Li Auto Inc. (“Li Auto” or the “Company”) (Nasdaq: LI), an innovator in China’s new energy vehicle market, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2020.

Operating Highlights for the Fourth Quarter of 2020

• Deliveries of Li ONEs were 14,464 vehicles in the fourth quarter of 2020, representing a 67.0% quarter-over-quarter increase and setting a new quarterly record. Deliveries for the full year 2020 reached 32,624 vehicles.

  

• As of December 31, 2020, the Company had 52 retail stores covering 41 cities in addition to 114 servicing centers and Li Auto-authorized body and paint shops operating in 83 cities.

Financial Highlights for the Fourth Quarter of 2020

• Vehicle sales were RMB4.06 billion (US$621.9 million) in the fourth quarter of 2020, representing a 64.6% increase from RMB2.46 billion in the third quarter of 2020.

• Vehicle margin was 17.1% in the fourth quarter of 2020, compared with 19.8% in the third quarter of 2020.

• Total revenues were RMB4.15 billion (US$635.5 million) in the fourth quarter of 2020, representing a 65.2% increase from RMB2.51 billion in the third quarter of 2020.

• Gross profit was RMB724.6 million (US$111.0 million) in the fourth quarter of 2020, representing a 45.9% increase from RMB496.8 million in the third quarter of 2020.

• Gross margin was 17.5% in the fourth quarter of 2020, compared with 19.8% in the third quarter of 2020.

• Loss from operations was RMB78.9 million (US$12.1 million) in the fourth quarter of 2020, representing a 56.2% decrease from RMB180.0 million in the third quarter of 2020. Non-GAAP loss from operations was RMB71.1 million (US$10.9 million) in the fourth quarter of 2020, representing a 58.0% increase from RMB45.0 million in the third quarter of 2020.

• Net income was RMB107.5 million (US$16.5 million) in the fourth quarter of 2020, compared with RMB106.9 million net loss in the third quarter of 2020. Non-GAAP net income³ was RMB115.4 million (US$17.7 million) in the fourth quarter of 2020, representing a 621.3% increase from RMB16.0 million in the third quarter of 2020.

• Operating cash flow was RMB1.82 billion (US$279.1 million) in the fourth quarter of 2020, representing a 95.9% increase from RMB929.8 million in the third quarter of 2020.

• Free cash flow was RMB1.60 billion (US$245.1 million) in the fourth quarter of 2020, representing a 113.2% increase from RMB749.9 million in the third quarter of 2020.

Recent Developments

Deliveries Update

• In January 2021, the Company delivered 5,379 Li ONEs, representing a 355.8% increase compared to January 2020. As of January 31, 2021, the Company had 60 retail stores covering 47 cities, in addition to 121 servicing centers and Li Auto-authorized body and paint shops operating in 89 cities.

Completion of Offering of American Depositary Shares

• In December 2020, the Company completed a follow-on offering of 54,050,000 American depositary shares (the “ADSs”), each representing two Class A ordinary shares of the Company, including the underwriters’ full-exercise of the option to purchase additional ADSs, at a price of US$29.00 per ADS. The net proceeds of this offering were US$1.53 billion.
  The Company plans to use the net proceeds from the offering for research and development of (i) next-generation electric vehicle technologies, including high-voltage platforms, high C-rate battery, and ultra-fast charging, (ii) the next BEV platform and future car models, and (iii) autonomous driving technologies and solutions, as well as for general corporate purposes.

Safety Evaluation Results

• In January 2021, the Company announced the safety evaluation results for Li ONE published by the China Insurance Automotive Safety Index (“C-IASI” or “中国保险汽车安全指数”) Management Center based on crash tests. Li ONE achieved the G rating, the highest safety rating, in three out of four evaluation categories – occupant safety, pedestrian safety, and assistance safety. In the category of crashworthiness and repair economy, Li ONE received an M rating, one of the top results received by large premium SUVs.

• In January 2021, Li ONE received five-star ratings for both volatile organic compounds (“VOC”) & vehicle odor intensity (“VOI”), and electromagnetic radiation (“EMR”) in the China Automobile Health Index (“C-AHI” or “中国汽车健康指数”) assessment by China Automotive Engineering Research Institute Co., Ltd. (“中国汽车工程研究院股份有限公司”).

