Li Auto, which once led new automakers with its extended-range models, is now facing unprecedented pressure.

Recent reports suggest Li Auto will close 100 underperforming stores in the first half of 2026, while its Changzhou factory is currently operating below full capacity, drawing immediate market attention.

Li Auto has denied the store closure rumors, stating that recent online reports about batch store closures and layoffs are false. The company confirmed it will shut down a small number of underperforming mall stores this year, but this does not involve large-scale closures.

However, the company did not comment on the current status of its factory operations.

Amid swirling rumors of "closing 100 stores" and the real-world challenge of uneven capacity utilization at the Changzhou plant, compounded by declining year-on-year sales and an uncertain product strategy, the automaker is experiencing its most difficult transition pains since its founding.

Although Li Auto has refuted the claim of closing 100 stores, the process of shutting down underperforming locations is indeed underway.

A recent investigation found that a Li Auto store in the Lujiazui Center in Shanghai's Pudong district has already closed. Staff at another Li Auto store in the Century Link Mall revealed that the aforementioned retail location did indeed close on January 14th, with the two stores being just 3 kilometers apart.

According to the salesperson, the direct reason for closing the Laofoye store was that it "wasn't selling well." Although sales of the MEGA model at that store were considered decent, they paled in comparison to the volume of mainstay models like the i6 and i8. More critically, the location suffered from drawbacks—low surrounding residential density and customer traffic being diverted to multiple other shopping malls. The salesperson noted that the Century Link location, with its dense residential area, sees more confirmed customers.

The salesperson also disclosed that the team from the Laofoye store was not laid off; most transferred to the Century Link store, while others moved to different locations. The stores Li Auto is closing mostly terminated operations due to failing to meet profitability expectations.

It is undeniable that the rapid expansion of mall stores during the previous growth cycle has now become a cost burden.

Data shows that Li Auto's average annual deliveries per store in 2025 were about 741 vehicles, a decline of over 25% compared to nearly 1,000 vehicles in 2024. The annual operating cost for some mall stores is close to 5 million yuan, yet their conversion rate is less than 5%, with average monthly foot traffic of only around 80 people, making them "cost black holes."

The core of this channel adjustment is to phase out inefficient capacity and concentrate resources on core stores. Simultaneously, through the "Hundred Cities Starry Sky Plan," Li Auto is exploring lower-tier markets with a light-asset model—partners bear the costs of renovation and equipment, while sales operations remain self-run. The company has already established 356 stores under this plan, attempting to find a balance between cost control and volume expansion.

The production situation at Li Auto's Changzhou factory has become the most direct reflection of its operational pressure.

This base, with a comprehensive annual capacity exceeding 500,000 vehicles, now shows a pattern of "north-south division and uneven activity." Production zones for extended-range models L7 and L8 (Zones 2 and 1) have scarce orders, with frequent production line stoppages. A pattern of "three days on, four days off" has become the norm for workers. Permanent employees worry about work points, while outsourced workers are leaving due to lack of work. Some employees face the dilemma of inter-regional transfers.

In stark contrast, Zone 3, which produces the pure electric i6, operates on a double-shift pattern, "keeping the machines running even when people rest," with a stable daily output exceeding 700 units. Meanwhile, the production line for the i8 in the same factory has been idled due to insufficient orders and is planned for relocation to the Shunyi factory in Beijing.

This capacity imbalance is not an industry-wide phenomenon. BYD's factory, also located in Changzhou, has its workshops fully scheduled due to ample export orders. Workers mostly have only one day off per week, and the area outside the factory is bustling, forming a sharp contrast with the quiet scene at Li Auto's plant.

Behind the idle capacity lies a mismatch between the product structure and market demand. Slumping sales of extended-range models have left nearly half the capacity unused. With only the i6 supporting part of the pure-electric capacity, the overall capacity utilization rate has dropped significantly, further intensifying cost pressures.

The continuous decline in sales is the core signal of Li Auto's predicament.

Data indicates that Li Auto's full-year deliveries for 2025 were only 406,300 vehicles, an 18.81% year-on-year decrease. This figure not only fell short of the 500,500 vehicles delivered in 2024 but also represented only 63% of the adjusted annual target of 640,000 vehicles. Even with a year-end push in December, deliveries were just 44,200 units, and the fourth-quarter cumulative total of 109,200 vehicles could not mask the annual downturn.

The sales decline has directly led to a loosening of market position. Having long held the top spot in sales among new automakers, Li Auto fell out of the top three in 2025. Its market share in the segment for vehicles priced above 200,000 yuan declined substantially, with senior executives admitting they "can no longer return to the level of over 40% seen in 2022-2023."

Facing a full-year sales target of 550,000 vehicles for 2026, this planned 35.37% increase appears particularly challenging against the backdrop of intensifying industry competition. Competitors like XPeng and Xiaomi are also targeting around 550,000 units, making the fight for market share increasingly fierce.

Some analysts believe the root of Li Auto's troubles lies in an imbalanced product strategy. Over the past year, the company shifted its focus towards pure electric vehicles, launching products like the MEGA HOME, i8, and i6. However, market feedback has been polarized, failing to generate stable incremental growth. The pure electric flagship MEGA's monthly sales have dwindled to around 1,000 units, and the i8 garners only a little over a thousand new orders monthly. Only the i6, with its precise positioning, has become the sole bright spot in the pure electric segment.

Simultaneously, its foundational extended-range models have suffered a setback. Orders for mainstay models like the L7 and L8 have plummeted, leading to idle production lines. Furthermore, the competitive moat in the extended-range market has been breached—brands like XPeng, Xiaomi, and Leapmotor have all launched extended-range models with large batteries. For instance, the Leapmotor D19 boasts a battery capacity of 80.3 kWh. In contrast, Li Auto's next-generation model battery plans appear conservative, with the L9's capacity just over 70 kWh, putting it at a disadvantage in the range competition.

The dispersion of strategic focus has not only weakened the competitiveness of its extended-range models but also mired its pure electric transition in a predicament of "high investment, low output," ultimately causing the overall product matrix to lose its former advantage.

To reverse the decline, Li Auto has clearly stated its intention to return to the extended-range track in 2026, betting resources on the next-generation L9 model. It plans to consolidate its position in the high-end market through upgrades like a wire-controlled chassis, its self-developed M100 autonomous driving chip, and 400 km of pure electric range, targeting annual sales exceeding 100,000 units. However, whether this "all-in" adjustment will prove effective remains to be seen.

Confronted with multiple challenges, Li Auto has initiated comprehensive adjustments: refocusing on extended-range models for its products, streamlining SKUs, and making core features standard; phasing out inefficient stores in its channels while targeting lower-tier markets; optimizing capacity allocation in production to alleviate supply-demand imbalances; and introducing financial measures like 7-year low-interest plans with down payments as low as 15% to stimulate sales and reduce inventory.

But this transformation battle is undoubtedly difficult.

Competition in the extended-range market has reached a fever pitch, the pure electric transition still requires breakthroughs in technology and scale, and the impacts of organizational restructuring and key personnel changes have yet to fully materialize.

As 2026 becomes a critical year for Li Auto's strategic retrenchment and capability rebuilding, its ability to stabilize its base with the new L9 while effectively supporting it with pure electric models will not only determine its own breakout but also influence the competitive landscape among new automakers.