Hello, ladies and gentlemen. Thank you for standing by for Li Auto's first quarter 2026 earnings conference call. At this time all participants are in listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Janet Zhang, Investor Relations Director of Li Auto. Please go ahead, Janet.
Thank you operator. Good evening and good morning everyone. Welcome to Li Auto's first quarter 2026 earnings conference call. The company's financial and operating results were published in a press release earlier today and were posted on the company's IR website. On today's call, we will have our Chairman and CEO, Mr Xiang Li and our CFO, Mr Johnny Tie Li to begin with prepared remarks. Our President, Mr Donghui Ma and our CTO, Mr Yan Xie will join for the Q&A discussion. Before we continue, please be reminded that today's discussion will contain forward-looking statements made under the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain company filings with the U.S. Securities and Exchange Commission and The Stock Exchange of Hong Kong Limited. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.
Please also note that Li Auto's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. Please refer to Li Auto's disclosure documents on the IR section of our website, which contain a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Our CEO will start his remarks in Chinese. There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr Xiang Li. Please go ahead.
[Non-English content]
Hello, everyone. This is Li Xiang. Thank you for joining today's earnings conference call. In Q1 of this year, our deliveries entered a growth trajectory. From January to April, Li Auto returned to the top position in sales among Chinese brands in the Chinese new energy vehicle market, priced at RMB 200,000 and above. Monthly sales of our BEV model, the L6 i6, have stabilized at 20,000 units per month, ranking top 3 among all BEV SUVs. On May 15th, we launched the all-new Li L9, with delivery starting on May 17th. The all-new L9 comes in two trims, Livis and Ultra, priced at RMB 509,800 and RMB 459,800 respectively. The primary goal of our all-new generation Li L9 is to achieve the market position of a flagship SUV.
In important aspects of flagship product perception, such as styling, suspension and chassis, range extender, and electric powertrain, as well as intelligence and computing power, it sets the standard for what the next generation of flagship SUVs must possess. Within just 2 weeks, the Li L9 Livis secured over 10,000 orders, with transaction prices of over CNY 500,000. We expect that it will maintain a market share of over 20% in the CNY 500,000 and above NEV SUV market. Starting in June, we will focus our communication and promotion efforts on Li L9 Ultra, aiming to capture a 20% market share in the CNY 400,000-500,000 NEV SUV market. The all-new Li L9 marks the beginning of a series of new product rollouts for the Li L series. In late June, we will launch the all-new Li L8, an exceptional five-seater flagship SUV.
As the five-seater version of the all-new Li L9, it is a complete overhaul from the previous generation, and it is no longer a downgrade from Li L9. We believe the all-new Li L8 might be the best-handling large SUV globally, while delivering the most comfortable five-seat experience in its class. With the launch of the all-new Li L9, we have successfully and fully deployed our proprietary Mach M100 chip and the MindVLA model. This mass production of our full stack hardware-software solution was a key milestone for us. We're the first company in China to deliver full functionalities on a brand-new chip in its first-ever on-vehicle deployment. The Mach M100 chip is a five nanometer automotive-grade AI inference chip built on an AI-native dynamic data flow architecture. This unique architecture and superior computing power establish a long-term technological moat for us.
With an integrated hardware and software design, our chip delivers three times the effective computer power per unit cost. Furthermore, the Mach M100 chip enables us to deploy our latest MindVLA model on our vehicles. The number of parameters in this new model increased 10-fold from the previous version. The rollout of Mach M100 and the MindVLA is just the starting point. Moving forward, with larger models and data training at higher precision and higher frame rates, we expect a massive leap in the autonomous driving experience. The May 15th event focused primarily on hardware and vehicle performance. We believe it would require a dedicated two to three-hour session to fully showcase our advancements in software and intelligence.
We're planning a separate launch event in June dedicated to software and AI, which will take the time to provide an in-depth walkthrough of the real-world experience across in-cabin interaction, foundation model, autonomous driving, system agents, and our Mach chip. We look forward to giving a deep dive into the many things we can bring to our lives through software and embodied AI. Please stay tuned. With the steady rollout of our core technologies and our updated product portfolios, we maintain our full-year sales growth target of 20%. With that, I'll turn the call over to our CFO, Johnny, to walk you through our financial performance. Thank you.
