Li Auto Q3 2022 Outing Sees Revenue Rise 20%, Costs Widen Further

Although Li Auto realized a substantial revenue increase for Q3 2022, the company’s operating costs also rose.

Li Auto Inc (NASDAQ: LI) recently posted its Q3 2022 earnings report, which revealed a wide quarterly deficit despite a 20% increase in revenue. For the third quarter, the Chinese electric vehicle manufacturer raked in revenue of $1.31 billion but missed the consensus estimate by $60 million. Li Auto’s vehicle sales surged 23% on higher average selling prices, with the delivery of some models beginning in late August. However, the EV maker also incurred more expenses on developing these new car models for the period ending September 30th. The company’s total vehicle deliveries for the third quarter were 26,524 units, representing a 5.6% increase year-over-year (YoY) increase.

Li Auto Q3 2022 Operating Cost Increase Undermines Stronger Sales

As it stands, the 73% jump in operating costs for Li Auto erodes its stronger sales outing. The Beijing-headquartered EV manufacturer attributed its third-quarter expense increase to higher research and development costs. Most auto manufacturers have incurred rising material expenses due to the global semiconductor (chip) shortage. Nonetheless, Li Auto stated that it anticipated a production scale-up and higher deliveries due to easing global supply chain constraints.

Li Auto’s operating expenses more than doubled on a higher headcount. In addition, the electric vehicle maker also sustained a more extensive net loss in Q3 2022. This deficit grew from 21.5 million yuan a year earlier to a staggering 1.65 billion yuan, or $236.8 million.

Meanwhile, Li Auto’s gross margin sank to 12.7% in the third quarter from 23.3% in the year-ago quarter. The company’s latest gross margin figure also reflects a sizable drawdown from the 21.5% it stood at in the second quarter of this year.

Company CFO Remains Optimistic on Q4

Despite the unsavory development in Li Auto’s financial report for Q3 2022, the company’s chief financial officer, Tie Li, remains upbeat. Providing an assessment of Li Auto’s operational projections, Li explained:

“Looking ahead, we are optimistic that with rapid production ramp-up, rigorous execution, and responsible cost management, we will realize greater economies of scale and further drive down costs, putting us back on track to hit our profitability inflection point.”

Although Li admitted that Li Auto weathered a “challenging macro environment and cost inflation,” the company’s Q4 guidance remains strong. According to the Chinese EV manufacturer, vehicle deliveries for the fourth quarter could be between 45,000 and 48,000 cars. In perspective, this guidance represents an increase of 27.8% to 36.3% from last year’s fourth quarter. Furthermore, this suggested production ramp-up could also net Li Auto a 65.8% increase in revenue of between 16.51 billion yuan and 17.61 billion yuan.

Whether Li Auto will achieve its Q4 delivery target remains to be seen. However, the EV manufacturer is fast closing in on the total number of vehicles dispatched for the third quarter. Its combined number of deliveries made since October currently tops 25,000 units.

At the end of the third quarter, Li Auto had 271 retail stores across 119 cities. In addition, the company also operated 316 servicing centers and authorized body and paint shops in 226 cities.