Li Auto Inc. Price & Performance (LI)

Further information regarding risks and uncertainties is included in certain company filings with the U. S. Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited. The company does not assume any obligation to update forward looking statements except as required applicable law. Please also note that Li Auto's earnings press release and this conference call include discussions of unaudited U. S. GAAP financial information as well as unaudited non GAAP financial measures. Please refer to Li Auto's disclosure documents on the IR section of our Web set. Which contain a reconciliation of the unaudited non GAAP measures to comparable U. S. GAAP measures. Our CEO will start his remarks in Chinese, There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr. Jiang Li. Please go ahead.

So that Hi, everyone. Welcome to today's conference call.

China's NUV market maintained rapid growth in 2024. According to insurance registration data from the China Automotive Technology and Research Center, China's NEV penetration rate exceeded 50% for many consecutive months in 2024. Reaching 45.9% for the full year, up 12 percentage points year over year. Leveraging our outstanding product portfolio, organizational efficiency and continuous breakthroughs in artificial intelligence, we further solidified our position as the sales champion among Chinese auto brands in the RMB200000 and above NEV market. Taking our full year market share to 15.3%. In the fourth quarter of twenty twenty four, we delivered over 158,000 vehicles, setting a new quarterly record. Our full year deliveries exceeded 500,000 units making us both the first emerging NEV brand and first Chinese premium auto brand to reach this milestone. In addition, each model in our Lee L series including the L6 L7, L8 and L9 have achieved cumulative deliveries of over 200,000 units, respectively. Showcasing the strong user recognition of our products, and our highly efficient and consistent delivery capability.

These achievements will not have been possible without the effort and dedication of every team member at Li Auto support of our partners, and the trust of our users. I would like to express my heartfelt gratitude to them and look forward to reaching new milestones in collaboration. As our business continues to expand, a number of our financial metrics have reached record highs for the quarter. In Q4 twenty twenty four, total revenues reached RMB44.3 billion taking full year total revenues to RMB144.5 billion. [indiscernible] As of the end of twenty twenty four, our cash on hand has reached RMB112.8 billion We Our robust cash generation capabilities and substantial cash reserves provide solid support to our long term investments in electrification and artificial intelligence. Advancing our progress toward our long term vision. Looking forward, expect continued growth in 2024, aiming for 88,000 to 93,000 vehicle deliveries in Q1. There is no doubt that intelligence is the theme of the next phase of auto industry's evolution. We continue to invest in R and D and accelerate innovation. Our R and D investments exceeded RMB11 billion in 2024, driving further breakthroughs and growth in our autonomous driving system. In terms of autonomous driving, we solidified our position as a top tier player in the sector.

Our industry pioneering dual system autonomous driving solution combining an end to end model with a vision language model. Sets a trend in the industry with industry leading pace of iteration and performance. [indiscernible] In January, we rolled out AD Max V13, upgrading highway NOI to an end to end architecture providing end to end capability across both urban and highway driving scenarios. In parallel, we introduced a first of a kind AI reasoning visualization feature for autonomous driving. Providing users with a better understanding of how the autonomous driving function works. In February, we rolled out our latest end to end and DLM models trained on 10,000,000 video clips for all ADmax users. Making us the first automaker in China to deploy large models trained on 10,000,000 video clips. Our autonomous driving system has been evolving at an industry leading pace. Taking only seven months to grow from 1,000,000 to 10,000,000 video clicks. In addition, our 10,000,000 video clips AD Max V13 boasts industry leading performance, which was clearly demonstrated in our recent press reviews that evaluated top tier autonomous driving systems from global and domestic auto brand. AD Max V13 secured first place in a number of these head to head reviews with a significant advantage in terms of number of interventions. [indiscernible] Additionally, we have already initiated R and D for next generation model based on the Vision Language We plan to launch it alongside our first battery electric SUV [indiscernible] This year delivering refresher talent driving experience to our users.

