Li Auto: i8 Waves the White Flag in Record Time — But Still Can’t Turn Things Around？

$LI AUTO-W(02015.HK) officially launched its first pure electric SUV, the i8, on the evening of July 29. For details, see "Li Auto (i8 Minutes): Can i8 Redefine Li Auto's Pure Electric?". Although the i8 adopts a "same price for oil and electricity" pricing strategy, which was expected to be higher for pure electric, the pricing exceeded expectations. However, the i8 series continued the configuration and pricing logic of the L series.

In other words, distinctions were made for Pro, Max, and Ultra versions in terms of refrigerator/TV/intelligent driving, but this differentiation method caused dissatisfaction among the target users of pure electric (such as the Pro version lacking the iconic refrigerator, and the Max version not having the second-row screen as standard), ultimately leading to the i8's large order volume falling short of expectations after its release.

Li Auto also adjusted the i8's configuration and price again at noon on August 5, canceling the Pro, Max, Ultra distinctions, and only setting a single i8 Max configuration, reducing the i8 price from 349,800 yuan to 339,800 yuan, while offering a rear cabin entertainment screen package as an option for 10,000 yuan.

The final effect is that the Pro version is gone, the Max version is reduced by 10,000 yuan, and the original Ultra becomes an optional package for the Max version, adding 10,000 yuan for the rear screen, essentially equating to a 20,000 yuan price reduction.

Following the i8 release, due to the large order volume falling short of expectations, Li Auto's stock price has retreated from the pre-release high of $32 to the current $24, a retreat of 25%. Therefore, Dolphin Research attempts to answer several key questions investors are most concerned about in this article:

1) What issues exist in the original pricing logic of the i8?

2) What is the impact of the i8's price reduction on Li Auto?

3) Does this price adjustment reflect a change in Li Auto's strategic thinking?

4) Is the probability of success for the i6 high?

5) Can Li Auto's L series basic market be maintained?

6) How should Li Auto's current stock price be viewed? Is it suitable to enter?

1. What issues exist in the original pricing logic of the i8?

The i8's original configuration was aligned with the L8, adopting a "same price for oil and electricity" pricing strategy. From the pricing perspective alone, this pricing was already beyond market expectations, but the problem lay in the differentiation method of different versions, as the target users of pure electric and extended-range models differ.

① The user group of the L8 mainly consists of replacement users from the fuel vehicle market, familiar with and accepting the traditional multi-version configuration selection logic, primarily based on traditional high-end features such as refrigerators and TVs.

② However, the target users of the i8, although some are original extended-range Li Auto owners and BBA fuel vehicle replacement users, a considerable portion are users who already have pure electric vehicles and are upgrading or replacing. These users are not familiar with the configuration differentiation of the original L series and refer more to the existing market differentiation methods of pure electric competitors.

Unlike traditional cars (where the richness of comfort configurations has long been a core selling point, such as electric adjustment, massage, and ventilation functions of luxury seats), pure electric cars generally follow a pricing logic based on intelligence—hardware quantity and quality, software intelligent driving levels; and electrification—battery capacity, electric drive numbers, and standard air suspension.

However, traditional selling points such as comfort configurations like the size of the rear screen and sofa material are used for auxiliary differentiation, as seen in the LeDao L90 below.

Meanwhile, as pure electric competition intensifies, similar strategies like Nio's L90 "size equality" approach are emerging to launch lower-priced pure electric cars, making comfort configurations like "refrigerator, TV, big sofa" standard (mature products, transparent market prices).

Before the change, Li Auto's i8 pricing logic was still mainly focused on the three major electrics, with auxiliary intelligence, resulting in Li Auto being voted against by car owners.

2) What is the impact of the i8's price reduction on Li Auto?

① There is a possibility of contract and inventory impairment risks:

From the perspective of the i8's price reduction ratio, the actual price reduction of the i8 reaches 10,000-20,000 yuan, with a reduction ratio of 3%-5.4%. Due to the cancellation of the i8 Pro version, there is a possibility of confirming some contract and inventory impairment risks (as the Pro uses a separately procured Horizon intelligent driving solution), dragging down the gross margin.

② The overall gross margin of the i8 may be lower than that of the L8:

After this price reduction, the actual selling price of Li Auto's i8 is 10,000-30,000 yuan lower than the listing price of Li Auto's L8, and 5,000-25,000 yuan lower than the actual selling price of the L8 (L8 has a 5,000 yuan discount for 10,000 yuan).

