Li Xiang needs new tricks.
On August 28, 2025, Li Auto released its financial report for the second quarter ended June 30, 2025. Li Auto's performance has declined, and the year - on - year and quarter - on - quarter changes in key financial indicators reveal that the company is facing severe challenges.
The financial report data shows that Li Auto delivered a total of 111,074 vehicles in the second quarter of 2025, representing only a 2.3% year - on - year increase compared to 108,581 vehicles in the same period in 2024. The company's total revenue was 30.24 billion yuan, a 4.5% decrease compared to 31.67 billion yuan in the second quarter of 2024. Among them, vehicle sales revenue was 28.88 billion yuan, a 4.7% year - on - year decrease.
The financial report mentioned that the main reasons for the revenue decline were the decrease in the average selling price of vehicles due to the change in the product mix, as well as the interest subsidies and increasing sales incentives provided by the company to attract customers.
In terms of profitability, Li Auto's performance also declined. The gross profit in the second quarter was 6.067 billion yuan, a 1.8% decrease compared to 6.177 billion yuan in the same period last year. The gross profit margin was 20.1%, a slight increase compared to 19.5% in the same period last year. However, this was mainly due to the improvement in vehicle profit margins brought about by cost reduction, rather than a strong performance on the sales side. The vehicle profit margin was 19.4%, higher than 18.7% in the same period last year, indicating that the company has achieved certain results in production cost control.
Data at the operational level shows that Li Auto's operating expenses in the second quarter were 5.24 billion yuan, a 8.2% year - on - year decrease. Among them, R & D expenses were 2.81 billion yuan, a 7.2% year - on - year decrease; selling, general and administrative expenses were 2.71 billion yuan, a 3.5% year - on - year decrease.
Reducing operating expenses is a cost - control measure taken by the company in the face of market pressure. These measures led to an operating profit of 827 million yuan, a 76.7% year - on - year increase, and the operating profit margin increased from 1.5% in the same period last year to 2.7%. However, the net profit failed to continue this growth trend. The net profit in the second quarter was 1.097 billion yuan, a slight 0.4% decrease compared to 1.1 billion yuan in the same period last year. The non - GAAP net profit was 1.468 billion yuan, a 2.3% year - on - year decrease. This shows that although the company tried to control costs, the weakness on the revenue side ultimately eroded the profit results.
The most worrying part of the financial report is the company's cash flow situation. In the second quarter of 2025, the net cash used in operating activities of Li Auto was (in the original financial report, the term 'Net cash used in operating activities' was used, indicating that the company's daily business operations consumed more cash than they generated, representing a worrying financial situation. In contrast, 'Net cash provided in operating activities' means that the cash generated in operations is more than the cash used, indicating a good financial situation) negative 3.036 billion yuan, a significant 607.1% increase in cash outflow compared to negative 429 million yuan in the same period last year. The free cash flow was negative 3.842 billion yuan, compared to negative 1.853 billion yuan in the same period last year, an increase in cash outflow of 107.4%.
According to the financial report, the deterioration of operating cash flow and free cash flow was mainly due to the increase in payments related to inventory purchases. This indicates a mismatch between vehicle production and sales, and the company may face the pressure of inventory backlog.
Furthermore, the company expects vehicle deliveries in the third quarter of 2025 to be between 90,000 and 95,000 units, which means a significant year - on - year decline of 41.1% to 37.8%. Correspondingly, the total revenue is expected to be between 24.8 billion and 26.2 billion yuan, with an expected year - on - year decline of 42.1% to 38.8%. This shows that Li Auto is entering a relatively difficult period.
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At the conference call after the financial report was released, Li Xiang, the founder, chairman, and CEO of Li Auto, tried to inject some confidence into this poor report card. He emphasized that the company "persistently pursues user - centered technology and product innovation", and mentioned that the Li MEGA won the sales championship in the MPV market above 500,000 yuan, as well as the newly launched all - electric SUV, the Li i8. He said that the company will continue to invest in products and intelligentization, and expects the Li i6 to be launched in September to further expand the product line.
