China EV 2Q26 earnings under pressure; 3Q deliveries and new-model ramp-up are more critical

Overview

This report is Morgan Stanley's 2Q26 earnings preview for Chinese EV start-ups, covering Li Auto Inc., NIO Inc. and XPeng Inc. The report believes that 2Q results will reflect resilient revenue and volume growth, but gross and operating margins will be pressured by memory, raw-material costs, R&D and new-model launch spending. Entering 3Q, investor focus will shift from near-term earnings to delivery guidance, flagship-model ramp-up, order momentum and peak-season performance in September.

Core views

The core view is that 2Q26 earnings pressure remains, but 3Q26 volume guidance and the pace of new-model launches may become more important variables for share-price reactions. Li Auto is expected to post a 2Q US-GAAP net loss of approximately RMB2bn, with 3Q delivery guidance of 100–105k units; NIO is expected to post a 2Q US-GAAP net loss of RMB280–300mn while remaining profitable on a non-GAAP basis, with 3Q deliveries of 115–120k units; XPeng is expected to post a 2Q US-GAAP net loss of approximately RMB1bn, with 3Q deliveries of 115–120k units, supported by L03, G9L, MONA L05, exports and long-term options in robotics/robotaxi.

Analysis framework

The report uses an earnings-preview, key-KPI tracking, consensus-EPS impact assessment and probability-weighted valuation framework, focusing on 2Q vehicle gross margin, group gross margin, OPEX as a percentage of revenue, 3Q volume guidance and new-model ramp-up. The valuation section uses probability-weighted DCF or probability-weighted valuation, separately disclosing WACC, beta, long-term growth and bull/base/bear scenario weights.

Methodology notes

• Valuation methodologyProbability-weighted DCF

  Li Auto valuation

  Uses bull/base/bear scenario weights of 25%/50%/25%, with base-case assumptions including a 15.9% WACC, 2.1 beta and 3% long-term growth, reflecting volume growth driven by rising EV penetration in China.

• Valuation methodologyProbability-weighted valuation

  NIO valuation

  Uses bull/base/bear scenario weights of 25%/50%/25%, assuming net profit reaches breakeven in 2028, with key parameters of a 17.8% WACC, 2.4 beta and 3.0% long-term growth.

• Valuation methodologyProbability-weighted DCF/SoTP

  XPeng valuation

  Uses bull SoTP/base/bear scenario weights of 30%/50%/20%, with base-case assumptions of a 3% terminal growth rate, 1.6x beta and 12.8% WACC, while allowing for potential valuation re-rating of non-auto businesses.

Asset mapping & comparison

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

• Li Auto Inc. (LI.O)

  Chinese EV start-up covered by the research

  Strengths

  The ramp-up of L-series sales, incremental BEV models and faster-than-expected autonomous-driving development could provide upside.

  Weaknesses

  A 2Q US-GAAP net loss of approximately RMB2bn is expected, with OPEX of approximately RMB5.2bn, or 21% of revenue; near-term operating discipline is a key differentiating factor.

  Comparison

  3Q delivery guidance is 100–105k units, below NIO and XPeng's 115–120k range, but revenue scale and the flagship-model mix remain supportive.

  Risks

  Component bottlenecks, delays in model launches and slower auto-volume growth could create downside risks.

• NIO Inc. (NIO.N)

  Chinese EV start-up covered by the research

  Strengths

  Expected to remain profitable on a non-GAAP basis in 2Q, with 3Q supported by easing supply constraints, new-model momentum and stronger September deliveries.

  Weaknesses

  Vehicle gross margin may weaken modestly due to rising investment costs, with OPEX of approximately RMB6.4bn, or 20% of revenue.

  Comparison

  3Q delivery guidance is forecast at 115–120k units, the same as XPeng and above Li Auto's forecast range.

  Risks

  Lower-than-expected volumes, insufficient signs of operating-efficiency improvement and slower auto-volume growth could weigh on sector valuations.

