On August 26th Beijing time, Li Auto (NASDAQ: LI / HKEX: 02015) released its first-half 2026 financial report after the Hong Kong market close and prior to the US market opening. As widely anticipated, declining vehicle deliveries weighed heavily on the company's core financial metrics during the period, though a sequential improvement in vehicle gross margin offered a silver lining. Below is a detailed breakdown of the key performance indicators.
Total revenues reached 48.6 billion yuan, a 13.4% decrease compared to the 56.2 billion yuan reported in the same period last year. Vehicle sales contributed 45.6 billion yuan, down 14.9% year-over-year from 53.6 billion yuan, a decline attributed to a less favorable product mix leading to lower average selling prices and reduced delivery volumes. Other sales and service revenue, however, grew 16.9% to 3.1 billion yuan from 2.6 billion yuan previously, driven by an expanding vehicle base on the road.
Cost of sales fell 1.7% year-over-year to 44 billion yuan from 44.8 billion yuan, reflecting the drop in deliveries. Consequently, gross profit tumbled 59.2% to 4.6 billion yuan, with the overall gross margin contracting to 9.5% from 20.3% a year earlier, a decline of 10.8 percentage points. Notably, the first-quarter 2026 gross margin stood at 7.9%, implying a meaningful improvement in the second quarter. Vehicle gross margin specifically was 7.8% for the half-year, down 11.8 percentage points from 19.6% in the prior-year period. Given that the first-quarter vehicle margin was only 6.1%, the second-quarter rebound was instrumental in lifting the half-year figure to 7.8% — a critical positive signal for the company.
Selling, general, and administrative expenses were trimmed to 4.3 billion yuan from 5.3 billion yuan a year earlier, primarily due to reduced employee compensation. Company disclosures reveal that headcount in the first half of 2026 fell by 3,970 employees compared to the same period in 2025, encompassing layoffs, voluntary departures, non-renewed contracts, and outsourcing transitions. Total compensation expenses correspondingly decreased to 6 billion yuan from 6.7 billion yuan in the year-ago period. Operating loss widened to 5.3 billion yuan, reversing from a profit of 1.1 billion yuan in the first half of 2025. Net loss reached 4 billion yuan, compared to a net profit of 1.7 billion yuan previously.
Turning to the balance sheet, cash reserves stood at 87.5 billion yuan as of June 30, 2026, down from 101.2 billion yuan six months earlier. This represents a net cash outflow of 13.7 billion yuan over the half-year, with first-quarter outflows of 6.9 billion yuan and second-quarter outflows of 6.8 billion yuan, raising questions about when the bleeding will cease. Research and development investment edged up 3.3% to 5.498 billion yuan from 5.324 billion yuan, with the R&D expense ratio climbing 1.9 percentage points to 11.3% due to the revenue contraction.
Regarding shareholder returns, the company's 1 billion USD buyback program has seen 2.34 billion HKD repurchased on the Hong Kong exchange through June and 289 million USD on the US exchange through July.
On the macro front, policy adjustments triggered an industry-wide sales slump in the first half of 2026, and combined with the company's own product cycle and competitive challenges, Li Auto experienced a marked downturn during this period. However, with the refresh of the L-series lineup completed and the higher-priced MEGA model slated for release on September 2nd, the company anticipates a potential sales recovery in the second half of 2026, which could improve overall financial performance. Whether this marks a genuine turnaround, however, remains to be seen.
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