You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” or in other parts of this annual report. A. Operating Results We are a leader in China’s NEV market. We design, develop, manufacture, and sell premium smart electric vehicles, including both EREVs and BEVs. The cumulative deliveries of our vehicles surpassed 1,500,000 as of December 31, 2025. 111 Table of Contents Key Factors Affecting Our Results of Operations Our business and results of operations are affected by a number of general factors that impact the China automotive industry, including, among others, overall economic growth in China, any increase in per capita disposable income, growth in consumer spending, raw material costs, and the competitive environment. They are also affected by a number of factors affecting the NEV industry in China, including laws, regulations, and government policies, battery and other new energy technology development, charging infrastructure development, and increasing awareness of the environmental impacts of tailpipe emissions. Unfavorable changes in any of these general factors could adversely affect demand for our vehicles and materially and adversely affect our results of operations. While our business is influenced by these general factors, our results of operations are more directly affected by the following company-specific factors. Our ability to attract orders and achieve delivery targets Our results of operations depend significantly on our ability to attract orders from users and achieve our vehicle delivery targets, both of which impact our sales volume. Appropriate vehicle pricing is essential for us to remain competitive in the China automotive market while preserving our ability to achieve and maintain profitability in the future. When our premium SUVs compete with comparable premium models of other automakers, an attractive price can help boost orders, which in turn may contribute to our sales volume and revenue growth. In addition, it is critical for us to successfully manage production ramp-up and quality control so as to deliver vehicles to users in adequate volume and high quality. As we continue to scale our production and diversify our product portfolio, we may have challenges in our quality control processes. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—Our ability to develop, manufacture, and deliver automobiles of high quality and appeal to users, on schedule, and on a large scale is unproven and still evolving.” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We may be compelled to undertake product recalls or other actions, which could adversely affect our brand image, financial condition, results of operations, and growth prospects.” Our ability to control production and material costs Our cost of sales primarily consists of direct production and material costs. Our future profitability significantly depends on our ability to manufacture our vehicles in an efficient manner. As part of the manufacturing process, we purchase a wide variety of components, raw materials, and other supplies. We expect that our cost of sales will be affected primarily by fluctuations in certain raw material prices, although we typically seek to manage these costs and minimize their volatility through our arrangements with the suppliers, as well as our production volume. As our business further grows in scale and we establish ourselves as a major player in the NEV industry in China, we expect to have higher bargaining power and hence more favorable terms from suppliers, including pricing and payment terms. Our ability to execute effective marketing Our ability to execute effective marketing will affect the growth of our orders. Demand for our vehicles directly affects our sales volume, which in turn contributes to our revenue growth and our ability to achieve and maintain profitability. Vehicle orders may depend, in part, on whether prospective users find it compelling to purchase our vehicles among competing vehicle models as their first, second, or replacement cars, which in turn depends on prospective users’ perception of our brand. We guide our marketing channel selection and marketing expenditure by precisely analyzing the effectiveness of marketing channels based on our needs at various stages of sales and brand awareness. Effective marketing can help amplify our efforts in boosting vehicle sales with efficient costs. Our ability to maintain and improve operating efficiency Our results of operations are further affected by our ability to maintain and improve our operating efficiency, as measured by our total operating expenses as a percentage of our revenues. This is important to the success of our business and our prospect of consistently maintaining achieving profitability. As our business grows, we expect to further improve our operating efficiency and achieve economies of scale. 112 Table of Contents Key Components of Results of Operations Revenues Our revenues consist of vehicle sales and other sales and services revenues. We begin recognizing vehicle sales revenues when we begin making deliveries of the applicable models. We also recognize revenues from peripheral products and services, including multiple distinct products and services of vehicle sales such as providing non-warranty after-sales services, sales of charging stalls, goods from online store, parts and accessories, sales of Li Plus Membership, and commission service. Cost of Sales Vehicle sales Our cost of sales primarily consists of cost of vehicles sales, including direct production and material costs, labor costs, manufacturing overhead (including depreciation of assets associated with the production), shipping and logistics costs, reserves for estimated warranty costs, and consumption tax and related surcharge. The cost of sales also includes adjustments to warranty costs and charges to write down the carrying value of the inventory when it exceeds its estimated net realizable value or the inventory that is either obsolete or in excess of the forecasted demand, losses on inventory purchase commitments, and impairment charges of manufacturing property, plant, and equipment. Other sales and services Cost of other sales and services generally includes costs associated with