Chief Financial Officer Li Tie emphasized that the company focused on cost optimization and operational efficiency improvement this quarter, achieving "robust profitability", and said that the company's healthy financial situation is sufficient to support future innovation - driven growth. However, these optimistic statements are in sharp contrast to the cold financial data and pessimistic performance guidance.
Li Xiang has always presented himself as a "super product manager". He once said in a conversation with Luo Yonghao that among the bosses of new car - making forces, only he and Lei Jun of Xiaomi are "super product manager - type bosses", and only they can create super products.
Although Li Auto's quarterly performance and short - term forecast have declined, if we shift our focus from the performance of a single quarter and examine the company's overall situation and the external environment, we will find some factors that are beneficial to Li Auto.
First and most importantly, Li Auto has an extremely abundant cash reserve.
According to the financial report, the total amount of Li Auto's cash and cash equivalents, restricted cash, time deposits, short - term investments, and time deposits and financial instruments in long - term investments is as high as 106.9 billion yuan. This huge amount of funds is the strongest moat for Li Auto to cope with market fluctuations. It means that the company has enough capital to bear short - term losses and cash outflows, can continue to invest in R & D, and has greater strategic flexibility in market competition without making decisions that harm long - term development due to short - term financial pressure.
More importantly, the macro - policy environment of the Chinese automotive industry is undergoing subtle changes, and these changes are beneficial to companies like Li Auto.
For a long time, the Chinese new energy vehicle market has been highly competitive, with price wars occurring frequently. Many car companies have sacrificed profits in order to seize market share. This vicious competition has not only damaged the overall healthy development of the industry but also brought great pressure to the supply chain. To correct this phenomenon, relevant national departments have begun to call on car companies to end the excessive competition and return to rational competition. At the same time, in response to the widespread problem of long payment terms for suppliers in the automotive industry, departments such as the Ministry of Industry and Information Technology have launched the "work related to stabilizing the supply chain and ensuring supply in the automotive industry", advocating that vehicle manufacturers shorten the payment terms to suppliers to within 60 days.
This policy orientation is actually a positive signal for Li Auto. Li Auto's products are positioned for mid - to high - end family users, and its core competitiveness lies in its in - depth understanding of user needs and product definition ability, rather than low - price competition. The call to end excessive competition helps to suppress irrational price wars in the market and return competition to the track of product strength, technological strength, and brand strength, which are exactly Li Auto's advantages.
Li Auto has already set an example in the issue of supplier payment terms. On July 23, the company announced that it had completed the adjustment of payment terms for all direct - purchase suppliers in mid - July, with a contract payment term of 60 days and monthly payments, and most of them were settled by wire transfer. This measure not only responds to the national call but more importantly, consolidates the relationship with supply chain partners.
In an industry like the automotive industry that highly depends on supply chain collaboration, a stable and healthy supply chain system is the cornerstone of a company's long - term development. In contrast, those competitors who are deeply involved in price wars and have tight cash flows will find it difficult to fulfill the commitment of a 60 - day payment term in a short time. They may face the risk of supply chain disruption due to overdue payments to suppliers, thus being at a disadvantage in future competition. Therefore, from this perspective, although Li Auto is under short - term performance pressure, its stable business philosophy and healthy financial situation put it in a relatively favorable position when the industry enters an adjustment period.
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However, Li Auto can't be too optimistic. Although Li Auto has strong financial resources and a relatively stable supply chain, the external competitive pressure it faces is intensifying at an unprecedented speed, and the time window for it to adjust and respond may not be as long as expected.
The real threat comes from the emergence of well - positioned and powerful direct competitors. Although Li Auto launched its first all - electric six - seat family SUV, the Li i8, in July, which was highly anticipated to help Li Auto open up a new situation in the all - electric market, its competitors also showed their aces almost at the same time.
Tesla, the global leader in the electric vehicle market, launched a six - seat version of the Model Y L for the needs of family users in the Chinese market. Tesla's strong brand appeal, mature three - electric technology, and efficient cost - control ability make it a formidable opponent that cannot be ignored in any niche market.
