NASDAQ:LI

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Li Auto Stock Edges Higher After Q2 Results Show Sequential Recovery Despite Sharp Year-Over-Year Declines

Li Auto (NASDAQ: LI) shares rose about 0.4% after the Chinese electric vehicle maker reported second-quarter 2026 results that showed improving margins, cash flow and profitability compared with the first quarter, despite substantial year-over-year declines.

The muted stock reaction reflects a mixed report: Li Auto's business appears to be recovering sequentially, but its results remain significantly weaker than a year ago.

Revenue and Deliveries Remain Under Pressure

Li Auto delivered 98,330 vehicles during the quarter, down 11.5% year over year, although deliveries improved from 95,142 in the first quarter.

Total revenue fell 15.1% year over year to RMB25.7 billion ($3.8 billion), while vehicle sales declined 16.7% to RMB24.1 billion. However, compared with Q1, revenue increased 11.7% and vehicle sales rose 11.8%, providing evidence that operating conditions improved during the quarter.

Margins Recover From Q1 Lows

One of the more encouraging parts of the report was the sequential margin recovery. Vehicle margin improved to 9.4% from 6.1% in Q1, while gross margin increased to 11.0% from 7.9%.

Those levels nevertheless remain far below Q2 2025, when vehicle margin was 19.4% and gross margin was 20.1%, highlighting the profitability pressure facing Li Auto amid intense competition in China's EV market.

The company posted a net loss of RMB1.7 billion, compared with a RMB1.1 billion profit a year earlier. But the loss narrowed from RMB2.3 billion in Q1. Non-GAAP net loss similarly improved sequentially to RMB1.5 billion from RMB2.1 billion.

Cash Flow Shows Major Sequential Improvement

Cash flow was another positive signal. Operating cash flow returned slightly positive at RMB15 million after Li Auto burned RMB6.1 billion in the previous quarter. Free cash flow remained negative at RMB1.3 billion, but improved substantially from negative RMB7.4 billion in Q1. The company also ended June with a sizable RMB87.5 billion ($12.9 billion) cash position.

Li Auto has also been aggressively buying back shares. Under its $1 billion repurchase program, the company had repurchased approximately $631.5 million of shares as of the earnings release.

Q3 Outlook Points to Return to Delivery Growth

For the third quarter, Li Auto expects deliveries of 95,000-100,000 vehicles, representing year-over-year growth of 1.9%-7.3%. Revenue is projected at RMB26.6 billion-RMB28.0 billion, ranging from a 2.8% decline to 2.3% growth year over year.

The approximately 0.4% rise in LI shares suggests investors are giving some credit to the sequential recovery and improving outlook, while remaining cautious about weak year-over-year sales, depressed vehicle margins and continued losses. The key question for coming quarters will be whether refreshed models can translate the sequential rebound into sustained delivery growth and further margin recovery.
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Author
The Investor 08-26-26
For the week ending January 19, China reported EV insurance registrations for various brands, with BYD leading the market at 55,000 units, followed by Tesla at 10,000. Li Auto and Xpeng recorded 9,500 and 9,400 registrations, respectively, while Xiaomi saw 5,600 units and Leapmotor registered 7,000. Zeekr and Aito trailed with 3,600 and 6,100 registrations.

Nio reported 4,700 total sales last week, a 145.7% year-on-year increase. Within this, the Nio brand accounted for 2,836 registrations, and its sub-brand Onvo contributed 1,913 units.
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Author
WS News 01-21-25