Li Auto Inc. (LI) Q3 2025 Earnings Call Transcript

Hello, ladies and gentlemen. Thank you for standing by for Lee Auto's third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode.

Today's conference call is being recorded. I will now turn the call over to your host, Ms. Janet Zeng, Investor Relations Director of Lee Auto. Please go ahead, Janet.

Thank you, Operator. Good evening and good morning, everyone. Welcome to Lee Auto's third quarter 2025 earnings conference call. The company's financial and operating results were published in a press release earlier today, and they were posted on the company's IR website. On today's call, we will have our chairman and CEO, Mr. Xiang Li, and our CFO, Mr. Johnny Tier Li, to begin with prepared remarks. Our president, Mr. Dong Hui Ma, and CTO, Mr. Yan Hie, will join for the Q&A discussion. Before I continue, please be reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Detigation and Form Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain company failings with the U.S. Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited and the obligation to update any forward-looking statements except as required under the applicable law. Please also note that Lialto's earnings press release in this conference call include in these discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to Liotto's disclosure documents on the IR section of our website, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Our CEO will start his remarks in Chinese. There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr. Xiangli.

Please go ahead. 大家好 我是理想 2025 年的第三季度 也是理想汽车面向第二个十年的第一个季度 我们经历了产品周期 公关舆情 公用链爬产 政策变化等问题带来的各种挑战 这些因素对我们的交付和经营也产生了影响 但是今天更想和大家聊一聊我们长期的思考 理想汽车面向第二个十年 三个最重要的关键选择应该怎么做 分别是组织 产品 技术 第一个关键选择是组织 我们所面临的选择是创业公司的管理模式 还是职业经理人的管理模式 理想汽车在过去的十年里 最初的七年是创业公司的管理模式 随着规模的扩大 This is a big deal of my previous business, and I've never experienced the sales of the company. In 2022, many people would suggest we to go to the business of business management and management management. Because in history, In the past three years, we were very努力 to make us become a job of a job of a job of a job of a job in the past three years. In real experience and落地後, we realized that the company and the job of a job of a job of a job is two different types of job. 它与流程组织结构无关 而是管理理念和要素的差异 以及各自适用于不同阶段和行业环境 职业经理人的管理方式可以非常成功 但是需要三个要素 第一 行业和技术周期相对稳定 第二 企业的行业地位领先去稳固 第三 创始人和创业团队要么没有动力干了 要么已经不在了 如果满足这些条件 职业经理人的管理模式是非常好的选择 苹果和微软也都在职业经理人接班后 从千亿美金成长为万亿美金的企业 而创业公司的条件恰恰相反 第一 行业和技术周期在发生巨大的变化 第二 行业格局不确定 企业还不是领先者 第三 创始人和创业团队每天还在投入的努力工作 充满动力 在人工智能重塑各个行业的今天 我们所处的环境 我们自身的特点 更符合创业公司的条件 创业公司的管理的核心是四件事 第一 更多的对话 深度的对话 而非更多的汇报 在高度变化中 深度的对话是提升认知和大胆决策的关键要素 第二 拘销用户价值 而非只是交付 对用户真正有价值的东西才值得交付 而不仅仅是完成各种交付的任务 第三持续提升效率而非占有更多的资源去年花十块钱做的事情今年就要花八块钱去做从而才有更多的资源去做短期不创造收入的长期投资和能力建设 第四要识别关键问题而不是创造信息不对称只有价值增加了效率提升了关键问题解决了才可以在高度竞争高度变化的环境中持续满足用户的需求 过去三年我和创业团队努力学习职业经理人的管理体系 逼迫自己接受各种变化 但是我们却变得变成了越来越差的自己 而英伟达和特斯拉今天仍以创业公司的方式管理 如果全世界最强的那些公司都可以使用创业公司的管理方式 我们有什么理由放弃自己最擅长的方式 从1998年开始 我有27年的创业公司的管理经验 而且从来没有在任何大企业中以职业经理人的方式工作过 当下面对的又是一个行业高度竞争 技术高度变化的大环境 我自己热爱汽车 热爱产品 热爱人工智能 工作就是自己最大的爱好 为什么不用自己最擅长的能力和方式来管理理想汽车 这是理想机车面向第二个十年第一重要的选择 因此从今年四季度开始 我们坚定的回到创业公司的管理模式 以此来面对新时代新技术的挑战 组织的选择是一切的基础 进入今的十年 