Li Auto - Earnings Call - Q2 2025

Transcript

Speaker 3

Hello, ladies and gentlemen. Thank you for standing by for Li Auto's second quarter 2025 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, Darcy. Good evening and good morning, everyone. Welcome to Li Auto's second quarter 2025 earnings conference call. The company's financial and operating results were published in a press release earlier today and are 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 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 CFO 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.

感谢1,360,000个家庭的认可, 也感谢合作伙伴、股东以及所有我们共同生长的员工。 4月份我们推出了全新的Li Mega Hold, 目前月销量在3,000台左右, 远超预期。Li Mega于去年3月发布之后历经14个月, 自今年5月起成为¥500,000以上MPV销量第一, 自6月起成为¥600,000以上所有纯电车的销量冠军。这次成功一方面彰显了公司上下快速识别问题自我迭代的能力, 另一方面也有力地证明了产品价值终将被市场和时间验证。 L系列方面, 上半年我们完成了全系在售产品的智能换新。6月以来, 受销售服务体系调整和市场因素的影响, L系销量有所波动。尽管如此, 六七两月我们在¥200,000以上的新能源汽车市场依然位列前三。我们将继续发挥Li Auto在逆境中成长的能力, 尽快完成交付体系调整, 包括优化销售和交付的能力, 建立全链路的营销体系, 调动销售积极性。同时, 我们将聚焦价值, 聚焦用户, 更加有效地应对市场变化。 7月29日我们正式发布Li i8, 并于8月20日开启交付。Li i8是Li Auto重新定义纯电SUV, 并集成Li Auto最新创新成果于一体的作品, 兼顾越野车的全能、豪华轿车的操控、MPV的空间舒适等优势。其先锋造型也是用户选择Li i8的核心原因之一, 很好地印证了我们通过正向研发创造独特用户价值的产品理念。作为重新定义纯电SUV的全新产品, Li i8发布以后, 我们专注于逐步赢得用户口碑。我们很高兴看到Li i8的市价满意度高达97%。随着用户深度体验产品, 充分了解和感受产品价值, 市场反应逐渐升温。自8月20日开启交付以来, 首批用户对Li i8的用户体验给予了高度评价。我们有信心到9月底累计交付超过8,000辆的Li i8, 相信通过时间的验证, Li i8能够和Li Mega一样成为所在价格带的纯电标杆产品。 此外, 我们的五座纯电SUV Li i6的上市筹备工作进展顺利, 将于9月底上市并开始交付, 进一步扩大我们的产品矩阵, 满足更广泛用户的需求。配合纯电车型的推出, 我们已经建成中国车企规模最大的补能体系, 作为最近两年建站速度最快的车企, Li Auto致力于为纯电用户打造没有里程焦虑的用车体验。目前我们的自建超充站已经超过3,100座, 配备超过17,000根充电桩, 其中高速超充站超过了1,000座, 覆盖中国最繁忙的九纵水环高速公路, 平均间隔150公里就有一个座。城市超充站超过2,100座, 覆盖260座城市, 一二线城市平均3.5公里就有覆盖。我们有信心达成年底4,000座的建站目标。 在充电速度方面, 我们的补能体系也达到了行业领先水平。目前我们的充电桩均为250千瓦以上, 其中4C和5C桩的占比超过61%。后续建站将全部采用4C和5C的充电桩, 进一步提高我们补能体系的超充能力。此外, 我们持续探索并构建汽车充电服务生态。6月我们在常州上建了全国首座穿梭式超充站, 和加油站的模式一样, 不但支持人车分离, 还能实现多车同时超充, 让充电体验更加便捷高效。我们也已经在测试自动的充电机器人, 希望未来能够重新定义智能的充电。 我们坚持对R&D的持续投入, 以进一步巩固Li Auto在智能化领域的行业领先地位。我们坚信智能化将越来越成为用户购买决策的关键乃至首要因素, 也将重构汽车生产, 为出行带来革命性的变化。我们预计今年在AI上的投入超过¥6 billion, 用于基础设施以及产品的技术研发。8月20日我们自研的VLA large model和Li Xiaohu智能体, 随着Li i8的交付正式上线, 其中VLA技术架构成为行业首个上车交付的, 并将于9月中旬通过OTA部署到所有的AD Max V13车型。VLA large model结合空间、语言智能和行为策略, 具备更加精准的空间感知能力、思维链的推理决策能力, 像人类司机一样通过语言交流的能力和路线Efusion生成及选择最佳路径的能力。通过采用更像人类智能的技术架构, VLA large model可以在盲义驾驶、平稳舒适、三点调头、连续任务、递固行驶等方面带来用户显著的体验提升, 并能通过持续的强化学习越来越懂用户偏好。 同时, 基于自研第一座模型Mind GPT的Li Xiaohu也从语音助手升级为Li Xiaohu智能体, 其能力的提升极大扩展了车载服务生态。比如, 您可以用生活助手对接外卖APP, 完成到店取餐, 自主调用车外摄像头和支付APP完成停车场扫码付费。Li Xiaohu的记忆能力不仅增加了工具的多样化, 然后也使其更加情感化和个人化。未来我们将继续深耕AI技术, 并利用R&D成果不断推进产品的迭代、进化。以车为载体, 我们将致力于成为物理世界和数字世界的桥梁, 将AI普惠到每一位用户。 AI之外, 我们的R&D也聚焦电驱技术和5C超充等核心环节。我们自研的驱动电机包含了核心的碳化硅工艺芯片, 它从优化了整车能耗及续航表现。另一项R&D重点是5C电池, 我们自研了电芯和热管理系统, 更好地支持超快充和长续航, 从0充到80%都能保持300千瓦以上的高功率。此外, 电池的寿命也表现出色。在超充模式下, 1,500个满充满放的循环后, 电池的健康度仍然可以保持在80%以上, 领先于行业。我们将继续借助自研优势, 通过自研自制或技术自研、合资生产等方式构建产品盈利, 同时进一步优化生产成本。 销售服务网络方面, 通过近期的组织架构调整, 我们致力于构建以门店为核心的用户运营能力, 提升终端销售转化能力, 更好地传递品牌及产品价值。同时, 我们将继续优化网络结构, 扩大和升级在头部汽车城及商场的网络覆盖, 并逐步在第一线城市增加门店数量, 以触达更多的用户群。为了更好地支持纯电车型上市, 我们今年的开建节奏整体较为前置。截止目前, Li Auto在全国150多个城市运营了约550家零售中心, 门店数量较去年年底新增50家, 全国的总展位数量也从去年的3,700多个增加到4,400多个。 Li Auto在发展历程中一直坚持做男儿正确的事, 从EREVs的Li ONE和L系列到5C纯电的Li Mega, Li i8, 无论面临怎样的挑战, 我们创造更强技术和更好产品的初心永远不会改变。今年大家看到纯电的进步, 包含Li Mega Hold和Li i8。之后我们将继续打造极致的EREV和纯电产品, 并深耕品牌建设。未来我们将继续以技术创新为驱动, 持续引领行业变革。我们希望通过长期不懈的努力, 为用户提供卓越科技、贴心服务和幸福陪伴。下面有请我们的CFO Johnny Tie Li为大家详细介绍我们的财务表现。

