Li Auto reported a disappointing 2025 in which revenue and profit both slid, prompting founder and CEO Li Xiang to abandon the company’s previous, high‑octane growth posture. The fourth quarter revenue fell to 287.75 billion yuan and the company posted an annual revenue of 1,123.12 billion yuan; quarterly net profit plunged to 20.20 million yuan and full‑year net profit dropped to 1.139 billion yuan, declines that make this year more about damage control than market conquest.
At the company’s earnings call Li Xiang framed 2026 as a year for structural repair rather than rapid scale‑up. He set a modest target — just over 20% volume growth, implying at least about 487,000 vehicle deliveries — and outlined operational changes designed to correct what he called “the biggest mistake”: managing a direct‑to‑consumer retail network with dealer‑style practices.
The tactical fixes are twofold. Li Auto has launched a partner system intended to convert store managers into empowered local operators with influence over site selection and daily operations, and it says it will rationalize its network by shuttering underperforming showrooms while prioritizing premium mall and auto‑city locations for new openings. Executives insist closures are limited and routine; the company aims to show measurable retail performance gains by the third quarter.
Li Xiang also pitched artificial intelligence as a cure for the “big company disease” that he argues has degraded decision‑making and information flows as the firm scaled. The company has not quantified productivity gains, but executives presented AI as central to improving orchestration between factories, supply chains and a newly reorganized retail footprint.
On the product front the balance between defence and ambition is visible. The mid‑sized i6, positioned as a high‑volume battery electric model, suffered early supply ramp issues but is now said to have a monthly capacity of 20,000 units, shoring up the sales baseline. Li Auto is also betting on a refreshed, higher‑priced L9 (the Livis variant starts at 559,800 yuan) to lift brand cachet and average selling price, and plans to introduce a pure‑electric i9 in the second half of the year.
That product mix helps explain the conservative 20% target. A successful L9 can raise the company’s market ceiling and pull up margins across the range, but even a blockbuster L9 — one that sells 8,000 units a month — would be a strategic win more than a lever for spectacular short‑term volume growth. With rivals still pushing expansion and China’s new‑energy vehicle market intensifying, Li Auto appears to be buying time to recalibrate rather than trying to outrun the competition.
For investors and competitors the immediate question is execution. The measures Li announced—partnered stores, selective closures, an AI overhaul and premium product launches—are sensible in isolation, but their payoff depends on managerial discipline, satisfactory retail productivity improvements by Q3 and sustained supply stability. If those elements do not materialize, Li Auto risks drifting from a correction into a deeper market share squeeze.
The company’s repositioning signals a broader moment for China’s electric vehicle sector: a shift from relentless top‑line chase to a more nuanced choice between profitable consolidation and risky expansion. Li Auto has chosen the former for 2026; whether that translates into renewed momentum or merely a pause before renewed competition will be decided by data in the coming quarters.