However, from the overall configuration comparison between the L8 and i8, Li Auto's i8, due to its larger battery (battery energy is 45kWh higher), has a higher overall battery cost compared to Li Auto's L8 (estimated to be 20,000-25,000 yuan more expensive), so Dolphin Research estimates that the overall gross margin of Li Auto's i8 will be lower than that of the L8 (lower selling price, higher BoM cost).

③ The i8 may have a certain sales erosion effect on the existing L8:

From the configuration comparison between the i8 and L8, apart from differences in power and drive mode, there is not much difference in other configurations. Correspondingly, the pure electric i8 is more suitable for the needs of user groups in first- and second-tier cities (with well-established supercharging stations, the i8 is also more suitable for urban commuting), while the L8's user group is also concentrated in China's first, new first, and second-tier cities, and the i8 has a pricing advantage over the L8, which may further erode the already low sales of the L8 model.

④ The i8 pricing logic may affect the existing L series basic market configuration differentiation logic:

This time, the i8 has changed to a unified configuration, no longer using "refrigerator, TV, big sofa" as the main differentiation point of the model, which may also affect the existing L series basic market configuration differentiation logic. Potential L series buyers may be influenced by the i series price adjustment and unified configuration, considering this version differentiation method unreasonable, thereby affecting the subsequent sales of the L series basic market.

3) Does this price adjustment reflect a change in Li Auto's strategic thinking?

Because the release of Li Auto's i8 is also planned as an important turning point for adopting the "dual energy" strategy, and generally, pure electric models have higher battery costs, so the pricing of the model itself is usually higher than that of extended-range models.

The aging of L series models means that pure electric is a battle Li Auto must win. From the versions and prices released at the i8's launch, the pricing strategy of "same price for oil and electricity" is already "sincere" for the pure electric i8 model, which has higher cost.

As the first model of Li Auto's pure electric strategy this year, the i8 plays a role in establishing a high-end mindset for the pure electric brand. The i8 sets the tone for pure electric, and the i6, to be released in September, aims for sales. If the i8 is not well-prepared, similar models on the same platform as the i6 will also be affected. Therefore, Li Auto urgently reduced the price and adjusted the versions of the i8.

Even if this is likely to erode the basic market of the L series, affect the pricing logic of the L series, and drag down the gross margin, the decision behind this indicates that Li Auto no longer has time for trial and error in pure electric. This year, even if it means sacrificing the sales and profit base of the L series, pure electric must be elevated.

From the consecutive two months before the i8 release (June/July) when the L series sales basic market showed negative growth year-on-year, and the month-on-month sales in July had already fallen to 30,000 units, Li Auto still did not offer any discounts or promotions for the L series basic market, but instead withdrew some discount offers, the fundamental purpose of which is to ensure the success of the pure electric strategy that is fully bet on this year.

4) Is the probability of success for the i6 high?

Dolphin Research believes that in the currently highly competitive pure electric market of 200,000-300,000 yuan, and considering that Li Auto itself is not a player born from brand strength, the pricing of the i6 will still be a key factor.

Dolphin Research expects that, based on Li Auto's goal of not losing in pure electric this year, the new i6 in September will continue to adopt the "electric lower than oil" pricing strategy, similar to the i8, which will create an awkward situation of internal competition.

But unlike the i8, the L6 is a model with monthly sales of around 15,000 units, which is currently Li Auto's largest basic market. If it is eaten by the lower-priced, higher-cost i6, it will have a more serious impact on Li Auto's fundamentals.

5) Can Li Auto's L series basic market be maintained?

In "Aito VS Li Auto: Two Heroes Compete, Who is the Winner?", Dolphin Research has already detailed that the first-mover advantage of Li Auto's L series is being continuously consumed, especially since Li Auto itself is not truly a player born from brand strength (the model structure is continuously sinking).

And if the user group values practicality attributes (large space + home attributes) more, it is naturally easy to be attracted by competitive models with lower prices but also good product strength, especially when the moat of extended-range technology itself is not high and relatively easy to imitate.

① External threats: From the models to be launched in the second half of this year, Li Auto's L6+L7 in September will face direct competition from Aito's new M7 mid-term facelift, which is expected to have a significant impact on Li Auto's L6+L7 models,

because the current Aito's old M7 still has certain product strength issues. Once the product strength shortcomings are addressed, coupled with Huawei's brand strength support, the probability of Aito's M7 continuing to create a hit is high, and it will continue to seize the sales basic market of Li Auto's L6+L7.