providing non-warranty after-sales services, cost of goods from online stores and parts and accessories, costs of charging stalls, vehicle internet connection costs, and shipping and logistic costs. Operating Expenses Our operating expenses primarily consist of research and development expenses and selling, general and administrative expenses. Research and Development Expenses Our research and development expenses are primarily comprised of salaries, bonuses, benefits and share-based compensation expenses for those employees engaged in research, design and development activities, consultation fees, validation and testing fees, and other expenses that are directly attributable to the development of new technologies and products, depreciation and amortization of equipment and software of research and development activities and other expenses. Research and development costs are expensed as incurred, except for certain costs associated with developing internal-use software when such costs are incurred within the application development stage of software development. Selling, General and Administrative Expenses Our selling, general and administrative expenses consist of salaries, bonuses, benefits and share-based compensation expenses for sales and marketing personnel and the employees involved in general corporate functions, marketing and promotional expenses, rental and other expenses associated with sales and servicing network, professional service fees, depreciation and amortization expenses, and other general corporate related expenses. Interest Income and Investment Income, Net Interest income primarily consists of interest earned on cash deposits in banks. Investment income primarily consists of gain from short-term investments and fair value changes in our long-term investments. 113 Table of Contents Seasonality The sales volume of passenger vehicles typically declines over January and February, particularly around the Chinese New Year, gradually climbs over the spring and summer months, and typically culminates in the last three months of the calendar year. Our limited operating history makes it difficult for us to judge the exact nature or extent of the seasonality of our business. Also, any unusually severe weather conditions in some markets may impact demand for our vehicles. Taxation Cayman Islands The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains, or appreciation, and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties, which may be applicable on instruments executed in, or brought within the jurisdiction of, the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments. Hong Kong Our subsidiary incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on its taxable income generated from operations in Hong Kong. Additionally, payments of dividends from our subsidiary in Hong Kong to us are not subject to any Hong Kong withholding tax. Mainland China Three, four and four of our consolidated entities applied preferential enterprise income tax rate of 15% for the years ended December 31, 2023, 2024 and 2025, respectively, being qualified as “high and new technology enterprise” under the PRC Enterprise Income Tax law. The high and new technology enterprise certificate is effective for a period of three years. One entity is in line with China’s Western Region Development Strategy for a preferential enterprise income tax rate of 15% from the year ended December 31, 2023 to the year ending December 31, 2030. One of our subsidiaries was awarded as a Software Enterprise in March 2022 and was thereby entitled to an income tax exemption for two years beginning from its first profitable calendar year since 2022, and a 50% reduction in the standard statutory income tax rate for the subsequent three consecutive years. The subsidiary was also approved as a “National Encouraged Key Software Enterprises” in May 2024 and May 2025. Entities recognized as “National Encouraged Key Software Enterprises” will be exempted from enterprise income tax for the first five years, commencing from the first year of profitable operation after offsetting tax losses generating from prior years, and be subject to a preferential income tax rate of 10% after the first five years. Accordingly, the subsidiary was qualified to enjoy the preferential income tax rate of 0% in calendar year 2024. The “National Encouraged Key Software Enterprises” status is subject to annual evaluation and approval by the relevant authorities, and the timing of annual review and approval by the relevant authorities vary from year to year. The related reduction in income tax expense as a result of official approval confirming “National Encouraged Key Software Enterprises” status is accounted for upon receipt of such approval. Therefore, for the calendar year of 2025, the subsidiary applied preferential income tax rate of 12.5% (50% reduction in the standard statutory income tax rate) as a Software Enterprise. Other Chinese companies are subject to enterprise income tax at a uniform rate of 25% as of December 31, 2025. We are subject to VAT rate of 13% for revenue from sales of vehicles, sales of charging stalls, goods from online store, parts and accessories in the PRC, and VAT rate of 6% for revenue from provision of commission service in the PRC. We are also subject to surcharges on value-added tax payments in accordance with PRC laws. We are subject to consumption tax rate of 3% and related surcharge for the sales of extended-range electric passenger vehicles. Dividends paid by our PRC subsidiaries to our Hong Kong subsidiary will be subject to a withholding tax rate of 10%, unless the Hong Kong subsidiary satisfies all the requirements under the Arrangement Between China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and receives approval from the competent tax authority, in which case dividends paid to the Hong Kong subsidiary will be subject to withholding tax at the standard rate of 5%. Effective from November 1, 2015, the aforementioned approval requirement had been abolished, but a Hong Kong entity is still required to file application package with the tax authority, and to settle overdue taxes if the preferential 5% tax rate is denied based on the subsequent review of the application package by the tax authority. 