Li Auto has told investors and the media that it will close some of its lowest‑performing retail outlets, a strategic retrenchment aimed at lifting single‑store productivity. The company rejected a media claim that it plans to shutter 100 stores, saying the move is still in an assessment phase; nonetheless, it confirmed closures will target locations opened during its fast expansion that show weak efficiency.
The retreat marks a striking reversal from the past few years when Li built out an extensive direct‑sales network. The firm had only 52 retail centers at the end of 2020, expanded to 467 by the end of 2023 and reported 502 centers at the end of 2024; by December 31, 2025 those totals stood at 548 retail centers and 561 after‑sales and authorized repair sites. That rapid roll‑out tracked the company’s steep delivery growth through 2024, when deliveries topped 500,000 vehicles for the first time.
But 2025 brought a notable slowdown: annual deliveries fell to about 406,000 vehicles, a roughly 19% drop year‑on‑year. The sales weakness has translated into margin pressure and quarterly losses; Li posted its first quarterly net loss after 11 consecutive profitable quarters, with gross margin compressing to the mid‑teens and a third‑quarter net loss driven in part by a recall tied to its MEGA platform.
The store rationalization is part of a broader strategic reset. Internally the company has restructured product management from three price‑tiered lines into two consolidated lines and announced a substantial L‑series refresh intended to reclaim leadership in range‑extended technology. Management has signalled a return to a leaner, start‑up style operating model to cope with intensifying competition from both legacy automakers and new entrants rolling out large‑battery range‑extender models.
Li’s move mirrors a wider industry shift: new‑energy vehicle makers in China are transitioning from a land‑grab phase to a focus on profitability, channel efficiency and customer experience. Competitors are also rethinking networks — examples include multi‑brand, mixed asset models and the consolidation of delivery and after‑sales channels — as firms seek to lower unit costs and raise per‑store yields rather than simply pursue footprint expansion.
For investors and market observers the key question is execution. Pruning underperforming outlets can improve returns if cost savings are realized and service coverage is preserved, but closures risk reducing visibility and convenience for potential buyers. How Li balances store cuts with network density, how effectively the L‑series relaunch stimulates demand, and whether recall‑related reputational damage is contained will determine if the move restores margin momentum or simply trims losses as the market normalises.