And in the second half of the year, there are also XPeng and Xiaomi in 2026 using the "big battery" + "small fuel tank" solution to target the extended-range market;

② Internal worries: From the partial withdrawal of discounts for the L series before the i8 launch, and the emergency price adjustment after the i8 launch due to large orders falling short of expectations, it can be seen that Li Auto's strategic focus this year is on ensuring pure electric makes a splash, even at the cost of sacrificing part of the L series basic market.

Li Auto's L series sales basic market faces "internal and external threats". If it does not reduce prices to maintain pure electric sales, losing ground is likely to happen.

6) How should Li Auto's current stock price be viewed?

Dolphin Research has already mentioned in "Seres vs Li Auto: Who is the Chosen One of Domestic 'BBA'?" that Li Auto's blue ocean strategy corresponds to a high-risk, high-reward investment model for investors. If successful, it will bring a double hit to profits and valuation (the Davis double hit brought by the successful positioning of the L series extended-range models), but if it fails, it will trigger a Davis double kill moment (the pure electric MPV Mega basically has no splash).

Compared to the gamble before the i8 release, the risk of gambling at the current time point is even greater, and the odds and win rate may be relatively lower:

① If the i8 order volume sees a rebound after this price adjustment: Assuming the average monthly sales of the i8 before the price adjustment is adjusted from 2,000-3,000 units to 3,000-5,000 units, it will have a certain short-term boost to Li Auto's stock price, but due to:

a. The release failure of Li Auto's i8 increases the market's doubts about whether the i6 can succeed;

b. The L series basic market experienced a severe month-on-month decline in July, and if the i8's sales increase is achieved at the cost of sacrificing the L series;

Therefore, it is difficult for the market to factor in the expectation of i6's success into the stock price, and the potential increase may be relatively limited (only able to return to the 10-20 point increase before the i8 release).

② But if the i8 order volume after the price reduction is also average:

a. The i8's performance after the price reduction is average, and the market continues to worry about whether the i6 can succeed,

b. Before the i6 is launched in September, Li Auto is expected not to reduce the price of the L series, as it aims to ensure the success of the pure electric strategy, making it difficult for the L series basic market to rebound in the short term. The market will start to worry about the i8's erosion of the L8, the i8's gross margin issues, and the impact of the i8's price adjustment on the L series pricing logic.

Meanwhile, in the upcoming second-quarter financial report to be released in August, Li Auto previously guided in the last quarter's earnings call that due to the significant promotions for the L series in April, the Q2 gross margin may be under pressure (expected to retreat from 19.8% in Q1 to around 19%), and since it is expected not to adjust the price of the Li Auto L basic market, and the i6 will be launched in September, contributing little to Q3, so the Q3 sales guidance may not be very optimistic.

Moreover, the gross margin guidance may also need to consider the contract impairment risk of the i8, and the impact of the i8's lower pricing compared to the L8 on the i8's gross margin, so funds may wait for the release of negative factors in Li Auto's stock price, retreating to a relatively safe price range (around $20-22) before re-gambling on whether the i6 can succeed, as the risk of gambling on the i6 is greater than before the i8 release.

Dolphin Research believes that the risk of gambling on the i6 model is greater and requires a stronger safety margin.

① If the i6 continues to fail this time, Li Auto will once again experience the "Mega moment" of 2024, delaying the pure electric strategy for another year, while the extended-range strategy continues to lose ground, and the stock price may quickly fall to the pessimistic price range of $15-18 estimated by Dolphin Research, and only at this time point will the risk be cleared, making it a more suitable entry point.

Especially when the Li Auto L series basic market fails to succeed in the i6 series, it can reduce prices to boost sales in the short term, and in 2026, it will launch a major facelift for the extended-range models, and Li Auto's cash flow safety cushion is still sufficient.

② If the i6 pricing exceeds expectations this time, continuing to achieve "electric lower than oil" to ensure i6's sales, and the i6's sales can successfully reach around 10,000-15,000 units, although the L series basic market decline is a high probability trend, the market is expected to start switching to the 2026 dimension, pricing the success of next year's major facelift for extended-range models + pure electric strategy, and the stock price is expected to evolve towards the neutral to optimistic scenario estimated by Dolphin Research of $30-40.

Dolphin Research Historical Depth:

"Aito VS Li Auto: Two Heroes Compete, Who is the Winner?"

"Seres vs Li Auto: Who is the Chosen One of Domestic 'BBA'?"