Moving on to Supercharging Network. We're accelerating its deployment in preparation for the launch of BEV models in 2025. In 2024, we built fourteen twenty supercharger stations at an industry leading pace. We operate the largest highway supercharging network of any auto OEM in China. As of now, we have over 1,900 supercharging stations with over 10,000 charging stalls in operation. [indiscernible] Our supercharging networks covers a wide range of reasons both in rapid charging speed and high uptime rate. And even in winter, Li Mega can charge up to 500 kilometers in twelve minutes with battery precondition. Even under the heavy load of spring festival holiday, our charging facilities reach an uptime rate of 99.9% The overall charging experience and efficiency are essential to BEV users. Looking forward, we will continue to accelerate the deployment of our supercharger network aiming to have 2,500 supercharging stations by the time we launched Li with the i8, our first battery electric and SUV. We plan to expand to 4,000 stations by the end of twenty twenty five. Moving on to our sales and servicing network. In 2024, the overall quality and sales efficiency of our retail stores have improved substantially. By replacing lower performing shopping mall stores with sales centers located in major auto parks, our proportion of sales centers has increased from 24% at the end of twenty thirteen twenty twenty three to 42% at the end of twenty twenty four.

Total nationwide display spots increased from over 2,600 to over 3,700. In terms of same store sales, taking the newly opened Tungdo High-tech Zone sales center as an example, Its same store sales has reached 175 units per month in just four months since opening. This fully demonstrates the operating efficiency of our new sales centers. As of February 28, 2025, we had 500 retail stores in 150 cities nationwide. [indiscernible] five, while we continue to strengthen our offline presence, we will continue to pursue high quality expansion of our sales network at a reasonable pace prioritizing operating Li. We're also advancing our overseas expansion plan In January 2025, we opened our R and D center in Munich, Germany. This is our first overseas R and D center, marking the first step in our globalization and D strategy. Additionally, we have established directly operated servicing centers in three regions, Kazakhstan, Dubai and Uzbek Uzbekistan In 2025, we plan to enhance our overseas expansion efforts with a continued focus on markets with high growth potential. Believe that in the future, we will see an increasing number of Li Auto vehicles on the road in different countries. Looking forward to 2025, will maintain our product competitiveness with a relentless focus on creating user value.

We will further upgrade our existing models and ensure smooth launch of our new BEV models. In addition, will continue to embrace intelligent transformation by strengthening our R and D, technological innovation and cash generation capabilities to ensure sustainable long term development and breakthroughs in this artificial intelligence era. I will now turn the call over to our CFO, Johnny, to walk you through our financial performance. Thank you, Yuchang. Hello, everyone. I will now walk you through some of our fourth quarter twenty twenty four financials. Due to time constraints I will address financial highlights here and encourage you to refer to our earnings press release for further details. Total revenues in the fourth quarter were RMB40 4,300,000,000.0 or $6,100,000,000 up 6.1% year over year. And 3.3% quarter over quarter. [indiscernible] This included RMB42.6 billion or US5.8 billion dollars from vehicle sales [indiscernible] up 5.6% year over year and 3.2% quarter over quarter, both the year over year and the sequential increase were primarily attributable to the increase in vehicle delivery. Partially offset by the lower average average selling price. The year over year ASP decline was mainly due to different product mix while the sequential ASP change was mainly due to the interest subsidies provided to customers.

Cost of sales in the fourth quarter was RMB 35,300,000,000.0, or US4.8 billion dollars up 10.5% year over year. And 4.9% quarter over quarter. Gross profit in the fourth quarter was RMB 9,000,000,000, or US1.2 billion dollars down % year over year and 2.8% quarter over quarter. Vehicle margin in the fourth quarter was 19.7%, compared with 22.7% in the same period last year. And 2020.9% in the prior quarter. [indiscernible] The year over year decrease was mainly due to different product mix The sequential decrease was mainly due to the loss on purchase commitment and lower average selling price due to interest subsidies provided to customers. Gross margin in the fourth quarter was 20.3%, [indiscernible] versus 23.5% in the same period last year and 21.5% in the prior quarter. Operating expenses in the fourth quarter were RMB 5,300,000,000.0, or $721,600,000 down 22% year over year and 9.1% quarter over quarter. R and D expenses in the fourth quarter were RMB 2,400,000,000.0, or 300 US329.9 million dollars down 31% year over year and 6.9% quarter over quarter. [indiscernible] The year over year decrease was primarily due to the decreased expenses related to product portfolios and technologies. And decreased employee compensation.

