Summary of Key Points
In the first quarter of 2026, the new energy vehicle industry faced a challenging period due to the reduction in purchase tax incentives and rising raw material costs, resulting in a 21.1% decline in sales year-on-year. However, Li Auto managed to achieve growth against this trend: it delivered 95,000 vehicles (a 2.5% increase year-on-year), ranking first among Chinese new energy brands with annual sales exceeding 200,000 units. Its pure electric business (such as the i6 model) was a major contributor to sales growth, while its extended-range vehicle business completed a technological upgrade with the launch of the new L9. Li Auto also demonstrated financial stability, with a cash reserve of 94.3 billion yuan, and continued to increase its research and development (R&D) investments. Its "pure electric + extended-range" business model has proven resilient to economic cycles.
I. Li Auto's Growth in the Industry's "Cold Winter"
The new energy industry had a tough time this quarter: purchase tax incentives were reduced, leading to consumer hesitation; at the same time, rising costs for battery and chip materials increased manufacturing expenses, forcing companies to either raise prices and scare off customers or absorb the losses. As a result, most companies saw declines in both sales and profits.
Li Auto stood out, delivering 95,000 vehicles, exceeding its own target of 85,000-90,000 units and taking the lead among Chinese brands with annual sales over 200,000 units. The secret to its success lies in two factors: first, its pure electric business emerged during a transition period for extended-range vehicles; second, it built customer trust by covering the difference in purchase taxes for existing customers, preventing them from bearing additional costs.
II. The Rise of the Pure Electric Business
Previously, Li Auto's focus was on extended-range vehicles, which some criticized as being too reliant on a single business model. In 2025, it made pure electric technology its core strategy, and this year, the efforts paid off:
- Bestselling Models Driving Sales: The pure electric i6 sold 20,000 units in June and even surpassed 24,000 units in March, reaching 100,000 units in just seven months—making it one of the fastest-selling pure electric SUVs in its price range.
- A Strong Charging Infrastructure: With 4,077 self-built supercharging stations offering 5C charging (which can charge the battery for hundreds of kilometers in minutes), Li Auto has reduced customer concerns about charging. By the end of this year, it plans to double the number of superchargers to 8,300, further enhancing convenience for pure electric users.
- Customer-Focused Approach: During price increases, Li Auto compensated customers who placed orders for the i6 in 2025 but had not received their vehicles by covering the full amount of the purchase tax difference. This move increased customer loyalty despite short-term profit losses.
Now, the pure electric business is capable of driving growth on its own, freeing Li Auto from the risks associated with a single focus area.
III. A Fresh Approach to Extended-Range Vehicles
Extended-range vehicles were Li Auto's strength, but this quarter it took a bold move against industry trends by discontinuing all older L-series models. It neither reduced prices to clear inventory nor sold both old and new models simultaneously. The reasons behind this decision are:
- Protecting Customer Trust: Selling both old and new models while reducing prices could have given the impression of losing value to existing customers, damaging the brand's reputation.
- Making Room for New Technologies: By discontinuing the older models, Li Auto freed up production capacity to produce the new L9, which incorporates advanced technologies such as self-developed chips, body-intelligent systems, and electronically controlled chassis. The new L9 was an instant hit, with the Livis version (focusing on intelligence) attracting thousands of orders within two weeks of its launch, aiming for a 20% market share in the high-end segment.
IV. Strong Financial Foundation and Aggressive R&D Investment
Li Auto's financial strength and commitment to R&D are key to its success:
- Solid Cash Reserves: With 94.3 billion yuan in cash reserves, it has more than eight times the amount of interest-bearing debt (very little money owed) and a low asset-liability ratio of 51.2% (lower than industry peers), with 85% of its debt being interest-free, minimizing financial risks.
- Aggressive R&D: It invested 2.7 billion yuan in R&D this quarter (an 8.3% increase year-on-year) and plans to invest 12 billion yuan for the year, with half of that going towards AI technology. Additionally, it announced a $1 billion share repurchase program, showing confidence in its future prospects and reassuring shareholders and the R&D team.
These investments have paid off: the new L9's self-developed chips and body-intelligent features, along with the 5C supercharging infrastructure, are examples of Li Auto's R&D efforts creating a competitive advantage.
V. A Balanced Dual Business Model
Li Auto's "pure electric + extended-range" approach functions like two complementary wheels:
- The pure electric i6 and i8 models ensure stable sales, while the new L9 enhances brand value and technological capabilities.
- Both businesses share technologies (such as 5C charging) and supply chains, mitigating risks during transitions (e.g., when extended-range vehicles are updated).
In an industry characterized by price wars and low profits, Li Auto avoids these tactics, focusing on long-term product and technology development. With the launch of more new models, its position in the high-end new energy market will only strengthen.
In summary: By prioritizing customer needs, investing in technology, and maintaining a balanced business model, Li Auto has created a resilient foundation for growth even during an industry downturn, setting it up for continued success in the future.