• In February 2021, Li ONE achieved a five-star safety rating in the latest China-New Car Assessment Program (“C-NCAP” or “中国新车评价规程”) test released by China Automotive Technology and Research Center Co., Ltd. (“中国汽车技术研究中心有限公司”). Li ONE received a weighted score of 92.2%, including 94.73% on occupant protection, 72.89% on pedestrian protection, and 100% on active safety. Li ONE is the only large SUV model that received top C-IASI, C-AHI and C-NCAP scores.

New Research and Development (“R&D”) Center

• In February 2021, the Company announced the establishment of a new R&D center in Shanghai, China dedicated to the development of cutting-edge electric vehicle technologies. These technologies include high-voltage platforms, ultra-fast charging technologies, autonomous driving technologies, next generation intelligent cockpits, operating systems and computing platforms. This R&D center will have end-to-end development capabilities for new models. The R&D center has already started recruiting, and expects to ultimately house over 2,000 staff in the future.

CEO and CFO Comments

Mr. Xiang Li, founder, chairman, and chief executive officer of Li Auto, commented, “Against the backdrop of a once-in-a-century shift in the automotive industry to smart electric vehicles, the fourth quarter capped off a year of significant growth for our company. We delivered 14,464 Li ONEs during the quarter, up 67.0% on a quarter-over-quarter basis. With 32,624 vehicles delivered to our users in 2020, Li ONE became the best-selling new energy SUV of the year in China. This outstanding performance was fueled by strong demand driven by our distinctive product offering and superior user experience, and made possible by our focused product strategy and our ability to rapidly scale up a consistent and high-quality manufacturing process, a critical pillar of our business. We are especially thankful to our teams for their dedication and focus as they faced the unprecedented impact of the COVID-19 pandemic in 2020. With our donations to the affected regions in China, including the cities of Wuhan and Shijiazhuang, we want to shoulder some of the burden and lend a hand to those in need. We are also proud that Li ONE users’ clubs in various cities have been mobilized to help in the fight against the pandemic.

“As always, we are grateful for the consistent support and trust from our users. Looking ahead, we will accelerate the development of the second-generation extended-range platform and high-voltage BEV technologies, aiming to enrich our model mix to cater to the needs of a wider range of family users, while adhering to the brand positioning of premium smart electric vehicles, all in an effort to maximize the value proposition for our users. We are planning on the reconfiguration of our state-of-the-art Changzhou factory for our new model pipeline, especially the full-size premium SUV based on brand new architecture to be launched in 2022. With the establishment of our Shanghai R&D center, we are also expediting R&D across the board to provide safer, more convenient, and more refined products and services.

“Having successfully completed the first phase of our strategic cycle and entered the second stage this year, we will continue racing ahead toward our mission - creating homes on the move that bring happiness to the entire family (“创造移动的家，创造幸福的家”),” concluded Mr. Li.

Mr. Tie Li, chief financial officer of Li Auto, added, “Our robust results in the fourth quarter once again demonstrate the effectiveness of our product strategy and outstanding operational efficiencies. Our total revenues reached RMB4.15 billion, 65.2% higher than the third quarter and significantly exceeding the top end of our revenue guidance by 22.4%. Our gross margin remained robust at 17.5% in the fourth quarter, reflecting our manufacturing efficiency and disciplined cost management approach. Most notably, we nearly doubled our operating cash flow quarter-over-quarter to a record high of RMB1.82 billion, and raised US$1.53 billion in net proceeds through our successful follow-on offering, setting a solid financial foundation as we increase investments for autonomous driving technologies and BEV platforms for our future growth. We are excited to enter 2021 on an upbeat note and look forward to effectively executing our roadmap to deliver value for our users and shareholders alike.”

Financial Results for the Fourth Quarter of 2020

Revenues

• Total revenues were RMB4.15 billion (US$635.5 million) in the fourth quarter of 2020, representing a 65.2% increase from RMB2.51 billion in the third quarter of 2020.

• Vehicle sales were RMB4.06 billion (US$621.9 million) in the fourth quarter of 2020, representing a 64.6% increase from RMB2.46 billion in the third quarter of 2020. The increase in revenue from vehicle sales was mainly attributable to a 67.0% increase in vehicle deliveries to 14,464 vehicles in the fourth quarter of 2020 from 8,660 vehicles in the third quarter of 2020.

