To The Moon

$Li Auto(LI)$ Fiscal Q3 2025 Earnings is scheduled for Wednesday, November 26, 2025, before U.S. market open.

Consensus Sentiment: Cautious. The company is in a acknowledged "crisis mode" transition, shifting from its dominance in Extended Range EVs (EREV) to fighting a price war while pivoting to AI and global expansion.

Scorecard: What the Market Expects vs. Reality

Li Auto has already released its delivery numbers, so the "surprise" will come from margins and guidance, not volume.

Fiscal Q2 2025 Earnings Analysis: The "Reality Check" Quarter

The Q2 2025 report was a pivotal moment for Li Auto. It marked the official end of its "hyper-growth at all costs" phase and the beginning of a painful but necessary strategic reset.

The Scorecard: Q2 2025 Financials

Revenue: RMB 30.2 Billion ($4.2B)

• Result: Missed estimates. Down 4.5% Year-over-Year (YoY).

• Context: Despite selling more cars than last year, revenue dropped. This confirms that the cheaper Li L6 is dragging down the Average Selling Price (ASP).

Deliveries: 111,074 Vehicles

• Result: Up +2.3% YoY.

• Context: Growth has stalled significantly compared to the triple-digit growth seen in 2024.

Vehicle Margin: 19.4%

• Result: Better than feared. Improved from 18.7% last year.

• Context: This was the "silver lining." Management proved they could launch a cheaper car (L6) without immediately destroying margins, thanks to aggressive supply chain cost cuts.

Free Cash Flow: Negative RMB 3.8 Billion

• Result: Major Red Flag.

• Context: This was a shock for a company famous for its massive cash pile. It signals that inventory costs and AI investments are currently outpacing cash generation.

The "Lesson Learned" from Guidance

The guidance for Q3 was the most damaging part of the report. Management forecasted 90,000–95,000 deliveries (a ~40% YoY decline) and revenue of roughly RMB 25B.

Lesson #1: The "Blue Ocean" is Gone

What happened: For three years, Li Auto had the "Extended Range EV" (EREV) market largely to itself.

The Lesson: That monopoly is over. AITO (Huawei) has successfully successfully invaded Li Auto's territory. The weak guidance is a direct admission that Li Auto is losing market share in the premium segment (L9/L8) to Huawei's M9 and M7. Investors learned that Li Auto no longer has pricing power.

Lesson #2: The "L6 Trap" (Cannibalization Risk)

What happened: The guidance implied that the vast majority of sales are now the cheaper L6 model.

The Lesson: Investors learned that the L6 isn't just "additive"—it is cannibalizing the more profitable L7 and L8 models. If you sell a cheaper car to the same customer base, your revenue shrinks even if your volume stays flat. This "mix shift" is the primary headwind for the stock right now.

Lesson #3: Operational "Indigestion"

What happened: Management blamed the weak guidance partly on "sales system restructuring."

The Lesson: Li Auto tried to change too much, too fast (launching the MEGA, shifting to pure EVs, and restructuring sales teams all at once). The lesson is that execution risk is real. The company is not invincible; it broke its own momentum with strategic errors earlier in the year and is now paying the price in lost quarters.

Investor Takeaway

The Q2 earnings and Q3 guidance transformed the narrative from "Growth Stock" to "Turnaround Story."

Previously: You bought LI for 50%+ annual growth.

Now: You hold LI if you believe they can successfully pivot to autonomous driving (catching up to Huawei) and stabilize margins in a price war.

Verdict: The market has now "de-risked" the stock by pricing it for low growth. Any surprise to the upside in the upcoming Q3 report (e.g., margins staying >19%) could spark a rally, as the bar has been set extremely low.

Key Metrics to Watch (The "Make or Break" Numbers)

Vehicle Margin (The "Mix" Problem)

This is the single most important number for Q3.

The Issue: Li Auto's sales mix has shifted heavily toward the Li L6, its cheapest model. While volume is high, the L6 has lower margins than the flagship L9.

The Target: In Q2, vehicle margin was 19.4%. If this drops below 18%, the stock will likely be punished, as it signals they are buying sales with profitability—a dangerous game in a price war.

Q4 Guidance (The "Crisis" Response)

Management recently held a closed-door "strategy reflection" meeting. Investors need to hear the output of this in the guidance.

Expectation: Markets are nervous. Any guidance below 125,000 deliveries for Q4 could be viewed as a disappointment, given the seasonal strength usually seen in Q4.

Competition: Listen for comments on AITO (Huawei). Huawei's aggressive entry has directly eaten into Li Auto's premium SUV market share.