Speaker 8

Hello everyone, this is Xiang Li. Thank you for joining today's earnings conference call. In the second quarter of 2025, we delivered over 110,000 vehicles, bringing total revenues to RMB 30.2 billion. According to insurance registration data from the China Automotive Technology and Research Center, we captured a 13.4% market share in the RMB 200,000 and above NEV market in China, making yet another quarter where we have top segment sales among Chinese auto brands. As of the end of July, our cumulative deliveries exceeded 1.36 million vehicles. I would like to extend my sincere gratitude to those 1.36 million families who have placed their faith in us, as well as our partners, shareholders, and employees for being part of this journey. We launched Li Mega Home in April this year. The sales results far exceeded our expectations, with approximately 3,000 units sold monthly.

Fourteen months after launch in March last year, Li Mega has become the best-selling MPV priced above RMB 500,000 since May 2025, and then the top seller among all BEVs in the same price range since June 2025. These achievements demonstrate our ability to quickly identify issues and grow, while standing as a powerful testament to our product value as validated by the market and test of time. The refreshed L series that we launched in the first half of this year experienced sales fluctuations since June due to sales and service system adjustments and other market factors. Despite these challenges, in June and July, we maintained our top three positions in the RMB 200,000 and above NEV market. We will draw on Li Auto's ability to thrive in challenging conditions and swiftly complete the restructuring of our sales and service system.

This includes enhancing sales and delivery capabilities, building an end-to-end marketing system, and boosting sales team morale. Meanwhile, we will focus on creating value for our users to respond more effectively to market dynamics. We officially launched Li i8 on July 29th, with deliveries starting on August 20th. Li i8 showcases our latest innovations and redefines best SUVs by combining the versatility of off-roaders, the ride and handling of luxury sedans, and the comfort of MPVs. Its pioneering design is a key reason why users choose Li i8, validating our product philosophy. Since its launch, our focus has been on accumulating positive user word of mouth for this innovative product. We are especially pleased to see a test drive satisfaction rate of over 97%. As customers experience the product firsthand, Li i8 continues to gain momentum.

Since deliveries began on August 20, we received glowing reviews from the initial batch of customers. We expect cumulative deliveries of Li i8 to exceed 8,000 units by the end of September. We're confident that over time, just like Li Mega, Li i8 will establish itself as the benchmark in its price range. Additionally, preparation for our five-seat BEV SUV, Li i6, is progressing smoothly. We plan to launch Li i6 and commence deliveries at the end of September. Li i6 will expand our product lineup to cater to a broader audience base. To support our BEV launch, we operate the largest charging network among automakers in China. As the automaker with the fastest growing charging network over the past few years, Li Auto strives to empower BEV users with a hassle-free experience. As of now, we have more than 3,100 charging stations equipped with over 17,000 charging stalls.

Among these charging stalls along the highways, over 1,000 supercharging stations cover China's busiest nine east-west and nine south-north highway routes, a 150-kilometer interval on average. Additionally, more than 2,100 urban supercharging stations are spread across over 260 cities, with an average coverage radius of 3.5 kilometers in first and second-tier cities. We're confident that we'll reach our 4,000 station goal by the end of this year. Our charging network also leads the industry in terms of charging rate. Currently, all of our charging stalls support charging rates of 250 kilowatts or higher, with over 61% being 4C and 5C chargers. All of our upcoming charging stations use 4C and 5C charging stalls, further enhancing the ultra-fast charging capability of our energy replenishment networks. Furthermore, we continue to explore and build a new ecosystem for our automotive charging services.

In June, we launched China's first pass-through supercharging station in Changzhou, which functions like a gas station. It allows users to stay in the car while supercharging multiple vehicles at the same time, making the charging experience more efficient and more convenient. We're also testing autonomous charging robots, aiming to redefine smart charging in the future. We remain committed to ongoing investments in research and development to further solidify Li Auto's leading position in intelligence. We believe that intelligence is becoming an increasingly critical, maybe even the most critical driver of users' purchasing decisions. It will also reshape the automotive and mobility industry. We expect our AI investments this year to exceed RMB 6 billion, which will be allocated to infrastructure development as well as product and technology development.

On August 20, we officially rolled out our proprietary VLA large model driver, and Li Xiaohu is an agent with the delivery of Li i8. As the industry's first VLA architecture to be delivered in production vehicles, the VLA driver large model is scheduled to be deployed on all the AD Max models via OTA updates by mid-September. The VLA large driver large model integrates spatial and linguistic intelligence with behavioral strategy. It boasts enhanced capabilities in precise spatial perception, chain-of-thought reasoning, and decision-making, natural language interaction just like human drives, and routes with diffusion generation and optimal path selection. By adopting a technical architecture that more closely resembles human intelligence, the VLA driver large model significantly enhances user experiences in areas such as defensive driving, smoothness and comfort, three-point turns, continuous task execution, and underground garage navigation.

