Li Auto Inc. (LI) Q1 2026 Earnings Report, Transcript and Summary

Hello, ladies and gentlemen. Thank you for standing by for Li Auto's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Ms. Janet Chang, Investor Relations Director of Li Auto. Please go ahead, Janet.

Thank you, operator. Good evening, and good morning, everyone. Welcome to Li Auto's First Quarter 2026 Earnings Conference Call. The company's financial and operating results were published in a press release earlier today and were posted on the company's IR website. On today's call, we will have our Chairman and CEO, Mr. Xiang Li; and our CFO, Mr. Johnny Tie Li, to begin with prepared remarks. Our President, Mr. Donghui Ma; and our CTO, Mr. Yan Xie, will join for the Q&A discussion. Before we continue, please be reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain company filings with the U.S. Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that Li Auto's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to Li Auto's disclosure documents on the IR section of our website, which contain a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Our CEO will start his remarks in Chinese. There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr. Xiang Li. Please go ahead.

[Interpreted] Hello, everyone. This is Li Xiang. Thank you for joining today's earnings conference call. In Q1 of this year, our deliveries entered a growth trajectory. From January to April, Li Auto returned to the top position in sales among Chinese brands in the Chinese new energy vehicle market priced at RMB 200,000 and above. Monthly sales of our BEV model, the Li i6 has stabilized at 20,000 units per month, ranking top 3 among all BEV SUVs. On May 15, we launched the all-new Li L9 with deliveries starting on May 17. The all-new L9 comes in 2 trims, Livis and Ultra, priced at RMB 509,800 and RMB 459,800, respectively. The primary goal of our all-new generation Li L9 is to achieve the market position of our flagship SUV in important aspects of flagship product perception such as styling, suspension and chassis, range extender and electric powertrain as well as intelligence and computing power. It sets the standard for what the next generation of flagship SUVs must possess. Within just 2 weeks, the Li L9 Livis secured over 10,000 orders with transaction prices of over RMB 500,000. We expect that we'll maintain a market share of over 20% in the RMB 500,000 and above NEV SUV market. Starting in June, we will focus our communication and promotion efforts on Li L9 Ultra, aiming to capture a 20% market share in the RMB 400,000 to RMB 500,000 NEV SUV market. The all-new Li L9 marks the beginning of a series of new product rollouts for the Li L Series. In late June, we will launch the all-new Li L8, an exceptional 5-seater flagship SUV. As the 5-seater version of the all-new Li L9, it is a complete overhaul from the previous generation, and it is no longer a downgrade from Li L9. We believe the all-new Li L8 might be the best handling large SUV globally while delivering the most comfortable 5C experience in its class. With the launch of the all-new Li L9, we have successfully and fully deployed our proprietary MAHE M100 chip and the MindVLA model. This mass production of our full stack hardware software solution was a key milestone for us. We're the first company in China to deliver full functionalities on a brand-new chip in its first-ever on-vehicle deployment. The MAHE M100 chip is a 5-nanometer automotive-grade AI inference chip built on an AI-native dynamic data flow architecture. This unique architecture and superior computing power established a long-term technological moat for us. With an integrated hardware and software design, our chip delivers 3x the effective computing power per unit cost. Furthermore, the MAHE M100 chip enables us to deploy our latest MindVLA model on our vehicles. The number of parameters in this new model increased tenfold from the previous version. The rollout of MAHE M100 chip and the MindVLA is just the starting point. Moving forward, with larger models and data training at higher precision and higher frame rates, we expect a massive leap in the automotive and in the autonomous driving experience. The May 15 event focused primarily on hardware and vehicle performance. We believe it would require a dedicated 2- to 3-hour session to fully showcase our advancements in software and intelligence. We're planning a separate launch event in June dedicated to software and AI. We'll take the time to provide an in-depth walk-through of the real-world experience across in-cabin interaction, foundation model, autonomous driving, system agents and our MAHE chip. We look forward to giving a deep dive into the many things we can bring to our lives through software and embodied AI. Please stay tuned. With the steady rollout of our core technologies and our updated product portfolio, we maintain our full year sales growth target of 20%. With that, I'll turn the call over to our CFO, Johnny, to walk you through our financial performance. Thank you.

