Li Auto reported its first quarterly net loss in three years amid slowing demand and significant sales pressure, in a reversal of fortune for the plug-in hybrid specialist once considered one of the more successful Chinese automakers.

The company swung to a third-quarter net loss of 625.0 million yuan, equivalent to $88.2 million, from net profit of 2.81 billion yuan a year earlier. That missed the 439.8 million yuan profit consensus estimate in a Visible Alpha poll by a wide margin.

Revenue also undershot expectations, dropping 36% to 27.36 billion yuan. It was the company’s worst top-line decline since it listed in New York in 2020.

Before Wednesday’s results, Li Auto was one of the few profitable electric-vehicle makers in China, recording its first annual profit in 2023.

The Beijing-based company’s disappointing performance emphasizes the need for brands to differentiate themselves in a crowded field. It also highlights the highly competitive Chinese auto market, where new EV models are launched almost every month, and carmakers constantly roll out the latest technology to attract customers.

Li Auto faced weaker sales this year as demand for hybrid cars moderated. A spate of new model launches by rivals has also squeezed its market share. It delivered 93,211 vehicles in the third quarter, down 39% from the previous year, with sales falling further last month.

Additionally, the company’s foray into the full-EV space hasn’t gone as well as it had hoped. Its MEGA multipurpose vehicle and i8 sport-utility vehicle have experienced subdued sales. Meanwhile, the i6—another battery SUV—has received strong orders and was expected to become a major sales driver, but has faced some production-capacity challenges, analysts said.

The Chinese automaker’s margin fell to 16.3% in the July-September period, compared with 21.5% a year ago and 20.1% in the second quarter. Its vehicle margin declined to 15.5%, weighed by estimated recall-related costs for the Li MEGA and higher unit manufacturing costs due to lower production volume, the company said. Li Auto recalled more than 11,000 MEGA 2024 EVs over a battery safety risk.

For the fourth quarter, Li Auto expects to deliver between 100,000 and 110,000 vehicles, a decline of about one-third from a year earlier. It projected revenue of 26.5 billion yuan to 29.2 billion yuan, down 34%-40%.

The soft guidance comes as the market remains cautious about the carmaker’s prospects in the battery EV market. Li Auto, once a top-selling hybrid-car brand, is trying to find its edge in the full-EV segment—a feat made more difficult by rivals like XPeng and Xiaomi, which are seeing solid momentum for their electric cars.

Li Auto’s shares in Hong Kong have shed more than 20% of their value so far this year, compared with the Hang Seng Index’s nearly 30% gain. Its American depositary receipts were recently about 1.6% lower in premarket trading after the results.