Li Auto (NASDAQ:LI) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
Li Auto reported a first-quarter revenue of RMB 23 billion, which is a decrease of 11.4% year over year and 20.1% quarter over quarter, primarily due to a lower average selling price and decreased vehicle deliveries.
The company launched the new Li L9 model and received over 10,000 orders within two weeks, aiming for a 20% market share in the RMB 500,000 and above SUV segment.
Li Auto's future outlook includes a delivery target of 95,000 to 100,000 vehicles for the second quarter and an expected revenue range of RMB 24.1 billion to 25.4 billion.
The company achieved a significant milestone with the deployment of its proprietary MAH100 chip and the MindValley model, enhancing its autonomous driving capabilities and cost efficiency.
Management emphasized the importance of store partner programs in improving sales efficiency and anticipated further improvements in store operational capabilities.
Li Auto plans to expand internationally with the introduction of the Li L9 in overseas markets, particularly in the Middle East and Southeast Asia, and is preparing for a Europe launch with the all-electric VIC model.
Full Transcript
OPERATOR
Hello, Ladies and gentlemen, thank you for standing by for Li Auto's first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Janet Zeng, investor Relations Director of Li Auto. Please go ahead, Janet.
Janet Zeng (Investor Relations Director)
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 to begin with prepared remarks, our President, Mr. Dong Hui Ma and our CTO, Mr. Yan Xie will join for the Q and 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 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 Ltd. 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 Generally Accepted Accounting Principles (GAAP) financial information as well as unaudited non Generally Accepted Accounting Principles (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 Generally Accepted Accounting Principles (GAAP) measures to comparable Generally Accepted Accounting Principles (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. Hsien Lee. Please go ahead.
Li Xiang (Chairman and CEO)
Hello everyone. 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, monthly sales of our BEV model, the BL6i6 has stabilized at 20,000 units per month, ranking top three among all BEV SUVs. On May 15, we launched the all new Li L9 with delivery starting on May 17. The all new L9 comes in two trims, Li L9 Ultra priced at RMB 509,800 and RMB 459,800 respectively. The primary goal of our all new generation L9 is to achieve the market position of a flagship SUV in important aspects of flagship product perception such as styling, suspension and chassis, rank 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 two weeks, the L9 Libis secured over 10,000 orders with transaction prices of over RMB 500,000. We expect that it will 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 R&B 400 to 500,000 NEV SUV market. The all new Li L9 marks the beginning of a series of new product rollouts for the Lee L series. In late June we will launch the all new LE8, an exceptional five seater flagship SUV. As the five 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 the L9. We believe the all new LE L8 might be the best handling large SUV globally while delivering the most comfortable 5 seat experience in its class. With the launch of the all new Li L9, we have successfully and fully deployed our proprietary MAH1100 chip and the MindValley 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 dataflow architecture. This unique architecture and superior computing power establish a long term technological mode for us. With an integrated hardware and software design, our chip delivers three times the effective computer power per unit cost. Furthermore, the Maho M100 chip enables us to deploy our latest MindValley model on our vehicles. The number of parameters in this new model increased tenfold from the previous version. The rollout of Mahe M100 and the mine VLA is just a starting point. Moving forward with larger models and data training at higher precision and higher frame rates, we expect a massive leap in the autonomous driving experience on May 15. The May 15 event focused primarily on hardware and vehicle performance. We believe it would require a dedicated two to three 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 walkthrough of the real world experience across in Cabin Interaction Foundation Model, autonomous Driving System agents and our Mosquito 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.
Johnny Tie
Thank you, thank you Li Xiang hello everyone. Given time constraints, my remark will be limited to first quarter financial highlights. All figures will be quoted in RMB unless otherwise stated. For further details, including the corresponding US dollar amount, we encourage you to refer to our earnings press release. Total revenues in the first quarter were 23 billion, down 11.4% year over year and 20.1% quarter over quarter. This included 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 vehicles delivery 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 21.2 billion, up 2.7% year over year and down 10.4% quarter over quarter. Gross profit in the first quarter was 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 4.8 billion, down 4.8% year over year and 13.8% quarter. 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 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 versus 271.7 million income from operations in the same period last year and the 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 net loss in the first quarter was RMB 2.3 billion versus 646.6 million net income in the prior quarter in the same period last year and 20.2 million net income in the prior quarter in the prior quarter. Diluted net loss per ADF attributable to ordinary shareholders was 2.26 in the first quarter versus diluted net earnings of 0.62 in the same period last year and 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 was the 1.7 billion used in the same period last year and 3.5 billion RMB provided in the prior quarter. Free cash flow was negative 7.4 billion in the first quarter versus negative 2.5 billion RMB in the same period last year and 2.5 billion RMB in the prior quarter. Our cash position remained solid with a quarter end balance of 94.3 billion. With this strong tax position, we continue to return to our to shareholders through a US$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 total consideration of US$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 24.1 billion and 25.4 billion. This business outlook reflects the Company's current and preliminary review on this business situation and market condition, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator and start our Q and A session. Thank you.
OPERATOR
Thank you. If you wish to ask a question, please press Star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star two. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions and if you have additional questions, you can re enter the queue. If you are a Mandarin speaker, please ask your questions in Chinese first, then follow with English translation. Your first question comes from Tin Sao with Morgan Stanley.
Tin Sao
So my first question is about L9. So how's the order inflow for the Li Auto L9 currently? And the waiting period for the Li L9 Ultra variant has 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. Thank you.