Thank you, Li Xiang. Hello, everyone. Given time constraints, my remarks will be limited to first quarter financial highlights. All figures will be quoted in RMB unless otherwise stated. For further details, including the corresponding U.S. dollar amount, we encourage you to refer to our earnings press release. Total revenues in the first quarter were RMB 23 billion, down 11.4% year-over-year and 20.1% quarter-over-quarter. This included RMB 21.5 billion from vehicle sales, down 12.7% year-over-year and 21% quarter-over-quarter. The year-over-year decrease was mainly driven by a lower average selling price due to different product mix. The sequential decrease was mainly attributable to reduced vehicle deliveries due to seasonal factors related to the Chinese New Year holidays and lower average selling price due to different product mix. Cost of sales in the first quarter was RMB 21.2 billion, up 2.7% year-over-year and down 10.4% quarter-over-quarter. Gross profit in the first quarter was RMB 1.8 billion, down 66% year-over-year and 64.8% quarter-over-quarter. Vehicle margin in the first quarter was 6.1% versus 19.8% in the same period last year and 16.8% in the prior quarter. The year-over-year and the sequential decrease was mainly due to the different product mix. Gross margin in the first quarter was 7.9% versus 20.5% in the same period last year and 17.8% in the prior quarter. Operating expenses in the first quarter were RMB 4.8 billion, down 4.8% year-over-year and 13.8% quarter-over-quarter. R&D expenses in the first quarter were RMB 2.7 billion, up 8.3% year-over-year and down 9.8% quarter-over-quarter. SG&A expenses in the first quarter were RMB 2 billion, down 19% year-over-year and 22.6% quarter-over-quarter. The year-over-year and sequential decrease was mainly due to the decreased employee compensation and reduced expenses related to marketing and promotion activities. Loss from operations in the first quarter was RMB 3 billion compared RMB 271.7 million income from operations in the same period last year and RMB 442.6 million loss from operations in the prior quarter. Operating margin in the first quarter was negative 13% versus 1% in the same period last year and negative 1.5% in the prior quarter. Net loss in the first quarter was RMB 2.3 billion versus RMB 646.6 million net income in the same period last year and RMB 20.2 million net income in the prior quarter. Diluted net loss per ADS attributable to ordinary shareholders was RMB 2.26 in the first quarter versus diluted net earnings of 0.62 in the same period last year and RMB 0.01 in the prior quarter. Turning to our cash flow and balance sheet. Net cash used in operating activities in the first quarter was RMB 6.1 billion versus RMB 1.7 billion used in the same period last year and RMB 3.5 billion provided in the prior quarter. Free cash flow was negative RMB 7.4 billion in the first quarter versus negative RMB 2.5 billion in the same period last year and RMB 2.5 billion in the prior quarter. Our cash position remains solid with a quarter end balance of RMB 94.3 billion. With this strong cash position, we continue to return to our -- to shareholders through USD 1 billion share repurchase program announced in March. To date, we have repurchased a total of 17.5 million Class A ordinary shares, including 7.3 million ADS for a total consideration of USD 148.1 million. And now for our business outlook. For the second quarter of 2026, the company expects the delivery to be between 95,000 and 100,000 vehicles and quarterly total revenues to be between RMB 24.1 billion and RMB 25.4 billion. This business outlook reflects the company's current and preliminary view on the business situation and market conditions, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator and start our Q&A session. Thank you.

[Operator Instructions] Your first question comes from Tim Hsiao with Morgan Stanley.

[Interpreted] So my first question is about L9. So how is the order inflow for the Li Auto L9 currently? And the wait for the Livis variant have stretched to 9 to 11 weeks. So could you share the company's production capacity arrangement for this model? And what is the targeted sales mix of the L9 in your second quarter delivery guidance? That's my first question.