Furthermore, through ongoing and reinforcement learning, it can become increasingly adept at understanding user preferences. Meanwhile, our proprietary foundation model, Mind GPT-powered Li Xiaohu, has evolved from a voice assistant into an intelligent agent. The agent's enhanced capabilities greatly expand the in-car service ecosystem. For example, it can act as a life assistant to connect with food delivery apps and pick up orders at restaurants, or activate vehicles' external cameras and make payments by scanning and paying fees at parking lots. Its memory capability not only increases the diversity of tools, but also makes Li Xiaohu more emotionally resonant and personalized. Going forward, we will continue to build our AI capabilities and harness our R&D achievements to continuously advance product iteration and evolution. With the vehicle as a platform, we're committed to bringing the physical and the digital world, extending the benefits of AI to every user.

Beyond AI, our R&D also focuses on core areas such as electric drive technology and 5C supercharging. For instance, our proprietary drive motors, including key components like silicon carbide power chips, have significantly boosted vehicle energy efficiency and range. Another key R&D focus is 5C batteries. We have developed in-house battery cells and a thermal management system that can better support ultra-fast charging and long driving range. The 5C battery can maintain a high charging power of over 300 kilowatts while it charges from 0 to 80% of SOC. Additionally, the battery lifespan is exceptional. Even after 1,500 full charge discharge cycles in supercharging mode, battery health remains above 80%, which is industry first. We will continue to leverage our in-house R&D advantages to further bolster product competitiveness and optimize production costs by developing key technologies in-house and manufacturing in-house or through joint ventures.

Turning now to our sales and service network, a recent organizational restructuring will empower us to build our store-centric user operation capability, which we believe will help boost sales conversions and improve how we communicate our brand and product value. Meanwhile, we will continue to define our network structure by expanding and upgrading coverage in major auto parks and shopping malls. We will gradually increase the number of stores in lower-tier cities to reach more user cohorts. To better support our NEV launches, our store expansion schedule has been strategically front-loaded this year. As of now, we operate over 550 retail stores across more than 150 cities nationwide, with net additions of about 50 stores and 700 display spots since the end of last year. Throughout our journey, we have always believed in doing what we believe is right, even when it's difficult.

From EREVs, Li One, and Li L series to BEVs, Li Mega, and Li i8, our commitment to developing advanced technologies and better products remains unshaken, no matter how much adversity we face. This year, we've demonstrated progress in BEV innovation with offerings like Li Mega Home and Li i8. Looking ahead, we will remain devoted to creating superior EREVs and BEVs while strengthening our brand. We'll continue to leverage technological innovation to lead industry transformation. Through our long-term persistent efforts, we will aim to provide our users with cutting-edge technology, extraordinary services, and meaningful companionship. I will now turn the call over to our CFO, Johnny, to walk you through our financial performance.

Speaker 6

Thank you, Xiang. Hello, everyone. I will now walk you through our second quarter financial performance. Given time constraints, my remarks today will be limited to some key financial results. 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 revenue in the second quarter was RMB 30.2 billion, down 4.5% year-over-year, and up 16.7% quarter-over-quarter. This included RMB 28.9 billion from vehicle sales, down 4.7% year-over-year, and up 17% quarter-over-quarter. The year-over-year decrease was mainly due to lower average selling price caused by production mix changes, customer interest subsidy, and higher sales incentives, partially offset by increased vehicle delivery. The sequential increase was mainly due to the increase in vehicle deliveries. Cost of sales in the second quarter was RMB 24.2 billion, down 5.2% year-over-year, and up 17.3% quarter-over-quarter.

Gross profit in the second quarter was RMB 6.1 billion, down 1.8% year-over-year, and up 14.1% quarter-over-quarter. Vehicle margin in the second quarter was 19.4%, versus 18.7% in the same period last year, and 19.8% in the prior quarter. The year-over-year increase was attributable to lower average cost of sales, mainly due to cost reduction, partially offset by lower average selling price caused by production mix changes, customer interest subsidies, and higher sales incentives. Vehicle margin remained relatively stable over the prior quarter. Gross margin in the second quarter was 20.1%, versus 19.5% in the same period last year, and 20.5% in the prior quarter. Operating expenses in the second quarter were RMB 5.2 billion, down 8.2% year-over-year, and up 3.8% quarter-over-quarter. R&D expenses in the second quarter were RMB 2.8 billion, down 7.2% year-over-year, and up 11.8% quarter-over-quarter. The year-over-year decrease was primarily due to decreased employee compensation.

The sequential increase was mainly impacted by the pace of new vehicle programs and higher expenses to support our product portfolio expansion and technology advancements. SG&A expenses in the second quarter were RMB 2.7 billion, down 3.5% year-over-year, and up 7.4% quarter-over-quarter. The year-over-year decrease was primarily due to decreased employee compensation, partially offset by increased marketing and promotion activities. The sequential increase was mainly due to increased marketing and promotion activities. Income from operations in the second quarter was RMB 827 million, up 76.7% year-over-year, and 204.4% quarter-over-quarter. Operating margin in the second quarter was 2.7% versus 1.2% in the same period last year and 1% in the prior quarter. Net income in the second quarter was RMB 1.1 billion, down 0.4% year-over-year, and up 69.6% quarter-over-quarter.

Diluted net earnings per ADS attributable to ordinary shareholders were RMB 1.03 in the second quarter, versus RMB 1.05 in the same period last year and RMB 0.62 in the prior quarter. Now, turning to our balance sheet and cash flows, we maintain a robust cash position of RMB 106.9 billion as of June 30, 2025. Net cash used in operating activities in the second quarter was RMB 3 billion, versus RMB 429.4 million in the same period last year and RMB 1.7 billion in the prior quarter. Free cash flow was negative RMB 3.8 billion in the second quarter, versus negative RMB 1.9 billion in the same period last year and negative RMB 2.5 billion in the prior quarter.

For our business outlook for the third quarter of 2025, the company expects the delivery to be between 90,000 and 95,000 vehicles, and the quarterly total revenues to be between RMB 24.8 billion and RMB 26.2 billion. This business outlook reflects the company's current and preliminary view on its business situation and the market conditions, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator to start our Q&A session. Thank you.