更关键的问题是 我们真正要为用户解决什么问题 产品是什么 技术往哪里走 这是永恒不变的本质 首先关于产品 We also need to make a choice. In the past 10 years, what are our products? Is it a car? Is it a car? Or is it a car? Is it a car? When the product is停留在 the car, the logic of競争 will become a战战. It is more than 20 km or less than 20 km. If it is more than 2 cm or less than 2 cm. If it is just a car, it is more than a car, more than a car, more than a car, and more便宜的价格. Let's copy the already been confirmed by the design of the project. 比如理想R9 所有除此之外的研发投入 都是研发成本的浪费 更强的传感器 更强的模型 更强的钻力 更强的主动悬架 都是整车成本的浪费 甚至性能强大的钻力 和主动悬架 等产生的能耗还会给 虚航带来负面效应 如果我们选择做智能终端 就会更加关注屏幕里的那些事 本能的变成 智能手机功能的重复建设 过去几年行业在智能终端上大部分创新 本质上是把智能手机的功能搬到车上 把手机的APP放到车机里 把车在车里上更大的原模型 甚至希望能够在车里做coding 在车里做deep research 用户买车到底是为了工作 还是为了更好的生活 明明在手机和电脑上有更好的体验 更自然的应用 为什么非要放在车上 这些投入对于用户的价值提升非常有限 甚至是企业的自娱自乐 我们还可以让车变成物理世界的巨身智能产品 说白了就是机器人 电行金刚的动画片和电影明确地告诉我们 机器人最大的分类就是两种形式 一种像人一样 一种像车一样 皮刘侠和赛车总动员也清晰地告诉我们 汽车是机器人的核心形态之一 如何把车变成机器人 给他眼睛和耳朵的感知能力 给他大脑和神经的模型能力 给他心脏等器官一样的计算能力 改造硬件形成更强的本体能力 让汽车机器人具备顶级司机的能力 不仅可以开车 还可以每天迎接你 帮你停车 帮你充电 给你开关车门 无为不至地为你提供便捷 体验和关怀 它还可以扮演父母助理乘务员的角色 在车内可以提供最便捷的生活服务和空间照顾 就像飞机的同等舱服务 就像小时候 妈妈一直在我们身边的照顾和关怀 如何定义一个好的居身机器人 从被动的机器成长为自动的机器 再进化为主动的机器人 未来十年 居身智能最有价值的产品 一定是具备自动和主动能力的汽车 产品的竞争 也是自动和主动能力达到什么程度 而这些价值会融入高频的生活和体验中 有了就再也回不去了 电动车的选择不是不好而是不够 智能终端的选择也不是不好而是不够 只有选择聚身智能这个最难的题 我们才可以真正改变用户的生活 提供自动和主动服务的聚身智能机器人产品 恰好他就是变金刚的汽车形态机器人 是赛车总工员P刘侠的汽车形态机器人 新时代给予汽车企业和创业者们最好的机遇和最高难度的挑战 接下来是技术的选择 更具体的讲是完整AI系统的技术选择 是面向数字世界的语言智能才是物理世界的巨身智能 这意味着要构建完全不同的系统能力 要想做好聚身智能,最重要的是构建一套不同于语言智能的AI系统,它包含聚身智能的感知相当于眼睛和耳朵,聚身智能的模型相当于大脑,聚身智能的操作系统相当于神经,聚身智能的钻力相当于心脏,聚身智能的本体相当于人类的身体, 当下没有任何第三方供应商可以完整的提供这套系统 甚至没有任何一个是可以供应的 语言智能最大的特点是关注好模型和计算 更大规模的模型更大规模的计算就会带来更强的能力 而巨身智能必须增加对物理世界的感知 模型也是必须基于对物理世界的理解 精准是首要任务 其次才是犯卦 操作系统需要确保软硬的最优融合 提高更高的帧率 整体系统要快和精准 为巨身智能的感知模型操作系统等提供的算力也需要在端侧供应而不是云端 最后还要改造硬件成为巨身智能的本体 比如三维神经控制的线控和主动压价系统 提高本体执行的效率和准确性 如果你聚身智能以及整个AI系统 你发现可以改变以及急切需要改变的实在太多了 首先是感知 基于现有的感知模型和端侧的算力 现在的3D BEV OCC战略网络 2D VIP 有效的感知距离 我讲的是有效而非理论上最大 只有100多米 远远不如人类的眼睛 如果升级成人眼工作原理相似的3D VIT,有效距离可以扩大两至三倍 今天我们辅助驾驶可能50%以上的常见问题自然就解决了 3D VIT不仅限于自动驾驶的领域,在车外和车主的主动交互与服务 在车内与家人的主动交互和服务也就变成了可能 这需要感知模型的研究和研发的重大突破 还必须有M100这样的为居身智能定制设计的芯片 和强大的编译团队高效配合才可以实现 其次是模型 有了3DVIT才有的真正对物理世界的理解 VLA模型中的VL才可以更好的对物理世界的感知和理解 人类的数据才可以更高效的被用于训练 世界模型生成的数据才可以更好的去完善训练 现有最好的计算平台 一个4B的MOE的模型运行帧率只有10赫兹 而执行系统是60赫兹 如果模型运行的帧率可以快两至三倍 现在辅助驾驶的一些舒适性的问题 反映迟针的问题都可以有效的解决 这同样需要对传统的GPU架构和算力进行深度的改造和定制 以及专有的操作系统 M100芯片就是为解决 具身智能这些本质的问题而研发的 最后是本体 人类的刹车转向的最快响应速度 在450毫秒左右 目前自动驾驶的感知到执行的完整电路 在550毫秒左右 坐在驾驶员的位置上 本能的反应就是慢很多 像老年人在开车 限动体系可以把整个电路的响应速度 提升到350毫秒 别小看这200毫秒的差距 这大概可以把失误率 下降50%以上 而且让人感觉 开的比自己还要好 还要安全 既是理性的真安全 又是感性的安全感 基于这样的需求 整个控制的方式 都会变得完全不同 如果只是关注 语言智能那样的模型规模的提升 模型规模扩大一倍 算力提升带来的性能提升 只有5%到10% 如果从巨身智能整体来看 每个环节全系统的去解决最关键的问题 那接下来一轮自动驾驶的技能提升应该有5到10倍 巨身智能为用户提供的自动和主动的快速交互和真实服务的能力 更是有和无的质变 过去三年我们对于巨身智能完整系统的技术储备 让我们下一代的产品充满信心 聚身智能机器人的元年从汽车机器人正式开启 千亿收入只是起步 以上三个关键的选择决定了我们第二个十年发展的基础 它比上一个十年更难 也更具挑战性 我们深知未来的竞争不在一时一刻 而在方向的长期选择和持续投入的定力 依托坚实的财务基础 我们会保持专注 用我们最热爱的创业公司的管理模式 打造领先的巨身智能产品 确保理想汽车能够穿越周期引领技术 成为一家长期为用户和社会创造价值的企业 我也希望以后更多的以这样的方式 与投资人们进行沟通和交流 而不是每个季度以固定格式的汇报 感谢我们的投资人在我们最难的时候仍然支持和信任我们 我们一定尽最大的努力在未来的三到五年内 让理想汽车成为巨身智能领域表现最好的企业 用户价值最高的企业 谢谢 谢谢 Now it's translation for Mr. Lee The third quarter of 2025 was also the first quarter in the second decade of Lee Auto