• XPeng Inc. (XPEV.N)

  Chinese EV start-up covered by the research

  Strengths

  Vehicle gross margin is expected to remain above 12%; support comes from the L03 ramp-up, G9L and MONA L05 filling product gaps, accelerating exports from 4Q, and long-term options in robotics and robotaxi.

  Weaknesses

  A 2Q US-GAAP net loss of approximately RMB1bn is expected, with OPEX of approximately RMB5.6bn, or 27% of revenue; new-model launch expenses are relatively high.

  Comparison

  3Q delivery guidance is forecast at 115–120k units, comparable to NIO and above Li Auto's forecast range; it has more long-term options, but the market has not yet fully priced them in.

  Risks

  Intensifying competition in the mid-to-high-end market, cash-flow pressure from low profitability and slower industry volume growth could weigh on valuation.

Key data

• Li Auto 2Q26 net loss forecastApproximately RMB2bnOn a US-GAAP basis.
• Li Auto 2Q26 revenue and gross marginRevenue approximately RMB25bn; group GpM 10%; vehicle GpM 8.3%Revenue is at the high end of guidance, while vehicle gross margin rises 2.3 percentage points sequentially.
• Li Auto 3Q26 delivery guidance forecast100–105k unitsSupported by the ramp-up of L6/i6, the Mega facelift and the launch of i9.
• NIO 2Q26 net loss forecastRMB280–300mnUS-GAAP loss, but expected to remain profitable on a non-GAAP basis.
• NIO 2Q26 group gross margin18.1%Down 0.9 percentage points sequentially, as investment costs offset product-mix improvement.
• NIO 3Q26 delivery guidance forecast115–120k unitsSupported by easing supply constraints, new-model momentum and stronger September deliveries.
• XPeng 2Q26 net loss forecastApproximately RMB1bnOn a US-GAAP basis.
• XPeng 2Q26 revenue and gross marginRevenue RMB20bn+; group GpM 18.5%; vehicle gross margin 12%+Group gross margin declines 2.1 percentage points sequentially, but vehicle gross margin remains relatively resilient.
• XPeng 3Q26 delivery guidance forecast115–120k unitsL03 is expected to ramp from approximately 2–3k units in July to 13–15k units in September.

Impact & implications

From an investment perspective, near-term share prices may depend less on 2Q earnings and more on management commentary regarding 3Q deliveries, orders, model ramp-up and cost control. If September deliveries materialize, model transitions proceed smoothly and gross-margin pressure remains manageable, the market may raise its confidence in the volume and medium-term earnings trajectory; conversely, delays in new models, supply-chain disruptions or intensifying competition could continue to pressure sector valuations and individual-company earnings expectations.

Risks

• Continued memory and raw-material inflation compressing vehicle gross margins.
• R&D and new-model launch expenses remaining elevated, weighing on 2Q margins.
• Delays in new-model launches or capacity ramp-up.
• Delivery disruptions caused by component bottlenecks.
• Intensifying competition among mid-to-high-end new energy vehicles.
• Lower-than-expected volumes or insufficient order momentum.
• Operating-efficiency improvements falling short of expectations.
• Slower auto-industry volume growth weighing on overall valuations.

What to watch

• 2Q26 vehicle gross margin and group gross margin performance.
• Whether 3Q26 delivery guidance reaches or exceeds market expectations.
• Whether September deliveries can be supported by seasonality, new models and capacity ramp-up.
• Progress on Li Auto's L6/i6, the Mega facelift and the i9 launch.
• NIO's easing supply constraints, new-model orders and the sustainability of non-GAAP profitability.
• The pace of XPeng's L03 ramp-up from July to September, and whether G9L and MONA L05 can fill the demand gap left by the G6.
• Whether XPeng's exports begin to ramp up more visibly from 4Q.
• Whether robotics and robotaxi projects begin to be re-rated by the market.