Thank you, Li Xiang. Hello, everyone. Given time constraints, my remarks will be limited to first quarter financial highlights. All figures will be quoted in RMB, unless otherwise stated. For further details, including the corresponding U.S. dollar amounts, we encourage you to refer to our earnings press release. Total revenues in the first quarter were RMB 23 billion, some 11.4% year-over-year and 20.1% quarter-over-quarter. This included RMB 21.5 billion from vehicle sales, down 12.7% year-over-year and 21% quarter-over-quarter. The year-over-year decrease was mainly driven by a lower average selling price due to different product mix. The sequential decrease was mainly attributable to reduced vehicle deliveries due to seasonal factors related to the Chinese New Year holiday and lower average selling price due to different product mix.
Cost of sales in the first quarter was CNY 21.2 billion, up 2.7% year-over-year and down 10.4% quarter-over-quarter. Gross profit in the first quarter was CNY 1.8 billion, down 66% year-over-year and 64.8% quarter-over-quarter. Vehicle margin in the first quarter was 6.1%, versus 19.8% in the same period last year and 16.8% in the prior quarter. The year-over-year and the sequential decrease was mainly due to the different product mix. Gross margin in the first quarter was 7.9%, versus 20.5% in the same period last year and 17.8% in the prior quarter. Operating expenses in the first quarter were CNY 4.8 billion, down 4.8% year-over-year and 13.8% quarter-over-quarter. R&D expenses in the first quarter were CNY 2.7 billion, up 8.3% year-over-year and down 9.8% quarter-over-quarter. SG&A expenses in the first quarter were CNY 2 billion, down 19% year-over-year and 22.6% quarter-over-quarter.
The year-over-year and sequential decrease was mainly due to the decreased employee compensation and reduced expenses related to marketing and promotion activities. Loss from operations in the first quarter was RMB 3 billion, versus CNY 271.7 million income from operations in the same period last year, and CNY 442.6 million loss from operations in the prior quarter. Operating margin in the first quarter was negative 13%, versus 1% in the same period last year, and negative 1.5% in the prior quarter. Net loss in the first quarter was RMB 2.3 billion, versus CNY 646.6 million net income in the same period last year and CNY 20.2 million net income in the prior quarter. Diluted net loss per ADS attributable to ordinary shareholders was CNY 2.26 in the first quarter, versus diluted net earnings of CNY 0.62 in the same period last year and CNY 0.01 in the prior quarter.
Turning to our cash flow and balance sheet. Net cash used in operating activities in the first quarter was CNY 6.1 billion, versus CNY 1.7 billion used in the same period last year, and CNY 3.5 billion provided in the prior quarter. Free cash flow was negative CNY 7.4 billion in the first quarter, versus negative CNY 2.5 billion in the same period last year and CNY 2.5 billion in the prior quarter. Our cash position remains solid with a quarter-end balance of CNY 94.3 billion. With this strong cash position, we continue to return to shareholders through a $1 billion share repurchase program announced in March. To date, we have repurchased a total of 17.5 million Class A ordinary shares, including 7.3 million ADS for a total consideration of $148.1 million. Now for our business outlook.
For the second quarter of 2026, the company expects the delivery to be between 95,000 and 100,000 vehicles and quarterly total revenues to be between CNY 24.1 billion and CNY 25.4 billion. This business outlook reflects the company's current and preliminary review on the business situation and market condition, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator and start our Q&A session. Thank you.
Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions, and if you have additional questions, you can reenter the queue. If you are a Mandarin speaker, please ask your questions in Chinese first, then follow with English translation. Your first question comes from Tim Hsiao with Morgan Stanley.
My first question is about L9. How's the order inflow for the Li Auto L9 currently? The waiting period for the Livis variant have stretched to 9-11 weeks. Could you share the company's production capacity arrangement for this model? What is the targeted sales mix of the L9 in your second quarter delivery guidance? That's my first question. Thank you.
