Summary of Key Points
The newly launched luxury SUVs, the Li Auto L9 and WM Motor M9, both priced in the five-hundred-thousand yuan range, have been extremely successful. However, the underlying strategies behind their success are quite different: Li Auto relies on user trust (by providing financial guarantees to mitigate policy risks and ensuring vehicle resale value), even at the cost of short-term profits; WM Motor, on the other hand, leverages Huawei's brand and technological strength. While WM Motor has generated significant buzz, its profits are diluted by high marketing expenses, and it also faces challenges related to the evolution of its target customer base. There is no right or wrong approach; they simply represent different choices: one focuses on building long-term trust, while the other aims for short-term popularity.
I. Comparing Sales Figures: Don’t Make Direct Comparisons
Li Auto claims that within two weeks of the L9’s launch, over 10,000 pre-orders were placed (90% of which were for the top-of-the-line model), while WM Motor reported cumulative pre-orders of 70,000 for the M9. Many people compare these numbers to determine who has won, but they are not directly comparable:
- Li Auto’s 10,000 pre-orders refer to firm commitments made after the official launch (with no refund option), over a two-week period;
- WM Motor’s 70,000 pre-orders include both intent deposits and potential cancellations, spanning nearly one and a half months from April to May.
Therefore, comparing the numbers alone is meaningless. However, it does reveal some key differences: Li Auto’s customers are willing to pay for the highest-end options, recognizing the product’s value; WM Motor’s customers are attracted by Huawei’s brand and technology.
II. Li Auto’s Sharp Drop in Gross Profit Margin: Not a Disaster, but a Strategic Investment
In Q1 of 2026, Li Auto’s gross profit margin plummeted from 20.5% to 7.9%, resulting in a net loss of 2.3 billion yuan. Many believe this indicates a crisis, but it was actually due to two strategic investments:
1. Investment in Market Strategy: To compete with Tesla and Xiaomi in the electric vehicle market, Li Auto launched the affordable electric i6 to increase sales volume and lower the average price. Additionally, discounts were offered on older L-series models, which reduced overall profits. This was a voluntary sacrifice to address its shortcomings in the electric vehicle sector.
2. Customer Benefits: With the reduction of purchase tax policies, the industry shifted the burden of additional costs to consumers. Li Auto took full responsibility for these costs, while other companies did not. Moreover, Li Auto stopped selling older models three months before the new models were released, avoiding price cuts that could have affected sales and caused capacity waste. This approach preserved the resale value of existing vehicles for its customers. Although the financial results were poor, it strengthened user trust.
Li Auto’s CFO expects the gross profit margin to return to 10% in the second quarter, and the company holds 94.3 billion yuan in cash, ensuring its financial stability.
III. WM Motor’s Success: Where Does the Money Go?
WM Motor’s impressive pre-orders for the M9 are noteworthy, but its financial reports reveal underlying concerns:
- High Gross Profit Margin, Low Profit: The company had a high gross profit margin of 26.2% in Q1 (above industry average), but sales expenses amounted to 3.72 billion yuan (a cost ratio of 14.4%), significantly higher than those of competitors like BYD (4%) and Great Wall (6%). Marketing and distribution costs consumed most of the profit, leaving an net profit of only 100 million yuan, a 73% decrease year-over-year.
- Rental from Huawei: From 2022 to 2025, WM Motor paid Huawei a total of 75 billion yuan for technology licenses, with this amount increasing by 483% in 2024. The more WM Motor sells, the more it pays to Huawei, limiting its profit margins.
WM Motor’s premium positioning relies on Huawei’s technology, but this also creates a dependency. It faces a dilemma: if it wants to continue using Huawei’s technology, it must pay; if it aims for independent development, additional costs are required.
IV. User Anxiety Due to Model Upgrades
Both companies have released new models, leaving questions about what to do with existing vehicles. Their approaches differ significantly:
- Li Auto: The company takes direct action to alleviate user concerns by stopping sales of older models and covering purchase tax costs, ensuring customers do not face additional expenses. This may result in poor financial performance, but it maintains the resale value of old vehicles for its customers.
- WM Motor: While the M9’s upgrade includes significant improvements (such as increasing the number of laser radars to six and adding 800V fast charging), the trade-in value for older models only decreases by 20,000 to 50,000 yuan. WM Motor’s core customer base is tech-savvy, accustomed to rapid product updates. However, as more families purchase M9s as long-term investments, the issue of vehicle depreciation becomes more prominent.
In summary, Li Auto uses financial resources to address user concerns, while WM Motor relies on technological advancements to mask these issues.
V. The Leadership Styles: Yu Chengdong Builds Faith, Li Xiang Builds Trust
The leadership styles of the two company founders greatly influence their brand approaches:
- Yu Chengdong: He creates a sense of “far-leading” superiority through confident and flamboyant press conferences, emphasizing Huawei’s technology and building a loyal user base. This approach can lead to rapid sales, but it may also isolate the company from negative feedback.
- Li Xiang: His straightforward communication (which sometimes attracts criticism) is aimed at maintaining customer trust. He delivers on his promises, such as ensuring vehicle resale value by stopping older model sales and covering costs. Despite public backlash, customers recognize his sincerity.
Faith can drive immediate sales, but trust is what ensures long-term customer loyalty. Short-term popularity may be impressive, but true success depends on customer satisfaction.
Conclusion: The Ultimate Competition Lies in Customer Loyalty
The winner in the five-hundred-thousand yuan luxury SUV market is not determined by the number of pre-orders at a single launch event, but by whether customers are willing to continue buying and recommending the brand. Li Auto focuses on building trust over the long term, while WM Motor relies on rapid growth driven by Huawei’s support. There is no one-size-fits-all solution; ultimately, only brands that retain customers can achieve lasting success. After all, quick sales may indicate technical prowess, but it is the ability to retain customers that truly defines a company’s competitiveness.