$Li Auto(LI.US)

Li Auto 26Q1 Earnings Report: Revenue and Profit Both Decline, Gross Margin Falls to 7.9%

Key Takeaways:

1. Revenue and Profit Both Decline, Quarterly Performance Turns from Profit to Loss: Total revenue for Q1 2026 was RMB 23.0 billion, down 11.4% year-over-year. Affected by product mix adjustments and market price cuts, net profit for the period turned from profit to loss, recording a loss of RMB 2.3 billion. Core profitability indicators face phased adjustment pressure.

2. Intensified Market Competition, Gross Margin Significantly Declines: Against the backdrop of the new energy vehicle price war in China, the company's Q1 vehicle deliveries increased slightly by 2.5% to 95,142 units, but the quarterly gross margin fell from 20.5% in the same period last year to 7.9%. This shows that as competition in the segment intensifies, the original brand premium space is being compressed, and pricing power is being tested.

3. Operating Expenses Continue, Free Cash Flow Turns Negative: With the consumption of new product R&D and technology investment, free cash flow (FCF) for this quarter turned negative, with a net outflow of RMB 7.4 billion. The phased pressure on cash flow places higher demands on the company's subsequent heavy-asset synergy and capital management efficiency.

4. Advancing Vehicle Model Cycle Updates, Market Awaits Scale Effect Recovery: Management is accelerating product iteration, launching the new Li L9 and the Li L8 planned for delivery in June to cope with market pressure. Q2 revenue guidance is set at RMB 24.0 billion to RMB 25.4 billion. The start of the new product cycle is expected to drive a sales rebound and gradually improve profit margins in the second half of the year.

5. Ample Cash Asset Reserves, Buyback Plan Provides Downside Protection: Despite short-term fundamental pressure, the company still holds ample cash and cash equivalents of RMB 94.3 billion (approximately USD 13.7 billion) on its books, and its balance sheet shows strong risk resistance. At the same time, the USD 1.0 billion stock buyback plan being advanced by management also provides a certain psychological safety cushion for market valuation.

Li Auto's Q1 was affected by the intertwined impact of the price war and internal product structure adjustments, with gross margin declining and the quarter recording a loss. However, its resilient cash reserves on the books and the subsequent normalized delivery of new models provide the necessary financial defense support for it to navigate the industry reshuffle period.

Source: Yidu Caibao, providing original earnings report downloads.

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