Speaker 3

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions. If you have additional questions, you can re-enter 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 Tina Howe from Goldman Sachs. Please go ahead.

感谢管理层接受我的提问。我这边有两个问题, 第一个是跟咱们销量相关的, 就我们看到今年其实L系列的销量还是有下滑, 所以想问一下今年咱们整体销量的目标将如何达成? 那管理层计划如何通过从产品、营销还有渠道等方面的调整来实现这个目标? 然后第二个问题是关于咱们的芯片, 自研芯片, 能不能请管理层介绍一下最新的一些进展? Thanks for taking my question. I have two questions. The first one is regarding our sales volume, because this year we've seen the L series, their sales volume has been declining. How does management plan to achieve our full-year target through product, marketing as well as channel strategies going forward? The second question is regarding our self-developed chips. Can management give us some update on this front? Thanks!

Speaker 0

我是马东辉, 我来回答第一个问题。关于销量, 大家都比较关注。我们在产品侧, 大家也都知道我们有增程车型, 还有纯电车型。对于增程车型, 我们会以智能来巩固这个基本盘。理想作为增程技术的引领者, 我们将核心通过智能辅助驾驶的深度换新来强化产品的竞争力。9月份, 我们增程全系AD Max的车型将会升级VLA智能辅助驾驶。目前, VLA Preview版本已经随着理想i8开始交付用户, 并且驾驶性能提升是非常显著的。如果做个类比, 好比ChatGPT 4.0相比3.5的一个代际突破, 并且新版的模型参数规模将达到41, 较之前的端到端模型提升超过10倍, 相当于脑容量大幅扩容。直接带来两个核心体验的升级。在行车端, 平顺性和舒适性是显著优化的, 用户反馈已经很难区分是辅助驾驶还是人类驾驶。在泊车端, VLA的远程召唤和VLA的自动泊车功能也收获了高度认可, 既可以解决用户实际用车的痛点, 也能够获得更好的使用体验。从行业视角来看, VLA架构高度契合人类智能进化的逻辑, 并且现在更多的同行认可也加入了VLA的研发阵营。接下来, 辅助驾驶的竞争核心是迭代数种, 关键是在于强化学习。理想汽车已经搭建并且启用了直程强化学习的仿真环境, 核心是依托世界模型来实现场景和数据的重建和生成。后续将通过这一体系来推动VLA模型快速迭代, 保持行业的领先。在纯电车型方面, 今年理想的纯电产品线将形成梯次发力的格局, 打开新的增长空间。理想Mega月销已经稳定在3,000台以上, 持续贡献纯电销量的基本盘。理想i8上市后, 电钻的试驾反馈很好, 目前正在推进产能的爬坡, 力争在9月底累计交付8,000到10,000台。9月份我们将发布理想i6, i6的设计很好看, 开起来既舒适又运动, 空间体验也很好, 精准匹配年轻用户的需求, 有望成为纯电的走量主力。

Speaker 8

Translating for this mock here. There has been a big focus on sales recently, and because our product consists of BEV and EREVs, I will answer this question from two perspectives. First of all, on the EREV front, we will solidify our market position through intelligence. As a leader in range extended technology, we're enhancing product competitiveness through major upgrades in assisted driving. Starting in September, all V80 Max models across our EREV lineup will receive the VLA assisted driving system. We delivered the VLA Preview version to users alongside VLA delivery. The performance improvement that VLA brings can be compared to the improvements from ChatGPT 3.5 to 4.0. The VLA driver large model has 4 billion parameters, over 10 times higher compared to our previous end-to-end model. This is analogous to an increase in brain capacity. This has significantly improved experiences in two core areas.

In daily driving, it delivers substantially improved smoothness and comfort. Many users comment that it's now very difficult to tell apart whether it's the car driving itself or the human driving. In addition, in terms of parking, users have praised our newly introduced VLA summon function and parking functions as it actually addresses pain points while at the same time giving them a better experience. From the industry perspective, we believe the VLA architecture is going to be highly aligned with human intelligence evolution. We're seeing more and more industry participants recognize and join the VLA account. We believe that future competition of assisted driving will hinge on iteration speed, for which reinforcement learning is the key. The simulation environment required for reinforcement learning has been built and is now operational.

The core technology behind this is the world model, which is used to reconstruct and generate the scenarios and data required for reinforcement learning. Moving forward, we will leverage this system to rapidly iterate the VLA model so as to maintain its industry-leading position. That's for EREVs. On the BEV front, this year our lineup with Dennis will be released over time through two major models, gradually opening up new growth opportunities. Li Mega has steadily achieved monthly sales of over 3,000 units, stabilizing our BEV sales foundation. Since its launch, our Li i8 has received very positive feedback from test drives. We're now ramping up production capacity and are striving to deliver between 8,000 to 10,000 units cumulatively by the end of September. In September, we will launch Li i6. The model has a very attractive design. It drives very well.

It balances comfort and sportiness and has excellent space experience. It precisely meets the needs of younger consumers and has the potential to become our sales driver in the BEV segment.

Speaker 0

allowing us to quickly enter core scenarios in fourth and fifth-tier cities. By increasing store density, we enhance brand exposure and fully tap the potential of lower-tier markets, injecting new momentum into overall sales growth.

Speaker 8

On the marketing front, we'll be adopting tailored strategies for different markets. Our sales servicing system is now built around one headquarter and 23 provincial regions, with the core principle being localization with strategies tailored to local markets. For example, in the northern region, we will be focusing on promoting EREVs because of their advantages in range and performance in winter. In southern regions, we're prioritizing BEVs, highlighting sales selling points like energy efficiency, spacious interior, and smart features, aligning closely with the local consumer preferences. We'll increase market investment, moving away from our previous assumption of great products will sell themselves. We'll fully embrace digital operations, building a sophisticated digital marketing platform to track and optimize the entire consumer journey, from audience targeting and lead generation to opportunity conversion. This enables precise decision-making on online marketing investments and significantly improves campaign effectiveness.

