Li Auto apologizes for the MEGA fire incident

A week ago, a fire involving a MEGA in Shanghai has once again put Li Auto in the spotlight.

On October 31, the day after the incident, Li Auto issued a statement apologizing for the event. Li Auto pointed out that they had contacted the vehicle owner immediately after the incident and were actively cooperating with relevant departments to conduct an investigation. However, since the accident vehicle requires joint inspection and testing by the user, fire department, and relevant agencies, this process must follow strict procedures and takes a considerable amount of time.

Li Auto stated that as of now, there has not been a final technical conclusion regarding the fire incident. However, Li Auto has already initiated an internal investigation and analysis, and has reviewed the records of the cloud-based early warning system and special verification data.

The results showed that among the Li Auto MEGA 2024 vehicles from the same batch as the accident vehicle, due to insufficient corrosion resistance of the coolant in that batch, under specific conditions, it could lead to corrosion and leakage of the cooling aluminum plates for the power battery and front motor controller in the cooling circuit, resulting in warning lights illuminating, limited power, and inability to power on. In extreme cases, this could cause thermal runaway of the power battery, posing safety hazards.

Therefore, Li Auto has proactively filed a recall plan with the State Administration for Market Regulation, recalling a total of 11,411 vehicles. They will also replace the power batteries and related equipment for the vehicle owners free of charge.

Based on market prices, the cost of a single power battery pack (including electronic control) easily exceeds 100,000 yuan. Even considering economies of scale, replacing the two core components, "power battery" and "front motor controller," the material and labor costs per vehicle are likely close to the 100,000 yuan level. This means that the direct cost expenditure for this recall will be at least in the tens of billions.

Looking back at the entire incident, Li Auto found that about four hours before the vehicle caught fire, their cloud-based early warning system had already received relevant alarm notifications, and staff contacted the vehicle owner and driver immediately. However, since there had never been a precedent for non-collision fires, they failed to take emergency measures in a timely manner, which also led to missing the best opportunity for early intervention.

Li Auto admitted that this exposed their inadequate risk assessment when facing low-probability risk scenarios without precedent. Moving forward, they will strengthen training and support for frontline teams, enhance the risk identification and decision-making capabilities of on-site and remote staff; optimize the handling strategies of the cloud-based early warning system, and be more decisive in guiding drivers to pull over and arrange for emergency measures when encountering critical signals.

Regarding the suspicions about the battery cell issues in this fire incident, Li Auto pointed out that based on records from the cloud-based early warning system and special analysis verification, all battery cell status parameters were normal before the incident, thus ruling out the possibility of fire caused by abnormalities in the battery cells themselves.

However, this judgment has formed an internal technical conclusion, but the final result still needs to be confirmed by relevant national departments in conjunction with the physical inspection, independent testing, and comprehensive analysis of the accident vehicle.

Additionally, regarding whether the rear sliding door can be opened normally after the accident, Li Auto stated that the vehicle automatically unlocked after the incident. At the same time, both the front and rear rows of Li Auto vehicles are equipped with mechanical emergency pull handles, which can fully ensure that occupants can unlock and exit the vehicle in extreme situations In response to the known issue of "insufficient corrosion resistance of the coolant" for this batch of vehicles, Li Auto has proactively initiated a recall. For the Li Auto MEGA produced after December 28, 2024, as well as other models in the Li Auto series, it stated that there is no such risk.

Thus, before the final conclusion of the incident, Li Auto has taken the initiative to "mend the fold after the sheep are lost," expressing its stance. This is also what Li Auto urgently needs at the moment.

Currently, Li Auto is experiencing dual pressure from declining sales and market value. With the entry of the Hongmeng Smart Mobility Corps, as well as Nio, Leapmotor, Lynk & Co, and others into the family market, Li Auto's monthly delivery volume has dropped from nearly 60,000 units at its peak to less than 30,000 units. Li Auto's stock price has also fallen from HKD 128 per share before the launch of the pure electric i8 to currently less than HKD 80, with its market value shrinking by nearly 40%.

It can be said that Li Auto is at a critical juncture, facing fierce attacks from competitors while transitioning from range-extended to pure electric products. It must find a way to restore market confidence.

It is worth noting that after more than a year of market cultivation following last year's turmoil, just as the sales and reputation of the MEGA were gradually stabilizing and beginning to establish a foothold in the MPV market above 500,000, this incident is akin to pulling the rug out from under them.

Industry insiders believe that the MEGA, as the flagship among flagships, should be the epitome of safety. The cornerstone of Li Auto's brand is "family" and "safety." The success of its L series stems from its precise grasp of the Chinese middle-class family's extreme pursuit of safety and comfort. If Li Auto chooses to "wait," the blow to its brand reputation will be long-term and irreversible.

Fairly speaking, before the final investigation conclusion is released, Li Auto's choice to bow its head, admit fault, and proactively recall is a key attitude for its self-rescue. By incurring the cost of the recall, it has preemptively cleared a "landmine" on its pure electric track and provided practical experience for its future pure electric vehicle matrix.

Whether this expensive lesson can ultimately allow Li Auto to "exhaust the bad news" depends on its subsequent execution.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk