How Weaker Guidance and Margin Pressure Will Impact Li Auto (LI) Investors

• Li Auto Inc. recently reported third quarter 2025 results, revealing a year-over-year drop in both vehicle deliveries and revenue, and issued fourth quarter guidance projecting continued declines that are below previous market expectations.
• The company is accelerating investment in AI-driven vehicles and expanding its battery electric lineup, while facing challenges from increased competition, supply chain issues, and costs related to a major vehicle recall.
• We'll examine how Li Auto's weaker fourth quarter guidance and margin pressures affect the key assumptions in its investment narrative.

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Li Auto Investment Narrative Recap

To be a shareholder in Li Auto, you need confidence in the company’s transition to pure battery electric vehicles, investment in AI, and the ability to maintain a strong competitive position in China’s rapidly evolving EV market. The recent Q3 2025 report and weaker Q4 guidance directly impact the most important short-term catalyst, successful BEV adoption, as falling deliveries and tighter margins signal a more challenging path to near-term volume growth, while also making margin protection the biggest risk. The magnitude of these shortfalls is material, with softer demand and elevated recall costs weighing on revenue and profitability, potentially weakening assumptions around cash flow and growth investments.

Among recent announcements, the launch of the Li i6 battery electric SUV in September 2025 stands out as particularly relevant. This product expansion represents the company’s push into mainstream BEVs, which is central to the investment case and now faces a tougher sales environment in light of the latest delivery and margin pressures. The Li i6’s market performance will be closely watched as a near-term indicator of whether Li Auto’s move toward BEVs can offset headwinds in its legacy hybrid segments and support the growth narrative.

However, against these ambitions, investors should be aware of intensifying competition and the risk that major sales declines could further pressure margins, potentially impacting ...

Read the full narrative on Li Auto (it's free!)

Li Auto's outlook anticipates CN¥232.1 billion in revenue and CN¥15.2 billion in earnings by 2028. This is based on analysts forecasting a 17.4% annual revenue growth rate and an earnings increase of CN¥7.1 billion from current earnings of CN¥8.1 billion.

Uncover how Li Auto's forecasts yield a $28.09 fair value, a 53% upside to its current price.

Exploring Other Perspectives

Five Simply Wall St Community valuations for Li Auto range from CN¥25.69 to CN¥37.09 per share, revealing strong differences of opinion. With competitive threats mounting, consider how falling deliveries and shrinking profitability could further influence these diverse expectations.

Explore 5 other fair value estimates on Li Auto - why the stock might be worth just $25.69!

Build Your Own Li Auto Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Li Auto research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Li Auto research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Li Auto's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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