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First of all, the order pattern for the L9 is very clear. The top-selling Livis version accounts for over 90% of all orders, and the already fully loaded Ultra version accounts for the other less than 10%, which reflects the customer recognition of our latest advanced technology and the willingness to pay for features and performance, and which also showcase our steady foothold in the market above RMB 500,000, which is a very positive trend for the brand. Later down the road, we're going to strengthen the promotion efforts on the Ultra version and continue to optimize the order mix. Secondly, on production capacity, the all new L9 and L8 will both be manufactured in our Changzhou base, and the two cars can be adjusted flexibly between the production lines. In the long term, we're confident of the ability to manufacture these two models.
May and June will be the ramp up period for these two cars, and the monthly production capacity will fall between 4,000 and 5,000 units per month. At the moment, the two-tone body color of Livis, and also some of the unique parts on this model are slightly supply constrained. We're now working around the clock with core suppliers to come up with solutions to make sure that we can deliver these cars to our customers as soon as possible. In the meantime, we have ample production capacity for the Ultra version, and we'll be able to adjust our production based on market demand. Finally, on L9 deliveries in Q2. Concerning the production ramp up, we expect to deliver around 8,000 units between the middle of May and the end of June.
After we fully ramp up in Q3, we're confident that the all-new generation L9 will reach a delivery level over the previous generation L9.
Thank you.
[Non-English content] My second question is about the profitability.
What's your profitability outlook for the second quarter? From a full year perspective, when do you expect to see a clear inflection point for earnings? Given the rising raw material costs, is a return to profitability achievable this year? Separately, Li Auto i6 now accounts for nearly 60% of the total vehicle sales. What is the floor level of the overall gross profit margin? Lastly, could you also share the gross margin target for the L9 and the other upcoming models scheduled to launch later this year? That's my follow-up question. Thank you.
Hi team, this is John. I will take this question. Our first quarter gross margin was impacted by several factors including the model refresh cycle. We need to refresh our L-series starting from the nine, and also a higher mix of i6 and also i6 deliveries in this amount total, and also purchasing tax subsidy to the i6. However, with the launch and delivery for the all new L9, we expect our gross margin to recover about 10% in the second quarter. Looking at the full year, as we complete our model refresh cycle and optimize our production layout, we expect a continued improvement in our gross margin. This year, our first priority is to successfully complete the refresh for the Li Auto series. We are pleased to see that the Li L9 delivery showcases our flagship capabilities and technology leadership.
It's gaining strong market recognition and was gaining market share about CNY half million price range. The success of all this Li L9 deliveries establishing a solid foothold in this price segment marks a step forward, building upon the success of the original Li L9. This year's all new Li Auto series, as well as our BEV portfolio, including the i9 to be launched with feature extensive in-house developed technologies and lay a solid foundation for us over the next two years. Thank you.
Thank you.
Your next question comes from Wenxuan Gao with CITIC Securities.
Let me ask in English. What are the real on-vehicle performance, user feedback, intelligent differentiation highlights, and actual cost reduction achieved by M100 chips and the Mach VLA large model, and what is the next development direction of the company's auto-driving system? Thank you.
This is Yan Xie. Let me answer your question. Compared to our ADAS 8.0 version, this 9.0 version, powered by our in-house Mach M100 chip, shows significantly improvement. It mainly shows up in how car make decisions in complex scenarios with more human-like control, both longitudinally and laterally, and a smoother, more comfortable driving and riding experience overall. 9.0 is our first AD version running on our in-house chips, which is already one of the best in the highly competitive market, but it's really just the beginning. With the new platform, the sensor will collect data at higher precision and higher frame rates, while the powerful compute of M100 allows us to run larger and better algorithms. This new platform let us improve data, compute, and algorithms all at the same time, and that's what will drive much faster leap in our autonomous driving capabilities.
