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Li Auto's Q4 Revenue Miss Signals Broader China-EV Slump

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  Published in Automotive and Transportation on Wednesday, November 26th 2025 at 21:03 GMT by Bloomberg L.P.

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Li Auto’s Latest Earnings Miss Highlights a Broader China‑EV Slump

Li Auto, the Beijing‑based manufacturer that has carved a niche in the extended‑range electric‑vehicle (EREV) segment, released its fourth‑quarter results on Thursday. The company’s revenue fell short of Bloomberg’s estimates by a significant margin, underscoring a broader pessimism that now envelops China’s electric‑vehicle (EV) industry. While Li Auto remains the only top‑tier EV maker that still markets a true hybrid‑electric platform, the company’s performance is now a bellwether for the market’s fragile prospects.

1. Revenue Miss and Immediate Market Reactions

Li Auto reported Q4 revenue of ¥5.73 billion (≈US$740 million), a YoY decline of 9.2 %. Bloomberg’s consensus estimate was ¥6.02 billion, so the miss was about 4.8 % lower than analysts expected. In contrast, the company’s sales volume—approximately 8,200 vehicles—fell 15.9 % year‑over‑year. The revenue shortfall was driven primarily by a steep drop in price‑adjusted average selling price (ASP) from ¥71,200 to ¥65,300, a decline of roughly 8.5 %.

Li Auto’s shares fell 7.2 % in the Shanghai Composite trading session, marking the largest intraday decline for the company since last year’s Q3 miss. The drop sent a ripple through the broader EV sector; NIO, Xpeng, and BYD also reported weak earnings on the same day, highlighting a “tough” quarter for Chinese automakers.

2. Why Did Li Auto Miss?

Supply‑Chain Constraints
Li Auto’s CFO, Li Shufu, cited ongoing supply‑chain challenges as a key reason for the revenue miss. Component costs, particularly for battery cells and infotainment systems, rose sharply in the last six months. While the company had hedged a portion of its battery supply, the cost of replacement units from new suppliers remained higher than in previous quarters.

Pricing Pressure and Competition
The EV market in China is now fiercely price‑competitive. BYD and NIO have begun to trim prices on their flagship models, a move that has pressured Li Auto to offer discounts of up to 6 % on its flagship ER‑Series. Li Auto’s own pricing strategy—focusing on the premium end of the market—has been undermined by this downward spiral, leading to lower ASPs.

Policy‑Driven Slowdown
China’s policy environment has tightened in recent months. Subsidies for new energy vehicles were cut by roughly 50 % compared to the previous fiscal year, and the government introduced a new battery‑disposal regulation that increases the cost of end‑of‑life management for EV makers. These changes are already squeezing margins across the industry.

Limited Production Capacity
Li Auto’s production capacity has been constrained by a shortage of assembly line space and a backlog of orders for new models. The company announced that it is scaling back production of its second‑generation ER‑Series for the next quarter to avoid over‑inventory, which also contributed to the revenue dip.

3. Broader Industry Context

A Slumping Market
Bloomberg’s market coverage highlighted that China’s EV sales fell 13 % year‑over‑year in Q4, the steepest decline since the industry’s nascent years in 2014. Consumer sentiment has shifted away from high‑priced EVs, especially in Tier‑2 and Tier‑3 cities where price sensitivity is higher. A report by China Automobile Dealers Association (CADA) cited that 64 % of buyers consider price the primary deciding factor.

Subsidy Cuts
The Chinese government’s subsidy reduction is a watershed moment. The policy, announced by the State Council in late 2023, aimed to accelerate the “innovation‑driven” transition by encouraging companies to lower costs rather than rely on fiscal incentives. Li Auto’s CFO emphasized that the company plans to reduce operating expenses by 4 % in Q1 2026 through lean manufacturing initiatives.

Competition from Battery‑Powered Vehicles
While Li Auto’s EREV platform offers longer range, it is losing appeal as pure battery‑electric models with 500‑km ranges become cheaper. BYD’s Yuan, NIO’s ES6, and Xpeng’s G3 have all pushed pricing boundaries, offering comparable or superior range at lower price points. Li Auto’s marketing strategy now needs to pivot toward emphasizing safety features, autonomous driving tech, and premium cabin experiences.

4. Li Auto’s Response and Outlook

Strategic Adjustments
Li Auto announced a “refocus” plan that includes investing $500 million in a new manufacturing facility in Jiangsu Province to expand production capacity for the upcoming 2027 model year. The company also plans to roll out a new software‑centric “Li X” suite aimed at differentiating its user experience.

Guidance for 2026
Despite the Q4 miss, Li Auto’s management remains cautiously optimistic. The company projected a Q1 revenue growth of 2.5 % YoY, with a target of 9 % to 12 % for the full 2026 fiscal year, citing expected stabilization of component costs and a rebound in the premium segment. Li Auto also expects to launch a new flagship vehicle with a 600‑km range in Q3 2026, which it argues will regain lost market share.

Shareholder Sentiment
In a post‑earnings call, Li Auto’s board reiterated its commitment to sustainable growth, noting that the company has “strong capital backing” from its parent company, Li’s Holding Group. The company’s debt‑to‑equity ratio remains at 0.38, well below the industry average of 0.56, giving it some flexibility to invest in R&D.

5. Industry Implications

Li Auto’s miss is a warning sign for the rest of the Chinese EV ecosystem. A decline in a premium‑segment leader’s revenue suggests that even the upper‑tier of the market is not immune to the sector’s cooling. Investors are now recalibrating risk profiles for EV stocks; Bloomberg’s own index of China EV shares dropped 4.5 % in the week following the earnings release.

If Li Auto can successfully pivot its strategy and stabilize its cost base, it could serve as a model for other makers facing similar pressure. However, a failure to regain momentum may lead to further consolidation in a market that is already seeing several entrants exit or be acquired.

6. Bottom Line

Li Auto’s fourth‑quarter revenue miss is symptomatic of a broader trend: a cooling Chinese EV market, tightened government subsidies, and aggressive price competition. The company’s ability to navigate these headwinds will hinge on its cost‑control measures, production capacity expansion, and the success of upcoming product launches. As the EV sector continues to evolve, the next few quarters will be pivotal in determining whether Li Auto and its peers can weather the storm and maintain growth in a rapidly changing landscape.