Li Auto Inc. (LI) Report Interpretation

Overview

Nomura reviews Li Auto’s 2Q26 results and management call. It sees a sequential operational recovery and potential support from upcoming launches, but judges near-term conditions difficult because China’s premium EV market is highly competitive and 3Q guidance remains muted.

Core views

Li Auto reported 2Q26 revenue of CNY25.7bn, down 15% year-on-year but up 12% quarter-on-quarter and slightly above its original guidance. Quarterly shipments were 98.3k units, down 11% year-on-year and up 3% sequentially. Nomura estimates average selling price was about CNY245k, up 8% quarter-on-quarter, as the L9 made a larger contribution than in 1Q26. Profitability also improved sequentially: gross margin rose 3.2 percentage points quarter-on-quarter to 11.0%, vehicle gross margin rose 3.4 points to 9.4%, and operating margin improved 4.1 points quarter-on-quarter to negative 9%. However, the year-on-year declines remained substantial, with gross margin down 9.0 points and vehicle gross margin down 10.0 points. Net loss was CNY1.7bn, improving 26% quarter-on-quarter but worsening 256% year-on-year, which Nomura characterizes as an insufficient recovery in an unexciting operating and market environment. For 3Q26, management guided to 95–100k shipments, implying 1.9–7.3% year-on-year growth. After July sales of 30.5k units, this points to monthly sales of 32.3–34.8k units in August and September. Revenue guidance is CNY26.6–28.0bn, or negative 2.8% to positive 2.3% year-on-year. Nomura considers the shipment outlook suboptimal, though reasonable given competition in the premium segment, and estimates that the guidance implies a 3Q26 average selling price of around CNY263k, up about 7% quarter-on-quarter. The report argues that demand for China autos remains unclear while premium-segment competition has intensified. Nomura expects Xiaomi’s upcoming SkyNomad SUVs to increase peer pressure in 2H26. Li Auto’s refreshed L-series, the planned 2 September launch of the new MEGA, and the mid-September launch of the i9 flagship six-seat family SUV could improve product mix. Management also targets 10k monthly sales for the new L6 once outstanding issues are resolved. These launches offer a route to improvement, but Nomura expects a bumpy near-term path. Management targets long-term gross margin of 15–20% and expects it to return to 15% in 4Q26. Full-year capex guidance is CNY6bn. Overseas expansion is planned through L-series sales in the Middle East and Central Asia, where L9 entered Kazakhstan and Uzbekistan in July 2026, followed by a Dubai launch event in September. Li Auto plans to enter Europe with BEV products from 4Q26 and introduce right-hand-drive versions of models including MEGA and i6 in 2H26. In smart driving, OTA 9.1 launched in July, OTA 9.2 is scheduled for October with full adoption of a 3D vision transformer, and the year-end OTA 9.3 is expected to materially expand the parameters of the VLA model. Nomura maintains its Neutral rating and USD20 target price. The target is based on a 12-month-forward DCF valuation discounted back to 2026, using an 11.9% WACC, 11.1% market risk premium, and 1.5% terminal growth rate; it implies 1.1x 2026F price-to-sales. The stock was trading at 0.6x 2026F price-to-sales.

Analysis framework

Nomura reviews reported quarterly revenue, deliveries, average selling price, margins and losses against year-on-year and quarter-on-quarter comparisons, then interprets 3Q guidance in the context of premium-EV competition. It combines management’s product, margin, capex, overseas, and smart-driving updates with a DCF valuation to support its maintained rating and target price.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  Discounted cash flow valuation

  Nomura discounts projected cash flow back to 2026 on a 12-month-forward basis, using an 11.9% WACC, 11.1% market risk premium, and 1.5% terminal growth rate to derive its USD20 target price.

• Industry AnalysisVolume-price decomposition

  Delivery and average-selling-price analysis

  The report separates shipment volume from estimated average selling price to explain revenue trends and infer the effect of a higher L9 contribution and expected product-mix changes.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Li Auto Inc. (LI)

  Primary covered company; sequential earnings recovery is weighed against competitive and execution challenges.

  Strengths

  Higher estimated 2Q26 ASP from greater L9 contribution, sequential margin improvement, and upcoming MEGA and i9 launches.

  Weaknesses

  Revenue and shipments declined year-on-year; vehicle gross margin remained single digit and the company remained loss-making.

  Comparison

  Faces increased competition in China’s premium EV segment, including from Xiaomi’s upcoming SkyNomad SUVs.

  Risks

  Intensified China EV competition, weaker-than-expected momentum for new L-series models, and EV/smart-vehicle supply-chain disruption.

Key data

• 2Q26 revenueCNY25.7bn-15% year-on-year, +12% quarter-on-quarter; slightly above original guidance
• 2Q26 vehicle shipments98.3k units-11% year-on-year, +3% quarter-on-quarter
• 2Q26 gross margin11.0%-9.0 percentage points year-on-year, +3.2 percentage points quarter-on-quarter
• 2Q26 vehicle gross margin9.4%-10.0 percentage points year-on-year, +3.4 percentage points quarter-on-quarter
• 2Q26 net lossCNY1.7bn-256% year-on-year; loss improved 26% quarter-on-quarter
• 3Q26 shipment guidance95–100k units+1.9% to +7.3% year-on-year
• 3Q26 revenue guidanceCNY26.6bn–CNY28.0bn-2.8% to +2.3% year-on-year
• DCF target-price assumptions11.9% WACC; 11.1% market risk premium; 1.5% terminal growthUSD20 target price implies 1.1x 2026F P/S

Impact & implications

Nomura sees the sequential improvement in pricing and margins as encouraging, but not enough to offset subdued demand visibility and stronger competition in China’s premium EV segment. Product launches, a projected 15% gross margin in 4Q26, and overseas expansion are the company’s identified routes to improve the outlook.

Risks

• Competition in China’s EV market could intensify further.
• New L-series models could show weaker-than-expected sales momentum.
• Supply-chain disruption could affect EV and smart-vehicle production.
• The target price could be impeded by general market, macroeconomic, company, or market-related risks.

What to watch

• August and September monthly deliveries implied by the 3Q26 shipment guidance.
• Launch execution for the new MEGA on 2 September and the i9 in mid-September 2026.
• Whether the new L6 reaches management’s 10k monthly-sales target after issues are resolved.
• Progress toward management’s expectation of a 15% gross margin in 4Q26.
• Competitive developments from Xiaomi’s upcoming SkyNomad SUVs and broader premium-EV demand.
• Execution of Middle East, Central Asia and European expansion, plus OTA 9.2 and OTA 9.3 upgrades.