Li Auto Inc

Li Auto reported a net loss of RMB1.7 billion in Q2 2026, reversing from a net income of RMB1.1 billion a year earlier, as vehicle margin fell to 9.4% from 19.4% due to product mix and cost pressures. Total revenue declined 15.1% year over year to RMB25.7 billion, while vehicle sales revenue dropped 16.7% to RMB24.1 billion. The company maintained a robust cash position of RMB87.5 billion and repurchased 91.7 million class A ordinary shares for about RMB631.5 million. For Q3 2026, Li Auto expects deliveries between 95,000 and 100,000 vehicles and revenue between RMB26.6 billion and RMB28 billion. CEO Xiang Li cited rising costs for lithium carbonate, memory chips, and PCBs as temporary headwinds, and the company plans to launch the new Li MEGA and Li i9 in the coming months.

The draft amendment to the Road Traffic Safety Law introduces for the first time a dedicated chapter with special provisions for autonomous vehicles, clarifying that when traffic violations occur while autonomous driving functions are activated, the manufacturer or importer will be responsible for handling them, and requiring that autonomous driving functions must not be falsely or exaggeratedly advertised. The draft has 9 chapters and 170 articles, and also stipulates that autonomous vehicles must pass road traffic rule compliance testing and be legally registered before hitting the road, and implements a compulsory motor vehicle traffic accident liability insurance system. Cui Dongshu, head of the Passenger Car Market Information Joint Conference of the China Automobile Dealers Association, said this legal revision clarifies primary responsibility at the legal level and resolves the long-standing pain point of liability attribution. Market reaction was mixed. Hong Kong-listed new energy vehicle makers broadly fell, with XPeng down 9.19 percent, NIO down 3.45 percent, Li Auto down 3.60 percent, and Leapmotor down 5.71 percent. Among robotaxi concept stocks, Pony AI fell 5.62 percent and WeRide fell 3.95 percent. Meanwhile, the upstream intelligent driving industry chain was relatively resilient, with Desay SV down slightly by 0.45 percent, Momenta up 5.97 percent, and Horizon Robotics up slightly by 0.53 percent.

Japanese, Western, and Chinese automakers are facing sales headwinds in China's auto market. In the first half of 2026, Honda's China sales fell 34.6 percent year on year, Toyota Motor dropped 17.1 percent, and Nissan Motor declined 15 percent, with Japanese brands posting double-digit decreases. European players Volkswagen, Mercedes, and BMW saw drops of 20 to 30 percent, while US automaker General Motors slipped 6 percent. Chinese manufacturers also saw domestic sales fall below the previous year for the first time in two years, with EV leader BYD down 16 percent and Li Auto down 5 percent. A rapid expansion of production capacity for new energy vehicles, including EVs, has led to oversupply, pushing factory utilization rates well below the 80 percent breakeven level. The strain of overproduction is spilling over into exports, with so-called zero-kilometer used cars, where new vehicles are shipped overseas as used cars, now accounting for over 90 percent of used car exports, prompting authorities to question BYD and others. NIO CEO William Li expressed a sense of crisis, saying China's auto industry has entered its most brutal phase, as the state-led push to nurture the EV industry reaches a crossroads.

Chinese electric vehicle maker NIO announced a more than 70% year-over-year increase in vehicle deliveries for July 2026, reaching 35,934 units. The total included 20,008 units from its NIO brand and 10,155 units from the ONVO brand. For the first seven months of the year, NIO's cumulative deliveries rose about 68% to 227,057 vehicles. Among peers, XPeng recorded 38,027 deliveries, a 4% year-over-year gain, while Li Auto posted 30,468 deliveries, roughly flat compared to a year ago. BYD reported 419,211 vehicles sold in July, a 22% year-over-year increase driven by overseas demand, marking its third consecutive month of year-over-year gains.