The sequential decrease was primarily due to the decreased employee compensation. SG and A expenses in the fourth quarter were RMB 3,100,000,000.0, or $421,500,000 down 5.9% year over year and 8.4% quarter over quarter. Year over year decrease was primarily due to decreased employee compensation. And improved operating efficiency. [indiscernible] sequential decrease was primarily due to decreased employee compensation associated with recognition of CEO's performance based awards in the third quarter. Of twenty twenty four. Partially Li by the increased marketing and promotion activities. Income from operations in the fourth quarter was RMB3.6 billion or $507,400,000 up 22% year over year and 7.9% quarter over quarter. [indiscernible] Operating margin in the fourth quarter was 8.4% improved from 7.3% in the same period last year. And 8% in the prior quarter. [indiscernible] Net income in the fourth quarter was RMB3.5 billion, or US484 million dollars down 38.6% year over year. And up 25.3%. Quarter over quarter. Diluted net earnings per share attributable to ordinary shares was RMB3.3.3 million 31 or $0.45 in the fourth quarter. Versus RMB5.32 in the same period last year and RMB 2.66 in the prior quarter. And now turning to our balance sheet and cash flow. Our cash position remains strong and stood at 112,800,000,000.0 or US15.5 billion dollars as of 12/31/2024.

Net cash provided by operating activities in the fourth quarter was RMB3.2 billion, compared to RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3.2 billion, a decrease of RMB3 8,700,000,000.0 or US1.2 billion dollars worth of RMB 17,300,000,000.0 in the same period last year. And RMB 11,000,000,000 in the prior quarter. Free cash flow was RMB 6,100,000,000.0 or $831,000,000 in the fourth quarter versus RMB 14,000,000,000 in the same period last year. And RMB 9,100,000,000.0 in the prior quarter. As of 12/31/2024, we had a total of 32,248 employees. For more information and details of our 2024 full year financial results, please refer to our earnings press release And now for our business outlook. For the first quarter of twenty twenty five, [indiscernible] the company expects the delivery to be between 181,000 vehicles. Representing a year over year increase of 9.5% to 15.7%. The company also expects the first quarter total revenue to be between RMB23.1 billion and RMB24.7 billion. Or US3.2 billion dollars and US3.4 billion dollars representing a year over year decrease of 8.7% to 3.5%. [indiscernible] This business outlook reflects the company's current and preliminary view on its business situation.

Market condition. Which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator and start our Q and A session. Thank you.

Your first question comes from Paul Gong with UBS.

So I will translate my questions. The first one is regarding the BUV months.

Can you remind us the overall the latest launch and timing of the new models and also the highlights of your BV models you could share with us. The second is regarding the AI strategy. We noticed management Li spending more focus, is increasingly more focused on the AI. And can you please share us with the latest development strategy? Thank you.

We're planning to launch two pure electric SUVs this year. First one being the BL VI8, which will be launched in July. And the second one VI6 will also be launched in the second half of this year. The two cars will be launched part of the reason we launched it in the second half this year is partly to catch the sales momentum in typically the sales season of Q3 and Q4 and also partly to save enough orders to support deliveries for next Q1 and Q2.

We tend not to release too much information before official product Li. Because we think it needs to be considered holistically Li with users buying experience, delivery experience, So please stay tuned for our official product release First of all, our overall view is that at this stage, the most important thing for artificial intelligence is to grow capabilities improve capabilities. And I'll provide one example using autonomous driving. Under rule based system, is very analogous to teaching an insect or primitive creature to drive. And later when we move on to end to end of BLM, it's comparable to a monkey learning drive with a human on-site. It is an improvement versus previous rule based system but it's still nothing comparable to a professional driver. This is determined by the fundamental architecture of the models because VLM and end to end are two separate brain systems and neither of them are strong enough.