The emergence of the six - seat Model Y L will directly impact the market segment where the Li i8 is located. At the same time, LeDao, a sub - brand of NIO, also released its large all - electric SUV, the LeDao L90, which is also a six - seat SUV targeting family users. Relying on NIO's mature battery - swapping system and brand image accumulated in the high - end market, the LeDao L90 also has strong competitiveness.
The Li i8, the six - seat Model Y L, and the LeDao L90 highly overlap in terms of price, size, seat layout, and target users, and a fierce head - on collision is inevitable. In this all - electric SUV market with similar prices and a five - door, six - seat layout, the label of "refrigerator, color TV, big sofa" that Li Auto relied on for success in the past is quickly losing its uniqueness.
Once upon a time, these comfort features were the magic weapons for Li Auto to attract family users. However, now these features have become the "standard configuration" for vehicles in this class. Competitors can not only provide them but also do better in some aspects. When everyone has a refrigerator, a color TV, and a big sofa, Li Auto's differential advantage is greatly weakened.
This means that Li Xiang needs to tell a new and more attractive story for the Li i8 and the Li i6 to be launched in September.
The past model of defining products by accurately capturing family users' needs for space and comfort faces new challenges in the all - electric era. Users of all - electric vehicles pay more attention to intelligentization, energy replenishment efficiency, and driving experience. Although Li Auto is also investing heavily in its own intelligent driving system, the VLA Driver large model, and the intelligent cockpit system, "Li Auto Mate", whether the leading advantages of these technologies are sufficient to build a new moat remains to be tested by the market.
According to the management's speech in the financial report conference call, Li Auto's future focus will be clearly concentrated in two core areas: the expansion of all - electric vehicle models and in - depth self - research on intelligent technologies.
Li Xiang's statement clearly outlines the company's product roadmap. After the all - electric MPV Li MEGA and the newly launched six - seat all - electric SUV Li i8, the company will continue to expand its all - electric (i - series) product lineup to occupy a more important position in the high - end all - electric vehicle market in China. However, no information was revealed about all - electric vehicle models after the Li i6.
At the technical level, Li Auto will continue to increase its investment in the intelligentization field, especially the high - level assisted driving system supported by its self - developed VLA Driver large model and the intelligent cockpit "Li Auto Mate" based on the self - developed MindGPT large model. These will be the keys for Li Auto to try to surpass the "refrigerator, color TV, big sofa" model and build new core competitiveness in the competition of product homogenization.
In May this year, at the second season of Li Auto AI Talk, Li Xiang said that the realization of VLA is not a sudden change but a continuous evolution process, which corresponds to the past, present, and future of Li Auto's assisted driving.
He compared the first - stage self - developed assisted driving that relies on rules and high - precision maps to "insect - animal intelligence"; the second - stage end - to - end + VLM (visual language model) pushed since 2024 is close to "mammalian intelligence". The ultimate goal, the third - stage VLA, will open up real "human intelligence".
Li Xiang believes that in the future, VLA will be a large model like a human driver. It can fully perceive the physical world through a combination of 3D and 2D vision and has a complete "brain" including language ability and thinking - chain reasoning ability, so as to understand, make decisions, and execute like a human. Eventually, VLA will be presented in the product form of a "driver agent", and users can communicate with it in the most natural way.
To ensure the safety of this powerful model, Li Auto has formed a "super alignment" team of more than a hundred people to inject the qualities of professional drivers into it and avoid learning dangerous behaviors such as cutting in line. At the same time, through self - developed "world models" for simulation verification, the problem of the AI black box is solved. Li Xiang firmly believes that in the AI era, solid basic skills are more important than taking shortcuts, and the ability barriers built by large enterprises through self - developed underlying technologies can never be easily overcome.
However, on the day when Li Auto released its financial report, Jin Yuzhi, the CEO of Huawei's Intelligent Automotive Solution Business Unit, believed that companies following the VLA technology route are currently learning information from the Internet through various large language models such as OpenAI and then converting all learning into the LM method to master knowledge.
He said, "Huawei will not take the VLA path. We think this path seems to be a shortcut, but in fact