114 Table of Contents If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” For more information on tax regulations, see “Item 10. Additional Information—E. Taxation.” Significant Accounting Policies and Critical Accounting Estimates An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We prepare our financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue and expenses during the reported period in the consolidated financial statements and accompanying notes. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. The following descriptions of significant accounting policies, judgments, and related critical estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report. When reviewing our financial statements, you should consider (i) our selection of significant accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions. Revenue Recognition Our revenues are primarily derived from sales of vehicles, along with multiple distinct performance obligations within each sale of vehicle, as well as other sales and services which are sold or provided separately which include providing non-warranty after-sales services, sales of charging stalls, goods from online store, parts and accessories, sales of Li Plus Membership, commission service and customer loyalty points offered to customers in connection with the purchase of vehicles. Revenue is recognized when or as the control of the goods or services is transferred to a customer. Depending on the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and services is transferred over time if our performance: ●provides all of the benefits received and consumed simultaneously by the customer; ●creates and enhances an asset that the customer controls as we perform; or ●does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date. If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and services. 115 Table of Contents Contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin, depending on the availability of observable information. Assumptions and estimations have been made in estimating the relative selling price of each distinct performance obligation, and changes in judgments on these assumptions and estimates may impact the revenue recognition. When either party to a contract has performed, we present the contract in the balance sheets as a contract asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment. A contract asset is our right to consideration in exchange for goods and services that we have transferred to a customer. A receivable is recorded when we have an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due. If a customer pays consideration or we have a right to an amount of consideration that is unconditional, before we transfer a good or service to the customer, we present the contract liability when the payment is made, or a receivable is recorded (whichever is earlier). A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration (or an amount of consideration is due) from the customer. Vehicle Sales We generate revenues from sales of vehicles, together with a number of embedded products and services through a contract. There are multiple distinct performance obligations explicitly stated in the sales contracts including sales of vehicles, charging stalls, vehicle internet connection services, over the air upgrades, or OTA upgrades, Li Plus Membership, certain products and initial owner extended warranty. The revenue for sales of the vehicles, charging stalls and certain products are recognized at a point in time when the control is transferred to the customer. For the vehicle internet connection service and OTA upgrades, we recognize the revenue using a straight line method over the service period. As for the initial owner extended warranty, we recognize the revenue over time based on a straight line method over the extended warranty period initially, and will continue monitoring the cost pattern periodically and adjust the revenue recognition pattern to reflect the actual cost pattern as it becomes available. We record a contract liability as deferred revenue regarding the unperformed obligations when cash received. After - Sales Services We also provide the after - sales repair and maintenance services and the revenues are recognized at a point in time when the relevant service is delivered. Sales of Charging Stalls, Goods from Online Store, Parts and Accessories We sell charging stalls and goods from online store, parts and accessories along with vehicle sales or separately. The revenue are recognized at a point in time when the charging stalls are installed and goods, parts and accessories are delivered to the customer. Sales of Li Plus Membership We also sell the Li Plus Membership to enrich the ownership experience of customers. Total Li Plus Membership fee is allocated to each performance obligation, mainly including after-sales repair and maintenance services and vehicle internet connection services, based on the relative estimated standalone selling price. And the revenue for each performance obligation is recognized either over the service period or at a point in time when the relevant goods or service is delivered or when the membership is expired, whichever is earlier. Commission service We also facilitate customer use of auto-financing products and services offered by banks and insurance companies. The commission service fee is recognized at a point in time when the relevant facilitation service is rendered. 