Li Auto Inc. (LI) reported mixed results for the second quarter of 2024, with adjusted earnings per ADS falling to 20 cents, down from 36 cents in the same period last year. This decline was attributed to rising costs, price reductions to stay competitive, and a weakening demand for EVs. Despite these challenges, Li Auto saw a surge in revenue, reaching $4.36 billion, up from $3.95 billion in the previous year’s second quarter. This growth was fueled by higher vehicle deliveries, with Li Auto selling 108,581 units compared to 86,533 in the second quarter of 2023.
However, the company’s gross profit dipped to $850 million from $859.9 million in the previous year, with the gross margin falling to 19.5% from 21.8%. This decrease in profitability was primarily due to a decline in vehicle margins. Li Auto also saw increases in research and development expenses, reaching $416.6 million, driven by investments in expanding its product range, developing new technologies, and compensating a growing workforce. Selling, general and administrative expenses also climbed to $387.4 million, primarily due to higher employee compensation and expenses related to expanding the sales and service network.
Despite the challenges, Li Auto’s financial position remains strong. As of June 30, 2024, the company had $11.12 billion in cash and cash equivalents, a significant increase from $8.38 billion a year earlier. However, its long-term debt also rose to $1.1 billion compared to $199.9 million in the previous year. Li Auto’s cash flow performance was affected in the second quarter, with a negative free cash flow of $254.9 million compared to a positive free cash flow of $1.33 billion in the same period last year. This was partly attributed to the costs associated with ramping up production of the new Li L6 five-seat family SUV.
Looking ahead, Li Auto anticipates a rebound in margins and cash flow in the second half of the year. The company expects production of the Li L6 to stabilize, and it has implemented measures to reduce costs and enhance efficiency. For the third quarter of 2024, Li Auto forecasts vehicle deliveries in the range of 145,000 to 155,000 units, representing a 38% to 47.5% increase from the same period in 2023. This growth is expected to drive revenue in the range of $5.4 billion to $5.8 billion, indicating a 13.6% to 22.1% increase year-over-year.
While Li Auto faces challenges in the current market, its strong financial position, growth in vehicle deliveries, and plans to improve margins and cash flow provide optimism for the future.