For the next step of autonomous driving, first, we will further scale up our input data and precision models, enabling more driving-related semantic information to be fed into the neural network, as this allows the model to see significantly more signals right from the sensors. Second, we will improve the model's cognitive capabilities, especially its ability to learn short-term cause and effect relationships. This empowers the model to go beyond simple behavior fitting, allowing it to make human-like judgments in more complex urban traffic scenarios. Finally, we will make the system much better at the execution stage. With more compute latency optimizations from our in-house operating system and a fully drive-by-wire chassis, the car will control motion more precisely and respond faster. That means the autonomous driving system will feel more confident and, more importantly, safer.
Because we design the software and the hardware together, our in-house M100 chip delivers triple the computing powers.
[Foreign language] previous generation platform at half the cost. [Foreign language] similar cost brings six times higher effective computing power. Under the same model, our input frame rate has tripled, with an even greater increase in inference frame rate. Our goal is to match the performance of Tesla's FSD v14 in the U.S. in the second half of this year. The higher performance AI inference system built around M100 chip gave us a strong foundation to make this happen. Thank you.
[Non-English content] Since the implementation of the store partner program, what specific changes have been observed in key metrics such as sales per unit area, average monthly sales per store, output per employee and expense ratio in pilot stores as compared to before the reform?
Has the program's current impact on sales volume met expectations? How does the company quantitatively evaluate the program's effect on boosting sales in Q3 and beyond? Thank you.
[Non-English content]
Since we started to roll out the Store Partner Program as we grant the store managers with genuine decision making authority and profit sharing rights, it has really fully unlocked the potential of our frontline sales team. First of all, on the store manager level, we can see a fundamental shift in mindset. They've transitioned from previously store executors to actual business operators. They are able to independently view the ROIs of different business activities and really focus on the operating efficiency. In the meantime, it has also increased the stability of core management teams and long term commitment. The Store Management Programs have led the store owner to invest in the store long term. They've shifted their focus from chasing short term sales targets to cultivating the local user base, spreading word of mouth and building the competitiveness of their stores in the long term. From a timing standpoint, Q1 is a typical low season in car sales, and we're in the early stage of rolling out the Store Manager Program. On average, our stores have all beaten their monthly sales targets. We have also successfully cleared the inventory for the previous generation L series and also significantly increased user satisfaction. Going forward, as our store managers accumulate more operational experience and combined with our training system and support system, we believe that the operational efficiency and capability of our stores will continue to increase. Thank you.
Your next question comes from Tina Hao with Goldman Sachs.
非 常 感 谢 管 理 层 的 时 间 ， 我 是 Goldman Sachs 的 Tina Hao。 我 第 一 个 问 题 是 想 要 问 一 下 咱 们 即 将 上 市 的 这 个 Li L8， 目 前 有 一 些 什 么 信 息 可 以 分 享 吗 ？My first question is regarding the upcoming Li Auto L8 facelift. Wondering if there is any information that management can share at this point.
我是马东辉，我来回答这个问题。我们L系列的话，产品矩阵会随着L8的上市会更加的清晰。那L9是主打旗舰的六座，全新的L8会聚焦旗舰的五座，两款车型会形成高效的互补，持续巩固品牌在高端旗舰市场的优势地位。L8已经在四月份完成了工信部新车的公告申报，计划是六月底正式发布并启动交付。相较于老款车型，新车的车身尺寸和轴距均有所加长，车内升级为五座的布局，后排乘坐空间得到大幅的优化，整体乘坐体验全面提升。在动力部分，新车会搭载我们自研的1.5T增程系统，同时配备72.7度5C大容量的电池。电池容量和全新的L9保持一致，并且很多技术都是共享同一技术平台，在能耗和续航表现上十分出色。那另外车辆还提供了双色车身、电动踏板等丰富的个性化选装方案。那更多的信息请大家关注我们六月份的发布会。谢谢。
As we start to complete our L series product lineup, it is becoming clear that L9 will be a flagship six-seater and the new L8 will be a flagship five-seater. The two cars will complement each other and continue to strengthen our foothold in the high-end flagship market. The L8 has already been registered with the MIIT in April of 2026, and we're planning to launch and deliver it in June of 2026. Compared to the previous generation, the new car is larger in overall dimensions as well as wheelbase. The car will feature a five-seat configuration with a rear passenger space significantly improved and overall riding experience also much improved. On the powertrain front, the car will also feature our in-house developed 1.5-liter turbocharged range extender system with a 72.7 kilowatt-hour 5C large capacity battery, which is exactly the same as the one seen on the L9.
