Li Auto Inc. (LI) had a rough Wednesday after reporting third-quarter results that showed just how challenging the Chinese EV market has become. The company's revenue tumbled 36.2% year over year to 27.4 billion Chinese yuan (about $3.80 billion), and it posted an adjusted loss of 0.36 yuan per share—that's 5 cents—when analysts were expecting a 4-cent profit.
The revenue figure barely squeaked past the consensus estimate of $3.76 billion, but that was about the only bright spot in an otherwise gloomy report.
Deliveries Fall, Recall Costs Bite
Vehicle sales dropped 37.4% to $3.6 billion, driven by weaker delivery volumes. Li Auto delivered 93,211 vehicles during the quarter, down 39.0% from 152,831 units in the same period last year. That's also below the 111,074 units the company managed to deliver in the second quarter of this year, so the trend isn't heading in the right direction.
Making matters worse, vehicle margins took a serious hit. The company's vehicle margin contracted by 540 basis points to 15.5%. Strip out the estimated costs from the Li MEGA recall, though, and that margin would have been 19.8%—still down, but not quite as painful. Overall gross margin fell 520 basis points to 16.3%, or 20.4% when you adjust for recall-related expenses.
The recall impact wasn't just a rounding error. It turned what would have been a challenging quarter into a genuinely difficult one.
From Profit to Loss
The Tesla Inc. (TSLA) competitor posted an adjusted operating loss of 912.5 million yuan ($128.2 million), compared with adjusted operating income of 4.5 billion yuan in the prior year. Adjusted net loss came in at 360.3 million yuan ($50.6 million), a sharp reversal from adjusted net income of 3.84 billion yuan a year ago.
Cash flow also deteriorated. Li Auto reported a net operating cash outflow of 7.4 billion yuan ($1.0 billion) in the third quarter, a reversal from 11.0 billion yuan in net operating cash inflow a year earlier. That outflow also widened from the 3.0 billion yuan drain recorded in the second quarter of 2025.
Free cash flow was negative 8.9 billion yuan ($1.3 billion), compared with positive free cash flow of 9.1 billion yuan in the prior-year period and a 3.8 billion yuan outflow in the previous quarter. The company ended the quarter with $13.9 billion in cash and equivalents, so it's not in immediate danger, but burning through cash at this rate isn't sustainable long-term.
As of September 30, 2025, the company operated 542 retail stores across 157 cities, 546 service centers, authorized body and paint shops in 225 cities, and 3,420 supercharging stations with 18,897 charging stalls.
What Management Had to Say
Chairman and CEO Xiang Li highlighted some positives, noting that combined orders for the Li i8 and Li i6 models surpassed 100,000. He also pointed out that the company's VLA Driver large AI model reached a 91% monthly usage rate in October, suggesting customers who have the vehicles are engaging with the technology.
CFO Tie Li was more direct about the challenges, citing intensified market competition, supply chain constraints, and recall-related costs as key headwinds during the quarter. Translation: it's tough out there, and getting tougher.
Weak Guidance Ahead
For the fourth quarter of 2025, Li Auto expects revenue of 26.5 billion to 29.2 billion yuan ($3.7 billion to $4.1 billion), representing a year-over-year decline of 40.1% to 34.2%. That guidance is well below the analyst consensus estimate of $5.22 billion, which is a pretty significant miss.
The company projects vehicle deliveries of 100,000 to 110,000 units, representing a year-over-year decrease of 37.0% to 30.7%.
Price Action: LI stock was trading lower by 2.40% to $17.88 premarket at last check Wednesday.