We went through many challenges, including supply chain, product life cycle, PR challenges, as well as changing policies. All these factors have had a negative impact on our operations and deliveries. However, today I want to take this opportunity to talk about our long-term thinking in the next decade and three most important choices that we need to make, organization, product, and technology. The first choice we need to make is organization. The challenge we're facing is whether to choose an entrepreneurial model or a professional management model. In the last 10 years of Lee Auto, the first seven of those years, we operated as an entrepreneurial model company. But as we scaled over time to a scale that we've never seen before, especially in terms of revenue, around the time of 2022, many people suggested to us to shift to a professional management model. because historically whether it's Mercedes or BMW or any of these 100-year-old car enterprises as well as Microsoft and Apple which is the tech giants have all operated under this model and have great success. In the last three years we tried very hard to make ourselves used to this professional management model. But after implementation we realized, came to the realization that the fund the entrepreneurial model and the professional management model are fundamentally different and it is irrelevant to processes and organization structures the difference really lies in management principles and key key operating principles and also they're tailored to two different different stages of growth and industry environment. The professional management model can be very successful, but it relies on three factors. The first one is that the industry and technology cycle has to be relatively stable. And the second is that the enterprise is already in a leading position, and the position is relatively stable. And the third one is that the founder and the founding team either lost their motivation or are not actively involved in the company if all these three criteria are satisfied a professional management model could be a very ideal choice whether it's Apple or Microsoft have both flourished after a professional management tour took over and grew from hundreds of billion dollars in revenue to trillion dollar companies the entrepreneurial model is catered to an entirely different environment. First of all, the industry and technology cycles are going through fundamental changes. And second, the industry is very unstable and the company enterprise itself is not yet a leader. And thirdly, the founder and the founding team are still devoted to everyday work with their full passion and fully motivated. As AI is shaping many industries today the environment that we live in and considering the trace of this company we think that we fit into the entrepreneurial model way better the entrepreneurial model really is about four things first of all there needs to be more conversations as opposed to reports in a rapidly changing environment deep conversations is really key to increasing our knowledge and judgment of the world as well as to making bold decisions and secondly if focusing on user value as opposed to just short-term deliveries only those things that create value for the users are worthy to be delivered as opposed to only focusing on how many tasks that we've delivered on and third one is keep increasing efficiency as opposed to occupying more resources for example if we spend ten dollars on doing something last year and this year we need to do it in with eight dollars that's how we have have resources to really spend on projects and investments that do not generate short-term revenue but really benefit us in the long term and for the key is to focus is to recognizing the key issues as opposed to just creating information asymmetry and only as we create more value and increase efficiency and solve the key issues can we really thrive in a highly competitive and rapidly changing environment and consistently meet customer demand. In the last three years, me and my team have tried very hard to adapt to the professional managed model and we have forced ourselves to embrace all kinds of changes. However, we all realized that we became a diminished version of ourselves. NVIDIA and Tesla are still operating as an entrepreneurial company. And if the largest and strongest companies are all operating in the entrepreneurial model, there is no reason for us not to utilize our strengths and what we're most used to. Since 1998, I have 27 years of running entrepreneurial companies. And I have never worked in any large corporation as a professional manager. Now, we're facing a highly competitive environment with rapidly changing technologies. I personally am passionate about products, about automobiles, and about AI, and work is my largest passion. So why don't I focus on what I'm most used to and what I'm best at to manage the auto? And that's the most important first choice as we look into our second decade. As a result, starting from Q4 this year, I and my founding team will firmly revert back to the entrepreneur model and to embrace the new era and new technological challenges. The choice of organizational model is the foundation of everything. Looking into the next decade, the next key question is how we really solve issues for our customers. First of all, what products do we build? Where is technology headed? That's always the essence of everything. First of all, on products, we also need to make an important choice. What kind of products should we really build for our users? Is it electric vehicles? Is it smart devices? Or is it embodied robots? If we only focus on electric vehicles, competition is really all about an arms race in spec sheet. Do you have more, 20 kilometers of range more? Do you have a car that's two centimeters longer in dimensions? And if it's only focused on electric vehicles, it's all about larger space, more range, and cheaper prices. And maybe copy some proven designs, just like how the Liao9 has been copied. Other than that, all R&D investments are a waste. Stronger sensors, bigger models, more computing power, better active suspension, always waste of cost and even stronger and stronger computation power and active right suspension may even have negative impact on range and secondly if we choose to focus on smart devices then we'd automatically be focused more on what happens in the screen features that used to belong to smart phones and smart tablets will be migrated to the car environment in fact most of the innovations in smart devices is really about moving what's already available in smartphones into vehicles and we'll keep moving mobile apps into head units deploying larger language models in head units and even do coding in cars and conduct deep research but then we ask ourselves the question when our users buy our cars, do we really buy it for their work or to live a better life? If certain experiences are already better in mobile phones and tablets or computers and more natural, why should we even bother putting them in cars? All these investments create very little incremental value for users. And thirdly, the third route is for us to make our cars into an embodied embodied AI in the physical world, or in layman terms, robots. The movie Transformer told us that there are broadly two types of robots. The first type looks like human beings, and the second type looks like cars. Knight Rider and Cars, these TV shows or movies, have clearly showed us car-shaped robots is going to be a mainstream form factor of robots going forward. So how do we transform our cars into robots? We need to give it ears and eyes for perception. We need to give it brains and nerves, which is modeling capability. We need to give it hearts, which is computing power. And we need to reshape the hardware to make it a stronger physical presence. So our robots need to parallel the top drivers and can not only drive, but also pick you up, park for you, have to charge the car up, have to close the door, open the door, and meticulously make your life more convenient and safer. It can also play the role of parents, assistants, or even flight attendants, and to provide you the convenience and take care of you within the sphere of the car, just like first-class cabin and the services on planes. And it's also like when we're little that our mother takes care of us and makes us happy. So how do we define a good embodied robot? How do they make them to change from passive machines into an automated machine and then further into proactive machines? In the next decade, the most valuable embodied AI product is going to be vehicles that are automated as well as proactive. And competition is really how automated and proactive can we make these products and how can we fuse them into high-frequency life experiences, something that once we get used to, we can never go back. So whether it's electric vehicles or smart devices, these are not necessarily bad choices, but we think they're not sufficient. And only if we choose embodied AI, which is the hardest of all these three problems, can we really change the life of our users and really provide automated and proactive services that only embodied AI products can provide. And it's really like what you see in Transformers movies. They're car-shaped robots. Or what we see in cars or in Knight Riders, they're robots that are shaped in cars. And I believe that this is the biggest challenge and opportunity that we entrepreneurs see in this new era. And the next choice is about technology. or more specifically, our full-stack AI system, what do we choose? What kind of technology do we choose to power this full-stack AI system? Is this something that's language-based that's faced towards the digital world or is this something faced towards the physical world? These two options require completely different system capabilities. If we want to build a good embodied AI, we need to build an AI system that's completely different from language-based AI models including perceptions like eyes and ears including the model itself like brain including the operating system like nurse and including the computation power which is like hearts and also the physical body itself just like human body at this moment there's no third party supplier that can provide this full stack system and in fact not any company can provide even part of this system and the focus of large language models is really focusing on the model itself and computation larger models and more computation probably is always going to generate stronger capabilities however for embodied AI we need to better understand the physical world and the model is also built on our understanding of the physical world accuracy is the first priority and generalization only comes next operating system needs to make sure the optimal integration is made between the hardware and the software and also provide higher higher higher frequency and also the system needs to be fast and precise and also the computation power that powers the perception the model at the operating system system needs to reside on the device side as opposed to the cloud side and lastly we'll also need to modify the hardware itself to become a brilliant body hardware and for example our active suspension it's just like a 3d nurse to some nerve control and it can increase the efficiency and precision of execution in the physical world so if I look like look at this entire AI system through the lines of embodied AI you see that there's so many change that needs to happen and desperately need to happen the first change comes in perception based on the current model and the competition power that can be deployed on the device a current 3d BV or occupancy network or 2d vision transformer the effective range of perception I'm talking about effective as opposed to a theoretical maximum is only just about over 100 meters, which is way less than human eyes. However, if we upgraded to 3D vision transformer, which is just similar to how human eyes work, this range can be improved by two, three times. And it can solve more than 50% of the common issues we see in autonomous driving. A 3D vision transformer is not only limited to autonomous driving, but it can also benefit that interactions with a car inside and outside of the car, these can also all become possible. So that requires fundamental breakthroughs in perception models, both in research and also development. And also it requires tailored chips for embodied AI, just like M100, which we have developed, and also requires a very strong compiler team and high-efficiency cooperation. The next area of improvement is in models. It's only with 3D vision transformer can we really understand the world. The VL in the VLA can really understand and perceive the world better. And human data can be more effectively used for training. And world model can also be used more effectively for training. For example, in the status quo computation platform, a 4 billion parameter MOE model can only run at 10 hertz, but the execution frequency is 60 hertz. So we can increase the frequency of the model by two, three times. It can also automatically solve many issues, including comfort and speed of reaction in autonomous driving. And it also requires us to fundamentally modify and customize the traditional GPU architecture and to have a dedicated operating system. And M100, again, is really designed for solving these embodied AI problems. An athlete is the embodied hardware itself. A human being can typically react to braking and steering in about 450 milliseconds. and for a typical autonomous driving system from perception to execution the entire closed loop takes about 550 milliseconds so for a typical driver today they can easily it's very obvious to them that autonomous driving is much slower it's like an elderly driving car drive the drive by a wire system can reduce can we reduce the response time to about 350 milliseconds and the difference of 200 milliseconds is not to be underestimated it can roughly reduce the accident rate by over 50% and it also feels better even than driving by themselves and it's also safer it's safer both in the subjective as well as the objective sense so based on these needs all the entire control mechanism will be different and if we only focus on increasing the scale of model just like we did in language models for example if we increase the size of model two times and with corresponding increase in computation power they're really performance increase is only going to be five to ten percent but if we look at this from an embodied AI perspective and to solve the key issues in every stack on every level of stack the next generation autonomous driving can really increase the performance by five to tenfold and and that is what can empower embodied AI to perform fast and accurate and valuable services and that's the difference between zero one in the past three years we have made a lot of progress in technology and systems for embodied AI and that makes us very confident about the next generation of products the start of embodied AI robots starts with car robots and it's starting this year I believe and hundreds of billions of revenue is only a starting point so the above three key strategic choices really lay the foundation for the next decade of our development it's more challenging than the last decade and we're deeply aware that real competition isn't really about short-term wins as well as staying on the right path over the long term and having the dedication to keep investing in it. Backed by a strong financial foundation, we will stay focused, embrace our beloved entrepreneurial management style, and build leading body intelligence products so Lead Auto can navigate market cycles, lead technological transformation, and become a company that creates unique, lasting value for users and society in the long run. Finally, I also look forward to engaging with you guys in this manner moving forward rather than presenting a quarterly report in a fixed format. And I want to express my gratitude to all of you for your support and trust, especially during our most challenging times. We're fully committed to making Li Auto the best performing company in embodied intelligence and the greatest creator of user value within the next three to five years.