The real question for us is how can we allow a big model to operate just like human beings, like they can understand the physical world, understand the software world, which includes navigation and a bunch of other things, as well as the intentions of the passengers. So we need to build a model that combines all three categories and build them into one foundational model, which includes under using three d vision and understanding of language space using LMM and understanding the physical world using end to end. Only if we combine these three into one model can we understand the world just like human beings and drive like human beings. And this is our overall understanding of breakthroughs in artificial intelligence. And we don't tend to make specific plans in this area.

Your next question comes from Tim Syll with Morgan Stanley.

So my first question is about the sales growth.

How should we think about the auto selling sales growth this year? Against the backdrop of top competition? When would you expect Li Auto's multi sales to be returned to the previous state level? [indiscernible] L series and together with the EV launches into second half. That's my first question. [indiscernible] Our overall strategy for sales growth for this year consists of several aspects. One is product upgrades, expansion of sales network, as well as reinforced marketing practices and expansion overseas. First of all, on the product front, we'll be launching the AD upgraded version of L Series and Mega Series this year. As well as our new completely new BAB electric SUV model. The new pure electric SUV will help us tap into a bigger market. In the meantime, our upgraded autonomous driving system, LEAP 13, trained on 10,000,000 video clips at well's inclusive improved its capability significantly, which also forms a solid foundation for our sales growth.

On the sales network front, we currently operate five zero two retail stores. And on top of that, we have started to work with after sales partners to increase coverage in Tier four and Tier five stay Apart from the official stores, we have all apart from these permanent stores, we have also opened over 200 retail stalls and pop up stores 60 pop up stores in the shopping malls to open up our customer acquisition channel. On the marketing front, we have introduced professional live streaming sales representatives to help us open up our customer acquisition channel. In the meantime, with our dedicated DCC call center, personnel, we can also increase conversion rate of these increased new customers acquired through those channels. On the overseas front, our overseas expansion plan is proceeding as planned. And we have made significant progress in Middle Asia in Asia Pacific and various other markets. We will continue to increase our investments in Latin America Middle East and European markets. We have also made progress in working with authorized dealers overseas through a group of high quality and experienced authorized dealers, are confident to achieve a major growth overseas this year. [indiscernible] technology improvements and nimble marketing strategies as well as expansion of sales network, I'm pretty confident about the overall sales grade growth this year.

So my second question is also related to AI. Because Li Auto has been investing in AI aggressively over the past past few quarters. What would be the scale that the Autodes AI related investment in the following years? And in addition to two key application [indiscernible] And the other one is a contract Will there be any new locations or or beyond the closing in the following quarters? That's my second question. Thank you.

Overall, investments in AI related initiatives will seek substantial growth in the next few years, but it will mainly be funded by our cash burn operations. So when we think about this overall positioning, what we need to do in the AIs period.

I think the first fundamental question is our positioning. Because different position requires different types of capability and provide different types of user value. So let's take an example of after 1975 in the PC world, [indiscernible] And there was Window making DOS and I'm sorry, there was Microsoft making DOS and Windows. And there were also device manufacturing. And similarly in the mobile age, there was iPhone and there was Android offering device, OS and open platform and etcetera. Each one of these companies achieved great market success. But they chose different positioning and they used different models and they have to make different trade offs For example, Apple chose a less open approach and provided better user experience, whereas Android had a more open approach and but the user experience may not be perfect at all times. So coming back to Li Auto, which one of these positioning positions should we choose? First of all, we think in the AGI world, our positioning is to become a hardware or device manufacturing. Manufacturer. But different from PC or mobile world, device manufacturer for AGI world requires a different set of capabilities and experience. So in general, the device we make in the AGI world or the overall AGI device is Li speaking a robot.

