Li Auto refuses to enter the ICU

In the capital market, the timing of "submitting results" is sometimes directly proportional to the performance level. In the past, Li Auto was often among the early submitters, but in the third quarter, it was rather tardy, one day later than NIO.

On November 26th, Li Auto released its third - quarter financial report. Core data such as delivery volume, revenue, and profit all showed significant year - on - year declines. The revenue was 27.4 billion yuan, a year - on - year decrease of 36.2%. The profit performance was even more dismal, with a net loss of 624 million yuan, compared with a net profit of 2.8 billion yuan in the same period last year.

What's more severe is that during the traditional peak season for car sales in the third quarter, Li Auto's delivery volume was 93,211 units, not only a nearly 39% year - on - year decrease but also a more than 16% quarter - on - quarter decline. In the same periods of 2023 and 2024, the data showed an increase of over 20% and 40% respectively.

Another unfavorable signal is that the popular i6 has the "lowest gross profit" among all Li Auto's products. This means that the only temporarily firm gross profit margin of car sales (excluding the estimated cost of the MEGA recall, with a quarterly gross profit margin of 20.4%) will continue to face pressure in the future.

Against the difficult backdrop of the weakening advantage of range - extended electric vehicles and the inability of pure - electric products to fully shoulder the burden, the significance of Li Auto's all - in approach to AI is becoming increasingly prominent. If sticking to range - extended electric vehicles was Li Auto's first major decision, now Li Auto is once again at a crossroads, with a stronger sense of a high - stakes gamble.

The difference is that AI faces far less criticism than range - extended electric vehicles and is much more important for Li Auto. It will be a long - term main line running through the entire company. Range - extended electric vehicles represent a "tactical" crossroads, while AI represents a "strategic" crossroads.

Since clearly announcing the transformation to AI at the end of last year, Li Auto has shown a determined resolve. It has been continuously making efforts in R & D investment, technological layout, and the adaptation and construction of the organizational structure. The most typical manifestation is that Li Xiang no longer manages the daily car - making business and focuses on AI and top - level strategy, the "ammunition for tomorrow," while Ma Donghui is fully responsible for the "bread for today."

The challenges Li Auto faces are two - fold. On the one hand, in the highly unified consensus, the competition in the AI track is far more intense than that of the range - extended electric vehicle track back then, and it is extremely difficult for Li Auto to break through. On the other hand, AI mainly has infrastructure value for Li Auto and is difficult to make an effective contribution to profits in the short term. It still needs continuous "blood transfusion" from the main car - selling business.

Breaking Through in the Pure - Electric "Shift Period"

Range - extended electric vehicles are Li Auto's basic market and the "supplier of provisions" for the long - term war. The significant decline in the performance of the third - quarter report has an obvious negative impact on financial data and the stock price. The potential hidden danger lies in whether there is strong and sustainable "hematopoietic ability" to support the full implementation of AI.

In fact, at the beginning of this year, Li Auto had already faintly touched the "ceiling" of range - extended electric vehicles. The core reason is that after several years of development, the range - extended electric vehicle market has become a highly mature and severely homogenized track. Just like the fuel or plug - in hybrid markets, when there is no obvious gap in technology and configuration among different brands, "price competition" will inevitably become the result of competition.

Li Auto is obviously unable to avoid this. As more and more competitors who "learn from Li Auto" emerge and establish their own characteristics, the first - mover and innovation dividends of Li Auto in the range - extended electric vehicle track and the configuration of "refrigerators, color TVs, and big sofas" have faded. Upstream, it faces all - round sniping from AITO, and downstream, there is the rapid rise of Leapmotor, which offers products at "half the price of Li Auto." Without the brand appeal moat of Huawei and lacking the extreme cost - effectiveness of Leapmotor, Li Auto has to face the dilemma of "being caught in the middle."

