Li Auto’s Earnings Call: Growth Amid Challenges

Li Auto, Inc. ((LI)) has held its Q4 earnings call. Read on for the main highlights of the call.

Li Auto’s recent earnings call painted a picture of robust growth and strategic advancements, despite some financial challenges. The company celebrated strong delivery numbers and financial performance, while also acknowledging concerns over declining gross margins and reduced net income. However, Li Auto’s commitment to research and development, supercharging infrastructure, and international expansion suggests a promising trajectory for long-term growth.

Record Vehicle Deliveries

In the fourth quarter of 2024, Li Auto achieved a remarkable milestone by delivering over 158,000 vehicles, setting a new quarterly record. For the full year, deliveries surpassed 500,000 units, marking Li Auto as the first emerging NEV brand and Chinese premium auto brand to reach this level. This achievement underscores the company’s strong market presence and growing consumer demand.

Strong Financial Performance

Li Auto reported impressive financial results for Q4 2024, with total revenues reaching RMB44.3 billion and full-year revenues at RMB144.5 billion. The company’s robust cash reserves of RMB112.8 billion highlight its strong cash generation capabilities, providing a solid foundation for future investments and growth initiatives.

Expansion of Supercharging Network

In 2024, Li Auto significantly expanded its supercharging network by building 1,420 stations, now operating the largest highway supercharging network among auto OEMs in China. The company plans to further expand to 4,000 stations by the end of 2025, reinforcing its commitment to enhancing infrastructure for electric vehicles.

International Expansion Initiatives

Li Auto made notable strides in its international expansion efforts by opening an R&D center in Munich, Germany, its first overseas facility. Additionally, the company established servicing centers in Kazakhstan, Dubai, and Uzbekistan, signaling its intent to strengthen its global footprint and cater to international markets.

Autonomous Driving Advances

The company advanced its autonomous driving capabilities with the rollout of AD Max V13, which upgraded highway NOA to an end-to-end architecture. Li Auto also introduced AI reasoning visualization to enhance user understanding of its autonomous driving functions, showcasing its commitment to innovation in this field.

Decrease in Gross Margin

Li Auto experienced a decline in gross margin to 20.3% in Q4 2024, down from 23.5% the previous year. This decrease was attributed to changes in the product mix and interest subsidies, which affected the average selling price and overall profitability.

Reduced Net Income

Despite a quarter-over-quarter increase, Li Auto’s net income in Q4 2024 was RMB3.5 billion, marking a 38.6% decrease year-over-year. The decline was influenced by lower gross margins and other financial pressures, highlighting areas for potential improvement.

Challenges in Maintaining High ASP

The average selling price (ASP) of Li Auto’s vehicles saw a decline due to interest subsidies and changes in the product mix. This impacted the company’s revenue generation from vehicle sales, presenting a challenge in maintaining high ASP levels.

Forward-Looking Guidance

Looking ahead, Li Auto provided guidance for continued growth in 2025, with plans to deliver between 88,000 and 93,000 vehicles in Q1, marking a year-over-year increase of 9.5% to 15.7%. Despite an expected decrease in Q1 total revenue, the company remains optimistic about its strong financial position and strategic investments in electrification and AI. Li Auto also aims to accelerate its supercharging network deployment, targeting 2,500 stations by the launch of its first battery electric SUV, the Li i8, and expanding to 4,000 stations by the end of 2025.

In conclusion, Li Auto’s earnings call highlighted a blend of strong growth and strategic initiatives, tempered by financial challenges. The company’s record vehicle deliveries and robust financial performance are promising, while its focus on international expansion and technological advancements positions it well for future success. Despite concerns over declining margins and net income, Li Auto’s forward-looking strategies and investments offer a positive outlook for stakeholders.