In-Depth Analysis of Li Auto's Strategic Transformation

Based on the background information you provided and the data I obtained through a professional financial data system, I will conduct a comprehensive strategic analysis for you.

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According to the latest market data [0], Li Auto (NASDAQ: LI) currently has a stock price of $16.69 and a market capitalization of approximately $16.85 billion. The company has experienced a significant stock price pullback over the past year, with a 6-month decline of 45.88%, plummeting from the 52-week high of $33.12 to the current level. This stock performance reflects the market’s concerns about the company’s declining performance.

Indicator	Value	Industry Positioning
P/E Ratio	25.49x	Moderately Low
ROE	6.43%	Medium Level
Net Profit Margin	3.63%	Under Pressure
Current Ratio	1.80	Financially Relatively Stable
Debt Risk	Low Risk	Financially Relatively Healthy

Looking at the latest quarterly results, the company’s Q3 FY2025 financial report shows earnings per share of -$0.09, far below the market expectation of $0.04, representing a 325% negative surprise; operating revenue reached $3.85 billion, also lower than the expected $4.13 billion, a decline of 6.71% [0]. This performance confirms the sales decline trend you mentioned.

Li Auto’s choice to return to the extended-range strategy has deep-seated business logic support:

The extended-range technical route has been fully validated in the Chinese new energy vehicle market. Li Auto is the pioneer and leader in the extended-range track, with the deepest technical reserves, supply chain management, and brand recognition in this field. Compared to the difficulty of entering the pure electric market from scratch, returning to the extended-range track is a refocusing of the company’s strengths.

The fact that the MEGA model has monthly sales of less than 1,000 units indicates that Li Auto has not yet formed brand premium capabilities in the high-end pure electric market [0]. This stands in stark contrast to the company’s previous success in the extended-range market, proving that extended-range is still the source of the company’s core competitiveness.

From the financial data, the company incurred a loss in Q3, with an operating profit margin of only 2.84% [0]. Extended-range models have relatively more guaranteed profitability due to their more mature cost structure and higher cost-performance ratio.

You mentioned that the company has set a sales target of 550,000 units for 2026, representing a growth of approximately 40% compared to the approximately 410,000 units in 2025. The achievement of this target faces the following key variables:

• The major upgrade of the L9 model is expected to boost performance in the high-end market
• Adjustments to the organizational structure and sales system may improve operational efficiency
• The improvement of the extended-range product matrix will cover a wider price range

• Xiaomi Auto has entered the market, and its brand momentum and ecological advantages cannot be ignored
• Emerging players such as Xpeng and Leapmotor are accelerating their layout in the extended-range track
• The Aito brand continues to exert pressure, intensifying market competition

The competitive landscape of the current extended-range market is undergoing structural changes:

Competitor	Competitive Advantage	Threat Assessment
Aito (Huawei Group)	Leading intelligence, strong brand premium	Direct competition in the high-end market
Xiaomi Auto	Strong ecological integration capability, large user base	Potential full coverage of the mid-to-high-end market
Xpeng Motors	Leading intelligent driving technology, solid pure electric foundation	Accelerated launch of extended-range products
Leapmotor	Strong cost control capability, high cost-performance ratio	Erosion of the sinking market

Li Auto is facing significantly increased competitive pressure. In 2025, the company dropped from the top spot in sales among emerging players to outside the top three, and the rate of market share loss exceeded expectations [0]. This indicates that the extended-range market is no longer Li Auto’s “comfort zone”, but has entered an era of full-scale competition.

The upgrade of the L9 must bring significant improvements in product strength, including core dimensions such as cruising range, intelligence level, and cockpit experience. Otherwise, it will be difficult to stand out in fierce competition.

While maintaining brand premium, it is necessary to achieve more competitive pricing through economies of scale and supply chain optimization. The 40% sales growth target means that incremental users must be acquired, making pricing strategy crucial.

Adjustments to the sales system should focus on improving single-store efficiency and service quality, rather than simple network expansion. User experience is the core moat of the Li Auto brand.

Risk Type	Specific Performance	Impact Level
Market Share Risk	Competitors are accelerating the erosion of the incremental market	High
Technology Iteration Risk	Intelligent driving and cockpit technologies are surpassed	Medium-High
Cash Flow Risk	Sales falling short of expectations leads to capital pressure	Medium
Brand Risk	Poor performance of pure electric products affects long-term brand momentum	Medium

From a valuation perspective, the company’s current P/E ratio is 25.49x, P/B ratio is 1.63x, and EV/OCF is 5.68x [0]. The consensus analyst target price is $21.50, representing an upside of approximately 28.8% from the current price. However, HSBC downgraded its rating from “Buy” to “Hold” in December 2025, while Piper Sandler and Citi both maintained “Neutral” ratings [0], reflecting the market’s cautious attitude towards the company’s short-term prospects.

• The stock price has fallen by more than 50% from its peak, and risks have been released to a certain extent
• If the 2026 sales target is achieved, the current annualized sales volume is approximately 500,000 units, with a relatively reasonable implied valuation
• The key lies in whether growth can be realized and whether profitability can be improved

Based on the above analysis, I believe that the probability of Li Auto regaining the leading position in the extended-range market in 2026 is

, for the following reasons:

• The company’s technical accumulation and brand recognition in the extended-range field are still leading
• The strategic return is a pragmatic choice that aligns with the core competence circle
• The financial situation is relatively stable, with the ability to cope with the industry downturn

• The growth rate of competitors exceeds expectations
• The 40% sales growth target is challenging
• The failure of pure electric products may have a long-term impact on the brand

The more likely outcome for Li Auto is to , but it will be difficult to restore the absolute leading position it held before 2024. The company needs to make breakthroughs in three dimensions: product innovation, pricing strategy, and user operation, simultaneously, to achieve its strategic goals. For investors, the current valuation has fully reflected pessimistic expectations, and they can accumulate positions on dips, but need to closely monitor the sales data and performance realization in the first half of 2026.

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[0] Jinling AI Financial Data System - Real-time quotes, company profile, financial analysis and technical indicator data of Li Auto (obtained on January 22, 2026)