116 Table of Contents Customer Loyalty Points We offer customer loyalty points, which can be used in our online store to redeem our merchandise or services. We determine the value of each customer loyalty point based on cost of our merchandise or services that can be obtained through redemption of customer loyalty points. We conclude that the customer loyalty points offered to customers in connection with the purchase of vehicles is a material right and is considered as a separate performance obligation. The amount allocated to the customer loyalty points as separate performance obligation is recorded as deferred revenue and revenue is recognized when the customer loyalty points are used or expired. To encourage user engagement and generate market awareness, customers or users of our mobile application can also obtain customer loyalty points through referring new customers to purchase the vehicles. We account for such points as selling and marketing expenses with a corresponding liability recorded under accruals and other current liabilities upon the points offering. Practical Expedients and Exemptions We follow the guidance on immaterial promises when identifying performance obligations in the vehicle sales contracts and concludes certain services, including lifetime roadside assistance, are not material performance obligations considering these services are not critical items. Considering the result of the qualitative assessment and the quantitative estimate, we conclude not to assess whether promises are performance obligations if they are immaterial in the context of the contract and the relative stand-alone fair value individually and in aggregate is immaterial to reported consolidated results. Product Warranties We generally provide product warranties on vehicles based on the contracts with our customers at the time of sale of vehicles. We accrue a warranty reserve for the vehicles sold by multiplying the expected unit costs for warranty services by the sales volume, which includes the best estimates of projected costs to repair or replace items under the warranties and for recalls when identified. These estimates are made primarily based on actual claims incurred to date and the estimates of the nature, frequency and average costs of future claims. These estimates are inherently uncertain given our relatively short history of sales, and changes to the historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within the accrued and other current liabilities while the remaining balance is included within other non-current liabilities in the consolidated balance sheets. Warranty cost is recorded as a component of cost of sales in the consolidated statements of comprehensive (loss)/income. We reevaluate the adequacy of the warranty accrual on a regular basis. We recognize the benefit from a recovery of the costs associated with the warranty when specifics of the recovery have been agreed with our suppliers and the amount of the recovery is virtually certain. We do not consider standard warranty as being a separate performance obligation as it is intended to provide assurance that a product complies with agreed-upon specifications and is not viewed as a distinct obligation. Accordingly, standard warranty is accounted for in accordance with ASC 460, Guarantees. We also provide extended warranty for certain vehicle. The extended warranty is an incremental service offered to customers and is considered a separate performance obligation distinct from other promises and is accounted for in accordance with ASC 606, Revenue from Contracts with Customers. In November 2025, we initiated a voluntary recall of 11,411 units of the 2024 Li MEGA. In addition to product warranties, we recognized the estimated costs of the recall in 2025. 117 Table of Contents Impairment of Long-Lived Assets and Intangible Assets We evaluate property, plant and equipment and intangible assets with definite lives for impairment, whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate the carrying value of an asset (or asset group) may not be recoverable in accordance with ASC 360, Property, Plant and Equipment. We measure the carrying amount of long-lived assets against the estimated undiscounted future cash flows associated with it. An impairment exists when the estimated undiscounted future cash flows are less than the carrying value of the asset (or asset group) being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset (or asset group) exceeds its fair value. No impairment loss of long-lived assets was recognized for the years ended December 31, 2023, 2024 and 2025. Intangible assets with indefinite lives are tested for impairment at least annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired in accordance with ASC 350, Intangibles—Goodwill and Other. We first perform a qualitative assessment to assess all relevant events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. If after performing the qualitative assessment, we determine that it is more likely than not that the indefinite-lived intangible asset is impaired, we calculate the fair value of the intangible asset using a discounted cash flow method and perform the quantitative impairment test by comparing the fair value of the asset with its carrying amount. Inherent in our development of cash flow projections are highly subjective assumptions and estimates derived from a review of our operating results, business plan forecasts, expected growth rates, and cost of capital, similar to those a market participant would use to assess fair value. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, we recognize an impairment loss in an amount equal to that excess. No impairment loss of indefinite-lived intangible assets was recognized for the years ended December 31, 2023, 2024 and 2025. Consolidation of VIEs Subsidiaries are those entities in which we, directly or indirectly, control more than half of the voting power, have the power to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of the board of directors, or have the power to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. A VIE is an entity in which we, or any of our subsidiaries, through contractual arrangements, has established a controlling financial interest (as defined in ASC 810, Consolidation) and is able to direct the activities and derive the economic benefits of the entity. Accordingly, the Company is considered the primary beneficiary of each VIE and consolidates each entity in accordance with U.S. GAAP. Critical judgements have been involved in determining whether a legal entity is a consolidated affiliated entity, and must be reconsidered as a matter of course, upon the occurrence of certain events as provided for within ASC 810-10-35-4. In this regard, we will continue to monitor and assess whether we remain primary beneficiaries of these entities and should continue to consolidate each prospectively. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure.” All significant intercompany balances and transactions within the group have been eliminated upon consolidation. Share-Based Compensation We grant share options and restricted share units to eligible employees, directors and consultants and accounts for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Employees’ share-based compensation awards granted with service conditions and the performance condition, are measured at the grant date fair value. Employees’ share-based compensation awards granted with only service conditions are recognized as expenses over the vesting period, using the graded vesting method, net of estimated forfeitures. For performance-based awards, share-based compensation expense is recognized over the expected performance achievement period as the achievement of each performance achievement becomes probable. 118 Table of Contents A change in the terms or conditions of a share-based award, or cancellation of a share-based award accompanied by the concurrent grant of a replacement award is accounted for as a modification (that is, an exchange of the original award for a new award), unless the award’s fair value, vesting conditions, and classification as an equity instrument are the same as immediately before and after the change. The compensation costs associated with the modified awards are recognized if either the original vesting condition or the new vesting condition is achieved. We recognize incremental compensation cost for an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The binomial option-pricing model is used to measure the value of share options. The determination of the fair value is affected by the fair value of the ordinary shares as well as assumptions regarding a number of complex and subjective variables, including the expected share price volatility, risk-free interest rates and expected dividends. Fair Value of Options For share options for the purchase of ordinary shares granted to employees, directors and consultants classified as equity awards, the related share-based compensation expenses are measured based on the fair value of the awards on the grant date, which is calculated using the binomial option pricing model. The determination of the fair value is affected by the share price as well as assumptions regarding a number of complex and subjective variables, including the expected share price volatility, actual and projected employee share option exercise behavior, risk-free interest rates and expected dividends. The fair value of the ordinary shares is assessed using the income approach/discounted cash flow method, with a discount for lack of marketability, given that the shares underlying the awards were not publicly traded at the time of grant. No share options were granted under the 2019 Plan and 2020 Plan in 2023, 2024 and 2025. Income Taxes Current income taxes are recorded in accordance with the regulations of the relevant tax jurisdiction. We account for income taxes under the asset and liability method in accordance with ASC 740, Income Tax. Under this method, deferred tax assets and liabilities are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and liabilities in the financial statements and their respective tax basis, and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive (loss)/income as “income tax benefit/(expense)” in the period of change. The determination of the realizability of deferred tax assets requires judgment in assessing the likelihood of future tax consequences. A number of factors are evaluated in considering whether there is evidence that it is more likely than not that the deferred tax assets will be realized, including whether there will be sufficient taxable profits available during the utilization periods, and tax planning strategies. Valuation allowances are established when necessary to reduce the amount of deferred tax assets if it is considered more likely than not that amount of the deferred tax assets will not be realized. We record liabilities related to uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that it is more likely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense. We did not recognize uncertain tax positions as of December 31, 2024 and 2025. Recently Issued Accounting Pronouncements A list of recently issued accounting pronouncements that are relevant to us is included in Note 3 to our audited consolidated financial statements included elsewhere in this annual report. 119 Table of Contents Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of our future trends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 ​ 2024 ​ 2025 ​ ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ US$ ​ ​ (in thousands) Revenues: ​ ​ ​ ​ ​ —Vehicle sales 120,294,667 ​ 138,538,092 ​ 106,683,100 15,255,480 —Other sales and services 3,556,665 ​ 5,921,854 ​ 5,629,411 804,995 Total revenues 123,851,332 ​ 144,459,946 ​ 112,312,511 16,060,475 Cost of sales(1): ​ ​ ​ ​ ​ ​ —Vehicle sales (94,482,347) ​ (111,121,036) ​ (87,591,473) (12,525,414) —Other sales and services (1,872,234) ​ (3,682,772) ​ (3,735,980) (534,238) Total cost of sales (96,354,581) ​ (114,803,808) ​ (91,327,453) (13,059,652) Gross profit 27,496,751 ​ 29,656,138 ​ 20,985,058 3,000,823 Operating expenses: ​ ​ ​ ​ ​ ​ —Research and development(1) (10,586,129) ​ (11,071,358) ​ (11,314,949) (1,618,016) —Selling, general and administrative(1) (9,767,955) ​ (12,229,323) ​ (10,664,857) (1,525,055) —Other operating income, net ​ 264,210 ​ 663,657 ​ 473,631 ​ 67,728 Total operating expenses (20,089,874) ​ (22,637,024) ​ (21,506,175) (3,075,343) Income/(Loss) from operations 7,406,877 ​ 7,019,114 ​ (521,117) (74,520) Other (expense)/income: ​ ​ ​ ​ ​ ​ Interest expense (86,251) ​ (187,755) ​ (168,078) (24,035) Interest income and investment income, net 2,082,948 ​ 1,819,964 ​ 1,918,883 274,397 Others, net 1,048,189 ​ 664,301 ​ 67,447 9,645 Income before income tax 10,451,763 ​ 9,315,624 ​ 1,297,135 185,487 Income tax benefit/(expense) ​ 1,357,362 ​ (1,270,374) ​ (157,707) ​ (22,552) Net income 11,809,125 ​ 8,045,250 ​ 1,139,428 162,935 Note: ​ (1) Share-based compensation expenses were allocated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 ​ 2024 ​ 2025 ​ ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ US$ ​ ​ (in thousands) Cost of sales 46,631 ​ 39,728 ​ 35,996 5,147 Research and development expenses 1,552,421 ​ 1,257,921 ​ 782,917 111,956 Selling, general and administrative expenses 779,637 ​ 1,333,256 ​ 438,841 62,753 Total 2,378,689 ​ 2,630,905 ​ 1,257,754 179,856 ​ Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenues Our total revenues decreased from RMB144.5 billion in 2024 to RMB112.3 billion (US$16.1 billion) in 2025, primarily due to decrease in revenues from vehicle sales. Revenues from vehicle sales decreased from RMB138.5 billion in 2024 to RMB106.7 billion (US$15.3 billion) in 2025, primarily attributable to the decrease in vehicle deliveries from 500,508 vehicles in 2024 to 406,343 vehicles in 2025. 