No longer alone at head of the NEV pack, Li Auto shows early adopters don’t always win

While it remains a leader in China’s crowded field of new energy vehicle makers, the company faces growing competition from rivals that are quickly catching up

Key Takeaways:

• Li Auto’s profit fell 31% last year to 8.1 billion yuan, as it started off 2025 with weak vehicle deliveries in January and February
• The company is positioning its i8 model as its main force to break into the segment for pure electric vehicles

By Lau Chi Hang

With new-energy vehicles (NEVs) poised to dominate the future of driving, Li Auto Inc. (2015.HK, LI.US) was once sitting pretty as one of the sector’s earliest adopters. In the intensely competitive market, the company continually outperformed nearly all rivals in terms of unit sales and was one of the first to post a profit in this long-haul race.

But nothing stands still in the fast-paced, ultra-competitive industry, where today’s winner can easily become tomorrow’s roadkill.

Li Auto’s latest financial report for 2024 is hinting at such vulnerability, as younger rivals start to nip at its tires. The carmaker’s revenue rose 16.6% last year to 144 billion yuan ($20 billion), but its profit fell 30.7% to 8.09 billion yuan. Undermining its bottom line were higher operating expenses, including a 25% jump in selling and administrative expenses that totaled 12.2 billion yuan for the year.

Deliveries stumble

While Li Auto’s deliveries hit a new high in 2024, up 33% year-on-year to more than 500,000 units, the pace of deliveries has shown signs of weakness in early 2025. The company only delivered 29,900 units in January and 26,300 in February, though those two months are typically slow due to the Chinese New Year period. Still, those figures marked a major slowdown from late 2024 when monthly deliveries often exceeded 40,000 units.

Meanwhile, some of its rivals are notching big gains in real time as they roll out their latest hit models. XPeng (9868.HK, XPEV.US) has delivered more than 15,000 of its budget MONA M03 models for two consecutive months, and sold a cumulative total of more 20,000 units of its P7+ model in the two months since its launch. Those zooming sales powered Xpeng to average monthly deliveries of 30,400 in both January and February, exceeding Li Auto’s total for those two months.

Leapmotor (9863.HK) is also catching up, notching up to 25,000 units in monthly deliveries for the past two months, close to Li Auto’s deliveries.

Of course, a couple of months of deliveries can’t define a company’s long-term success. After all, the launch of new models often leads to a sudden explosion in sales when they hit the market, especially if they get strong reviews. That said, however, several NEV makers have posted significant growth in deliveries over the past six months. Those companies are rapidly gaining the scale that was long one of Li Auto’s greatest strong suits, which made it one of the first in its class to become profitable. As the others edge closer to profitability, Li Auto’s claim to fame as one of China’s top NEV makers is quickly diminishing.

Rising XPeng and Leapmotor

The reality is that Li Auto is being challenged from all directions. Other NEV manufacturers are rapidly catching up, including not only Xpeng and Leapmotor, but also Huawei, whose Harmony Intelligent Mobility Alliance (HIMA) delivered 35,000 vehicles in January. More recent entrant Xiaomi (1810.HK) is also quickly catching up despite its late entry to the race, coming on strong on with positive reviews and big demand for its upscale cars.

At the same time, traditional automakers are also stepping up their games for fear of being sidelined if they fail to compete in NEVs. Geely has been pouring its NEV efforts into Zeekr (ZK.US), and FAW is also teaming up with Leapmotor to develop NEVs. Even global EV leader Tesla (TSLA.US) is slashing prices in China to improve its competitiveness, directly fighting for turf with the local brands that otherwise dominate the market.

Li Auto’s core strength in extended-range electric vehicles (EREVs) is also under siege. EREVs, which include a gasoline-powered engine to charge the vehicle’s batteries, can effectively solve the range anxiety. Unlike traditional hybrid cars, EREVs don’t contain separate gasoline engines that can power the car, but simply use gas to charge up the batteries.

Having seen Li Auto’s success, other automakers are naturally racing to incorporate the technology into their own models. Leapmotor is one of the most successful examples in that regard. The Harmony Intelligent Mobility Alliance’s AITO M7 also outpaced Li Auto’s L-series for several consecutive months, chipping away at the latter’s core market.

Pure EVs, the ultimate battleground

As pure electric vehicles (EVs) mature and gain greater driving ranges, EREVs also risk a sales slowdown and even becoming obsolete. Dual power systems combining gasoline and electric motors result in higher maintenance costs and technical complexity for EREVs, which is costing them popularity among drivers. That’s leading many to believe that pure EVs are the future of the automotive market.

Li Auto founder and longtime car enthusiast Li Xiang has no doubt taken note of this trend long before most, launching the company’s Li Auto MEGA to focus on the pure EV market. But seeing the future doesn’t always guarantee success, as Li learned after widespread criticism of the MEGA following its launch. Some people even joked the model looked like a hearse, and it sold only 10,000 units in 2024 after its launch that year.

Undeterred, Li Auto is resolving to make a comeback in pure EVs this year. Its first pure electric SUV, the Li Auto i8, is set to launch in July. The company sees the model as an important test for pure EVs, even if that comes at the expense of profitability. Li Auto says it’s prioritizing value and experience for users, as well as charging convenience, over simply short-term sales. The company hopes to make the model into a top-tier brand in the high-end pure EV segment within the next three years.

So, can Li Auto power up its game up to the next level? Will it be able to reclaim its position as one of the industry’s most dominant players? It’s still too early to say as the race for dominance drives on. The only thing that’s certain is that competition will be relentless, with billions of dollars in new investment required to stay on top of the latest technologies. Auto-making is no longer as simple as Geely’s founder Li Shufu once said when he famously described cars as “nothing but four wheels plus two couches.”

To subscribe to Bamboo Works weekly free newsletter, click here