The refresh and upgrade of the entire L series in May this year also failed to stop the downward trend. In terms of the comprehensiveness of the upgrade, the breakthrough of core technologies, and the universality of configuration improvement, this upgrade can be regarded as the "strongest in history" for the L series, and the price remained unchanged. For example, the Pro version was upgraded from Horizon J5 to 6M, and the Max version directly adopted the "chip king" NVIDIA Thor with a computing power of 700 TOPS. Other aspects such as the chassis, battery life, and cockpit were also upgraded to varying degrees.

If Li Auto's decline is still acceptable when viewed from its own perspective, then the contrast with its old rivals is even more obvious. Since the beginning of this year, Li Auto has lagged behind XPeng in sales for several months. Since August, Li Auto has been overtaken by NIO for three consecutive months. In the same period last year, Li Auto's monthly sales were about twice or more than those of these two companies.

Not long ago, Li Auto's market value was surpassed by XPeng. In terms of this year's stock price performance, NIO and XPeng's stock prices have risen by more than 30%, while Li Auto's has fallen by nearly 10%.

To cope with the pressure of sales and inventory, Li Auto had to resort to the last resort - price cuts. Since October, the L series has undergone a significant round of terminal price cuts, with a maximum reduction of up to 45,000 yuan through a combination of cash subsidies, trade - in subsidies, and insurance subsidies. At the recent Guangzhou Auto Show, Li Auto also plans to continue upgrading intelligent configurations, including pushing innovative VLA charging and defensive AES to AD Max models and pushing the urban NOA function to AD Pro models.

Meanwhile, Li Auto's pure - electric products have not been able to fully take over the burden of the L series. The performance of the i8 has fallen short of expectations, and there are doubts about the i6's "trading price for volume." Although the MEGA is on an upward trend, the user base in this product segment is small, and the recent fire accident has undoubtedly dealt a heavy blow. At least in the short term, pure - electric products cannot replace range - extended electric vehicles as the main sales force for Li Auto, and it is even difficult to fill the gap left by range - extended electric vehicles.

Therefore, Li Auto's AI strategy has a sense of a last - ditch battle. In the highly competitive automotive track, AI may be the only way to break through.

Reconstructing Li Auto with the AI Strategy

At a closed - door strategic meeting in mid - October, Li Auto reflected on issues such as the decline in sales, R & D, and products. For the first time, it admitted both internally and externally that "the efficiency has slowed down." It also spent a whole day discussing how to invest in AI, with a focus on increasing investment earlier, stating that "more convincing results need to be delivered."

Li Xiang has repeatedly stated that "organizational ability is Li Auto's core competitiveness." To implement the AI strategy, Li Auto has made several top - down adjustments to its team and organizational structure this year.

On November 11th, Li Auto issued an organizational adjustment announcement. The Organization Department and the Human Resources Department, two first - level departments, were integrated into the Human Resources Department and incorporated into the Product and Strategy Group. Yang Haishan was appointed as the person - in - charge and reports directly to Li Xiang. This change represents the return of Li Auto's human resources from the financial system to the strategic system.

Although Li Auto responded that it was just a "normal organizational adjustment," in fact, it is strongly related to Li Xiang's hope to better promote the AI strategy. It can also be regarded as safeguarding the AI strategy at the human resources structure level. For example, in terms of the supply of core AI talents, human resources can be deeply integrated with strategic considerations. Some also believe that this move may be related to the loss of core AI talents such as Xia Zhongpu and Jia Peng.

In September, Li Auto reorganized its autonomous driving department, splitting it into 11 flat second - level departments, including splitting the previous model algorithm, mass - production R & D, and data - closed - loop teams and adding a new innovation business department. Lang Xianpeng, the top technology executive at Li Auto, clearly stated the purpose of this adjustment in an internal letter: "To achieve technological breakthroughs and product implementation at a faster speed and higher quality, and to make the autonomous driving organization continuously evolve towards an AI - oriented organization."

Even earlier, Li Auto completely abandoned the Huawei PBC system and re - adopted the OKR management model. Many Huawei - affiliated executives gradually faded out of the core management. On the surface, this is a return to the "Li Auto gene," that is, giving up radicalism, embracing the long - term, and breaking down departmental barriers. From the perspective of the AI strategy, this may also be to fit the long - cycle and trial - and - error nature of AI R & D.