120 Table of Contents Revenues from other sales and services remained relatively stable at RMB5.6 billion (US$805.0 million) in 2025, compared with RMB5.9 billion in 2024. Cost of Sales Our cost of sales decreased from RMB114.8 billion in 2024 to RMB91.3 billion (US$13.1 billion) in 2025, mainly attributable to the decrease in vehicle deliveries. Gross Profit As a result of the foregoing, we generated gross profit of RMB21.0 billion (US$3.0 billion) in 2025, compared with RMB29.7 billion in 2024. Research and Development Expenses Our research and development expenses remained relatively stable at RMB11.3 billion (US$1.6 billion) in 2025, compared with RMB11.1 billion in 2024. Selling, General and Administrative Expenses Our selling, general and administrative expenses decreased from RMB12.2 billion in 2024 to RMB10.7 billion (US$1.5 billion) in 2025, primarily attributable to due to decreased employee compensation associated with the recognition of share-based compensation expenses regarding the chief executive officer’s performance-based awards in 2024. Income/(Loss) from Operations As a result of the foregoing, we recorded loss from operations of RMB521.1 million (US$74.5 million) in 2025, compared with income from operations of RMB7.0 billion in 2024. Operating margin was negative 0.5% in 2025, compared with 4.9% in 2024. Interest Income and Investment Income, Net Our interest income and investment income, net increased from RMB1.8 billion in 2024 to RMB1.9 billion (US$274.4 million) in 2025, primarily attributable to the fair value change of equity investments and investment income from financial instruments, partially offset by decrease in interest income. Others, Net Our others, net decreased from RMB664.3 million in 2024 to RMB67.4 million (US$9.6 million) in 2025. Income Tax Expense We had income tax expense of RMB157.7 million (US$22.6 million) in 2025, compared with income tax expense of RMB1.3 billion in 2024, primarily due to the decrease in income before income tax. Net Income As a result of the foregoing, we recorded net income of RMB1.1 billion (US$162.9 million) in 2025, compared with net income of RMB8.0 billion in 2024. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Revenues Our total revenues increased from RMB123.9 billion in 2023 to RMB144.5 billion in 2024, primarily due to increase in revenues from vehicle sales. 121 Table of Contents Revenues from vehicle sales increased from RMB120.3 billion in 2023 to RMB138.5 billion in 2024, primarily attributable to the increased deliveries of 500,508 vehicles in 2024, compared with 376,030 in 2023, partially offset by the lower average selling price mainly due to different product mix and changes in pricing strategy. Revenues from other sales and services increased from RMB3.6 billion in 2023 to RMB5.9 billion in 2024, primarily attributable to the increased provision of services and sales of accessories, which is in line with higher accumulated vehicle sales. Cost of Sales Our cost of sales increased from RMB96.4 billion in 2023 to RMB114.8 billion in 2024, which was primarily due to the increase in vehicle deliveries, partially offset by the lower average cost of sales due to different product mix and cost reduction. Gross Profit As a result of the foregoing, we generated gross profit of RMB29.7 billion in 2024, compared with RMB27.5 billion in 2023. Research and Development Expenses Our research and development expenses increased from RMB10.6 billion in 2023 to RMB11.1 billion in 2024, primarily attributable to increased expenses to support our expanding product portfolios and technologies, and increased employee compensation. Selling, General and Administrative Expenses Our selling, general and administrative expenses increased from RMB9.8 billion in 2023 to RMB12.2 billion in 2024, primarily attributable to increased employee compensation associated with growth in number of staff and the recognition of share-based compensation expenses regarding the chief executive officer’s performance-based awards in 2024, as well as increased rental and other expenses associated with the expansion of sales and servicing network. Income from Operations As a result of the foregoing, income from operations was RMB7.0 billion in 2024, compared with income from operations of RMB7.4 billion in 2023. Operating margin was 4.9% in 2024, compared with 6.0% in 2023. Interest Income and Investment Income, Net Our interest income and investment income, net decreased from RMB2.1 billion in 2023 to RMB1.8 billion in 2024, primarily attributable to the fair value change of equity investments, partially offset by increase in interest income. Others, Net Our others, net decreased from RMB1.0 billion in 2023 to RMB664.3 million in 2024. Income Tax Benefit/(Expense) We had income tax expense of RMB1.3 billion in 2024, compared with income tax benefit of RMB1.4 billion in 2023, primarily attributable to the non-cash tax benefit of RMB2.0 billion being recorded in 2023 for the release of valuation allowance on certain deferred tax assets. Net Income As a result of the foregoing, we recorded net income of RMB8.0 billion in 2024, compared with net income of RMB11.8 billion in 2023. 