Li Auto reported a second-quarter net loss of 1.7 billion yuan ($251 million), narrowing from 2.3 billion yuan in the first quarter but reversing a net profit of 1.1 billion yuan a year earlier. Vehicle deliveries increased sequentially during the quarter, although lower volumes and average selling prices continued to pressure revenue and margins.
Revenue and Deliveries
Second-quarter revenue reached 25.7 billion yuan, down 15.1% from the same period a year earlier but up 11.7% from the first quarter.
Revenue from vehicle sales fell 16.7% year-on-year to 24.1 billion yuan. Li Auto attributed the decline to lower deliveries and a reduction in average selling prices resulting from changes in its product mix.
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The company delivered 98,330 vehicles during the quarter, down 11.5% year-on-year but 3.4% higher than in the first quarter. The figure was in the upper half of Li Auto’s guidance range of 95,000 to 100,000 vehicles.
Vehicle Margins Improve
Li Auto’s vehicle margin increased to 9.4% from 6.1% in the first quarter, although it remained significantly below the 19.4% recorded a year earlier.
Overall gross margin improved to 11.0% from 7.9% sequentially but remained below the 20.1% reported a year earlier.
Gross profit fell 53.3% year-on-year to 2.8 billion yuan. However, it increased 56.9% from the first quarter as the company benefited from improvements associated with newer products.
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Li Auto said those improvements were not yet sufficient to offset the impact of vehicle sales volumes and pricing.
Operating Loss Narrows Sequentially
Operating expenses decreased 2.0% year-on-year to 5.1 billion yuan.
Despite the lower expenses, Li Auto reported an operating loss of 2.3 billion yuan, compared with operating income of 827 million yuan in the second quarter of the previous year.
Cash flow showed a stronger sequential improvement. Operating cash flow turned positive at 15 million yuan in the second quarter, compared with a net outflow of 6.1 billion yuan in the first quarter.
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Free cash flow remained negative at 1.3 billion yuan but improved substantially from negative 7.4 billion yuan in the previous quarter.
Cash Reserves and Share Repurchases
Li Auto held 87.5 billion yuan in cash reserves at the end of June, a decrease of 6.8 billion yuan from the end of March.
During the second quarter, the company spent HK$2.1 billion on share repurchases in Hong Kong and $150.9 million on repurchases in the United States.
As of the earnings release, Li Auto had used approximately $631.5 million of its $1 billion share repurchase program.
Li Auto Issues Third-Quarter Guidance
Li Auto expects to deliver between 95,000 and 100,000 vehicles in the third quarter. The forecast represents year-on-year growth of between 1.9% and 7.3%.
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The company expects third-quarter revenue of 26.6 billion yuan to 28.0 billion yuan, corresponding to a year-on-year change ranging from a 2.8% decline to 2.3% growth.
At the midpoint of the delivery guidance, third-quarter volumes would remain broadly unchanged from the second quarter.
New EV Models Expected to Support Sales
Li Auto is counting on refreshed battery-electric vehicle models, including the Li L6, along with the upcoming Li i9, to improve its product mix.
Chief Financial Officer Tie Li expects margins to expand during the second half of the year as higher-priced Li vehicle variants contribute a larger share of sales and refreshed battery-electric models enter the market.
The company faces additional pressure if it maintains its full-year delivery target of approximately 490,000 vehicles. Based on the reported first-half performance, Li Auto would need to deliver around 196,500 to 201,500 vehicles in the fourth quarter to reach that target.
The required fourth-quarter volume would represent a substantial increase from the company’s current quarterly delivery level.