Li Auto Inc (NASDAQ:LI) stock fell 3.14% (As on March 13, 11:26:08 AM UTC-4, Source: Google Finance) after the company eked out a profit in the fourth quarter, barely recovering from the previous quarter’s loss, as investors weighed the challenges facing the company amid slowing demand and intense competition in China’s electric-vehicle market. The decline came after Li Auto reported a more than 99% plunge in net profit to 6.5 million yuan, equivalent to about $950,000, and gave a weak first-quarter guidance. For the full year, net profit plunged 86% to 1.12 billion yuan and gross margin declined to 18.7%. Annual revenue dropped 22% to 112.31 billion yuan.

Revenue for the three months ended December fell 35% to 28.78 billion yuan, as the company sold 109,194 vehicles–a 31% decline from the previous year. The figures were below analysts’ expectations for net profit of 150.2 million yuan and revenue of 32.41 billion yuan in a Visible Alpha poll. The earnings miss came as Li Auto faced several challenges in 2025, from a slowdown in demand for plug-in hybrids to a lukewarm response to its battery EV lineup. The company had been relying on robust hybrid sales to drive revenue, but competition in the segment intensified last year, with rivals like Zhejiang Leapmotor and Huawei-backed auto brands coming to the fore. Shares in the Chinese automaker steadily declined in the second half of last year despite the launch of two battery-electric models, the i8 and i6, reflecting investors’ concerns about its competitiveness in the space. In early February, the company announced the all-new L9, with a planned launch in the second quarter, helping shares hit a 2026 high that month. Li Auto said its fourth-quarter gross margin fell to 17.8% from 20.3% a year earlier, weighed by a different product mix.

For the first quarter of 2026, the Li Auto Inc. expects: Deliveries of vehicles to be between 85,000 and 90,000 vehicles, representing a year-over-year decrease of 8.5% to 3.1%. Total revenues to be between RMB 20,400 million (USD 2,900 million) and RMB 21,600 million (USD 3,100 million), representing a year-over-year decrease of 21.3% to 16.7%. The company is facing rising material costs, primarily from lithium batteries, as well as pressures from the L-series vehicle destocking and its own purchase-tax subsidies and additional discounts. Despite the weak results and guidance, Li Auto remains one of the few Chinese EV makers to have turned a profit. It has ambitions to be more than just an EV maker, aiming to become an AI company over the next decade.