Li Auto Inc. ( LI ) shares fell Thursday after the Chinese electric vehicle maker reported sharply weaker fiscal fourth-quarter 2025 results, reflecting lower deliveries, shrinking margins and costs linked to the recall of the Li MEGA in the third quarter of 2025.

Revenue And Deliveries Decline In Fourth Quarter

Quarterly revenue declined 35.0% year over year to 28.8 billion Chinese yuan ($4.11 billion), missing the analyst consensus estimate of $4.28 billion.

Adjusted net earnings were 0.25 yuan per American depositary share (4 cents), below the Street's expectation of 5 cents.

Vehicle sales fell 36.1% to $3.9 billion, primarily due to weaker delivery volumes.

Li Auto ( LI ) delivered 109,194 vehicles during the quarter, down 31.2% from 158,696 units a year earlier, though above the 93,211 units delivered in the third quarter of 2025.

For comparison, Nio Inc. ( NIO ) reported quarterly deliveries of 124,807 vehicles, rising 71.7% year over year and 43.3% quarter over quarter. Tesla Inc. ( TSLA ) delivered a record 418,227 vehicles globally in the quarter, although that figure declined 16% from a year earlier.

Margins Compress As Recall Costs Weigh

Profitability also weakened during the quarter.

Vehicle margin contracted to 16.8% from 19.7% a year earlier. Gross margin fell to 17.8% from 20.3%.

The company reported an adjusted operating loss of 188.4 million yuan ($26.9 million), compared with adjusted operating income of 4.2 billion yuan in the prior-year quarter.

Adjusted net income fell to 274.4 million yuan ($39.2 million) from 4 billion yuan a year earlier.

Li Auto ( LI ) ended the quarter with $14.5 billion in cash and equivalents.

Net operating cash flow totaled 3.5 billion yuan ($503.5 million) during the quarter, down from 8.7 billion yuan a year earlier. The company used 7.4 billion yuan in net operating cash flow in the third quarter of 2025.

Free cash flow was 2.5 billion yuan ($352.9 million) in the fourth quarter of 2025, compared with 6.1 billion yuan in the fourth quarter of 2024 and negative 8.9 billion yuan in the third quarter of 2025.

Retail Network Expansion And Operational Changes

As of Dec. 31, 2025, Li Auto ( LI ) operated 548 retail stores across 159 cities. The company also maintained 561 service centers, Li Auto ( LI )-authorized body and paint shops in 224 cities, and 3,907 supercharging stations with 21,651 charging stalls.

Chairman and CEO Xiang Li said the company's strategic adjustments in 2025 improved organizational efficiency, supply capacity and the sales system beginning in the fourth quarter.

He noted that the changes increased store productivity, eased production constraints for the Li i6 and helped Li i8 sales recover.

Xiang added that Li Auto ( LI ) will enter an important product cycle in 2026. The new Li L9 is scheduled to launch in the second quarter, featuring upgrades in powertrain, autonomous driving and chassis technology designed to significantly improve the user experience.

Li Auto CFO Tie Li said the company maintained a resilient gross margin in the fourth quarter by leveraging its operational strength and strict cost control, despite short-term pressure from model transitions and intensifying competition.

He added that a solid financial foundation supported full-year profitability, with year-end cash holdings of 101.2 billion yuan, giving the company strong capacity to pursue growth in embodied AI and global expansion.

Outlook Signals Further Revenue Pressure

For the first quarter of 2026, Li Auto ( LI ) expects revenue between 20.40 billion yuan and 21.60 billion yuan ($2.90 billion to $3.10 billion). That represents a year-over-year decline of 21.3% to 16.7% and is well below the analyst consensus estimate of $4.11 billion.

The company expects vehicle deliveries of 85,000 to 90,000 units, representing a year-over-year decrease of 8.5% to 3.1%.

LI Price Action: Li Auto ( LI ) shares were down 1.86% at $17.95 during premarket trading on Thursday, according to Benzinga Pro data.

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