Thank you. Hello, everyone. I will now walk you through some of our third quarter financials. Given time constraints, my remarks today will be limited to the financial highlights. All figures will be closed in RMB unless otherwise stated. For further details, we encourage you to refer to our earnings price release. Total revenues in the so-called R&B 27.4 billion decreased 36.2% year-over-year and 9.5% cultural This included R&B 25.9 billion from vehicle sales decreased 37.4% year-over-year and 10.4% quarter over quarter. Mainly due to lower vehicle deliveries, the sequential decline was partially offset by a higher average selling price due to the different products make. Cost of sales in the third quarter was R&B 22.9 billion, down 22% year-over-year and 5.3% quarter over quarter. Gross profit in the third quarter was R&B 4.5 billion, down 51.6 percent year-over-year and 26.3 percent quarter over quarter. Vehicle margin in the third quarter was 15.5 percent versus 20.9 percent in the same period last year and 19.4 percent in the prior quarter. The year-over-year decrease was mainly due to estimated ZMEGA recall cost and the higher per unit manufacturing cost from a lower production volume. The sequential decline was mainly due to the same recall-related cost, including such recall costs, vehicle margin would have been 19.8% in the third quarter. Cross margin in the third quarter was 16.3% versus 21.5% in the same period last year, and 20.1% in the prior quarter. Excluding the above-mentioned LiMega recall cost, gross margin would have been 20.4 percent in the soul culture. Operating expenses in the soul culture were R&B 5.6 billion, down 2.5 percent year-over-year and up 7.8 percent culture-over-culture. R&B expenses in third quarter were R&B 3 billion, up 15% year-over-year and 5.8% quarter-over-quarter. The year-over-year increase was mainly due to the impact of the pace of new vehicle programs and the increased investment in expanding our product portfolio and technology, along with expenses from the product configuration adjustment. The sequential increase was mainly due to those same product configuration adjustment expenses. SG&A expenses in the third quarter were RMB 2.8 billion, down 17.6% year-over-year, and and up 1.9% quarter over quarter. The year-over-year decrease was mainly due to the recognition of share-based compensation expenses regarding the CEO performance-based awards in the third quarter of last year. Loss from operations in the third quarter was R&B 1.2 billion versus R&B 3.4 billion income from operations in the same period last year and R&B 827 million income from operations in the prior quarter. Operating margin in the third quarter was negative 4.3% versus 8% in the same period last year and 2.7% in the prior quarter. Net loss in the third quarter was R&B 624.4 million versus R&B 2.8 billion net income in the same period last year and R&B 1.1 billion net income in the prior quarter. Diluted net loss per ADS attributable to our for ordinary shareholders was R&B 0.62 in the third quarter, versus diluted net earnings of R&B 2.66 in the same period last year, and R&B 1.03 in the third quarter. Tending to our balance sheet and cash flow, our cash prediction remains strong with a A quarter ended balance of R&B 98.9 billion. Net cash used in operating activities in the third quarter was R&B 7.4 billion versus R&B 11 billion provided in the same period last year, and R&B 3 billion used in the prior quarter. Free cash flow was negative RMB 8.9 billion in the third quarter, versus RMB 9.1 billion in the same period last year, and negative RMB 3.8 billion in the prior quarter. And now for our business outlook, for the fourth quarter of 2025, the company expects the delivery to be between 100,000 and 110,000 vehicles, and costly total revenue to be between RMB 26.5 billion and RMB 29.2 billion. This basis outlook reflects the company's current and preliminary view on its business situation and market conditions, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator and start our Q&A session.