Li Xiang (Chairman and CEO)
First of all, the order pattern for the L9 is very clear. The top selling live in 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 which also sets showcases our steady foothold and in the market above R&B 500,000 which is a very positive trend for the brand. Later down the road we are going to strengthen the performance 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 Chongyeo base and the two cars can be adjusted flexibly between the production lines. So in the long term we're confident about the ability to manufacture these two models. May and June will be the ramp up period for these two cars and the monthly production capacity will fall between 4 and 5,000 units per month. At the moment, the two tone body color of Levis and also some of the unique parts on this model are supply constraint slightly supply constrained? We're now working around the clock with core suppliers to come up 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, concerning 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 over the previous generation L9. Thank you.
Tin Sao
My second question is about the profitability. What's your profitability outlook for the second quarter? And from a full year perspective, when do we expect to see a clear inflection point for earnings and given the rising raw material cost, is a return to profitability achievable this year. And separately, Li 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. Thank you.
John
Hi Tim, this is John. I will take this question. Our first gross margin was impacted by several factors including the model refresh cycle. We need to refresh our L series starting from the 9th and also a higher mix of i6 and also il6 deliveries in the total amount and also purchasing tax subsidy to the is6. However, with the launch and delivery for the all new L9, we expect our gross margin to recover about 10% in the second quarter. Looking at the full year as we complete our model refresh cycle and optimize our production lineup, we expect continued improvement in our gross margin this year. Our first priority is to successfully complete the refreshment for the Li L series. We are pleased to see that the Li L 9 leeway showingcased our flagship capabilities and technology leadership is gaining strong market recognition and was gaining market share 500,000 price range. The success of of all this Li L9 in establishing a solid foothold in this price segment marks step forward. Building upon the success of the original Li i9 this year, all new Li L9 series as well as our BEV portfolio including the i9 to be launched with feature extensive in house developed technology and laying a solid foundation for us over the next two years. Thank you.
OPERATOR
Your next question comes from Wenzhou with CICC.
Wenzhou
Let me ask in English what are the real own vehicle performance, user feedback, intelligent differentiation highlights and actual cost reduction achieved by Mahe M100 chips and MindValley large model. And what is the next development direction of the company's auto driving system? Thank you. This is Yen. 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 on in how car make decisions in complex scenarios with more human like 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 networks. 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 cost and effect relationships. This empowers the model to go beyond 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 hardware together, our in house M100 chip delivers triple the computing powers of the previous generation platform at half the cost. A similar cost brings six times 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 system built around M100 chip give us a strong foundation to make this happen. Thank you. 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 story, output per employee and expense ratio in pilot stores are 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? Thank you. Since we started to roll out the store partner program as we grant those 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 transitioned from previously store executors to actual business operators that are able to independently view the ROIs 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 owner to invest in the store long term. They 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 is a typical low season in car sales and we're in the early stage of rolling out the store manager program. On average each our stores have all 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 system and support system, we believe that the operational efficiency and capability of our stores will continue to increase. Thank you.
OPERATOR
Your next question comes from Tina Ha with Goldman Sachs. So my first question is regarding the upcoming Liator Else so wondering if there is any information that management can share at this point.
Yen
As we start to complete our L Series product lineup, it is becoming clear that L9 will be a flagship six seater and the new L8 will be a flagship five seater. The two 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 Ministry of Industry and Information Technology (MIIT) in April of 2026 and we're planning to launch and deliver it 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 five seat configuration with the 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 two 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 an option and also an electric running board as another option. For more information, please stay tuned for our launch event in June. Thank you.
Tina Ha
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?
Yen
In our view, the competition in the mid to high end car vehicle segment over the next three to five years will really be a competition of embodied AI. The highest technical barrier and the core determinant of a 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 approach our teams, our former employees, and reach a very close level performance. Despite our many innovations. However, with our in house chips and much greater scale, much more computing power, much greater scale for models, we use a completely different architecture, making this traditional poaching approach ineffective because we're fully integrated vertically between hardware and software. So going forward we will turn our systematic capabilities into our core mode. Our capabilities and outputs will no longer be easily replicated by others. Another critical factor is time. It took us four 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'll also ensure the technological barriers that are sufficiently advanced and provide a long enough time horizon as a competitive advantage. Thank you.
Jing Cheng
Your next question comes from Jing Cheng with cicc. So my first question is about the also about the intelligence. As just mentioned by Mr. Li Xiang, we will help 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 human robotics
Yen
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 startups or medium sized companies or large companies. Info 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 is not limited to any specific type of company. As long as a company needs human beings, it will use robots. It's only a difference between whether they purchase the robots for somebody else or if they develop it in house. That would be the only so from a lot of time 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 will still take more than three 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. Thank you.
Jing Cheng
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 the 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 pipelines in overseas market.
Yen
We're steadfastly advancing our internationalization strategy and taking a faith approach to this based on the local market size, industry landscape and competitiveness. We will have choose between a model including establishing local subsidiaries, working with local dealerships or using a 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 in charging capability, UI and software ecosystem thermal management including serious hardware and software optimization. We will also be entering the middle we will 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 VIC in Europe and additionally for right hand drive markets, we will launch the Right hand drive version of our Lee Mega in key Asia Pacific markets including Hong Kong, Mainland China in Hong Kong, 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 and D to better support our ongoing global strategy. Thank you.
OPERATOR
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. Jenningseng, please go ahead.
Janet Zeng (Investor Relations Director)
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 line.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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