The two cars will share the same technological platform and have great energy consumption and range performance. Apart from that, the L8 will also be featured in a two-tone body color as an option, and also an electric running board as another option. For more information, please stay tuned for our launch event in June. Thank you.
[Foreign language] My second question is regarding AI. I'm wondering how does management view the current competition and investment in the AI industry? Also, what is management's thought on the competition in the industry?
你好，我是李想。我们认为未来的三到五年，中高端的智能汽车的竞争本质上就是汽车智能的竞争，而整个行业最高的技术壁垒以及决定公司长期竞争力核心，我们将聚焦于芯片和大模型的深度的联合设计。根据我们自研芯片的真实案例，过去我们的技术和信息都是流动的，大家都在使用英伟达的芯片的时候，我们虽然做了很多的创新，但是别人可以通过挖走我们的人，就可以做到和我们相似的水平。随着我们自研算力更强芯片，以及采用完全不同的模型的部署的方式和模型的规模，通过软硬一体的垂直整合，这让挖人的竞争方式就彻底失效。后续我们还会把系统化的能力变成核心壁垒，我们的能力和产出将不再会被别人简单地拿走。此外，时间也是重要的因素。我们自研芯片从启动到正式上车，使用了四年的时间。新的十年，我们也会保持技术和创新的竞争力，更要保持领先性足够高和时间足够长的技术壁垒。
In our view, the competition in the mid to high-end smart vehicle segment over the next three to five years will really be a competition of embodied AI. The highest technical barrier and the core determinant of a company's long-term success and competitive business will be a deeply integrated chip and large foundational model. Take our real world experience with in-house developed chips as an example. As in the past, technology and information really flowed freely in the industry because everybody used NVIDIA chips and others could easily poach our teams, our former employees, and reach a very close level of performance, despite our many innovations. However, with our in-house developed chips and much more computing power, much greater scale for our models, we use a completely different architecture, making this traditional approach ineffective because we're fully integrated vertically between hardware and software.
Going forward, we will turn our systematic ability into our core mode. Our capabilities and outputs will no longer be easily replicated by others. Another critical factor is time. It took us four years to bring our in-house chips from starting the program to vehicle production. In the next decade, while maintaining our technological and innovation edge, we will also ensure the technological barriers that are sufficiently advanced and provide long enough time horizon as a competitive advantage. Thank you.
Your next question comes from Yujie Jing with CICC.
好的，感谢接受我的提问。首先我这边第一个问题是关于机身智能。刚刚李想总这边也提到六月份我们会召开比较详细的偏智能化的一些发布会，会讲芯片等东西。想问一下目前我们对于可能人形机器人、机身智能这边一些战略和规划的中心。So my first question is about the intelligence. As just mentioned by Mr. Li Xiang, we will hold a more detailed intelligent technology launch event in June. I would like to ask about do we have any updates on our current strategy and also planning regarding to the human robotics?
你好，我是李想。我觉得从长远来看，我们能够清楚地看到，无论是我们的工厂、门店还是我们的用户，都需要人形机器人。那从市场格局来看，我们认为创业公司，像我们这样的初步牵引收入的中场，还有那些更大规模的大厂，其实都会进入到机器人的赛道中来。所以机器人既不独属于我们，也不独属于创业公司。机器人是标准的劳动力，是任何一个希望在该领域有所作为的公司都会去做的产品，并不专属于任何一类型的公司。只要公司的业务需要人，就一定会制造机器人，只不过到底是用外购的方式还是用自制的方式，这是唯一的区别。另外，最后我们看到的是，人形机器人形成规模化的、非常成规模的商业化和工业化。举个例子，比较像2010年到2015年的电动车领域。我觉得要想达到这个程度，基本上至少还需要三年以上的时间，甚至更久。所以在这个期间，还有非常多的技术需要去攻克。因为在每一个细微的环节上，其实接下来的技术路线都没有达成共识，这些都需要去解决。这是我们的判断。
In the long run, we can clearly see whether it is our factories, or stores, or our users, all need humanoid robots. We believe that robots should not be limited to startups or medium-sized companies or large companies, it should not be limited to us. Robots will be a standardized labor. It is something that any company who is willing to make a difference in their field should adopt. It is not limited to any specific type of companies. As long as a company needs human beings, it will use robots. It is only a difference between whether they purchase the robots from somebody else or they develop it in-house. That would be the only difference. From a long time standpoint, my belief is that for humanoid robots to reach full-scale development, deployment, and commercialization to a point just like where we got to with electric vehicles between 2010 and 2015. To get to that point will still take more than three years, because in every specific area, the technological path has not converged and there are many problems that remain to be solved. In between this period, we still need to work on solving many hard problems. Thank you.
