Li Auto Vows Not to Pass Costs to Consumers, Unveils Two Measures to Tackle Price Volatility

Li Auto Inc. released its financial results for the first half of fiscal year 2026 (January 1, 2026 – June 30, 2026) on August 26, reporting total revenue of RMB 48.65 billion, a 13.4% year-over-year decline. The company reported a net loss attributable to shareholders of RMB 3.994 billion, swinging from profit to loss compared to the same period last year, with a gross margin of 9.5%. During the Q2 2026 earnings call, Li Xiang, Chairman and CEO of Li Auto, stated that the company would not pass on the cost increases in semiconductors—such as chips and PCBs—to consumers. Instead, it would reduce costs by enhancing integrated design and supply capabilities, strengthening cost management, and improving the efficiency of sales and marketing expenditures. He projected that the company’s long-term healthy gross margin range would be between 15% and 20%. Ma Donghui, President of Li Auto, noted that the company will adopt two key strategies to address cyclical cost fluctuations: first, continuously advancing refined operations to drive cost reductions; and second, building structural cost advantages through full-stack in-house technology development and an independent supply chain system. In the short term, the company will manage cost pressures via long-term volume-locking agreements and refined operational measures. Over the medium to long term, it will rely on scaled deployment of in-house technologies to stabilize gross margins. Li Auto expects vehicle deliveries in the third quarter of 2026 to range between 95,000 and 100,000 units, with total revenue projected at RMB 26.6 billion to RMB 28.0 billion. With the full rollout of updated L-series models and the gradual launch of its pure electric vehicle portfolio, the company anticipates further improvement in its gross margin.