Thank you. If you do wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star too. If you are on a speakerphone, please pick up the answer to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions and if you have additional questions, you may re-enter the queue. If you are a Mandarin speaker, please ask your questions in Chinese first then follow with English translations. Your first question comes from Yingbo Zhu at Citix. Please go ahead.

Thank you very much. 它是很难立竿见影的 所以我的第一个问题就是 如果我们只展望未来一年 2026年有什么我们能够期待的技术和产品 以及基于未来十年的考量 我们投资人大概在多远的未来 真正能够看到公司产品和技术的一个跳升 感受到真正的不同 那我的第二个问题呢 是关于三电的 就是公司产品从增程向纯电切换 so i have two questions the first question um is about uh we are very glad to hear uh the companies return to entrepreneurship and next decade's plan, but any R&D and development needs time. So my first question is that if we just say next year, 2026, what kind of technology or product progress can we expect? And also from the investor's perspective, how long can we really see a technology or product to jump? in future, how long? And the second question related to BEV. The company's transition from EREV to DEV, these challenges. So can we please give us more information or confidence in this BEV part? How we prepare for the effective technology reserve and the supply chain preparation? Thank you.

I'm going to answer the first question. I think that in 2016, especially in the next year, we will be using the M100 system as the main AI system to start with the product. I think that the real value and experience will change. I think that the change is what I mentioned before. It will allow cars such a product 然后从被动的使用然后变成真正的然后自动化和主动化来为应付提供服务 而且这种服务和体验然后并不是说我们要搞一个地步 research或者我们去做一个coding 或者我们生成一个视频而是它会体验在我们日常的生活和高频体验中 每天都会感触到每天都能够体验到这样的价值带来的根本性的变化 对我觉得这是讲的第一点 第二点说如果未来的十年然后到底有什么样的然后明确的功能啊或者价值啊然后可以呈现 我觉得基于我们对然后人工智能和剧生智能的理解 他没有办法向传统的编程或者硬件功能得给出明确的功能这样的一个特性 而是说当我们去构建整个人工智能的系统化能力的时候 只要一些关最关键的核心的问题被解决 或者一些关键的性能进行突破 它会带来一系列的体验在我们具体的生活中 或者产品价值上的一系列的改变 而且改变甚至会远超我们的预期 我觉得这是我们自己理解的人工智能和巨神智能 and be able to give our digital world for our daily life

and for our daily life and for our daily life and for our daily life and for our traditional and technology in such a way On your first question about 2026 next year we'll be launching our AI system based on our internally developed M100 chips and once this system gets in the car that's where we'll start to see real value and change of user experience. As I mentioned earlier, our products would go from a machine that passively takes orders to a more automated machine and even a proactive machine that can provide services for the users. So unlike large language models which can conduct deep research or video generation, this embodied AI products and really benefit our users in their everyday use at a very high frequency. And on the second part about the next 10 years, unlike programming or traditional rule-based programming, we do not have a feature list or a list of functions. Instead, for a complex AI system, if we can solve key issues in some important areas and improve performances in some bottleneck points, then we'll start to see a series of changes that are unimagined before. And that's our understanding of embodied AI and AI system. And this is really the room for imagination for the next 10 years. 然后我们在电驱系统方面的话我们主要是聚焦对于用户有价值的像能效啊以及道化体验 那我们自己的话是自研代工了碳化硅功率芯片

然后并且我们自研自制了功率模块以及电机控制器的生产和研发 那同步呢理想汽车也自己建成了专属驱动电机的工厂 这样的话就构建了从碳化硅功率芯片,然后再到功率模块,再到电机的全链条自然能力 并且我们的电池技术不仅是用在存电车型上面,也包含征程的全系车型 可以保证在驾驶过程当中还安静很平顺 并且也有效的话是优化了能耗的水平,提升的话车辆的续航里程 关于电池技术的话我们是聚焦在充电速度和安全 然后我们围绕的话5C超充的电池 然后也构建了全站的自然能力 包括电芯的化学体系 然后电池管理系统BMS控制模型和算法 以及电池派克的布局和结构设计 可以实现超快充长续航长寿命 三重的核心优势 然后在电池的供应布局方面的话呢 我们规划的话是采用外购 然后加自研合资的双模式 那明年我们也将量产 理想自主品牌5C的电池 然后通过自研技术产业化的落地 进一步强化电池的安全性能 然后升级啊 拥护的本能体验 那最后一点的话是在电控 我们通过软硬件的全自研 然后打造机制的驾驶 制版在软件端我们可以实现对于动力的控制能单的管理以及发动机的标定等全站的话自研然后在硬件端的话像一些核心的预控制器PCB layout以及底层软件的自主研发都是我们全站自研通过于自研底盘技术的协同 and can perform the quality of the vehicle and the smoothness of the vehicle and smoothness of the vehicle. And to create a good-to-speak and easy-to-speak approach. In general, through the three-to-speak technology, we hope that we can use the power of the technology, and provide the fast-to-speak and fast-to-speak, a good-to-speak and safe-to-speak approach.

On the key-in-house BEV-related technologies, we focus on three areas, Electric drive, battery systems, and electronic control. First of all, on electric drive system, our focus is on efficiency and user experience. We have in-house developed and outsourced our manufacturing of silicon carbide power chips and in-house developed and in-house manufacturing of power modules and motor controllers. We'll also establish our own dedicated drive motor factory. We have built a full-chain in-house development capability, spanning from silicon carbide power chips, power modules, to electric motor assemblies. Our electric drive technology covers all BANF and EREF models, ensuring quiet and smooth driving experience while also optimizing for energy consumption and vehicle driving range. And secondly, on the battery system, our focus is on ultra-fast charging and safety. We have built a full stack in-house capability around 5C ultra-fast charging batteries with full control over self-chemistry, BMS control modules, and algorithms, as well as battery pack layouts and structural design, and achieving three core advantages across ultra-fast charging, long driving range, and long service life. On the supply front, we also have a combined strategy of external procurement and in-house development. Li Auto's own 5C batteries will enter mass production next year. This industrialization of in-house developed technology will further strengthen our battery safety and also improve user experience. And thirdly, on the electronic control system, our goal is to provide the best driving experience is also through in-house developed hardware and software. On the software side, we have full-stack in-house development capabilities, powertrain control, power management, and engine calibration. On the hardware side, our core domain controller PCB layout are all developed in-house as well as the underlying software. Together with our in-house chassis technology, we're able to enhance driving smoothness and comfort and make the drive experience easy and intuitive to our users. So through a combination of three electrical technologies, including battery, electric control, and electric drive, we provide our users with a special fast-charging, long-range, and smooth and safe driving experience. Thank you.

Thank you. Your next question comes from Tim Hsiao from Morgan Stanley. Please go ahead.

So I have two quick questions focusing on the near-term operation. So, the first one about the product, the i-Series, could imagine you can share the latest updates on orders and deliveries of Lee i-8 and i-6. In the meantime, how and when could you sell the current supply bubble neck of the Lee i-6 and i-8? And how should you think about the normalized sales volume of the two i-Series models in the following months? Second question is about ash flow. the other actually registered increasing operating cash outflow of about 7.4 billion r&b or free cash flow free cash outflow of 8.9 billion during this quarter so this caused quite a significant drop in companies cash reserve uh green oh why why is that and how should you think about the cash flow in the following quarters that's my second question thank you tim you 大家好 我是理想汽车马都归 我来回答第一个问题 然后今年的话 我们通过i6和i8 然后构建了BEV的产品矩阵 然后分别去覆盖主流和高端的家庭存电市场 也为理想汽车存电业务长期的稳定增长 奠定了坚实的基础 那对于我们来说的话 我们也完成了征程和存电酸能源形式的产品的一个布局

实现的话有效的互补 满足用户不同的需求 那对于纯电池型的话 核心亮点 那I系列产品实现了区域渗透率的大幅突破 特别是像对于像上海啊 北京 江州户等纯电的话 核心市场 那9月份上路地区的订单大幅的话 增加 关于供应的话 目前理想i8和i6两款产品正经历产能爬坡交付体数以及市场渗透发展的路径 那从11月份起为了解决产能爬坡 然后i6电池的供应将正式启用双供应商的模式 但是我们会保障两家供应商电池的性能跟质量标准是一致的 然后预计的话明年年初i6的月产能将稳步提升到两万台 那在此呢我们也想向理想i6的订单车主至于诚挚的歉意 受核心零部件供应的规划和产能爬坡的影响 您的提车时间有所延迟 感谢您的信任和选择 也恳请给予我们更多的支持和时间 This year, we established our BEV portfolio with I8 and I6 models, and respectively, they

cover the mainstream and premium segments for the family BEV market. These two cars create a solid foundation for the long-term stable growth of our BEV business. We also deployed our products to support the dual energy strategy, namely EREV and BEV, which effectively complement each other and to meet the diverse needs of our users. A key highlight that's worth mentioning is that we have made breakthroughs in key regional markets. The I-Series has successfully entered core BEV markets such as Beijing, Shanghai, Jiangsu, engine down with orders in these areas starting to increase significantly from September the i8 and i6 are steadily going through the path of production ramp-up delivery acceleration and market penetration and starting in November to address production ramp-up challenges we have we will officially start to begin a dual supplier strategy for our batteries on the i6 will ensure consistent performance and quality standards between these two suppliers. We'll expect monthly VL6 production capacity to steadily increase to about 20,000 units starting from early next year. We sincerely apologize to customers who placed orders on I6 and still waiting for their cars to be delivered. Due to constraints in the supply chain planning of key components and the pace of production ramp up your vehicle is still the delivery schedule has been affected we deeply appreciate your trusted choice of the auto and we kindly ask for your continued understanding and patience our team is working around the clock to accelerate the production and expedite that delivery process I think for the operating cash flow it's about two First, as we guided in the last earnings release, the third quarter, we faced great pressure

on the deliveries, and the delivery decrease will make the revenue decrease, which will finally impact the operating cash flow, and also the impact of shortening of the payment cycle to suppliers. And this is, as you may know, it's due to the government's authority starting from international-wide. Actually, we value our partnership with our supply chain partners and actively respond to their requirements. Currently, the settlement period for all our accounts payable is 60 days, and the payment is either the wire transfer or bank notes without any business notes or some kind of certificates from the EF, just the normal. Thank you.

Your next question comes from Ming He Sun-Li from B of A. Please go ahead.

Thank you, sir.