[Interpreted] First of all, the order pattern for the L9 is very clear. The top-selling Livis version accounts for over 90% of all orders and the already fully loaded Ultra version accounts for the other less than 10% which reflects the customer recognition of our latest advanced technology and the willingness to pay for features and performance and which also showcased our steady foothold in the market above RMB 500,000, which is a very positive trend for the brand. Later down the road, we're going to strengthen the performance of promotion efforts on the Ultra version and continue to optimize the order mix. Secondly, on production capacity, the all-new L9 and L8 will both be manufactured in our Changzhou base and the 2 cars can be adjusted flexibly between the production lines. So in the long term, we're confident of our ability to manufacture these 2 models. May and June will be the ramp-up period for these 2 cars and the monthly production capacity will fall between 4,000 and 5,000 units per month. At the moment, the two-tone body color of Livis are limited, and also some of the unique parts on this model are supply constraints, slightly supply constrained. We're now working around the clock with core suppliers to come with solutions to make sure that we can deliver these cars to our customers as soon as possible. In the meantime, we have ample production capacity for the Ultra version, and we'll be able to adjust our production based on market demand. And finally, on L9 deliveries in Q2, considering the production ramp-up, we expect to deliver around 8,000 units between the middle of May and the end of June. After we fully ramp up in Q3, we're confident that the all-new generation L9 will reach a delivery level of over the previous generation of L9.

[Interpreted] My second question is about the profitability. What's your profitability outlook for the second quarter? And from a full year perspective, when do you expect to see a clear inflection point for earnings? And given the rising raw material costs, is the return to profitability achievable this year? And separately, the Auto i6 now account for nearly 60% of the total vehicle sales. What is the floor level of the overall gross profit margin? And lastly, could you also share the gross margin target for the L9 and other upcoming models scheduled to launch later this year? That's my follow-up question.

Tim, this is Johnny. I will take this question. Our first quarter gross margin was impacted by several factors, including the model refresh cycle. We need to refresh our L Series starting from the L9, and also a higher mix of i6, and also L6 deliveries among the total, and also purchasing tax subsidy to the i6. However, with the launch and delivery for the's all-new L9, we expect our gross margin to recover to about 10% in the second quarter. Looking at the full year, as we complete our model refresh cycle and optimize our product lineup, we expect continued improvement in our gross margin. This year, our first priority is to successfully complete the refresh for the Li L Series. We are pleased to see that the Li L9 Livis, showcasing our flagship capabilities and technology leadership is gaining strong market recognition and gaining market share above RMB 0.5 million price range. The success of this Li L9 Livis establishing a solid foothold in this price segment marks a step forward -- building upon the success of the original Li L9. This year, all-new Li L Series as well as our BEV portfolio, including Li L9 to be launched, will feature extensive in-house developed technology and lay a solid foundation for us over the next 2 years. Thank you.

Your next question comes from Feixiang Gao with Citic.

[Interpreted] Let me ask in English. What are the real vehicle performance, user feedback, intelligent differentiation highlights and actual cost reduction achieved by MAHE M100 chip and MindVLA large model? And what is the next development direction of the company's auto driving system?

This is Yan. Let me answer your question. Compared to our ADAS 8.0 version, this 9.0 version powered by our in-house MAHE M100 chip shows significant improvement. It mainly shows up in how car makes decisions in complex scenarios with more humanlike control, both longitudinally and laterally. And a smoother, more comfortable driving and riding experience overall. 9.0 is our first AD version running on our in-house chip, which is already one of the best in the highly competitive market, but it's really just the beginning. With the new platform, the sensor will collect data at higher precision and higher frame rates, which -- while the powerful compute of M100 allows us to run larger and better algorithms. So this new platform let us improve data, compute and algorithms all at the same time. And this -- and that's what will drive much faster leap in our autonomous driving capabilities. For the next step of autonomous driving, first, we will further scale up our input data and precision models, enabling more driving-related semantic information to be fed into the neural network. And this allows the model to see significantly more signals right from the sensors. Second, we will improve the model's cognitive capabilities, especially its ability to learn short-term cause and effect relationships. This empowers the model to go beyond the simple behavior fitting, allowing it to make human-like judgments in more complex urban traffic scenarios. Finally, we will make the system much better at the execution stage with more compute latency optimizations from our in-house operating system and a fully drive-by-wire chassis and the car will control motion more precisely and respond faster. That means the autonomous driving system will feel more confident and more importantly, safer. Also, because we design the software and the hardware together, our in-house M100 chip delivers triple the computing power of the previous generation platform at half the cost. Our similar cost brings 6x higher effective computing power. Under the same model, our input frame rate has tripled with an even greater increase in inference frame rate. Our goal is to match the performance of Tesla's FSD v14 in the United States in the second half of this year. The higher performance AI inference systems built around M100 chip give us a strong foundation to make this happen. Thank you.

[Interpreted] Let me ask in English. Since the implementation of the store partner program, what specific changes have been observed in key metrics such as sales per unit area, average monthly sales per store, output per employee and the expense ratio in pilot stores compared to before the reform. Has the program's current impact on sales volume met expectations? And how does the company quantitatively evaluate the program's effect on boosting sales in Q3 and beyond?

[Interpreted] Since we started to roll out the store partner program as we grant the store managers with genuine decision-making authority and profit sharing rights, it has really fully unlocked the potential of our frontline sales team. First of all, on the store manager level, we can see a fundamental shift in mindset. They've transitioned from previously store executors to actual business operators. They're able to independently view the ROI of the different business activities and really focus on the operating efficiency. In the meantime, it has also increased the stability of core management teams and long-term commitment. The store management programs have led the store owners to invest in the store long-term. They've shifted their focus from chasing short-term sales targets to cultivating the local user base, spreading word of mouth and building the competitiveness of their stores in the long term. From a timing standpoint, Q1 was a typical low season in car sales, and we're in the early stage of rolling out the store manager program. On average, each of our stores have all been their monthly sales targets. We have also successfully cleared the inventory for the previous generation L Series and also significantly increased user satisfaction. Going forward, as our store managers accumulate more operational experience and combined with our training systems and support system, we believe that the operational efficiency and capability of our stores will continue to increase. Thank you.

Your next question comes from Tina Hou with Goldman Sachs.

[Interpreted] So my first question is regarding the upcoming Li Auto L8 facelift. So wondering if there is any information that management can share at this point?

[Interpreted] As we start to complete our L Series product lineup, it is becoming clear that L9 will be a flagship 6-seater and the new L8 will be a flagship 5-seater. The 2 cars will complement each other and continue to strengthen our foothold in the high-end flagship market. The L8 has already been registered with the MIIT in April of 2026, and we're planning to launch it in liberate in June of 2026. Compared to the previous generation, the new car is larger in overall dimensions as well as wheelbase. The car will feature a 5-seat configuration with a rear passenger space significantly improved and overall riding experience also much improved. On the powertrain front, the car will also feature our in-house developed 5.5-liter, 1.5-liter turbocharged range extender system with a 72.7 kilowatt-hour 5C large capacity battery, which is exactly the same as the one seen on the L9. The 2 cars will share the same technological platform and have great energy consumption and range performance. Apart from that, the L8 will also be featured in a two-tone body color as option and also an electric running board as another option. For more information, please stay tuned for our launch event in June. Thank you.

[Interpreted] So my second question is regarding AI. So wondering how does management view the current competition and investment in the AI industry. Also, what is management's thought on the competition in the industry?