Overall, Li Auto is trying to create a collaborative model of a "liquid organization": borderless, highly collaborative, and self - driven. Therefore, these changes in the organizational structure are more like "evolution" rather than just adjustments, and their underlying purpose is to ensure the efficient implementation and implementation of AI business.

The effects of a series of changes are also evident. The iteration cycle of the VLA model has been shortened from several weeks in the previous end - to - end process to a few days. The decision - making process has changed from multi - level approval to flat reporting, and the time for important decisions has been shortened from weeks to within one day.

On November 25th, Li Xiang said on a social platform that Li Auto will release smart glasses. "Li Auto's AI glasses are the best AI accessories for Li Auto." In addition, Li Auto is also considering an AI speaker, hoping to achieve more comprehensive coverage of Li Auto's AI capabilities among Li Auto car users.

The "Race" to Occupy the L3 Position

Different from XPeng's "flourishing in multiple fields" such as robots and flying cars, Li Auto's AI strategy is more focused and practical, mainly concentrated in three major areas: the VLA assisted - driving system, the MindGPT large - model for the intelligent cockpit, and AI infrastructure such as the Starry Ring OS.

Among them, VLA is the key bet for Li Auto's success or failure. Li Xiang mentioned that VLA is Li Auto's "driver large - model." It is not a complete end - to - end replacement but a combination of end - to - end and VLM, aiming to become an "AI that works like a human driver."

It should be noted that this is an infrastructure construction project that is difficult to make breakthrough progress in the short term, and its "auxiliary" effect on car sales is not obvious. For current leading intelligent driving players, except for professional reviewers and the relatively objective standard of the "take - over rate," the evaluations of ordinary users are quite subjective. It is hard to say that one has a much better experience than the other, and they each have their own advantages and disadvantages in different scenarios.

Therefore, the "race" is more about the industry level rather than the user experience level.

There has always been a debate about technological routes in the field of intelligent driving. The early debate between lidar and pure - vision solutions has not yet reached a unified consensus. The VLA that Li Auto and XPeng are heavily betting on also differs from the "world model" adhered to by Huawei and NIO. Jin Yuzhi, the head of Huawei's automotive business unit, believes that VLA is a "shortcut" route.

It is difficult for us to judge the correctness of technological routes. The final effect needs to be tested by time and users. The focus of the disputes among different companies, in addition to the differences in different concepts, is more importantly to gain a "leading position" in the upcoming L3 era.

In September, L3 - level vehicles received "conditional" production approval for the first time. Nine automakers, including Changan, BYD, and NIO, obtained the first - batch pilot qualifications, and Seres, Zeekr, Chery, and Dongfeng also quickly obtained the "entry tickets."

Just like the previous competition between end - to - end and map - less NOA, a new stage of intelligent driving competition has fully begun. Li Auto, which is generally considered to be in the "first echelon" of the industry, has the advantage of an early layout and great determination. However, like in the range - extended electric vehicle track, it faces the "squeeze" situation with Huawei within the industry and Tesla from outside.

In the past, compared with other new - energy vehicle startups, Li Auto, which achieved profitability early, had a stable "blood - supplying" ability. But now, with the decline of the basic market and a significant increase in AI investment, the pressure Li Auto faces may be no less than that of the range - extended electric vehicle route back then.

This year, Li Auto is expected to invest 12 billion yuan in R & D, making it the company with the highest investment among new - energy vehicle startups. The special investment in the AI field reaches 50%, far higher than the industry average. Despite the already large - scale investment, Li Auto still focuses more on "precise investment" rather than "scattering the net widely," which is also reflected in the investment proportion in the AI field and the focus on the VLA large - model.

Range - extended electric vehicles were a choice in the past, while AI is the most challenging application question now. Li Auto is one of the early players to start answering, but whether it can "submit the answer ahead of time" again depends not only on the sustainability of funds and the progress of technological breakthroughs but also on whether it is on the right track.

This article is from the WeChat official account “guangzi0088” (ID: TMTweb). Author: Xu Zhi. Republished by 36Kr with permission.