Give me a chance to ask for the question. I'm Ming Chen-Juan, Ming. 那我这边就是有两个问题一并请教 那第一个问题 公司怎么看明年自换补贴政策的变化 以及购置税提高至5%的影响 如果自换补贴推波的话 公司相对应的销售策略会是什么 So my first question is that Because next year the trade-in subsidy policy will change and also the EV purchase tax will increase from 0% to 5%. If the subsidy declines next year, what will be your sales strategy for 2026? That my second question is, because we will have a big change in the year of 2026, So my next second question is that in 2026, your ER-EVL series will have a new generation. So what can we expect most of the new features, specs, and what will be the new advantages for your new models?

Thank you. 您好 我是马东辉 我来回答这两个问题 然后第一个问题的话是关于支款补贴以及购置税的问题 然后我们认为的话 这也是汽车行业从原有的政策驱动 然后转向的话市场驱动的一个过程 这也是企业核心竞争力的一个凸显期 然后购置税政策的退坡短期市场一定会产生波动 因为用户会在2025年年底然后集中去锁定优惠 会出现类似的撬尾效应 并且在2026年QE的销量自然会出现环比的下调 但长期来看的话我们还是维持乐观 那N1的化渗透率也会稳步的增加 那2026年 国内的话 行动源渗透率 我们预估 可能会达到 55%到60% 对于高端市场的NV渗透率 会突破的话 60% 然后对于理想汽车的应对 策略的话 首先的话 在过渡阶段 还是要保障用户的利益 并且我们20年新开发的车型 要适配新的法规的规范 在过渡期的话 我们也推出了安心购车的方案 比如承担I6年底前索单 用户跨年交付的 工资税的一个差额 并且我们26款 所有产品油耗电耗 全部达成新政策的要求 可以享受26年新政策的優惠 长期的话 还是要强化用户的价值 通过技术的升维 来对冲影响没有捷径 那2026年的话呢 我们全气采取800V高压平台 以及5C的超充电池 提高效率将近能耗 并且在2026年 我们也将建成大约4800座超充站 并且高速充电桩的占比 预计也会超过35% 以及通过深化供应链的国产化 规模效应 稳定的价格 对于产品力 我们只有加速迭代 再加速迭代 总结来说的话 这个政策退坡肯定是行业高质量发展的一个分水岭

那理想2026年 我们是有信心这个实现交付量历史的突破 然后以产品力和用户价值去穿越主旗 巩固我们在高端市场的领先地位 谢谢 This change marks the auto industry's transformation from policy-driven adoption to organic market-driven adoption And it is precisely during this phase that the value of stronger players can really stand out As the purchase tax policy faces out, there will be fluctuations in the first short term, we believe We expect to see a pull-forward effect, namely if customers rush to lock in their incentives at the end of 2025. That will naturally lead to a substantial dip in the deliveries in Q1 in 2026. Looking to the longer term, we are optimistic about the penetration rate of NUVs. In 2026, the NUV penetration rate in the domestic Chinese market will probably reach between 55% to 60%, with the rate in the premium segment exceeding 60%. At the auto, our response strategy is to guarantee user benefits and adapt to new standards with our new vehicles rolling out during the transition period. And for the transition period, we have a peace of mind purchase program covering the purchase tax difference for I-6 customers who locked in their orders in 2025 but take deliveries in 2026 all of our 2026 models meet the new standards for gas and energy consumption so they will qualify for 2026 incentives in the longer term we will continue to be dedicated to user value and offset policy impacts through technology advancements for example we will be fully adopting 500 800 volt high voltage platform and 5c ultrafast batteries to enhance efficiency and reduce energy consumption in 2026 we aim to operate about 400 4800 supercharging stations by 2026 which was 30 percent 35 percent of which will be on highway service stations will continue to deepen our supply chain localization and leverage economy scale to stabilize pricing while accelerated accelerate product iteration to keep all of 2026 models at the forefront of product competitiveness. As to product strength, we must accelerate model iteration and accelerate further. In summary, this policy phased out marks a watershed moment for the industry's shift towards high-quality development.

Lee Auto is poised to achieve a historic breakthrough in deliveries in 2026, And we will navigate this cycle through superior product strength and user value, thereby consolidating our leadership in the premium market. 首先那个2026年L系列的大改款,我们是基于用户这个反馈以及核心技术积累,然后想去打造的代际型的迭代产品,然后去承接2026年,我们要重回征程产品领先地位的整体战略目标,然后在车型配置方面的话,我们会回归精简的ICU模式, 然后兼顾市场的覆盖和供应的效率 希望实现核心体验全系拉满 然后彻底消除入门版体验打折的一个痛点 然后在设计方面的话 我们也会延续家族的经典设计基因 同时强化豪华质感的升级 然后去平衡品牌的高辨识度 以及用户体验的话新鲜感 去打造更加贴合家庭需求的产品形态 那在技术方面的话 全系会标配5C的超充技术 那和我们现在的纯电的超充网络更好协同 然后更好的话去解决补能的焦虑 那同时呢 也依托征程领域先发的优势和技术沉淀 然后进一步去强化理想汽车是征程领导者的品牌认知 In the year of 2020, the main goal of the L-O-O-S系列 is to use确定性的技术升级

确定性的交付节奏 确定性的用户价值 从容去回应市场的不确定性 Thank you On the release dates and more details, we need to choose an appropriate time to release publicly But today, I still want to take the opportunity to give a glimpse on our products rollout for next year The next year for L-Series is going to be a major generational upgrade. And the changes are based on deep research of users and their feedback, as well as our accumulation of technology over the years. And we want to build a very strong product that's also fundamentally different from the current generation. And all this is to support our goal of reclaiming leadership in the ERAP market in 2026. In terms of model consideration, we'll be going back to the simplified SKU approach, which balances market coverage as well as supply chain efficiency. So even the base model will not compromise in terms of user experience. It will have all features as standards. And in terms of design upgrades, while retaining our iconic design DNA, we will be upgrading the premium feel and craftsmanship. We'll strike a balance between strong brand identity and fresh user appeal and to refine our products to better serve the needs of family. On the core technology front, 5C standard supercharging will be standard on all models and seamlessly integrating with our existing charging network to efficiently address range anxiety. And at the same time, we will reinforce our position as the EREV leader, building on our first mover advantage and deep expertise in EREV. The 2026 L-Series Refresh is about responding to market uncertainty with three certainties on technological upgrades, delivery cadence, and user value. We'll announce the specific launch timing and further details at the appropriate time. Please stay tuned. Thank you.