In our view, the competition in the mid- to high-end smart vehicle segment over the next 3 to 5 years will really be a competition of embodied AI. The highest technical barrier and the core determinant of the company's long-term success and competitiveness will be a deeply integrated chip and large foundational model. Take our real-world experience with in-house developed chips as an example. As in the past, technology and information really flowed freely in the industry because everybody used NVIDIA chips and others could easily coach our teams, our former employees and reach a very close level of performance despite our many innovations. However, with our in-house developed chips and much greater scale, much more computing power, much greater scale for models, we will -- we use a completely different architecture and making this traditional coaching approach ineffective because we're fully integrated vertically between hardware and software. So going forward, we will turn our systematic capability into our core moat. Our capabilities and outputs will no longer be easily replicated by others. Another critical factor is time. It took us 4 years to bring our in-house chips from starting the program to vehicle production. In the next decade, while maintaining our technological innovation edge, we will also ensure the technological barriers that are sufficiently advanced and provide long term -- a long enough time horizon as a competitive advantage.

Your next question comes from Jing Chang with CICC.

[Interpreted] So my first question is about the -- also about the intelligence. As just mentioned by Mr. Li Xiang, we will hold a more detailed intelligent technology launch event in June. So I would like to ask about -- do we have any updates on our current strategy and also planning regarding to the humanoid robotics?

[Interpreted] In the long run, we can clearly see whether it's our factories, our stores and our users, but all need humanoid robots. And we believe that robots should not be limited to start-ups or medium-sized companies or large companies. It should not be limited to us. Robots will be a standardized labor. And it's something that any company who is willing to make a difference in their field should adopt and it is not limited to any specific type of companies. As long as a company needs human beings, it will use robots. It only make a difference between whether they purchase a robot from somebody else or they develop it in-house. That would be the only difference. So from a timing standpoint, my belief is that for humanoid robots to reach full-scale development, deployment and commercialization to a point -- just like where we got to with electric vehicles between 2010 and 2015. To get to that point takes, will still take more than 3 years because in every specific area, the technological path has not converged, and there are many problems that remain to be solved. So in between this period, we still need to work on solving many hard problems.

[Interpreted] So my second question is about the overseas market. So could you share more updates on our latest overseas strategy, including our plans for 2026 and also following years? Our pace and also the contribution of international expansion, such as the overseas market sales volume target key regions, and also our product pipeline in the overseas market.

[Interpreted] We're steadfastly advancing our internationalization strategy and taking a phased approach to this. Based on the local market size, industry landscape and competitiveness, we will have choose between model, including establishing local subsidiaries, working with local dealerships or using the sole local sole distributor. In any case, we want to work with leading companies or partners locally and quickly build an integrated service system encompassing sales, delivery and after-sales. Our product and brands have continued to be recognized globally. In April -- in the Beijing Auto Show in April, we have received a lot of attention from overseas media and users and partners. We have also officially signed contracts with Saudi Arabia and UAE distributors. In the Middle East and Central Asia market, we will be taking our L Series, the range extender product line as the main product offered there. The first product will be an overseas dedicated all-new Li L9, which is optimized based on local conditions and charging capability ,UI and software ecosystem thermal management, including series of hardware and software optimizations. We will also be entering -- we'll be entering the Middle East and Central Asia market in Q3. Also starting in May, we will be gradually entering markets like Macau, China, Cambodia, Laos, and Myanmar to further cultivate our Southeast Asia market. In the second half of this year, we will introduce the all-electric Li i6 in Europe. And additionally, for right-hand drive markets, we will launch the right-hand drive version of our Li MEGA in key Asia Pacific markets, including Hong Kong, Mainland China, and Singapore by the end of this year. Regarding products, we're implementing a precise regional customization approach. All of our upcoming models will incorporate compliance with overseas regulations right from the early stage of R&D to better support our ongoing global strategy. Thank you.

As we are reaching the end of our conference call now, I'd like to turn the call back over to the company for closing remarks. Ms. Janet Chang, please go ahead.

Thank you once again for joining us today. If you have further questions, please feel free to contact Li Auto's Investor Relations team through the contact information provided on our IR website. This concludes this conference call. You may now disconnect your lines. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]