Li Auto reported a sharp deterioration in profitability during the first quarter of 2026, posting a net loss of 2.3 billion yuan ($330 million) as lower vehicle margins and slowing sales growth weighed on results.
The Chinese automaker released its unaudited first-quarter earnings on Thursday, reporting a reversal from the 647 million yuan net profit recorded in the same period a year earlier.
Revenue declined 11.4% year-on-year to 23 billion yuan, reflecting increasing competitive pressure in China’s electric vehicle market and a shift in product mix.
Despite the weaker financial performance, Li Auto delivered 95,142 vehicles during the quarter, exceeding its previously forecast range of 85,000 to 90,000 units.
Vehicle deliveries rose 2.5% compared with the first quarter of 2025 but declined 12.9% from the fourth quarter of last year.
The company’s profitability was hit by a significant decline in vehicle margins.
Gross margin fell to 7.9% in the first quarter, down from 20.5% a year earlier.
Li Auto attributed the decline primarily to lower average selling prices, changes in product mix and intensifying price competition across China’s new energy vehicle market.
The margin compression also affected cash generation.
Operating cash flow turned negative 6.09 billion yuan during the quarter, while free cash flow fell to negative 7.39 billion yuan, underscoring the impact of weaker profitability and softer market conditions.
Looking ahead, the company issued relatively cautious guidance for the second quarter.
Li Auto expects deliveries of between 95,000 and 100,000 vehicles, representing a decline of between 10.0% and 14.5% compared with the same period last year.
Second-quarter revenue is projected to range from 24.1 billion yuan to 25.4 billion yuan, which would represent a year-on-year decline of between 16.0% and 20.2%.
Based on the guidance, the company expects combined deliveries in May and June to reach between approximately 60,900 and 65,900 vehicles.
The outlook contrasts with forecasts issued by several domestic rivals.
Nio recently projected second-quarter deliveries of up to 115,000 vehicles, while Xpeng forecast deliveries of as many as 106,000 units during the same period.
To support a recovery in sales and strengthen its market position, Li Auto is accelerating new product introductions.
The company launched the updated Li Auto L9 in mid-May and expects the model to contribute to stronger performance during the second half of the year.
Li Xiang, founder, chairman and chief executive officer of Li Auto, said the company made progress in improving operations during the quarter despite challenging market conditions.
“The launch of the all-new Li L9 will consolidate the company’s benchmark position in the flagship SUV market,” said Li Xiang, Founder, Chairman and Chief Executive Officer of Li Auto.
Li Xiang added that organizational improvements and supply chain optimization efforts delivered measurable results during the first quarter.
Despite the loss, Li Auto maintained a substantial liquidity position.
As of March 31, the company held cash reserves of 94.3 billion yuan, providing financial flexibility as it navigates continued competition and pricing pressure in China’s electric vehicle sector.
The results highlight the increasingly difficult operating environment facing Chinese EV manufacturers, many of which continue to balance growth ambitions, aggressive pricing strategies and investments in new technologies while competing for market share in the world’s largest automotive market.
