Li Auto's aggressive product launch cadence is reshaping its sales mix, but meaningful operational improvement is still some way off.

On August 26, Li Auto delivered a second-quarter scorecard that is healing but has yet to return to normal profitability levels.

The company delivered 98,330 vehicles in the quarter, down 11.5% year-on-year but up 3.4% quarter-on-quarter. Total revenue reached RMB 25.67 billion, a decline of 15.1% year-on-year but an increase of 11.7% from the previous quarter.

Vehicle gross margin recovered to 9.4% from 6.1% in the first quarter, though it remained 10 percentage points below the same period last year. The company posted a net loss of RMB 1.705 billion, compared to a net profit of RMB 1.097 billion in the year-ago period, while the loss narrowed by approximately RMB 570 million quarter-on-quarter.

On a sequential basis, Li Auto saw revenue rise and losses narrow in the second quarter, but it has yet to turn profitable.

The shift comes amid a wave of model refreshes. The all-new L9 began deliveries in May, the all-new L8 followed in June, and the next-generation L6 launched in July. On the EV front, the i8 added a rear-wheel-drive long-range version, while the new-generation MEGA and flagship SUV i9 are scheduled for release in September.

During the earnings call, management disclosed the order mix for high-spec L-series models while acknowledging short-term disruptions from clearing old inventory, ramping new models, and adjusting sales policies during the transition period.

More notably, the company guided third-quarter deliveries of 95,000 to 100,000 units, roughly flat with the second quarter. This suggests that whether new product order momentum can convert into delivery volume, and whether a rising EV mix can simultaneously improve gross margins, will only be fully verified in the fourth quarter.

New Models Arrive in Rapid Succession, but Q3 Delivery Guidance Remains Largely Unchanged

From a product cadence perspective, the second quarter was not a complete new-model delivery cycle. The all-new L9 launched on May 15 with deliveries starting May 17, priced at RMB 459,800 and RMB 509,800. The all-new L8 hit the market on June 23 with deliveries beginning the same week. The next-generation L6, priced at RMB 249,800, did not start deliveries until late July.

On the second-quarter earnings call, Li Auto President Ma Donghui noted that since the all-new L9 launch, Livis version orders accounted for over 85% of the mix. The all-new L8 is led by its Ultra version, with strong test-drive conversion at dealerships. For the volume-oriented L6, management's commentary was more measured, expressing hope that the new model can sustain monthly demand of 10,000 units going forward.

Better-than-expected uptake of high-spec trims should support a recovery in average selling prices.

However, this does not yet translate into a clear expansion of overall order volume. The company did not disclose absolute order numbers for the L9 and L8, nor did it provide specific sales targets for the MEGA and i9. When discussing the MEGA, management said its performance still depends on order conversion, production ramp-up, and market conditions.

Ma Donghui directly acknowledged on the call that "the model transition period has caused temporary disruptions." This impact is already visible in monthly deliveries: Li Auto delivered 34,085, 33,350, 30,895, and 30,468 vehicles from April through July, with totals failing to rise consecutively following the L9 and L8 launches.

The third-quarter delivery guidance of 95,000 to 100,000 units represents a decline of roughly 3.4% to growth of 1.7% versus the second quarter. Revenue guidance of RMB 26.6 billion to RMB 28 billion implies growth of approximately 3.6% to 9.1% quarter-on-quarter. The revenue growth outpacing delivery changes is primarily supported not by surging volumes but by the resumption of high-priced L-series deliveries and potential product mix improvement from the i8, MEGA, and i9.

That said, the three new EV models have limited time to contribute in the third quarter. The i8 rear-wheel-drive long-range version launched on August 6 at RMB 309,800. The new-generation MEGA is scheduled for release on September 2, with the i9 planned for mid-September. The i9, in particular, had not yet announced pricing or specifications at the time of the earnings release, making the third quarter closer to a launch and ramp-up phase, with full sales contribution expected in the fourth quarter.

In his opening remarks on the call, Li Auto Chairman and CEO Li Xiang attributed this shift to the "dual-energy strategy" of running extended-range and pure electric models in parallel.

He disclosed that extended-range and EV orders currently account for roughly half each. The i6 has ranked among the top three models priced above RMB 200,000 for six consecutive months. After the i8 added a rear-wheel-drive long-range version and adjusted specifications, order performance has improved. Li Xiang expects the EV order share to rise further as the new-generation MEGA and i9 hit the market.

Li Auto's powertrain mix has in fact already shifted.

Based on China Passenger Car Association wholesale data, the i6 sold approximately 63,400 units in the second quarter. Combined with the i8 and MEGA, Li Auto's EV models totaled roughly 69,300 units, accounting for about 70% of the company's deliveries in the period. The i6 alone contributed approximately 64% of total sales.

By July, i6 wholesale volume fell to 15,420 units, with the i8 and MEGA at 1,026 and 336 units respectively. The three EV models combined accounted for roughly 55% of Li Auto's monthly sales that month.

