving. Will that affect our future development and also our iteration and also deployment of our new VLA factors.

A: Tie Li said second quarter negative operating cash flow due to paying off payables of last December, November, etc., and adjusted suppliers' payment term. Donghui Ma said assisted driving team had some departures, but current team has clear structure, new leaders, and VLA development continues with focus on safety and compliance.

Q: Right now, Li Auto already built a lot of 5C supercharging station. In the future, will you open your charging station for other brands? How will you operate the charging station? If you start to give other brand to use, will it impact your own brand car owners, user experience? And my second question is regarding to the autonomous driving technology. So right now, you have a very good VLA technology. But after VLA, how do you expect the development direction of autonomous driving and the technology iteration?

A: Donghui Ma said Li Auto vehicle owners' charging experience will remain best in coverage, speed, experience and value for money. Xiang Li said VLA represents pathway to L3, L4, L5 autonomous driving, with training from human data and world model, expecting VLA to achieve 10x driving safety of human drivers in next 2 years.