[Foreign language] My second question is about the overseas market? Could you share more updates on our latest overseas strategy, including our plans for 2026 and also the following years, our pace and also the contribution of international expansion, such as the overseas market, sales volume target, key regions, and also our product pipelines in overseas markets?
我是马东辉，我来回答这个问题。理想汽车的国际化战略是在稳步地推进。关于海外市场的话，我们是采取分阶段拓展的思路，结合当地的市场规模和竞争格局，我们会灵活去选用是设立子公司发展经销商，还是去签约独家总代的模式。那是希望依托当地的头部合作伙伴，快速去搭建销售、交付、售后一体的完整服务体系。理想汽车的品牌和产品也持续获得了海外市场的认可。在北京四月份车展，我们也收获了大量的海外媒体和用户的关注。我们也正式签约了像阿联酋、沙特头部的经销商。对于中东、中亚等市场，我们会以L系列增程车型为主力，首款海外专属的版本，全新的Li L9，会结合当地的使用场景，在充电性能、座舱、空调热管理等软硬件的层面会进行优化。在Q3将正式进入中东、中亚的市场。在五月份，我们将陆续进入中国澳门、柬埔寨、老挝、缅甸，不断去深耕东南亚的市场。在下半年，我们还会在欧洲市场推出纯电的车型Li i6，并且针对于右舵的市场，我们在年底会在中国香港、新加坡等亚太核心区域投放Mega的右舵版本。在产品端，我们会坚持区域精准的适配。后续所有新车型在研发阶段，我们便会同步完成海外法规的适配，更好去支持理想国际化的战略。谢谢。
We're steadfastly advancing our internationalization strategy and taking a phased approach to this. Based on the local market size, industry landscape, and competitiveness, we will have to choose between a model including establishing local subsidiaries, working with local dealerships, or using a sole local distributor. In any case, we want to work with leading companies or partners locally and quickly build an integrated service system encompassing sales, delivery, and after-sales. Our product and brand have continued to be recognized globally. In the Beijing Auto Show in April, we have received a lot of attention from overseas media, users, and partners. We have also officially signed contracts with Saudi Arabia and UAE distributors. In the Middle East and Central Asia market, we will be taking our L series, the range extender product line, as the main product offer there.
The first product will be an overseas dedicated all-new Li L9, which is optimized based on local conditions in charging capability, UI and software ecosystem, thermal management, including a series of hardware and software optimizations. Starting in May, we will be gradually entering markets like Macau, China, Cambodia, Laos, and Myanmar to further cultivate our Southeast Asia market. In the second half of this year, we will introduce the all-electric Li i6 in Europe. Additionally, for right-hand drive markets, we will launch the right-hand drive version of our Li Mega in key Asia Pacific markets, including Hong Kong, China, and Singapore by the end of this year. Regarding products, we're implementing a precise regional customization approach.
All of our upcoming models will incorporate compliance with overseas regulations right from the early stage of R&D to better support our ongoing global strategy. Thank you.
As we are reaching the end of our conference call now, I'd like to turn the call back over to the company for closing remarks. Ms. Janet Zhang, please go ahead.
Thank you once again for joining us today. If you have further questions, please feel free to contact Li Auto's investor relations team through the contact information provided on our IR website. This concludes this conference call. You may now disconnect your line. Thank you.