On the channel side, for tier one, tier two, and tier three cities, we're optimizing our store portfolio to improve consumer acquisition and conversion, with a core focus on optimizing existing resources. We'll optimize store locations. We're proactively relocating stores in suboptimal positions for lower traffic areas to ensure higher consumer reach and operational efficiency. Meanwhile, we'll balance store mix. We're refining the ratio between mall-based stores and central stores in auto parts, leveraging mall store strengths in high consumer traffic areas to attract visitors, while utilizing central store high conversion capability to close sales, creating a seamless acquisition to conversion loop and enhancing overall operational efficiency. To accelerate our coverage in lower-tier cities, we're adopting a lightweight model called Star Plant to deploy stores to unlock new growth potentials.

Compared to traditional stores, these Star Plant stores require lower investments and have a shorter setup cycle, enabling rapid development in core locations within tier four and tier five cities. By increasing store density, we'll boost brand visibility and fully tap into the potential of lower-tier markets and inject fresh momentum into our overall sales growth.

Speaker 6

This is Yan. Let me share some information about our in-house design chip. The chip is successfully taped out and returned at the beginning of this year, and it is currently undergoing in-vehicle testing, and everything is in good shape. We expect to deploy it on our flagship models and deliver it to users next year. It takes about three years from setting up the project to its shipment. As far as I know, it is the fastest among similar efforts. The performance is quite satisfactory. Compared to the most powerful chips on the market, it could provide 2x performance when running GPT-like large language models and 3x when running vision models like CNNs. We designed a novel data flow architecture in which model computation is mostly driven by data, not instructions like other architectures.

In this way, the chip could achieve higher parity at the runtime, and we believe it is more suitable for large neural networks. The data-driven logic is orchestrated by our in-house design compiler, allowing the hardware to be more efficient and running at a higher frequency than most comparables in the market. Quite different from other AI chips on the market, we adopted a true hardware-software co-design approach. The chip, the compiler, the runtime system, and the Halo operating system are designed together from the beginning, so we can vertically integrate these hardware and software modules to a more powerful AI inference system more easily, and it could keep on scaling in the future.

With the landing of VLA large models on vehicles, we observed that computing power increase could translate to ADA's performance increase better than before, which means the higher the computing power, the better the performance, and it is more predictable. We have very strong confidence our innovative architecture, as well as the full stack development capability, could become our continuous differentiated capabilities and grow even stronger in the future. Thank you.

Speaker 3

Thank you. Your next question comes from Tim Hsiao from Morgan Stanley. Please go ahead.

Speaker 0

Morgan Stanley 的 Tim, 感谢这次我的提问。我有两个问题, 第一个问题呢是有关于理想的消费体系的变革, 想跟管理层请教一下目前我们销售体系的调整进展背后的思考和原因, 以及我们接下来预期的一个效果。那另外在看到成效之前, 这样的一个调整是否会影响到短期的销量和新车上市的节奏? My first question is about the adjustment to the sales system. What's the current progress of the adjustment to the auto sales system? Could you comment on the rationale behind the adjustment and the result you expect to achieve? In the meantime, could these changes adversely affect short-term sales performances and the pace of the new model launches? That's my first question. Thank you.

Speaker 8

September, Li Auto’s Li i6 will also debut as scheduled. The sales system transformation is all about providing stronger support for new vehicle launches, optimizing sales and service processes, improving the consumer car-buying experience, ensuring smooth new vehicle launches, and achieving rapid sales growth. Thank you.

Translating for Mr. Ma here. In August, we went through a major reorganization of our sales team. Now, currently, the headquarters directly manages 32 regions, and we also established new departments for sales and service operations and marketing. We've also restructured the store site selection team, strengthened our training academy, and enhanced our vehicle delivery teams. The new organizational structure is now fully operational and operating smoothly. In driving the sales system transformation, we adopted a four-step approach and internal methodology. Frontline experts clearly are identified as the key stakeholders. We focused on addressing three core needs of the frontline experts while aligning with the company's goal of delivering the best direct sales store experience. The first need we're trying to address is to ensure the frontline experts earn a competitive income. The income of frontline sales experts is directly hinged upon two things: order volume and sales needs.

We have established a dedicated marketing department to generate more online lead needs and restructured the site selection team to boost offline foot traffic to stores. We now give authority for sales strategy development during non-peak periods. We've also strengthened the training academy, equipping our experts with high-quality product message and materials and tools to improve order and conversion rates. Second, we will provide them with growth opportunities. We've built a dual track career advancement path for frontline staff, offering both specialist and then managerial tracks. We've launched targeted training programs for store managers, clearly defining long-term career pathways. This enhances team stability and strengthens frontline execution capability. Thirdly, we will enhance efficiency. We've reduced reporting layers and adopted a flatter and faster decision-making structure. Now, feedback channels, dedicated quality, and operations teams have been established, ensuring frontline concerns are heard, addressed, acknowledged, and acted upon.

This leverages our direct sales model to quickly resolve on-the-ground challenges. The sales system transformation is not a reactive adjustment, but it's a proactive strategic move to better align with frontline needs and further strengthen our direct sales advantage. While there may be some short-term adaptations, in the long run, it will continuously enhance both user experience and team effectiveness. Regarding new vehicle launches, our timeline remains unchanged, and the support is now even stronger. Li Auto's new model rollout is progressing strictly according to our established product roadmap. Li i8 was successfully launched at the end of July, with deliveries beginning on August 20th. Our production facilities are currently operating at full capacity. By the end of September, we expect to cumulatively deliver over 8,000 units of Li i8 and aim to challenge the 10,000 unit mark. Looking ahead, Li i6 will also launch as scheduled in September.

The sales system transformation is designed to provide stronger support for these new launches, optimizing sales and service processes, elevating the consumer purchase experience, and ensuring smooth new model launches and driving rapid sales growth. Thank you.

Speaker 3

Thank you. Your next question comes from Yingbo Zou from Citi. Please go ahead.