• Other sales and services were RMB89.2 million (US$13.7 million) in the fourth quarter of 2020, representing a 93.5% increase from RMB46.1 million in the third quarter of 2020. The increase in revenue from other sales and services was in line with the increased vehicle sales and the increased number of vehicles using the Company’s services.

Cost of Sales and Gross Margin

• Cost of sales was RMB3.42 billion (US$524.5 million) in the fourth quarter of 2020, representing a 70.1% increase from RMB2.01 billion in the third quarter of 2020.

• Gross profit was RMB724.6 million (US$111.0 million) in the fourth quarter of 2020, representing a 45.9% increase from RMB496.8 million in the third quarter of 2020. The increase of gross profit was primarily attributable to increased vehicle sales.

• Vehicle margin was 17.1% in the fourth quarter of 2020, compared with 19.8% in the third quarter of 2020. The decrease in vehicle margin was primarily due to a decrease in one-time rebate from suppliers compared with the third quarter of 2020.
  

• Gross margin was 17.5% in the fourth quarter of 2020, compared with 19.8% in the third quarter of 2020, which was mainly attributable to the decrease of vehicle margin.

Operating Expenses

• Total operating expenses were RMB803.5 million (US$123.1 million) in the fourth quarter of 2020, representing an 18.7% increase from RMB676.7 million in the third quarter of 2020.
  

• Research and development expenses were RMB374.2 million (US$57.3 million) in the fourth quarter of 2020, representing an 11.9% increase from RMB334.5 million in the third quarter of 2020. Non-GAAP research and development expenses3 were RMB369.1 million (US$56.6 million) in the fourth quarter of 2020, representing a 32.4% increase from RMB278.8 million in the third quarter of 2020. The increase in research and development expenses was primarily attributable to increased research and development activities for the Company’s next vehicle model and increased headcount, offset by the significant decrease in share-based compensation expenses over the third quarter of 2020, in which period higher cumulative share-based compensation expenses were recognized related to the stock options granted to employees with service conditions and a performance condition related to the IPO.
  

• Selling, general and administrative expenses were RMB429.3 million (US$65.8 million) in the fourth quarter of 2020, representing a 25.5% increase from RMB342.2 million in the third quarter of 2020. Non-GAAP selling, general and administrative expenses3 were RMB426.8 million (US$65.4 million) in the fourth quarter of 2020, representing a 61.5% increase from RMB264.2 million in the third quarter of 2020. The increase in selling, general and administrative expenses was primarily driven by increased marketing and promotional activities and increased headcount, offset by the significant decrease in share-based compensation expenses over the third quarter of 2020, in which period higher cumulative share-based compensation expenses were recognized related to the stock options granted to employees with service conditions and a performance condition related to the IPO.

Loss from Operations

• Loss from operations was RMB78.9 million (US$12.1 million) in the fourth quarter of 2020, representing a 56.2% decrease from RMB180.0 million in the third quarter of 2020. Non-GAAP loss from operations was RMB71.1 million (US$10.9 million) in the fourth quarter of 2020, representing a 58.0% increase from RMB45.0 million in the third quarter of 2020.

Net Income and Earnings Per Share

• Net income was RMB107.5 million (US$16.5 million) in the fourth quarter of 2020, compared with RMB106.9 million net loss in the third quarter of 2020. Non-GAAP net income was RMB115.4 million (US$17.7 million) in the fourth quarter of 2020, representing a 621.3% increase from RMB16.0 million in the third quarter of 2020.
  

• Basic and diluted net income per ADS6 attributable to ordinary shareholders were RMB0.12 (US$0.02) and RMB0.12 (US$0.02), respectively, in the fourth quarter of 2020, compared with both RMB0.52 net loss per ADS in the third quarter of 2020. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders3 were RMB0.13 (US$0.02) and RMB0.13 (US$0.02), respectively, in the fourth quarter of 2020, compared with RMB0.03 and RMB0.02, respectively, in the third quarter of 2020.

Cash position, Operating Cash Flow and Free Cash Flow

• Balance of cash and cash equivalents, restricted cash, time deposits and short-term investments was RMB29.87 billion (US$4.58 billion) as of December 31, 2020.
  

• Operating cash flow was RMB1.82 billion (US$279.1 million) in the fourth quarter of 2020, representing a 95.9% increase from RMB929.8 million in the third quarter of 2020.
  

• Free cash flow was RMB1.60 billion (US$245.1 million) in the fourth quarter of 2020, representing a 113.2% increase from RMB749.9 million in the third quarter of 2020.