Cash Flow & Burn Rate

Red Flag: In Q2, Free Cash Flow turned negative (-RMB 3.8B).

Watch For: With the company announcing "aggressive AI investment" (new data centers, end-to-end autonomous driving), investors need to confirm if the cash burn is accelerating. They have a massive cash pile (~$14.9B), but Wall Street hates sustained negative cash flow.

Strategic "Pivot" Points (Long-Term Narrative)

During the call, expect management to try and shift the narrative away from "slowing domestic growth" to these three future drivers. You can trade off the sentiment of these announcements:

"Year One" of Global Expansion (2025): Li Auto has historically been domestic-only. They are pivoting to export to the Middle East, Central Asia, and potentially South America to dodge EU/US tariffs. Bullish signal: Concrete export targets for 2026.

Autonomous Driving (VLA Model): They are playing catch-up to Tesla and Huawei with a new "Vision-Language-Action" end-to-end AI model. Bullish signal: A specific rollout date for L3/L4 capabilities.

Faster Product Cycles: Reports suggest they are shortening development cycles from 4 years to 2 years to keep up with Chinese competitors.

Li Auto (LI) Price Target

Based on 26 analysts from Tiger Brokers app offering 12 month price targets for Li Auto in the last 3 months. The average price target is $28.76 with a high forecast of $36.00 and a low forecast of $19.00. The average price target represents a 58.73% change from the last price of $18.12.

Trading Opportunity: Short-Term Post-Earnings

Current Sentiment: Bearish / "Hold" The stock is down ~7% in the last month, and expectations are low. This sets up a classic "better than feared" potential bounce, but the technicals are weak.

Scenario A: The "Relief Rally" (Bullish)

Triggers: Margins hold above 19% + Q4 Guidance forecasts >135k deliveries + Positive comment on "export" progress.

Trade: If the stock opens green and holds the $19.50 level, it could squeeze toward $22-$24 quickly as shorts cover (Short interest is ~5%, which isn't huge, but sufficient for a pop).

Instrument: Call options or long stock with a tight stop at recent lows ($17.50).

Scenario B: The "Margin Compression" Drop (Bearish)

Triggers: Margins dip to ~17-18% (due to L6 mix) OR Q4 guidance is soft (<115k deliveries).

Trade: If the stock breaks $17.00, there is little support until $14.00. The "negative cash flow" narrative will dominate.

Instrument: Put options (implied volatility is high, so spreads might be safer) or short selling on a break of support.

LI implied volatility (IV) is 51.7, which is in the 36% percentile rank. This means that 36% of the time the IV was lower in the last year than the current level. The current IV (51.7) is -6.6% below its 20 day moving average (55.4) indicating implied volatility is trending lower.

Scenario C: The "Volatility Crush" (Neutral)

Triggers: Earnings typically inline, guidance "okay."

Trade: Since IV is high (~8-9% move priced in), if the report is boring, option premiums will collapse.

Instrument: Iron Condor (selling out-of-the-money calls and puts) to profit from the stock staying within the $16-$21 range.

Summary

Li Auto (LI) is scheduled to release its fiscal Q3 2025 earnings release on Wednesday, November 26, 2025 (Before Market Open).

There is Cautious Transition from the executive sentiment, Li Auto is in "crisis mode," pivoting from domestic EREV dominance to a global, AI-driven strategy amidst a fierce price war. The market sentiment is bearish/hold, expecting a "make or break" report.

Top 3 Metrics to Watch:

1. Vehicle Margin (The Vital Sign): Must stay above 18%. With sales shifting to the cheaper Li L6, falling below this threshold signals that profitability is being sacrificed for volume.

2. Q4 Guidance (The Growth Check): Investors need a forecast of 125,000+ deliveries for Q4. Anything less will be viewed as a failure to capture seasonal demand and a loss of share to Huawei (AITO).

3. Cash Flow: Free Cash Flow turned negative in Q2. Markets need to see this stabilize despite heavy AI investments.

Trading Strategy (Implied Move ±9%):

• Bull Case: If margins >19% and guidance is strong, a break above $19.50 targets $22.00.

• Bear Case: If margins compress <18% or guidance is soft, a break below $17.00 could flush the stock to $14.00.

• Narrative Pivot: Look for announcements regarding global expansion (Middle East/Central Asia) to offset slowing domestic growth.

Appreciate if you could share your thoughts in the comment section whether you think Li Auto could outperform what market have already priced in for low growth in upcoming earnings.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.