好的, 感谢管理层。我有两个问题。第一个呢, 就是Li i8上市以后呢, 其实它对这个配置有这个调整和精简。后续呢, 公司的这个产品的这个和SKU的这个思路是不是也有一些变化和调整? 第二个呢, 就是怎么看待我们这个三季度的这个销量指引和收入指引。在这个收入指引和销量指引后面, 我们这个毛利率水平怎么去判断? I have two questions. The first one is that Li i8 has adjusted some of the configurations. What's our future strategy for the product and SKU for future models? My second question is how do we see better the gross margin level under the consumption of the third quarter's sales and revenue guidance? Thank you.

Speaker 8

感谢李想, 我们先回答那个第一个。我们确定现在会减少SKU数量, 回归李想万和L9时代, 每款车然后把一个配置打造到极致, 然后为我们的用户提供最强的产品力和性价比。另一方面, 在技术平台和产品的更新上, 我们会加快迭代的速度。按照我们过去的规划, 现在遇到的问题是我们出一次牌, 同行们会出两次牌。我们的整个迭代频率相当于让同行看着我们的牌和我们打牌。接下来我们必须加速技术平台和产品更新迭代的速度, 确保出牌的频率更快。我们有信心在2026年, 在整车产品力和人工智能体系化的能力上, 要超过2022年理想L9时代的领先程度。

First of all, we will be for sure reducing the number of SKUs. Back to the time of V1 and Li L9, we'll be focusing on a single SKU and making sure it's competitive, it's maximized, and providing customers with the best product and value for money. In terms of technological platform and products, we will be iterating faster. The issue we're facing today is by the time we play one hand, our peers have played two hands. The pace of the iteration is equivalent to letting our peers see our cars while we're playing. We must increase the pace of the iteration of both products and technology to make sure that we can play faster. We're confident that by 2026, both in terms of vehicle products and AI, we will be having a stronger lead compared to the time of Li L9 back in 2022. Thank you.

Speaker 6

This is Johnny for the third quarter gross margin. I think with the current sales volume and revenue guidance, we expect to maintain our gross margin at about 19%, just as the second quarter and first quarter.

Speaker 3

Thank you. Your next question comes from Paul Gong from UBS. Please go ahead.

的, 能否还请管理层多分享一下 Li i6 的这个产品定位、上市节奏、传播计划, 在一个可分享的一个信息范围之内, 更多的一些信息吧。第二个呢是关于当前最新的一个出海的规划, 就不知道有些什么样的最新的想法。 My two questions, the first one is regarding Li i6. We see the allowed scope. Can you please share more regarding the product positioning, the launching timetable, as well as the marketing plan? My second question is regarding your overseas strategy. I'm not sure what is the latest thought, and I would appreciate if you can share more color on this. Thank you.

Speaker 8

我是李想。理想 i6，我们有信心让它成为中大型五座车电 SUV 里最具竞争力的产品。拥有独一无二的 LED 外观设计，还有同级别领先的空间舒适性，还有超长续航，还有最重要的续航带动力。并且搭载了我们行业，搭载了行业最领先的 VLA 大模型，也是我们至今为止最用用最好开的产品。在理想 i6 上，我们也会采用更贴近用户的新的传播方式，把产品的价值和用户体验的价值想得更容易让用户理解。还有就是对于销售、交付、服务团队的培训也会更到位，把直营体系对于用户服务的优势要发挥出来。最后，我觉得在 i6 方面，我们也会，这一次认真的全面的做舆情防御，从而保证之前出现的一些问题能够得以制止。

For Li i6, I'm pretty confident that the Li i6 will become a most competitive product in the large five-seater BEV SUV market because it has a unique exterior design, it has industry-leading space and comfort, and a very long range, and one of the best real-world range. It would also be equipped with our industry-leading VLA large model. It would also be the best handling Li Auto product till today. On Li i6, we'll be taking a more user-centric, a new way of marketing. We'll be speaking to our product value and experience in a way that users can understand more easily. For sales, deliveries, and services teams, the training will also be more effective. Lastly, we will seriously take PR defense. We'll make sure that problems are addressed before they're extended.

我是马东辉, 我来回答一下关于出海的一个规划。大家知道理想汽车第一款产品理想万大规模交付是在2020年初, 我们内部把2020年到2024年看成是理想汽车发展的第一个阶段, 我们聚焦国内市场和增程的产品。第二阶段的话是2025年到2027年, 销售市场会从国内正式扩展为国内加海外, 然后产品的话也会变成增程加纯电。第三个阶段的话还是在2027年以后, 会是L4自动驾驶以及更多新形态的智能体的产品阶段。2025年是理想汽车海外的一个元年。研发侧的话, 我们建立了德国和美国的研发中心。销售渠道侧的话, 我们开始正式去搭建海外的销售和售后服务体系, 组建海外的团队, 建立各类的IT系统。产品侧的话, 目前我们在研的2026年的新产品, 新上市的产品都会提前考虑到海外的法律法规。在整个市场规划方面的话, 我们也制定了推进的节奏, 我们会主攻中东、中亚、欧洲市场。海外市场是基于也是很大的挑战, 比如理想在海外品牌知名度比较低, 海外市场的开拓需要长期能力和时间的积累, 我们有足够的耐心和决心。公司已经把海外市场专项定位中长期的战略之一。谢谢。

Translating for Mr. Ma here. When our first product, Li One, was delivered in volume, it was back in the beginning of 2020. We look at 2020 and through 2024 as the first stage of development for Li Auto, where we focus on the domestic market and on EREV products. The second phase is from 2025 to 2027. The markets we sell in will be formally expanded to global and domestic markets, and products extended to electric vehicles. The third phase will be after 2027, where we'll be focusing on all four autonomous driving and new form factors of AI agents. 2025 is the initial year of our global strategy. On the R&D front, we have built development centers in Germany and the U.S.

On the sales channel side, we are formally starting to build an after-sales and after-sales organization and building an overseas team, as well as a range of IT systems. On the product front, all of the products that we're developing to be launched in 2026 will be taking into account global regulations. In terms of product roadmap, in terms of marketing go-to-market strategy, we also have solidified our overall plan to focus on Middle East, Central Asia, and Europe.

