Li Auto Emphasizes Gross Profit Margins, Competition with Tesla and Apple

On March 2, at the company’s spring media communication meeting, Li Xiang, chairman and CEO of Li Auto, revealed the electric vehicle maker’s target – to occupy 35% of the passenger car market with a price range of more than 200,000 yuan ($28,997) in 2027, and to become the world’s leading artificial intelligence enterprise in 2030 in an effort to compete with Tesla and Apple.

Li Xiang also revealed that the pure electric vehicle equipped with 800V high-voltage platform in the future will achieve the same performance as other extended-range vehicles in its price range. Li believed that the price reduction of electric vehicles by some companies in the industry may not generate much profit, but it can hit at its rivals. He praised the prospect of the battery swapping model, adding that if EV batteries won’t be sold directly to consumers in the future, then the price of electric vehicles in general could be made much lower than that of fuel vehicles.

Li also emphasized the importance of gross profit margins needing to exceed 20%, otherwise it is impossible to continuously invest in R&D. Tesla is able to maintain a gross profit margin of 20% even if it cuts prices on a large scale, and BYD has also done so. “Many companies are learning from Tesla and Apple, but they have not learned the key, that is, the importance of gross profit margin,” Li explained.

Li Auto‘s brand is known for its family focus. Li emphasized that, after trade-offs, the organizational direction can be clear and resources can be invested in the key place. “The internal management of problematic enterprises is a mess because everyone has their own ideas, lacking a united goal.”

In 2022, Li Auto‘s revenue and delivery reached a new high, with annual revenue of 45.29 billion yuan ($6.57 billion), up 67.7% year-on-year, and 133,246 units, up 47.2% year-on-year. The internal goal is to achieve a monthly delivery of 30,000 vehicles in the second quarter of this year.

SEE ALSO: Li Auto Aims to Deliver Over 30K EVs Per Month in Q2

Li Auto‘s investment in R&D showed an obvious growth trend. In the fourth quarter of 2022, the R&D cost was 2.07 billion yuan, up 68.3% year-on-year, while in 2022, the cost was 6.78 billion yuan, a year-on-year increase of 106.3%.

Li Auto now has many L7, L8 and L9, but they have been questioned about their similarity in appearance and slightly different wheelbases and configurations. In the telephone conference after the financial report was released, Li Xiang said that the users of L7 and L8 are from very different groups and have different budgets, and hoped that users would have more options based on their trust in the brand.