Therefore, it needs to have the cognitive, the feedback, the reasoning and decision making capabilities. And that of course includes software, AI functionalities, OS on software side, and on the hardware side includes not only the physical movement pieces, but also the computing power. And on top of that, it also requires operation. [indiscernible] robust system to operate these devices in the AGI world. We can't simply rely on an IT software. Probably we need to use something more like a world model. So how do we manage the silicon based devices is also going to change. And at the same time, how we manage carbon based human beings are also going to be also going to change. Change and they're going to be managed differently. So in the AGI world, to sum up, we want to become a device maker providing with the above capabilities. The second thing we need to think about is user scenario. And from this point, I can see three types of robots in general. The first is more closely L4 vehicle. Or we call space robot. It can navigate itself in open space with its own cognition and decision making and execution power. The second type is the type of robot that enhances human capabilities.

And the third one, which I think is the most difficult one operates indoors. It has the shape of a human being and it can navigate itself. So these are the three different robots that I see in the AGI world and they combined pretty much cover all aspects of human life and we want to be a maker of all these devices, so we can provide services to our users in different scenarios. It is comparable, for example, to Apple, which provides the Macintosh, the iPhone, the iPad and iWatch which covers different aspects of users' life. Here's our latest thinking for the next three to five years and probably even longer And will iterate over time.

Thank you.

Your next question comes from Tina with Goldman Sachs. [indiscernible] management for your time. So my first question is in terms of the 2026 outlook, in terms of the I think overall auto industry EV industry, your volume outlook as well as competition intensity. And then also this year, the competition is mainly focused on autopilot. So next year, do you do you see a continuation or change in that? And then the second question is regarding autonomous driving itself. So in the future, in the world of L3 and L4 becoming more like prevalent, Does management think there is a monetization monetization method for these autonomous driving software? Thank you.

First of all, on industry and competition, we believe that the penetration rate of NEV will continue to increase in 2026, but market competition will transition from competing for growth to competing for market share. Brand will play an very important role in users purchase decisions and users tend to choose brands that are well known and have good word-of-mouth In different price segments, the top brands are going to increase market share through their advantages and product. Technology, brand and overall service experience. In other words, is the market concentration going to continue to increase. Another trend that we see is many car brands wale continue to improve and accelerate their development of advanced autonomous driving. The competition here is going to be more intense. On the technology front, technologies like Drive by Wire, which includes riding and ride and handling experience, technologies like AI cockpit, which includes user interaction experience will also become a focus of competition in 2026 and beyond. And for Li Auto, our strategy is to complete our product portfolio with many cars several cars launching in 2026, we will complete our full coverage of the range extended at Pure Electric product matrix covering different price ranges at different segments.

And to cater to more users as many users as possible. In the meantime, we'll increase our investment in autonomous driving and other artificial intelligence technologies to maintain our lead in product in overall product experience. We will also expand our expansion of our supercharging network and increased coverage as well as service experience and to fully eradicate rent anxiety for our users. Apart from the domestic market, we will work with different types of partners through different methods to accelerate our growth in overseas sales and service networks. Thank you. On L3 and L4, so coming back to the current stage of including L2 and L3, they're essentially machines assisting humans to drive. They're really tools. There may be different approaches to L2 and L3. But the main difference is in the range of usage. The coverage of usage and also the availability of different features. But fundamentally, it's really still the human driver taking control of the car. There's no fundamental change in the relationship between human and the car.

As we evolve to L4, the car will become an agent or we call a driver agent So there's going to be a fundamental change between the human and car relationship. The autonomous driving system will evolve from just being a tool to become an actual agent that can replace human beings in driving It's comparable to hiring a professional driver In this scenario, we believe that users will be willing will be willing to pay for this kind of service. And on top of that, when users are relieved from the burden of driving, cars will become a robot or we call space robot that can navigate the physical world in the AIH. And in this era, the in car information in the in car software and experience and services will have greater value and a may lead to new business models, which give us more room for imagination. So with the huge potential of L4 era, our team is already very actively exploring and our goal is to capture this very big opportunity when the time of L4 comes. Thank you.

Your next question comes from Bin Leung with Deutsche Bank.

My first question is about the first quarter gross margin guidance We have been noticing some of the positive side from the components pricing deduction also noticed that you provide some cash discount so can you provide the first quarter gross margin guidance? Thank you.

Hi, Maomin. This is Lijian.