Speaker 3

market is both an opportunity and a challenge. For example, overseas, Li Auto is not a very well-known brand, just to name a few of the challenges. The overseas market expansion will take time and effort, but we have enough patience and resolution. In fact, the overseas market expansion has been one of the top medium to long-term strategies for Li Auto. Thank you.

Thank you. Your next question comes from Janet Zhang from CICC. Please go ahead.

好的, 关于管理层好。那我这边的话跟您问两个问题。首先是第二季度, 我们看到整体现金流方面的话, 可能这个现金流和自由现金流出的话有进一步扩大。想问一下具体的原因是什么, 包括我们可能怎么看待后续现金流的一个情况。那问题的话是关于自动驾驶, 那近期也是看到我们自动驾驶团队可能有一些人事变动, 包括外部环境方面, 支架监管可能有一定的层延和升级。那是否会影响我们后续VLA新开发迭代和推送? 我来翻译一下。 So I have two questions. The first is, we have seen that our operating cash flow or net cash flow outflows further expand in the second quarter. May you explain what the main reasons and how should we view the subsequent cash flow situation in the future? The second question is about the autonomous driving. We can see some key changes in our autonomous sectors. Also we see the regulatory tightening on autonomous driving. Will that affect our future development and also our integration and also deployment of our new VLA functions?

This is Johnny. I will take the first question. I think in the second quarter, as our payment term by the end of last year was three months to four months, we are paying off most of the payables of last December, November, and January, February, basically. This is why in the second quarter we have some negative operating cash flow. As you may know, we have already adjusted the payment term to 60 days to respond to the regulatory requirements and the industry trends. In the third quarter, the operating cash flow negative, the operating cash flow yield can be will be enlarged in the third quarter. We expect that will improve the cash flow in the fourth quarter if we can have a better sales volume balance in the fourth quarter. Thank you.

Speaker 8

seeking a dynamic balance between safety verification and experience innovation. We have the confidence and ability to ensure the continuity of VLA development iteration and the certainty of rollout and implementation. Thank you.

Speaker 3

Translating for Mr. Ma here. To directly answer the question, yes, our assisted driving team has seen a few departures recently. Some level of talent movement is not uncommon in this blossoming industry, and the percentage of people involved is actually very small. We'd like to extend our sincere thanks to those who have left for their contribution at Li Auto. Together, we have truly delivered many great products and experiences for our users. Our current assisted driving team operates with a very clear organizational structure, a well-developed talent pipeline, and strong strategic reserves of talent. In light of recent changes, we have appointed new leaders who bring a more youthful energy to the roles. They carry extensive experience from their past work and offer an international technical perspective. We have the kind of innovative thinking that will drive the team forward.

Li Auto's strong brand appeal and promising prospects continue to attract outstanding talents from across the industry and bring fresh energy to our team. We're steadily advancing our VLA product delivery. The VLA preview version we have already delivered features VLA driving, VLA parking, and VLA summon capabilities. We expect to roll out a complete version with scheduled shipment to all V80 Automax users in September, adding the VLA command functions to deliver a more convenient and intelligent assisted driving experience. We also have another major update scheduled for October to create additional user value. The increased regulatory focus on assisted driving really represents an important step towards healthy and orderly growth for this industry. From our perspective, a stricter regulatory environment helps the truly capable companies with real technical expertise to stand out. At Li Auto, safety and compliance have always been our top priority when developing new technologies.

As we adapt to these evolving standards, we've been strengthening our testing protocols and quality control systems. This not only improves VLA's technological maturity and reduces potential risks, but also helps us to deliver a safer and more reliable assisted driving experience for our users. Throughout VLA's development, we've maintained focus on user value and compliance boundaries, constantly striking a balance between safety validation and experience innovation. We're confident and fully capable of maintaining consistent progress in VLA's development and ensuring its timely rollout. Thank you.

Thank you. Your next question comes from Ming Xun Li from Bank of America. Please go ahead.

Speaker 6

谢谢给我提问的机会。关键层好。我这边也是两个问题。第一个问题是因为我们现在有非常多的5C超充站，我们在未来是否会开放给其他品牌使用，如何运营？如果假设有开放给其他品牌使用，是否会影响本品牌车主的使用体验？我第二个问题是如何看待VLA之后的自驾行业跟技术的迭代方向？我这边也翻译一下。 Right now, Li Auto already built a lot of 5C supercharging stations. In the future, will you open your charging station for other brands? How will you operate the charging station if you start to give other brands to use? Will it impact your own brand's car owners' user experience? My second question is regarding the autonomous driving technology. Right now, you have a very good VLA technology. After VLA, what do you expect the development direction of autonomous driving and the technology iteration? Thank you.

Speaker 8

你好, 我是Donghui Ma。我来回答第一个问题。对于Li Auto车主而言, 使用Li Auto超充的体验永远是最好的。我用四个字来概括, 多快好省。多, 是指我们自建的超充桩数量在车企里面绝对是第一的。对比特斯拉的压制比超过了1.5:1。用户在哪里都可以找到我们的充电桩。我们实现了G318全象限全线的贯通, 实现了九纵九横的高速超充网络核心路段的贯通。目前我们已经建成了车企规模最大的城市和高速的超充网络。快, 指的是10分钟就可以补能500公里, 买一杯咖啡的时间就能够满电出发。快, 非常快。好车和桩协同的智能体验, 包括智能的充电规划, 预约的充电即插即用, 再加上单手可提的轻量化的充电枪, 对于女性用户非常贴心, 非常友好。省, 是指相比其他品牌的电动车, Li Auto车主会有专享的优惠定价, 更省钱, 并且Li Auto车主的积分可以抵扣充电的费用等等。这些不仅仅是字面上的数字, 是用户每天都能感受到的充电自由。关于对于其他品牌开放, 我们一直将两C4C桩开放给其他品牌, 但可能达不到车, 达不到Li Auto车主以上的体验, 因为充电过程需要车端和桩端的一体化协同。谢谢。

Speaker 3

For translating for Mr. Ma here, for Li Auto vehicle owners, I can assure that the experience with our charging stations will always be the best. I can summarize the experience with four words: coverage, speed, experience, and value for money. First of all, coverage. We're absolutely number one among all automakers in terms of the number of supercharging stations. We have about 1.55 times the number of charging stations compared to Tesla. Wherever our users go, they can easily find our charging stations. We completed the coverage along the G318, Sichuan to Tibet highway route, and core sections of the 9x9 highway network in China. We now operate the largest urban and highway supercharging network of any automaker in China. Second, speed. Our charging network supports 500 kilometers of driving range with only 10 minutes of charging, just the time of buying a cup of coffee.