On July 16, eight domestic automakers held launch events, six of which were new vehicle unveilings, a density that has sparked industry concern over excessively rapid product cycles. According to an incomplete tally by Red Star Capital Bureau, GAC Group, Geely Auto, Great Wall Motor, Xpeng, Leapmotor, SAIC's IM brand, Li Auto, and SAIC-GM-Wuling all had activities that day, rolling out a total of seven all-new or refreshed models. In the first half of this year, 630 new car models were introduced in China, averaging 3.5 per day, while only 173 new phone models hit the market in the same period — meaning new car launches are now more than twice as frequent as new phone releases. BYD executive He Zhiqi bluntly called it 'completely insane,' noting that a new car typically requires an investment of over 1 billion yuan and a development cycle of more than two years, yet the buzz rarely lasts three months. Dongfeng Nissan executive Sun Hao went further, likening the pace of new car launches to that of beverages. The rapid iteration has created a 'new car effect death valley,' where vehicles sell well at launch but demand fades just as production capacity ramps up, causing severe supply chain volatility. Several automakers have already booked massive asset impairment provisions — for example, SAIC Motor set aside 6.773 billion yuan in asset impairment provisions for 2025, while GAC Group's cumulative intangible asset impairments over the past three years have exceeded 3.2 billion yuan.

Li Auto has declined more than 17% over the past month, driven by a sharp drop in vehicle margins and consecutive monthly delivery declines, leaving the stock near its all-time low. The company reported June 2026 deliveries of 30,895 vehicles, down from 33,350 in May, with cumulative deliveries reaching 1,733,687. Vehicle gross margins collapsed to 6.1% in fiscal Q1 2026 from 19.8% a year earlier, and second-quarter guidance calls for 95,000 to 100,000 deliveries, a year-over-year decline of 10% to 14.5%. Despite the recent launch of the all-new Li L8 and an upcoming Li L6 model in July, the Street still sees more than 49% upside from current levels.

Xiaomi has introduced a new SUV range called Sky Nomad, stepping up its move into the automotive sector. The new vehicles will be sold as extended-range electric models, combining battery power with a combustion engine used to recharge the system and lengthen driving distance. Chief executive Lei Jun described the line, branded Xiaomi Pengcheng in Chinese, as made up of smart, versatile, spacious SUVs. The launch takes the company beyond purely battery-driven saloons and crossovers and into a larger SUV class. Xiaomi's automotive arm has grown into a meaningful contributor to turnover during the past two years, supported by sales of the SU7 saloon and the YU7 crossover.

Li Auto reported June 2026 deliveries of 30,895 vehicles, bringing cumulative deliveries to about 1.73 million, as softer monthly volumes highlight fierce competition in China's electric vehicle market. The company launched the all-new Li L8 flagship SUV in late June with premium Ultra and Livis trims priced at RMB 369,800 and RMB 429,800, respectively, but the new model has yet to fully offset the recent delivery slowdown. Investors are watching whether the Li L8 can stabilize volumes and support pricing power while Li Auto funds heavy investments in AI, battery electric vehicles, and charging infrastructure. Analysts project revenue could reach CN¥170.4 billion and earnings CN¥8.0 billion by 2029, implying a fair value of $21.18 per share, though more cautious estimates see revenue near CN¥111.7 billion and earnings of only CN¥680.6 million under deeper competitive pressures.

BYD reported a second consecutive month of global sales growth in June, with total sales rising 5.5% year-on-year to 403,472 vehicles. Overseas sales jumped 94.7% from a year earlier to 175,349 vehicles, providing the primary driver of growth as domestic China sales fell 22%, extending a run of year-on-year declines that began in May 2025. The May result, which showed a 0.3% increase, had ended an eight-month streak of declines. Domestic weakness reflects fading policy support following subsidy cuts, a prolonged property market slump weighing on household confidence, and elevated dealer inventories. China's car sales are now forecast to fall 11% this year, a sharp downgrade from a previously estimated 1% decline, according to the China Passenger Car Association.

HSBC analyst Yuqian Ding lowered the price target on Li Auto to $15.60 from $17.20 and maintained a Hold rating. Ding cut earnings forecasts for 2026 through 2028 below consensus, citing a more cautious view on the company's new car cycle and profitability outlook. Li Auto delivered 33,350 vehicles in May, with cumulative deliveries reaching 1,702,792 as of May 31. The company launched the all-new Li L9 in May, receiving more than 10,000 orders within two weeks of launch.

BYD has launched its largest electric vehicle yet, the seven-seat Great Tang SUV, starting at 239,900 yuan in China. The model has already received more than 150,000 pre-orders since its preliminary debut at the Beijing Auto Show in April. The Great Tang enters a higher-end SUV segment where domestic rivals like Huawei's Aito and Li Auto's L9 often sell for as much as 500,000 yuan. Chairman Wang Chuanfu noted that production of BYD's second-generation blade batteries is struggling to keep up with demand, while the long-range rear-wheel-drive version can travel up to 950 kilometers on a single charge under Chinese testing.