Li Auto Posts Largest Single-Quarter Loss Since IPO in Q1; Neutral Rating Maintained

Overview

Nomura Securities released a research report commenting on Li Auto’s Q1 2026 results. The report shows that Li Auto generated RMB 23.0 billion in revenue in Q1 — slightly above guidance but down 11% YoY; vehicle deliveries totaled 95,100 units, up 2% YoY. Due to product mix shifts — especially the increased share of lower-margin pure-electric i6 models — average selling price (ASP) declined sharply, driving vehicle gross margin down to a record low of 6.1%. The company posted a net loss of RMB 2.3 billion, the largest quarterly loss since its IPO. Looking ahead to Q2, management guidance suggests flat-to-slightly-lower deliveries sequentially and an expanded YoY revenue decline. Although the new L9 series provides some support, Nomura believes Li Auto’s path to profit recovery remains bumpy amid intensifying competition and rising raw material costs; thus, it maintains its Neutral rating and USD 20.00 target price.

Core views

Performance under pressure; gross margin hits historic low. In Q1 2026, Li Auto reported revenue of RMB 23.0 billion, down 11% YoY and 20% QoQ. Vehicle deliveries totaled 95,100 units, up 2% YoY but down 13% QoQ. Product mix changes — particularly the i6 pure-electric model accounting for 60% of total deliveries — led to a 15% YoY and 9% QoQ decline in ASP. Vehicle gross margin fell to just 6.1%, down 13.7 percentage points YoY and 10.7 pp QoQ — the lowest since 2020. Operating margin stood at -13.0%, negative for three consecutive quarters. Net loss reached RMB 2.3 billion — the worst quarterly loss since the company’s IPO. Q2 guidance tepid; sales growth faces headwinds. Management’s Q2 2026 guidance forecasts deliveries of 95,000–100,000 units, implying a 10%–14.5% YoY decline and suggesting monthly deliveries of ~30,000–33,000 units in May and June — a sequential decline from April. Revenue is expected to range between RMB 24.1 billion and RMB 25.4 billion, down 16%–20.3% YoY. Based on delivery guidance, Nomura estimates ASP may improve ~5% QoQ, driven primarily by contributions from the new L9 series. Nevertheless, the company maintains its full-year 2026 sales growth target of 20%, meaning it must deliver 290,000 vehicles in H2 — a demanding target. New vehicle cycles and overseas expansion represent key future catalysts. Regarding new models, the new L9 series generated over 10,000 orders within two weeks of launch, with the base Livis variant accounting for 90% of orders and the premium Ultra variant only 10%. The company plans to ramp up promotion of the Ultra variant in June, targeting a 20% market share in the RMB 400,000–500,000 NEV SUV segment. Additionally, the new five-seat L8 is scheduled to launch at the end of June, with further models including the L7 and i9 in the pipeline. On overseas expansion, Li Auto has signed distribution agreements with partners in Saudi Arabia and the UAE and plans to enter the Middle East and Central Asia via the new L9 extended-range model in Q3. Right-hand-drive models (e.g., MEGA) will be rolled out in H2, gradually entering Hong Kong, Singapore, and the EU.

Analysis framework

Nomura employs a combined top-down and bottom-up analytical framework. First, it quantifies the company’s current operational challenges by decomposing core financial metrics — revenue, deliveries, ASP, and gross margin — identifying adverse impacts from product mix shifts (e.g., high share of low-margin pure-electric models). Second, using management’s Q2 guidance, it projects forward delivery trends and profit recovery pathways, noting that while ASP may improve QoQ due to better model mix, YoY pressure remains substantial. Finally, it assesses the company’s medium- to long-term growth potential and risks across multiple dimensions — competitive landscape, cost pressures (e.g., rising lithium and memory prices), new vehicle cycles (L9, L8, etc.), and overseas expansion progress — leading to the conclusion to maintain a Neutral rating.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF Valuation

  The report uses a discounted cash flow model to derive the target price, assuming a weighted average cost of capital (WACC) of 11.9% and a terminal growth rate of 1.5% to estimate intrinsic value.

• Industry/ Sector Analysis FrameworkVolume-price decomposition

  Volume-Price Decomposition Analysis

  Revenue growth is decomposed into volume (deliveries) and price (ASP) components; analysis reveals that while volumes rose modestly, the sharp ASP decline was the primary driver behind revenue contraction and gross margin pressure.

• Corporate Fundamentals & Financial FrameworkProfitability Quality Analysis

  Gross Margin and Operating Margin Analysis

  Focuses on changes in vehicle gross margin and operating margin, highlighting that gross margin dropped to 6.1% and operating margin remained negative for three consecutive quarters — signaling deteriorating profitability quality in the current market environment.

Asset mapping & comparison

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

• Li Auto Inc. (LI.US / 02015.HK)

  Directly Covered Entity

  Strengths

  Strong upcoming vehicle pipeline (new L8, L7, i9); active overseas expansion (Middle East, right-hand-drive markets); maintained 20% full-year sales growth target reflects management confidence.

  Weaknesses

  Record Q1 loss since IPO; vehicle gross margin fell to historic low of 6.1%; high share of low-margin pure-electric i6 model; tepid Q2 guidance suggests possible sequential delivery decline.

  Comparison

  Compared to peers, Li Auto holds advantages in extended-range technology, but faces cost and pricing pressures during its early-stage BEV transition amid fierce competition.

  Risks

  Intensifying competition in China’s EV market; weaker-than-expected sales traction for new L-series models; unexpected supply chain disruptions.

Key data

• Q1 2026 RevenueRMB 23.0 billionYoY -11%, QoQ -20%
• Q1 2026 Vehicle Deliveries95,100 unitsYoY +2%, QoQ -13%
• Q1 2026 Vehicle Gross Margin6.1%YoY -13.7 pp, QoQ -10.7 pp — lowest since 2020
• Q1 2026 Net LossRMB 2.3 billionLargest single-quarter loss since IPO
• Q2 2026E Delivery Guidance95,000–100,000 unitsYoY -10.0% ~ -14.5%
• Q2 2026E Revenue GuidanceRMB 24.1–25.4 billionYoY -16.0% ~ -20.3%
• 2026 Full-Year Sales Target20% YoY growthImplies 290,000 deliveries required in H2

Impact & implications

Nomura believes Li Auto will continue navigating a bumpy road in the near term. Although the new L9 series has generated incremental orders, broader adoption of the premium Ultra variant remains challenging, and competition from peers remains intense. Meanwhile, rising raw material costs — notably for lithium and memory chips — will further compress margins. As such, the company is expected to remain under pressure on both delivery volume and profitability. That said, its firm full-year sales target and proactive overseas expansion strategy — including entry into the Middle East and right-hand-drive markets — provide a foundation for long-term growth, though short-term investors should remain cautious about uncertainty around profit recovery.

Risks

• Intensifying competition in China’s electric vehicle market
• Weaker-than-expected sales traction for new L-series models
• Unexpected supply chain disruptions in electric and intelligent vehicle components

What to watch

• Order intake for the new L9 Ultra variant and upcoming new models
• Market reception of the June software and AI development event
• Impact of lithium, memory, and other material cost fluctuations on gross margin
• Progress of expansion into the Middle East and right-hand-drive markets (Hong Kong, Singapore, EU)