Recently, Li Auto (LI) delivered a half-year report card showing clear performance pressure. In the first half of 2026, Li Auto generated revenue of RMB 48.65 billion, down 13.4% year over year; net profit swung from a profit of RMB 1.744 billion in the same period last year to a loss of RMB 3.981 billion. Behind the sharp reversal in net profit was a halving of gross margin and a year-over-year decline in deliveries.

The financial report shows that Li Auto's gross margin fell from 20.3% in the same period last year to 9.5%, with the core drag coming from a decline in vehicle sales gross margin. Vehicle sales gross margin dropped from 19.6% in the same period last year to 7.8%. The company's financial report explained that this change mainly stemmed from structural shifts brought about by a different product mix. With revenue scale contracting on one side and per-vehicle profitability falling sharply on the other, the two indicators together caused Li Auto's large half-year loss this year. As a new energy vehicle maker that was among the first to achieve profitability, whether Li Auto can strengthen its risk resistance amid fierce price wars and product iteration cycles still awaits market scrutiny. A Li Auto vehicle on display in a shopping mall in Nanchang.

Revenue decline under pressure

Judging from the financial report, the decline in vehicle sales revenue was the core factor behind Li Auto's revenue drop. In the first half of this year, Li Auto achieved revenue of RMB 48.65 billion, down 13.4% from RMB 56.172 billion in the same period last year. Breaking down the business structure, the company's main business vehicle sales revenue was RMB 45.6 billion, down 14.9% year over year; other sales and service revenue was RMB 3.05 billion, up 16.92% year over year. Li Auto said the main reasons were a lower average selling price due to a different product mix and reduced vehicle deliveries.

In terms of delivery data, Li Auto's new vehicle deliveries in the first half of this year were 193,000 units, down 5.1% from the same period last year. By quarter, Li Auto's new vehicle deliveries in the first quarter were 95,142 units, up 2.45% year over year from 92,864 units in the same period last year; sales fell noticeably year over year in the second quarter, with 98,000 vehicles delivered in the single quarter, down 11.5% year over year. What is worth watching is that while vehicle deliveries declined, Li Auto's total cost of sales in the first half of the year edged down only 1.7% to RMB 44.006 billion. Sales shrank, but costs could not be reduced in tandem.

Regarding the decline in average selling price caused by a different product mix, Li Auto said in a response to this newspaper's all-media reporter that as of the end of September, Li Auto's existing products will complete a full generational change, and a new form of family flagship SUV, the Li i9, will be added. By then, the range-extended product matrix Li L series and the battery electric product matrix Li MEGA and Li i series will each form a complete product matrix covering the RMB 200,000 to RMB 600,000 market. Among them, the Li L9, Li L8, the new-generation Li MEGA and the Li i9 will increase the proportion of high-value models and support the overall average price. In Li Auto's view, the core of stabilizing the price system is not relying on discounts, but continuously improving product value. New products are intensively equipped with technologies such as the Mach M100 chip, the Mach VLA model, 5C ultra-fast charging, self-developed batteries and full-line control chassis. At the initial launch, orders for the Li L9 Livis version accounted for about 85%, and the Li L8 also saw the Ultra version as the main sales driver, indicating that users are willing to pay for truly valuable technological upgrades.

Although new vehicle deliveries declined in the first half of the year, Li Auto's foundation in the high-end market remains solid. In China's new energy vehicle market priced at RMB 200,000 and above, Li Auto still ranks first among Chinese auto brands in sales with a 12.1% market share. As of June 30, 2026, Li Auto's cumulative deliveries reached 1,733,687 units. Li Auto's revenue has fluctuated in recent years: the company's revenue rose from RMB 123.85 billion in 2023 to RMB 144.5 billion in 2024, then fell to RMB 112.3 billion in 2025, down 22.3% year over year, and contracted to RMB 48.65 billion in the first half of 2026, down 13.4% year over year.

