Li Auto reported second-quarter 2026 revenue of CN¥25.7bn (US$3.8bn), a 15.1% decline from CN¥30.2bn in the same period a year earlier, as deliveries fell 11.5% to 98,330 vehicles. Gross margin compressed to 11.0% from 20.1%, while vehicle margin dropped from 19.4% to 9.4%, with the company attributing the deterioration primarily to a different product mix during a major model refresh cycle.

The company posted a net loss of CN¥1.7bn for the quarter, down from a profit of CN¥1.1bn in Q2 2025. Operating margin was (9.0)%, down 6.3pts. On a sequential basis, however, results improved across most metrics: revenue rose 11.7% from Q1 2026, gross margin widened from 7.9%, and operating losses narrowed from CN¥3.0bn. Free cash flow was CN¥(1.3)bn, an improvement from CN¥(7.4)bn in Q1 2026.

Li Auto launched the refreshed Li L8 in June, available in Ultra and Livis trims priced at CN¥369,800 and CN¥429,800 respectively, and the new Li L6 in July at CN¥249,800. July deliveries reached 30,468 vehicles. The company has repurchased approximately 91.7 million Class A ordinary shares for an aggregate consideration of approximately US$631.5m under its US$1.0bn buyback programme announced in March.

Despite the year-on-year deterioration, Li Auto claims to be the best-selling domestic automotive brand in China’s CN¥200,000+ NEV market in the first half of 2026. Cash and cash equivalents stood at CN¥87.5bn as of June 30, providing a substantial buffer as the company works through its model transition. R&D expenditure held broadly stable at CN¥2.8bn in Q2, reflecting continued investment in the MACH M100 chip and associated AI systems unveiled at the company’s Livis Day event in June.

For Q3 2026, Li Auto’s guidance is 95,000-100,000 deliveries and total revenues of CN¥26.6-28.0bn. The company said it expects margin expansion in the second half as product mix improves with higher sales contribution from Livis trim models and the launch of refreshed BEV models and the Li i9.

Why this matters:

• Sequential margin improvement matters more than the year-on-year decline for judging near-term trajectory.Vehicle margin recovering from 6.1% to 9.4% quarter-on-quarter, even while remaining well below last year’s 19.4%, suggests the worst of the pricing and mix pressure from the model transition may be easing, though it has not yet resolved.
• Flat third-quarter guidance implies limited near-term confidence despite new model launches.With delivery guidance sitting close to Q2’s actual result, the L6 and Li i9 refreshes appear expected to sustain rather than meaningfully lift volume in the immediate term, pushing the real test of demand recovery into the following quarters.
• Hitting the full-year delivery target now requires an implausible fourth-quarter acceleration.Needing roughly 196,500 to 201,500 vehicles in Q4 to reach the stated 490,000-unit goal, nearly double the current quarterly run rate, suggests the target itself may already be effectively unreachable barring an unprecedented surge in demand. A similar problem is currently unfolding with Xiaomi, which is banking on the Sky Nomad EREV launch if it wants to come close to its 550,000-unit 2026 target.