Turning profit into loss! Li Auto's Q3 revenue fell by 36% year-on-year, with a net loss of 624 million yuan, and the Q4 guidance is nearly 30% lower than expected | Earnings report insights

Li Auto's Q3 revenue fell 36.2% year-on-year, and more seriously, the company turned from profit to loss, with a net loss of 624 million yuan, compared to a net profit of 2.8 billion yuan in the same period last year. This cliff-like decline not only reflects a significant drop in delivery volume but also exposes the multiple pressures the company faces during its transformation period.

The collapse of gross margin is particularly concerning. The overall gross margin in Q3 dropped to 16.3%, down 5.2 percentage points from 21.5% in the same period last year; the vehicle gross margin fell to 15.5%, far below last year's 20.9%. Li Auto's management attributed this to the estimated cost of the Li MEGA recall (which eroded about 4 percentage points) and the increase in unit manufacturing costs due to the decline in production.

Core financial report indicators

Q3 revenue of 27.4 billion yuan, a year-on-year decrease of 36.2% and a quarter-on-quarter decrease of 9.5%;

Net loss of 624 million yuan, compared to a profit of 2.8 billion yuan in the same period last year;

Gross margin significantly dropped to 16.3%, down 5.2 percentage points from the same period last year; excluding the impact of the MEGA recall cost, it was 20.4%;

Vehicle gross margin fell to 15.5%, mainly due to the MEGA recall cost and the increase in unit manufacturing costs caused by the decline in production;

Operating cash flow was negative 7.4 billion yuan, and free cash flow was negative 8.9 billion yuan;

Business performance:

Q3 delivery volume of 93,211 vehicles, a year-on-year plunge of 39.0%;

Estimated cost of the Li MEGA recall eroded about 4 percentage points of gross margin.

Q4 outlook:

Expected delivery volume of 100,000 to 110,000 vehicles, a year-on-year decrease of 30.7%-37.0%;

Expected revenue of 26.5 to 29.2 billion yuan, a year-on-year decrease of 34.2%-40.1%;

Based on this forecast, Li Auto's total delivery volume for 2025 is expected to be between 397,000 and 407,000 vehicles, a significant decline of about 20% compared to approximately 500,000 vehicles in 2024.

Li Auto's stock fell more than 4% in pre-market trading, as the company's Q4 revenue guidance was below market expectations.

Cliff-like drop in delivery volume puts pressure on market share

The financial report shows that Q3 delivery volume was 93,211 vehicles, a year-on-year plunge of 39.0%. More notably, this marks the second consecutive quarter of delivery volume below 100,000 vehicles—Q2 was 111,074 vehicles, Q1 was 92,864 vehicles, while last year's Q4 was 158,696 vehicles.

Analysis indicates that this decline occurs against the backdrop of overall growth in China's new energy vehicle market, suggesting that Li Auto is losing market share. In the family SUV market priced between 300,000 and 500,000 yuan, Li Auto faces fierce competition from rivals such as BYD, Huawei's Aito, XPeng, and others, with the price war intensifying The supply chain bottleneck issue mentioned by the management is also worth paying attention to. Although the total orders for the new models i8 and i6 have exceeded 100,000 units, it remains to be seen whether they can be smoothly converted into deliveries. If the supply chain issues cannot be resolved quickly, it will directly affect the performance in Q4 and subsequent quarters.

Cash flow deteriorates sharply, funding pressure emerges

More concerning than the accounting losses is the overall deterioration of cash flow.

The financial report shows that the cash flow from operating activities in Q3 was negative 7.4 billion yuan, compared to positive 11 billion yuan in the same period last year. Free cash flow reached negative 8.9 billion yuan, a stark contrast to the positive 9.1 billion yuan in the same period last year.

Management explained that the deterioration in cash flow was mainly due to a decrease in cash received from customers and an increase in payments related to inventory purchases. The former reflects weakness on the sales side, while the latter suggests that the company has made significant stockpiling for the production of new pure electric models.

The transition to pure electric faces challenges, but there are still highlights

The financial report states that the total orders for the Li Auto i8 and i6 have exceeded 100,000 units. The Li Auto i6, launched in September, is positioned as a five-seat pure electric SUV, with a starting price of 249,800 yuan targeting the mainstream family market, featuring competitive configurations such as a 5C battery and a range of 720 kilometers.

At the same time, the high utilization rate of the VLA driver model (reaching 91% in October) is also a positive signal, indicating that the company's investment in intelligence is translating into user value. In the competition of new energy vehicles where "intelligence is differentiation," this is an important moat for Li Auto.

However, the financial report shows that R&D expenses reached 3 billion yuan in Q3, a year-on-year increase of 15.0%, accounting for more than 10% of revenue. Maintaining high-intensity R&D investment while revenue declines further compresses profit margins.