122 Table of Contents B. Liquidity and Capital Resources As of December 31, 2025, we had RMB101.2 billion (US$14.5 billion) in cash and cash equivalents, restricted cash, time deposits, short-term investments, and long-term time deposits and financial instruments included in long-term investments. Our cash and cash equivalents primarily consist of cash on hand, time deposits and highly-liquid investments placed with banks or other financial institutions, which are unrestricted for withdrawal and use and have original maturities of three months or less. Our cash used in operating activities in 2025 was RMB8.6 billion (US$1.2 billion), compared with cash provided by operating activities of RMB50.7 billion and RMB15.9 billion in 2023 and 2024, respectively. We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements, capital expenditures and debt repayment obligations for at least the next 12 months. We may decide to enhance our liquidity position or increase our cash reserve for future operations and investments through additional financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increasing fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. The PRC government imposes regulations on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from or registration with appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries and the VIEs to pay off their respective debt in a currency other than Renminbi owned to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations on Foreign Exchange.” Cash Flows The following table sets forth a summary of our cash flows for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 ​ 2024 ​ 2025 ​ ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ RMB ​ ​ ​ US$ ​ ​ (in thousands) Summary Consolidated Cash Flow Data ​ ​ ​ ​ ​ Net cash provided by/(used in) operating activities ​ 50,693,521 ​ 15,933,160 (8,611,397) (1,231,413) Net cash used in investing activities ​ (12,068) ​ (41,137,169) (703,125) (100,546) Net cash provided by/(used in) financing activities ​ 185,385 ​ (415,648) 767,402 109,737 Effects of exchange rate changes on cash, cash equivalents and restricted cash ​ 44,513 ​ 198,120 (452,773) (64,746) Net change in cash, cash equivalents, and restricted cash ​ 50,911,351 ​ (25,421,537) (8,999,893) (1,286,968) Cash, cash equivalents, and restricted cash at the beginning of the year ​ 40,418,158 ​ 91,329,509 65,907,972 9,424,715 Cash, cash equivalents, and restricted cash at the end of the year ​ 91,329,509 ​ 65,907,972 56,908,079 8,137,747 ​ Operating Activities Net cash used in operating activities for the year ended December 31, 2025 was RMB8.6 billion (US$1.2 billion). The difference between our net cash used in operating activities and our net income of RMB1.1 billion (US$162.9 million) was primarily attributable to (i) a net change in operating assets and liabilities of RMB15.1 billion (US$2.2 billion), which was primarily the result of (x) a decrease in trade and notes payable of RMB13.0 billion (US$1.9 billion) mainly consisting of trade payable for raw materials, and (y) an increase in inventories of RMB2.6 billion (US$368.8 million), partially offset by (ii) non-cash items of RMB5.4 billion (US$768.6 million), which primarily consisted of depreciation and amortization, share-based compensation expenses, deferred income tax, inventory write-downs and losses on purchase commitments relating to inventory. ​ 123 Table of Contents Net cash provided by operating activities for the year ended December 31, 2024 was RMB15.9 billion. The difference between our net cash provided by operating activities and our net income of RMB8.0 billion was primarily attributable to (i) non-cash items of RMB5.8 billion, which primarily consisted of depreciation and amortization, share-based compensation expenses, inventory write-downs and losses on purchase commitments relating to inventory, and interest and investment income, and (ii) a net change in operating assets and liabilities of RMB2.1 billion. The net change in operating assets and liabilities was primarily the result of (i) an increase in trade and notes payable of RMB2.2 billion mainly consisting of trade payable for raw materials, (ii) an increase in other non-current liabilities of RMB1.7 billion mainly consisting of accrued warranty and deferred government grants, and (iii) an increase in accruals and other current liabilities of RMB1.5 billion, which mainly includes salaries and benefits payables, tax payable, payable for research and development expenses, payables for logistics expenses, and accrued costs of purchase commitments relating to inventory and technical authorization fee, partially offset by (x) an increase in inventories of RMB3.1 billion, (y) an increase in prepayments and other current assets of RMB238.6 million and (z) a decrease in deferred revenue of RMB220.7 million. Net cash provided by operating activities for the year ended December 31, 2023 was RMB50.7 billion. The difference between our net cash provided by operating activities and our net income of RMB11.8 billion was primarily attributable to (i) non-cash items of RMB2.3 billion, which primarily consisted of share-based compensation expenses, depreciation and amortization, deferred income tax and inventory write-downs and losses on purchase commitments relating to inventory, and loss on inventory obsolescence, and (ii) a net change in operating assets and liabilities of RMB36.6 billion. The net change in operating assets and liabilities was primarily the result of (i) an increase in trade and notes payable of RMB31.8 billion mainly consisting of trade payable for raw materials and (ii) an increase in accruals and other current liabilities of RMB5.3 billion, which mainly includes salaries and benefits payables, tax payables, payable for research and development expenses, payables for logistics expenses, and accrued costs of purchase commitments relating to inventory, and (iii) an increase in other non-current liabilities of RMB1.6 billion mainly consisting of accrued warranty and deferred government grants, partially offset by (x) an increase in prepayments and other current assets of RMB2.4 billion and (y) an increase in inventories of RMB1.2 billion. Investing Activities Net cash used in investing activities for the year ended December 31, 2025 was RMB703.1 million (US$100.5 million). This was primarily attributable to purchase of property, plant and equipment and intangible assets of RMB4.2 billion (US$601.4 million), partially offset by net redemption of time deposits and short-term