It's really, really fast. Experience. Our charging network provides a very integrated experience between the vehicle and the charging stall, with very intelligent charging planning, charging reservation, and plug and charge functionality. Combining that with the lightweight charging poles designed to be easily handled with one hand, it's especially user-friendly for female users. In terms of value for money, compared to the owners of other EV brands, Li Auto vehicle owners enjoy a dedicated preferential electricity charging rate, saving on every charge. In addition to that, our owners can use their loyalty points to offset our charging costs. These aren't just numbers on paper. They translate into real everyday charging experience that our users can provide positive feedback on every day.

Our 2C and 4C charging stalls have been open to vehicle owners of other brands, but those other owners won't be able to have the same level of experience as our vehicle users because the best experience requires seamless integration of the vehicle as well as the charging stations. Thank you.

Speaker 8

我是李想。对, 那关于妙威, 我就说说我的一个看法。2025年整个辅助驾驶行业, 我们三遇到了质量时刻, 就相关技术和体验在整个上半年的进展缓慢, 同时还面临了来自然后监管的挑战。我认为这是黎明到来前的黑暗。VI是很清晰的通往L3、L4, 甚至是L5级自动驾驶的路径, 因为它和人的工作方式一样。我们预测, 未来会比人类的驾驶强10倍, 甚至100倍。VI是真正的, AGI的第三阶段的智能体, 它的能力提升来自于两个方面。首先是通过人类的数据和基础模型获得人类的芯片, 达到和人类相同的水平, 类似于师傅带徒弟, 大量的应用类似SMP和RHF的方式来进行后训练。更重要的是, 可以通过世界模型生成的环境进行强化训练, 也就是RRAF。这里的RRAF不是用于训练基座模型的, 而是用于直接训练智能体的。举个例子来说, 我们近期在国外国内经常看到L4的运营车辆掉到了施工场景的坑里, 但是在人类世界中, 这样的数据非常有限, 也无法用于训练。在世界模型中, 我们可以把这些坑变成数据资产, 生成无数个车辆掉坑的数据, 从而通过强化训练, 让智能体可以轻松地解决这类的问题。也就是说, 世界模型拥有比真实世界更难、更全面、更高质量以及更有挑战的数据和反馈方式, 从而解决了人类世界数据过拟合、数据分配不均以及无法剔除脏数据对智能体的影响。我们相信随着训练迭代和成长, 未来两年左右, VRA可以达到人类驾驶安全的10倍以上。而这背后的挑战是智能体需要更强的大脑和更强的心脏。大脑就是模型的规模, 端到端是3亿的, 是3亿参数的模型规模。虽然我们交付的VRA已经是40亿的模型规模了, 但是跟人类大脑相比还是有很大的不足。模型规模的扩大会带来放大能力的显著提升, 而对于模型规模的扩大, 也需要在端侧部署更强的算力。算力就相当于心脏, 通过给大脑持续的供血, 从而运行更大的模型。另外一方面, 在世界模型和RAF层面, 相比之前, 我们可能需要10倍起的推理算力, 用以解决RAF训练所需要的环境和数据。我们预测随着强化训练、模型规模以及算力的提升, 自动驾驶的进步速度和成长速度会远远高于以前的任何一种方式。我们相信未来3到5年里, 数字世界最大的智能体应用是编程, 而物理世界最大的智能体应用就是自动驾驶。我相信L4级别的自动驾驶将会在2027年实现。

Speaker 3

In fact, the beginning of 2025 has really been the most challenging period for assisted driving. With technological and experience progress slowing down, at the same time, regulatory pressures have grown. However, I see this as the darkness just before dawn. The VLA represents a clear pathway towards L3, L4, and even L5 autonomous driving. As it operates really in a way like human, only we can expect it to perform 10 times or even 100 times better than human drivers in the future. VLA is the true agent in the third stage of AI, and we build its capabilities in two ways. First, it acquires human experience by learning from human data and the foundational model through large-scale operation of SFT and RLHF to achieve performance on par with human drivers. It's like an apprentice learning from a master.

More importantly, it undergoes reinforcement training within environments generated by a world model using RLAIF to train agents. For example, we many times see L4 vehicles in China as well as overseas falling to traps, for example, construction nodes. This kind of data is very limited in the real world and cannot be used for training. However, with a world model, we can generate countless variations of cars falling into these traps and enabling the agent to learn rapidly and resolve these issues effortlessly through reinforced practice. The world model provides data that is more difficult, more comprehensive, and higher in quality and more challenging than real-world data. This approach effectively addresses critical issues in real-world data such as underrepresentation, imbalanced distribution, and the impact of unavoidable polluted data on agents.

We believe that ongoing iterative training and development, the VLA will achieve a level of driving safety at least 10 times that of a human driver within the next two years or so. The challenge behind this lies in equipping the agent with both a more powerful brain and a stronger heart. By brain, we refer to model scale. The end-to-end model has 0.3 billion parameters, while our VLA model has 4 billion parameters, which remain far inferior to human capabilities. Expanding this scale will substantially enhance generalization capability. Scaling the model will also require significantly more computing power on the device side, which acts as the heart to supply the brain with the necessary resources to supply larger models.

In the meantime, the realm of world models and RLAIF will likely require at least 10 times more computing power for reasoning than before to generate the environment and data necessary for RLAIF training. We anticipate that with the enhancements in reinforcement training, model scale, and computing power, the speed of our progress will far exceed anything we've seen in our previous approaches. I believe that in the next 35 years, the largest application of agents in the digital world will be programming, coding, while in the physical world, it's going to be autonomous driving. I believe that level 4 autonomous driving will be achieved by 2027. Thank you.

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 lines. Thank you.