Li Auto, a Chinese electric vehicle manufacturer that raced to profitability, reported a USD 340 million net loss for the first quarter, sending its shares falling and highlighting growing pressure to export its way out of a cutthroat domestic price war.
The company’s Hong Kong-listed shares dropped as much as 8% on May 29, to HKD 55.7 (USD 7.1), before closing at HKD 57.85 (USD 7.4), down 4.3%.
On the Nasdaq, Li Auto lost 1.5% to close at USD 15.54 on May 28, following the disclosure.
In the first three months of the year, Li Auto sold 95,142 vehicles, a 2.5% improvement from a year earlier. However, revenue from selling cars during the period declined 12.7% on the year to RMB 21.5 billion (USD 3.2 billion).
A simple calculation leads to an average selling price during the first quarter of RMB 226,327 (USD 33,315.7), down 22.9% from the year before, reflecting the brutal deflationary pressure in China’s EV sector. In a phenomenon the government calls “involution,” Chinese automakers have been relying on steep price cuts in pursuit of incremental gains in domestic market share, sacrificing margins, at a time of weak consumer sentiment under an economic slowdown.
Li Auto managed to increase sales volume, but the margin on its cars for the quarter was 6.1%, far below the 19.8% recorded a year earlier. Tracing back through its quarterly results since it joined the Nasdaq in July 2020, this is the first time for the margin to sink into single digits.
The net loss of RMB 2.2 billion (USD 323.8 million), reversing from the previous year’s net profit of RMB 650.3 million (USD 95.7 million), was also the worst performance since its initial US listing. The company added Hong Kong as a dual primary listing in August 2021.
In terms of profitability, Li Auto was a leader compared with key local rivals in premium EVs, Xpeng and Nio. Li Auto’s annual bottom line turned positive for the first time in 2023, and remained so in the next two years, while the other two were stuck in the red.
However, Li Auto reported its first quarterly net loss in three years for the July-September period, of RMB 624.9 million (USD 92 million). In the final quarter of last year, it eked out a net profit of RMB 20.2 million (USD 3.0 million).
Li Tie, the company’s CFO, also known as Johnny Li, attributed the margin drop to “raw material price fluctuations and our model refresh cycle” in the May 28 filing. During an online call with analysts that followed, he explained that the main reason behind the lower average selling price was “a different product mix.”
He also said a sequential decrease in vehicle deliveries from the previous term was “due to seasonal factors related to the Chinese New Year holiday,” which always falls in the first quarter.
Li maintained a fairly upbeat tone on the outlook, projecting that gross margin will recover to “about 10% in the second quarter,” pinning hopes on the launch and delivery of the all-new Li L9 model, which has received over 10,000 orders since its release in mid-May. He added that the margin should continue improving throughout the year, “as we complete our model refresh cycle and optimize our production layout.”
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However, Joel Ying, a Hong Kong-based analyst at Nomura, described the automaker’s guidance as “unexciting.” While noting Li’s comment on the new L9 receiving over 10,000 orders, Ying said, “We believe the company still needs to put effort in winning more orders.” He said that “competition pressure from peers” remains, while material prices are rising, including lithium, memory and other things.
“We expect Li Auto to continue facing pressure on its shipment delivery and margins,” Ying said, maintaining a “neutral” rating on the stock. A “bumpy ride is likely to continue,” he said.
Jeff Chung, Hong Kong-based automotive analyst at Citi, said that “we continue to prefer Nio [or] Xpeng over Li Auto” following the latest results, which missed market expectations.
Chung forecasts that Li Auto will log net losses of RMB 5.3 billion (USD 780.2 million) for 2026 and RMB 1.3 billion (USD 191.4 million) for 2027, due to “cost inflation and intense R&D” for upcoming new models. Chung also pointed out that the new L9 is “not a game changer and Li needs to refresh its aging models within the intensifying 9-series competition among peers.”
To cope with the challenges, Li Auto is taking a similar path as its peers: seeking more exports.
The company said in its latest annual report published last month that it “formally entered” Uzbekistan, Kazakhstan, Azerbaijan, and Egypt last year, while it established R&D centers in Germany and even the US, where Chinese cars are effectively barred from the market.
“As we enter 2026, commercially, we will continue to accelerate our overseas expansion, prioritizing high-potential markets such as Central Asia, the Middle East, Europe, and Southeast Asia,” management said in the annual report.
President Ma Donghui reaffirmed the company’s strategy during the May 28 earnings call, emphasizing that Li Auto has officially signed contracts with distributors in Saudi Arabia and the United Arab Emirates. “The first product will be an overseas-dedicated, all-new Li L9,” he said, while expounding on plans for expansion into Cambodia, Laos and Myanmar along with the introduction of an all-electric Li 6 model in Europe. Regions with right-hand drive are also on the horizon, he said, eyeing Hong Kong and Singapore.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.
Note: HKD, RMB figures are converted to USD at rates of HKD 7.83 = USD 1 and RMB 6.79 = USD 1 based on estimates as of June 8, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.