Li Auto is facing pressure at a level it has not experienced before. In October, the company sold 31,767 vehicles, marking a decline both year-on-year and month-on-month. Before this downturn, Li Auto had already played all its major product cards for the year. Its new pure electric model, the Li i8, received a lukewarm market response, while the Li i6, which was expected to drive volume growth, saw strong orders but was constrained by production bottlenecks. Next year is shaping up to be even more competitive.
Multiple industry sources told 36Kr that in mid-October, Li Auto held a three-day closed-door meeting in Beijing to reflect on issues across sales, R&D, and product development. The outcome was a shift in model strategy, product planning, and R&D priorities, along with plans for accelerated overseas expansion and increased investment in artificial intelligence.
During the meeting, the company acknowledged for the first time, both internally and externally, that its efficiency had slowed. Management said its product cadence and organizational speed can no longer keep pace with current competition. Meituan CEO Wang Xing, who serves on Li Auto’s board, attended only the first day’s discussion on product and strategy and spoke little.
Another area of scrutiny was the company’s overseas business. Li Auto has repeatedly adjusted its official stance on global expansion, once targeting 2028 while relying heavily on parallel exports. As regulations tightened, overseas volumes dropped sharply. Although Li Auto has invested in AI for years, the company now needs to deliver more convincing outcomes.
Underestimating Xiaomi
“In today’s market, every time we play a card, our competitors play two,” CEO Li Xiang said during the company’s second-quarter earnings call in August, openly acknowledging that Li Auto’s efficiency had slowed. This issue became a central point of reflection at the October meeting.
Li Auto concluded that its previous rhythm of updating platforms every four years is no longer compatible with today’s market. It has become reactive instead of proactive. The company’s range-extended L series, once capable of selling more than 50,000 units in a single month, has dropped to around 20,000 as multiple competitors move in. Meanwhile, Li Auto’s new pure electric models are facing competition across segments. The Li i8 competes with the Nio ES8, the Onvo L90, and the fully electric Aito M8. The Li i6 faces an aggressive opponent in Xiaomi’s YU7.
Separately, 36Kr learned that Huawei’s Harmony Intelligent Mobility Alliance has at least 25 models planned for next year, intensifying competition.
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Li Auto may also have underestimated the impact of Xiaomi’s rise. Many in the industry believed Xiaomi entered the market too late, including Li Auto. But Xiaomi’s two strong-selling models in two years have made it a serious competitor.
One of Li Auto’s key adjustments is accelerating its product cadence, shortening the platform update cycle from four years to two. To support this shift, the company has mobilized its supply chain partners at its supplier conference.
Li Auto’s approach to product development will also change. A person familiar with the matter told 36Kr that the company has accepted a new reality. “In the past, Li Xiang resisted stacking features. Going forward, if the market is rolling, we will roll. We are done making products that are just ‘good enough.’ If a product cannot wow users, we will not build it.”
From post-launch configuration changes for the Li i8 to the single-trim debut of the Li i6, the company is signaling a return to a product philosophy centered on a single configuration and refining it thoroughly, a method Li Auto has historically excelled at.
In design and R&D, Li Auto has decided to increase differentiation among future models. Instead of relying primarily on configurations to distinguish products, design will play a more defining role. This shift suggests the company may abandon its family-style “lookalike” strategy, in which one platform and a consistent aesthetic define the lineup. Future models are expected to feature more distinct appearances.
Previously, this approach improved hardware reuse, but it created drawbacks. “Buyers of the Li L9 often cannot tell the L6, L7, and L8 apart, and it lacks the sense of prestige and distinction that the Aito M9 has,” one industry insider said.
Following the strategy meeting, Li Auto’s R&D system held a parallel gathering in Changzhou to reflect on internal issues. Internally, the company believes it previously overemphasized the cost-effectiveness ratio of R&D investment. When revenue fell, R&D budgets were cut. After the Li Mega flopped last year, the company initiated major layoffs. Many employees viewed the decision as unjustified and damaging to morale.
Li Auto is now in a downturn. Focusing too heavily on cost-effectiveness risks reducing investment, slowing product cycles, and triggering a negative loop. Going forward, the company will reduce its emphasis on cost-effectiveness to ensure that staffing and R&D resources are not constrained. In its latest organizational adjustments, CEO Li took charge of the human resources department to oversee organizational structure and personnel decisions directly.
Additionally, Li Auto’s technology R&D division plans to establish an independent system similar to Xiaomi’s architecture department for its car business, which reports directly to founder Lei Jun and plays a prominent role in product innovation.
