Shares of Li Auto (NASDAQ:LI) fell in pre-market trading Tuesday after Goldman Sachs lowered its rating on the company from “buy” to “neutral,” following the electric vehicle maker’s fourth-quarter 2025 results. The brokerage cited increasing losses and weaker outlooks for both sales volumes and margins as key reasons for the downgrade.
Goldman Sachs also reduced its 12-month price target on Li Auto’s ADRs by 21% to $19 from $24. Its target for the company’s Hong Kong-listed shares was cut by 20% to HK$74 from HK$93.
The bank said Li Auto is likely to experience “two quarters of widening net profit loss (1Q26-2Q26, lowest since 3Q22), with lackluster volume growth (-6%/+2% yoy) and depressed vehicle gross margins (5%/10%, lowest since 1Q20).”
Goldman Sachs lowered its delivery forecasts for 2026–2028 by between 5% and 22%, pointing to softer guidance from management and a reduced pipeline of new vehicle models. The firm now expects only one facelift model to launch during the period, compared with three previously anticipated.
The brokerage also trimmed its gross margin projections by 0.4 to 1 percentage points and reduced net profit forecasts by 21% to 34%.
For the first quarter, Li Auto has indicated that vehicle margins will be around 5%, reflecting the impact of promotional campaigns, tax incentives and lower supplier rebates, each weighing on margins by roughly 3–4 basis points.
Goldman Sachs also noted rising production costs, estimating that the bill-of-material cost for electric vehicles could increase by around RMB4,000 per unit on average.
Management expects deliveries to grow about 20% year-on-year in 2026 and forecasts first-quarter shipments of between 85,000 and 90,000 vehicles. Goldman Sachs projects total deliveries of 476,000 units in 2026, representing growth of about 17%.
Profitability is expected to remain under pressure. The brokerage estimates EBIT margins of negative 0.4% in 2026, compared with negative 0.5% in 2025. Margins are projected to average around negative 9% in the first half before recovering to roughly 5% in the second half of the year. Profit per vehicle is expected to decline to RMB5,400 from RMB5,900.
Goldman Sachs also pointed to increasing operating expenses, forecasting research and development spending of roughly RMB12 billion in 2026, up from RMB11 billion in 2025.
Li Auto ended 2025 with net cash of RMB92 billion and a total liabilities-to-assets ratio of 53%.