The first caller is on the low season due to Chinese New Year and also we have some sales promotion after Chinese New Year. So all that conclude together, we expect our Q1 vehicle sales margin to be around 19%.

Great. And second question, second question is about media reports that the Chairman actually we are no longer taking off the auto business and the focus was shifting to the AI R and D. Can I my question is that what's the change in the management allocation and how to balance the vehicle business in the upcoming AI business? Thank you.

Mr. Li is still the CEO of the company and he still oversees the different departments related to the car business, including vehicle lines, including product department, branding, and strategy departments. This remains unchanged from 2024. And we have allocated new responsibility under our PLM and BGST framework, assigned new person in charge. And we remain devoted to relying on efficient collaboration across the company to support our success in long term.

Your next question comes from Yingbo Zhu with Scitech Security. So I have two questions. The first one is how will we be mega market performance? And what's our expectation or plan for mega in future? And the second question is, what's our long term plan for internal ization? Thank you. [indiscernible] pure electric MPP priced at over RMB500000.

It has been the number two in sales in this segment. For many consecutive months, only second to the Toyota Alphard. This year, we hope that V MEGA will remain top three in this segment and with expected annual sales between 25,000 On top of that, Li Mega is one of the cars with the highest Net Promoter Score among our product portfolio.

In periods like the Chinese Sprint Festival, Li Mega has been widely praised for its chassis, seat comfort, NVH, smart cockpit, autonomous driving and highway five C charging experience. Has significantly exceeded our user expectation. Which further led to an increase in mega NPS after the spring festival. Which speaks to user satisfaction with the product and services and their willingness to recommend the card to people around them. In the meantime, we are a number of our directly operated five C charging stations has exceeded 1,900 So mega users, whether they're driving on highways or driving in cities, they have easy access to five gs charging experience which eliminates any anxiety with charging on long road trips. In the meantime, we're also accelerating our rollout of more 5G supercharging stations And as planned, we will have over 2,000 stations by the end of the first quarter connecting the five transfers and the nine transfers in line nine longitudinal highway routes in China. By the time we launch the i8 this year, we expect to have over 2,500 stations of super charging stations. And in April, we plan to cover the entire distance of the G318, a well known Chinese roadway, so that our mega users can drive their cars on G318.

And we also have plans to open up 50 travel routes or road trip routes to provide easy charging experience for our users. By the end of this year, we will be our charging stations will be covering over 67,000 kilometers of highway and over 10,000 of inter province highways. Totaling over 77,000 kilometers. And we have already built four eighty three charging stations across the four major economic zones in China, with an average interval of 99 kilometers. By the end of this year, we will be covering all of our four economic zones with highway supercharging stations. As we continue to build out our supercharging stations, and as we roll out VI8 and other pure electric models, with the scale economy scale, we are very confident in the sales volume of Linmega. In 2025, we are very aligned that overseas expansion is going to be one of the core strategies of this company. So we will be devoted to expanding the overseas market and building capabilities across marketing, channel and after sales as well as organization and recruiting At the beginning of this year, we had already a established an independent overseas expansion department and have moved many experienced personnel from the company.

On the market front, we will be building on this luxury brand image that we have already established in Middle East and other markets to expand our market share. In the meantime, in the past year, we have already built service centers and after sales centers in Kazakhstan, Uzbekistan, and UAE. At the same time, we'll also provide original spare parts and tech support to qualified after sales partners so that our overseas customers can enjoy the same level of service that we provide to our domestic customers. In the meantime, we also expand our market in Middle East Latin America and Asia Pacific be working with high quality local partners to expand our overseas market. We'll also be picking a small number of dealers as our local partners to expand the market together. Will also expand our marketing and building out a very complete after sales market. After sales network. 2025 is our first year of officially launching into the overall overseas market. And we will be building on capabilities that we have built the domestic market and we're confident to have made significant progress in the overseas market this year.

Call now, I'd like to turn the call back over to the company for closing remarks. Ms. Janet Zhang, please go ahead.

Thank you once again for joining us today. If you have further questions, please feel free to contact Li Auto's Investor Relations team. That's all for today. Thank you and have a nice weekend. [indiscernible]