Thank you. Your next question comes from Paul Gong at UBS. Please go ahead.

Thank you for your question. I have two questions. 第一个问题是关于这个Mega的造回的,就我们了解到就这造回是四季度宣布的,为什么这个成本是基在三季度,然后这个金额是怎么确定的,有多少是由供应链承担,多少由我们自己承担,它对于四季度的毛利率会有些什么影响,然后在当前这个造回的情况的更新,以及就是最新的Mega的这个订单,能否也分享一下 这是第一个问题。 第二个问题是关于AI的这一边的。 能否请管理层分享一下VLA和世界模型当前的进展, 用户的反馈,后续的研发目标和迭代的进度。 So let me translate. I have two questions. The first one is regarding the recall of the mega. I noticed this was announced in Q4. Why are you booking it in Q3? And how did you determine the amount and the sharing between yourself and the supply chain? What's the impact for the Q4 GP margin? And if possible, please also update us about the latest situation of the callback of the recall, as well as the latest order of mega. My second question is regarding the AI. Can you please update us the latest development of VLA, water model, and the user feedback? If possible, please also give more color for the future targets and upgrades process. Thank you.

Paul, this is Johnny. I think I will shortly meet in time history and I will respond to your question very shortly. For instance, we recognize this Q3 is a test we regard this event as a subsequent event. So, it will be accrued in the most recent quarter we have record. So, it's a big phone. And for the record, I think we have announcement. I don't want to repeat most of the details covered. And currently, we just make all the battery packs to fulfill the recall requirement that there's the amount, and which means we lower the delivery of our 2025 mega delivery. So which means all the battery packs, we shift most of them to replace the 20-24 recall. I think that's better for the customer's benefit. And that's the company's value proposition.

Thank you. 然后让所有用户就能够同步去体验它的核心能力,使一些老车也能享受新的科技,新的体验,通过用户的反馈和数据分析,体验的升级是有明显的成效,特别是I系列的车主,自驾的使用意愿是很强的, 然后用户的日火以及MPI就是接管前的平均形式里程数均呈上升的一个趋势 并且用户也普遍的话反馈 然后VA在纵向控制上更加丝滑 然后绕行的决策呀更加的果断 然后在复杂路口选路准确性方面的话也显著的提升 那后续的话呢我们会不断的迭代 然后功能持续的话突破 OTA 8.0是作为首个全量推送的版本 当时是以安全作为核心的优化体验 在12月初我们会推送 OTA 8.1 然后进一步去提升VLA的感知能力 响应更加精准 然后在12月底我们会进行架构的升级 终点去强化语言和行为 信息的交互 优化的话决策的流程 并且会适配2026年自研芯片M100的上车 那后续的话我们也会有更多创新的功能陆续落地 推出行业首创防御型的AES功能 然后去升级安全防护的能力 我们也在探索任意车位到任意车位全场景的驳车 并且结合我们自建的超充站 去实现智能找车的功能 We rolled out our VLA driver to all of our ADMAX vehicles in September.

And with the strong migration capability of our model across all releases, all of our ADMAX users have access to this new model, including the new i-Series users, as well as the L9 users who bought the car back in 2012. And they're able to experience its core capabilities across the board. User feedback and data analysis have very clearly showed the effectiveness and the level of experience improvement. We can see that the L-Series and I-Series owners have a stronger willingness to use VLA driver, with both DAU and MPI showing improvement. In the meantime, users generally report the VLA to be smoother, especially in longitudinal control, and more proactive and decisive in detours and more accurate in route selection at complex intersections. And with ongoing iteration, the functions of VLA will continue to achieve further breakers. For OTA 8.0, which is our first full-scale rollout, the priority is mostly focused on safety. And in early December, we will release the OTA 8.1, which further enhances VLA perception capabilities for more precise and responsive behavior. And by your end, we will deploy an architecture upgrade to strengthen language behavior interaction and streamline the decision-making process, which will be compatible with our upcoming in-house developed M100 chip. Beyond core system improvements, we're rolling out a series of innovations, including the industry's first defensive driving AES feature to enhance safety capability, and any point to any point, full scenario automated parking and a smart finder to find charging stations. And all this completes the smart mobility ecosystem.

Thank you. Your next question comes from Tina Hu from GS. Please go ahead.

Thanks, management, for taking my question. So I just have one question. What is the progress in terms of our in-house developed SoC as well as the operating system and then the progress in terms of open source and then future development? Thank you.

Hi, Tina. Let me answer your question. We believe that AI infrastructure system is a core foundation for intelligent vehicles. To achieve this efficiency, the system must be designed as integrated architecture, not as separate parts. Our in-house design controller hardware and the operating system have enabled us to reduce development time from industry average of 15 months to 9 months. while lowering cost by 20 percent. Many modules in the inference stack still come from suppliers. To innovate faster together, we open-sourced Halo OS, enabling collaborative developments with our partners and ecosystem. In September, we established the Halo OS technical steering committee and assisting companies across intelligent vehicle value chain signed the community charters, including OEM, chip makers, software and hardware service providers, and the component suppliers. At the same time, we are undergoing our on-vehicle foundation model for physical AI. Our focus is to improve perception, understanding, and response, so the model can see further, understand better, and react faster. The AI inference chip is the computing engine of this system. Our controller built with our in-house design chip, M100, is now undergoing large-scale system testing. We expected commercial development to take place the next year. Co-designed with our foundation model, compiler, and software system, we expected M100 within our next generation VLA-based autonomous driving system to achieve at least three times the performance to cost ratio of today's high-end chips. On the basis of highly efficient AI inference and execution systems, our next priority will be faster iteration, continuous performance improvement, and lower cost. Development of our next generation platform and chip has already begun. Thank you.

Thank you. As we are now reaching the end of our conference call today, I would like to turn the call back over to the company for closing remarks. Ms. Janet Zhang, please go ahead.

Thank you once again for joining us today. If you have further questions, please feel free to contact Liato's investor relations team. That's all for today. Thank you.