Financial Results for the Fiscal Year 2020

Revenues

• Total revenues were RMB9.46 billion (US$1.45 billion) in 2020, compared with RMB284.4 million in 2019. The Company began making deliveries of Li ONEs in December 2019 and the fiscal year 2020 was the first full year after commencing making deliveries.
  

• Vehicle sales were RMB9.28 billion (US$1.42 billion) in 2020, compared with RMB281.0 million in 2019.

• Other sales and services were RMB173.9 million (US$26.7 million) in 2020, compared with RMB3.4 million in 2019.

Cost of Sales and Gross Margin

• Cost of sales was RMB7.91 billion (US$1.21 billion) in 2020, compared with RMB284.5 million in 2019.
  

• Gross profit was RMB1.55 billion (US$237.4 million) in 2020, compared with RMB0.1 million gross loss in 2019.
  

• Vehicle margin was 16.4% in 2020, compared with 0.5% in 2019.

• Gross margin was 16.4% in 2020, compared with 0.0% in 2019.

Operating Expenses

• Total operating expenses were RMB2.22 billion (US$340.1 million) in 2020, representing a 19.4% increase from RMB1.86 billion in 2019.
  

• Research and development expenses were RMB1.10 billion (US$168.6 million) in 2020, representing a 6.0% decrease from RMB1.17 billion in 2019. Non-GAAP research and development expenses were RMB1.04 billion (US$159.2 million) in 2020, representing an 11.1% decrease from RMB1.17 billion in 2019. The decrease in research and development expenses was primarily due to higher validation and testing fees incurred in 2019 to prepare for the production of Li ONE, partially offset by an increase in employee compensation expenses due to share-based compensation expenses recognized for stock options with service conditions and a performance condition related to the IPO as well as increased headcount.
  

• Selling, general and administrative expenses were RMB1.12 billion (US$171.5 million) in 2020, representing a 62.5% increase from RMB689.4 million in 2019. Non-GAAP selling, general and administrative expenses were RMB1.04 billion (US$159.1 million) in 2020, representing a 50.9% increase from RMB689.4 million in 2019. The increase in selling, general and administrative expenses was primarily attributable to (i) an increase in employee compensation due to increased headcount and share-based compensation expenses recognized for stock options with service conditions and a performance condition related to the IPO, (ii) increased marketing and promotional activities, and (iii) increased rental and related expenses with the expansion of our network of retail stores and delivery and servicing centers.

Loss from Operations

• Loss from operations was RMB669.3 million (US$102.6 million) in 2020, representing a 64.0% decrease from RMB1.86 billion in 2019. Non-GAAP loss from operations was RMB526.5 million (US$80.7 million) in 2020, representing a 71.7% decrease from RMB1.86 billion in 2019.

Net Loss and Earnings Per Share

• Net loss was RMB151.7 million (US$23.2 million) in 2020, representing a 93.8% decrease from RMB2.44 billion in 2019. Non-GAAP net loss was RMB281.2 million (US$43.1 million) in 2020, representing an 86.0% decrease from RMB2.01 billion in 2019.
  

• Basic and diluted net loss per ADS attributable to ordinary shareholders were both RMB1.82 (US$0.28) for the full year 2020. Non-GAAP basic and diluted net loss per ADS attributable to ordinary shareholders were both RMB0.65 (US$0.10) for the full year 2020. As of December 31, 2020, the Company had 1,809,288,310 ordinary shares outstanding.

Operating Cash Flow and Free Cash Flow

• Operating cash flow was RMB3.14 billion (US$481.2 million) in 2020, compared with negative RMB1.79 billion in 2019.
  

• Free cash flow was RMB2.46 billion (US$377.7 million) in 2020, compared with negative RMB2.75 billion in 2019.

Employees

• As of December 31, 2020, we had a total of 4,181 employees.

Business Outlook

For the first quarter of 2021, the Company expects:

• Deliveries of vehicles to be between 10,500 and 11,500 vehicles, representing an increase of 262.6% to 297.1% from the first quarter of 2020.
  

• Total revenues to be between RMB2.94 billion (US$450.6 million) and RMB3.22 billion (US$493.5 million), representing an increase of 245.9% to 278.8% from the first quarter of 2020.

This business outlook reflects the Company’s current and preliminary view on the business situation and market condition, which is subject to change.