Probing the shift from profit to loss

The shift in Li Auto's net profit from profit to loss and the sharp decline in overall gross margin were the most core factors behind this round of turning from profit to loss. The company's overall gross margin fell from 20.27% in the same period last year to 9.55%, a halving; vehicle gross margin fell by more than 10 percentage points year over year, causing a sharp contraction in business gross profit, which was the main reason the company turned from profit to loss in the current period and recorded a net loss of nearly RMB 4 billion. Li Auto said that vehicle gross margin fell from 19.6% in the same period last year to 7.8%, mainly due to a different product mix.

However, the financial report also released signals of marginal improvement. Li Auto said that in the second quarter, overall gross margin had rebounded from 7.9% in the first quarter to 11.0%, up 3.1 percentage points quarter over quarter; vehicle gross margin rebounded from 6.1% to 9.4%, up 3.3 percentage points quarter over quarter, already showing a clear trend of bottoming out and rebounding. Li Auto judged that with a higher delivery proportion of high-value models, the gradual release of scale effects and continued effective cost control, the company expects gross margin to improve further going forward.

In addition, persistently high research and development expenses further magnified the final loss. In the first half of this year, the company's R&D expenses increased 3.3% to RMB 5.5 billion from RMB 5.3 billion in the same period last year. In fact, as a new energy vehicle maker that was among the first to achieve profitability, Li Auto's net profit entered a continuous downward channel after reaching RMB 11.809 billion in 2023. The financial report shows that Li Auto's net profit in 2024 and 2025 was RMB 8.045 billion and RMB 1.139 billion, respectively, down 31.9% and 85.8% year over year. In just two years, net profit shrank sharply from the tens of billions level to the single-digit billions range. In the first half of this year, Li Auto once again fell into the quagmire of losses.

As for the reasons for the performance pressure, Li Auto attributed it to two major causes, external and internal. Externally, on the one hand, the overall market was declining. In the first half of 2026, China's passenger vehicle retail sales were 8.701 million units, down 20.2% year over year. In the same period, the penetration rate of new energy vehicles reached 54.1%. The coexistence of declining sales and high penetration indicates that the industry no longer gains incremental growth as penetration rises, and the market has shifted fully from incremental-driven to stock competition. On the other hand, rising raw material prices led to a clear increase in supply chain costs. In the first half of 2026, prices of core components and raw materials such as power semiconductors, memory chips and lithium carbonate continued to rise, further squeezing industry profit space. Taking lithium carbonate as an example, as of the end of June, lithium carbonate prices had risen 123% year over year. Batteries are the components with the highest cost proportion in new energy vehicles, and the sharp rise in lithium carbonate prices directly pushed up the raw material costs of complete vehicles.

Entangled in quality disputes

While under performance pressure, Li Auto's safety and quality issues have often triggered negative public opinion. Technical disputes over Li Auto's intelligent driving assistance system have drawn attention. According to media reports, on January 10 this year, a car owner surnamed Zhou in Qingdao was driving a Li L6 when the vehicle suddenly lost control and changed lanes under assisted driving, causing a collision. Li Auto officially said the accident stemmed from "low-angle winter sunlight directly shining, causing limited sensor recognition," and stressed that the user manual had noted relevant limitations. But the owner questioned that the accident section was a main road in Qingdao, so the so-called "non-standard road surface" claim did not hold, and statements in promotions such as "all-weather lidar" and "effectively avoiding collisions" were suspected of exaggeration.

In addition, a recall Li Auto voluntarily implemented last year also cast a shadow over the brand. In October 2025, Li Auto voluntarily filed a recall plan with the State Administration for Market Regulation, recalling 11,411 units of the 2024 Li MEGA produced from February 18 to December 27, 2024, starting from November 7, 2025. For vehicles within the scope of this recall, due to insufficient anti-corrosion performance of that batch of coolant, under specific conditions, the cooling aluminum plates of the power battery and front motor controller in the cooling circuit could corrode and leak, causing the vehicle to show fault lights, limited power and inability to power on, and in extreme cases could cause thermal runaway of the power battery, posing a safety hazard. Beijing Li Auto Co., Ltd. will replace the coolant, power battery and front motor controller free of charge for vehicles within the recall scope.