Li Auto forecasts Q3 revenue below estimates, Q2 deliveries miss

Chinese EV maker Li Auto reported Q2 results largely below analyst estimates, with revenue down 4.5% year-over-year to 30.25 billion yuan and vehicle deliveries missing expectations. More critically, the company issued significantly weaker-than-anticipated Q3 guidance, projecting revenue of 24.8-26.2 billion yuan and deliveries of 90,000-95,000 units, both substantially below consensus, signaling a notable slowdown in its growth trajectory despite a stable gross margin.

Analysis

Li Auto's outlook indicates a significant operational slowdown, with third-quarter guidance falling substantially short of market expectations. The company projects Q3 revenue between 24.8 billion and 26.2 billion yuan, starkly below the 41.15 billion yuan analyst consensus, and forecasts vehicle deliveries of 90,000 to 95,000 units, well under the 135,327 anticipated. This weak forward guidance follows a second quarter where performance already missed targets across the board. Q2 revenue declined 4.5% year-over-year to 30.25 billion yuan, and vehicle deliveries of 111,074 units fell short of the 121,826 estimate. The financial strain is further evidenced by a worsening free cash flow, which deteriorated to a negative 3.84 billion yuan from a negative 1.85 billion yuan in the prior year. A lone bright spot was the gross margin, which held firm at 20.1%, slightly up from 19.5% year-over-year and in line with expectations, suggesting some pricing discipline or cost control despite the volume and revenue headwinds.

Key Decisions for Investors

• Investors should view the substantially weak Q3 guidance as a major red flag, necessitating a re-evaluation of Li Auto's near-term growth trajectory and valuation multiples.
• Monitoring the company's monthly delivery figures and negative free cash flow will be critical to gauge whether this slowdown is temporary or indicative of deeper-seated demand issues and operational cash burn.
• While the stable gross margin offers a sliver of positive news on unit profitability, its sustainability should be questioned in the face of potentially slowing demand and intensifying competition in the Chinese EV market.