investments of RMB2.1 billion (US$305.3 million) and disposal of property, plant and equipment of RMB1.3 billion (US$185.9 million). Net cash used in investing activities for the year ended December 31, 2024 was RMB41.1 billion. This was primarily attributable to (i) net purchase of time deposits and short-term investments of RMB34.4 billion, (ii) purchase of property, plant and equipment and intangible assets of RMB7.7 billion. Net cash used in investing activities for the year ended December 31, 2023 was RMB12.1 million. This was primarily attributable to (i) purchase of property, plant and equipment and intangible assets of RMB6.5 billion, (ii) our net investment in long-term investments of RMB198.2 million, partially offset by our net redemption of time deposits and short-term investments of RMB6.4 billion. Financing Activities Net cash provided by financing activities for the year ended December 31, 2025 was RMB767.4 million (US$109.7 million), primarily attributable to net proceeds of RMB1.4 billion (US$194.0 million) from the borrowings comprised of secured borrowings and credit guaranteed borrowings, partially offset by repayment of principal on finance lease obligation of RMB664.0 million (US$95.0 million). Net cash used in financing activities for the year ended December 31, 2024 was RMB415.6 million, primarily attributable to net repayments of borrowings of RMB524.9 million comprised of unsecured borrowings and credit guaranteed borrowings, partially offset by proceeds from debt from third party investors of RMB94.6 million. Net cash provided by financing activities for the year ended December 31, 2023 was RMB185.4 million, primarily attributable to net proceeds of RMB1.2 billion from share issuance through our at-the-market equity offering program, partially offset by net payments of RMB1.0 billion of the borrowings comprised of secured borrowings and credit guaranteed borrowings. 124 Table of Contents Material Cash Requirements Our material cash requirements as of December 31, 2025 and any subsequent interim period primarily include the cash needs in our business operations, contractual obligations, and capital expenditures. Contractual Obligations The following table sets forth our contractual obligations by specified categories as of December 31, 2025. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment due by period ​ ​ ​ ​ Total ​ ​ ​ Less than One Year ​ ​ ​ 1‑3 Years ​ ​ ​ 3‑5 Years ​ ​ ​ Over 5 Years Capital commitments(1) 6,320,465 6,301,199 19,266 — — Purchase obligations(2) 7,303,842 7,165,992 137,850 — — Short-term and long-term borrowings 9,558,196 235,379 6,736,449 930,342 1,656,026 Operating lease liabilities 8,981,922 1,944,216 2,936,603 1,913,633 2,187,470 Finance lease liabilities 408,642 — 408,642 — — Total 32,573,067 15,646,786 10,238,810 2,843,975 3,843,496 (1) Our capital commitments primarily relate to commitments on construction and purchase of production facilities, equipment and tooling. (2) Our purchase obligations primarily relate to commitments on purchase of raw materials. Capital Expenditures Our capital expenditures were RMB6.5 billion, RMB7.7 billion and RMB4.2 billion (US$601.4 million) in 2023, 2024 and 2025, respectively. In these periods, our capital expenditures were primarily used for the acquisition of factory buildings, equipment, tooling and leasehold improvements mainly for retail stores and delivery and servicing centers and charging stations. We plan to continue to incur capital expenditures in the future to meet our business growth. Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantee as of December 31, 2025. Holding Company Structure Li Auto Inc. is a holding company with no material operations of its own. We conduct our operations through our PRC subsidiaries and the VIEs and their subsidiaries in China. As a result, our ability to pay dividends depends significantly upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under the PRC law, each of our subsidiaries and the VIEs in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, each of our wholly foreign-owned subsidiaries in China may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and each of the VIEs may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Research and Development” And “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” 125 Table of Contents D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2025 to December 31, 2025 that are reasonably likely to have a material adverse effect on our total revenues, profitability, liquidity, or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. E. Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue and expenses during the reported period. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements. For a detailed discussion of our significant accounting policies and related judgments, see Note 2 to our consolidated financial statements included elsewhere in this annual report. Product warranties We accrue a warranty reserve for the vehicles sold by multiplying the expected unit costs for warranty services by the sales volume, which includes the best estimate of projected costs to repair or replace items under warranties and recalls when identified. These estimates are made primarily based on actual claims incurred to date and the estimates of the nature, frequency and average costs of future claims. These estimates are inherently uncertain given the our relatively short history of sales, and changes to the historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within the accruals and other current liabilities while the remaining balance is included within other non-current liabilities in the consolidated balance sheets. Warranty cost is recorded as a component of cost of sales in the consolidated statements of comprehensive income. We reevaluate the adequacy of the warranty accrual on a regular basis. When our assumptions relating to the estimates of the projected costs to repair or replace items under warranties decreased/increased by 5% while holding all other assumptions constant, there would be no significant impact to our consolidated results of operations. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development services with us. ​ 126 Table of Contents