This shift broadly aligns with management's statement that "current extended-range and EV order structure is approaching balance," reflecting that after the L9 and L8 resumed deliveries, the sales mix is moving from EV-only support in the second quarter toward a more balanced contribution across both product lines.

This also means the EV share trajectory will not be a one-way upward line. The high second-quarter share was partly driven by i6 volume and the L-series being paused for model changes. In the third quarter, as L-series deliveries recover, the extended-range share is likely to rebound. Subsequently, with the refreshed i8, the MEGA replacement, and the i9 launch, the EV share may rise again.

What ultimately determines the outcome is not the number of models but whether the i6 can hold steady, the i8 can regain volume, and the i9 can generate meaningful orders at a higher price point.

The Key Variable in Q4 Is Delivery Volume

Vehicle gross margin improved from 6.1% to 9.4% in the second quarter, indicating the first-quarter trough has begun to repair, though it remains well below Li Auto's previous normal range of around 17% to 20%. Using vehicle sales revenue divided by deliveries, revenue per vehicle was approximately RMB 245,000 in the second quarter, up from RMB 226,000 in the first quarter but still below the roughly RMB 260,000 in the year-ago period.

Similarly, based on financial statement estimates, gross profit per vehicle was about RMB 23,000 in the second quarter, versus RMB 13,800 in the first quarter and RMB 50,500 in the same period last year. These figures indicate that the sequential improvement in revenue and gross profit was primarily driven by product mix recovery, while profit margins have not yet returned to pre-transition levels.

The company attributed the gross margin changes mainly to product mix.

On the call, management elaborated on cost-side pressures: rising prices for batteries, memory chips, PCBs, and other raw materials and components. At the same time, the model changeover involves amortization of molds, fixtures, and production equipment, as well as accounting treatment for discontinued models. These costs do not disappear immediately with new model launches and must be absorbed through future volumes.

Li Auto stated it will not directly pass these cost increases on to consumers. In the short term, it plans to cushion volatility through locked-volume agreements and refined operations, while in the long term, it aims to reduce system costs through in-house battery development, electric drives, and the Mach M100 chip.

Management suggested a healthy long-term gross margin range of 15% to 20%. However, this represents a medium-to-long-term target rather than a specific commitment for third-quarter gross margins.

Expenses also reflect transition pressures. Second-quarter operating expenses totaled RMB 5.137 billion, down 2% year-on-year but up 6.9% quarter-on-quarter. R&D spending was roughly RMB 2.78 billion, broadly stable, while selling, general, and administrative expenses rose 11.2% quarter-on-quarter, which the company attributed to increased marketing and promotion for new products. Operating loss stood at RMB 2.301 billion, with an operating margin of negative 9%. Although improved from negative 13% in the first quarter, it has yet to achieve effective scale dilution.

Cash flow offers another set of indicators. Second-quarter operating cash flow was a net inflow of RMB 15 million, a marked improvement from the RMB 6.091 billion net outflow in the first quarter, but essentially breakeven. Free cash flow remained negative at RMB 1.3 billion. As of end-June, the company held RMB 87.5 billion in cash reserves, providing ample buffer.

Chief Financial Officer Li Tie said on the call that starting in the third quarter, the company hopes to maintain stable operating cash flow on a quarterly basis, but whether it can turn operating cash flow and free cash flow positive for the full year depends heavily on fourth-quarter deliveries.

Sales targets also face pressure. Li Auto delivered 406,343 vehicles in 2025 and maintained a full-year sales growth target of 20% during the first-quarter call, corresponding to roughly 487,600 units. The company delivered 193,472 vehicles in the first half. If the third quarter achieves 95,000 to 100,000 units, the fourth quarter would need deliveries of approximately 194,000 to 199,000 units, or roughly 65,000 to 66,000 per month, to hit the earlier target.

This level is significantly higher than the recent monthly delivery pace of around 30,000 units. Notably, management did not reiterate the 20% annual growth target on this second-quarter call. As such, rather than simply counting new model launches, more instructive indicators are actual fourth-quarter production scheduling, delivery lead times, and end-market order conversion.

At this stage, Li Auto has shown several positive developments: vehicle gross margin has recovered for one consecutive quarter, revenue per vehicle is improving, operating cash flow has turned positive, and the EV lineup is no longer limited to just the MEGA.

However, third-quarter delivery guidance shows no meaningful growth, vehicle gross margin remains in single digits, and free cash flow is still negative. This suggests the growing pains of the transition cannot yet be declared over.

Whether Li Auto can move past this phase depends on at least three outcomes: whether the L6 can achieve management's stated monthly demand of 10,000 units; whether orders for the i8, MEGA, and i9 can convert into deliveries on schedule; and whether product mix improvements can lift gross margins faster than marketing, R&D, and capacity investments grow.

The second quarter offered signals of repair, but the true test of profitability awaits the fourth quarter, when new products will have completed a full delivery cycle.