Late entrant to global markets
At its strategy meeting two years ago, Li Auto judged that overseas expansion would not be a priority until at least 2028. The company relied primarily on parallel exports. At this year’s meeting, management reflected that “the biggest mistake was going all-in on overseas markets too late.” Li Auto now plans to accelerate its official global expansion.
Historically, Li Auto exported vehicles mainly through parallel channels to Russia, the Middle East, and Central Asia, reaching as many as 4,000 units in its best month. A Li L9 priced at RMB 450,000 (USD 63,000) in China could reportedly sell for RMB 900,000 (USD 126,000) in Russia through this channel. This pricing differential is based on industry estimates and is not independently verified.
This year, Russia and several Central Asian countries introduced restrictive policies. In April, Russia required Chinese vehicles transiting through Central Asia to pay all applicable taxes and fees upon entering the country. This removed the cost advantage of parallel-imported Chinese vehicles. As a result, Li Auto’s parallel export volume has dropped to a few hundred units per month.
China’s Ministry of Commerce and three other ministries also tightened rules governing used car exports. Starting January 1, vehicles registered for fewer than 180 days will not qualify for export licenses. This change effectively closes Li Auto’s parallel export channel.
While Li Auto hesitated, companies such as Xpeng, Leapmotor, and Nio made overseas expansion a central part of their strategies. Within Li Auto, the topic surfaced repeatedly, yet the company did not settle on a direction.
Li Auto formed a 30-person team in 2021 focused on overseas marketing and strategic analysis, but by early 2022 the team was reassigned to domestic operations. Over the next two years, Li Auto continued to question when and how to approach overseas markets. CEO Li publicly stated in 2023 that the company would not enter global markets before 2025. In February 2024, Li Auto announced plans for a direct-sales model overseas, before shifting again in May to a hybrid model combining direct sales and dealer partnerships.
This year, Li Auto clarified its strategy. It will focus on the Middle East, Central Asia, and Europe. The company has taken concrete steps, including establishing R&D centers in Germany and the US and opening retail locations in Uzbekistan and Kazakhstan. All new models launching in 2026 and beyond will comply with overseas regulatory requirements.
Doubling down on AI and chips
Like other ambitious automakers, Li Auto is deepening its investment in AI. During the strategy meeting, the company dedicated an entire day to AI and its future direction. Part of the discussion centered on AI and Li Auto’s second-generation chip. Lu Qi, head of the now-shuttered YC China, joined remotely.
According to sources, Li Auto has committed to increasing its investment in AI, especially in inference compute capacity. One insider said Lu argued, “In the future, the scarce resource will not be training compute, it will be inference compute.” According to the latest data, Li Auto currently has ten exaflops of training compute capacity and three exaflops of inference compute, with inference compute set to grow.
Sources also said Li Auto is rapidly iterating on its self-developed in-vehicle chips. The second-generation chip is planned for release in two years. Unlike Xpeng’s Turing chip or Nio’s Shenji chip, Li Auto’s second-generation chip will place greater emphasis on inference performance.
Li Auto’s first-generation chip was successfully taped out early this year and has returned from fabrication. It is now undergoing in-vehicle testing and is expected to be deployed in flagship models next year.
According to CTO Xie Yan, Li Auto has designed a new data flow architecture for its AI chips. In this design, model execution is driven largely by data instead of instructions, allowing higher parallelism and making it well-suited for large neural networks. “Compared with the most powerful chips on the market today, ours can deliver twice the performance for large language model workloads and triple the performance for vision models such as convolutional neural networks,” Xie claimed.
The meeting also concluded that Li Auto’s exploration of AI cannot remain limited to vehicle integration. It must invest substantially in robotics and terminal devices. Li Auto’s early approach focused on adapting AI technologies to individual business lines to find real-world use cases. At the 2023 autumn strategy meeting, Meituan’s Wang argued that combining large models with Li Auto’s in-car assistant would not unlock true AI potential.
Li Auto now believes it needs to go broader. At the 2024 autumn meeting, management discussed the necessity and feasibility of developing its own smart glasses. In June, the company established two new departments focused on “spatial robotics” and “wearable robotics.” To date, however, Li Auto has not released AI-driven hardware products outside the automotive category.
Li Auto’s overall pace remains in transition. But based on the reflections and recalibrations at its strategy meeting, the company is moving toward a faster and more agile product cycle and a more determined push into AI and global markets as it works to rebuild competitiveness for the next phase of industry competition.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Xiao Man for 36Kr.