SEC Filing | Li Auto Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2022

Commission File Number: 001-39407

Li Auto Inc.

(Registrant’s Name)

11 Wenliang Street

Shunyi District, Beijing 101399

People’s Republic of China

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

EXPLANATORY NOTE

We made an announcement dated February 25, 2022 with The Stock Exchange of Hong Kong Limited in relation to our annual results for the year ended December 31, 2021. For details, please refer to exhibit 99.3 to this current report on Form 6-K.

EXHIBIT INDEX

Exhibit No.		Description
99.1		Press Release—Li Auto Inc. Announces Management Change
99.2		Press Release—Li Auto Inc. Announces Unaudited Fourth Quarter and Full Year 2021 Financial Results
99.3		Announcement—Annual Results Announcement for the Year Ended December 31, 2021

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Li Auto Inc.

By		/s/ Tie Li
Name	:	Tie Li
Title	:	Director and Chief Financial Officer

Date: February 25, 2022

Exhibit 99.1

Li Auto Inc. Announces Management Change

BEIJING, China, Feb 25, 2022 — Li Auto Inc. ("Li Auto" or the "Company") (Nasdaq: LI; HKEX: 2015), an innovator in China’s new energy vehicle market, today announced that Mr. Kai Wang has tendered his resignation as chief technology officer of the Company for personal reasons. Mr. Donghui Ma, the Company’s chief engineer, will assume the responsibilities in managing Li Auto's research and development in intelligent vehicle technologies. Mr. Kai Wang will continue to serve as the Company's senior advisor until December 31, 2022 to ensure a smooth transition.

About Li Auto Inc.

Li Auto Inc. is an innovator in China’s new energy vehicle market. The Company designs, develops, manufactures, and sells premium smart electric vehicles. Its mission is to create homes on the move that bring happiness to the entire family (“创造移动的家，创造幸福的家”). Through innovations in product, technology, and business model, the Company provides families with safe, convenient, and comfortable products and services. Li Auto is a pioneer to successfully commercialize extended-range electric vehicles in China. Its first model, Li ONE, is a six-seat, large premium smart electric SUV. The Company started volume production of Li ONE in November 2019 and released the 2021 Li ONE in May 2021. The Company leverages technology to create value for its users. It concentrates its in-house development efforts on its proprietary range extension system, next-generation electric vehicle technology, and smart vehicle solutions. Beyond Li ONE, the Company will expand its product line by developing new vehicles, including BEVs and EREVs, to target a broader consumer base.

For more information, please visit: http://ir.lixiang.com.

Safe Harbor Statement

This press release contains statements that may constitute “forward-looking” statements pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “likely to,” and similar statements. Li Auto may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Statements that are not historical facts, including statements about Li Auto’s beliefs, plans, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Li Auto’s strategies, future business development, and financial condition and results of operations; Li Auto’s limited operating history; risks associated with extended-range electric vehicles; Li Auto’s ability to develop, manufacture, and deliver vehicles of high quality and appeal to customers; Li Auto’s ability to generate positive cash flow and profits; product defects or any other failure of vehicles to perform as expected; Li Auto’s ability to compete successfully; Li Auto’s ability to build its brand and withstand negative publicity; cancellation of orders for Li Auto’s vehicles; Li Auto’s ability to develop new vehicles; and changes in consumer demand and government incentives, subsidies, or other favorable government policies. Further information regarding these and other risks is included in Li Auto’s filings with the SEC. All information provided in this press release is as of the date of this press release, and Li Auto does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

Li Auto Inc.

Investor Relations

Email: ir@lixiang.com

The Piacente Group, Inc.

Yang Song

Tel: +86-10-6508-0677

Email: Li@tpg-ir.com

Brandi Piacente

Tel: +1-212-481-2050

Email: Li@tpg-ir.com

Li Auto Inc.

Exhibit 99.2

Li Auto Inc. Announces Unaudited Fourth Quarter and Full Year 2021 Financial Results

Quarterly total revenues reached RMB10.62 billion (US$1.67 billion)¹

Quarterly deliveries reached 35,221 vehicles

Quarterly gross margin reached 22.4%

Full year total revenues reached RMB27.01 billion (US$4.24 billion)

Full year deliveries were 90,491 vehicles

Full year gross margin reached 21.3%

BEIJING, China, Feb 25, 2022 — Li Auto Inc. ("Li Auto" or the "Company") (Nasdaq: LI; HKEX: 2015), an innovator in China’s new energy vehicle market, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2021.

Operating Highlights for the Fourth Quarter of 2021 and Full Year 2021

·	Deliveries of Li ONE were 35,221 vehicles in the fourth quarter of 2021, representing a 40.2% quarter-over-quarter increase and a 143.5% year-over-year increase.

·	Deliveries of Li ONE for the full year 2021 reached 90,491 vehicles, representing an increase of 177.4% from 32,624 vehicles in 2020.

		FY 2021				2021 Q4				2021 Q3				2021 Q2				2021 Q1
Deliveries			90,491				35,221				25,116				17,575				12,579

		FY 2020				2020 Q4				2020 Q3				2020 Q2				2020 Q1
Deliveries			32,624				14,464				8,660				6,604				2,896

As of December 31, 2021, the Company had 206 retail stores covering 102 cities and 278 servicing centers and Li Auto-authorized body and paint shops operating in 204 cities.

Financial Highlights for the Fourth Quarter of 2021

Vehicle margin2 was 22.3% in the fourth quarter of 2021, compared with 17.1% in the fourth quarter of 2020 and 21.1% in the third quarter of 2021.

Total revenues were RMB10.62 billion (US$1.67 billion) in the fourth quarter of 2021, representing an increase of 156.1% from RMB4.15 billion in the fourth quarter of 2020 and an increase of 36.6% from RMB7.78 billion in the third quarter of 2021.

Gross profit was RMB2.38 billion (US$373.5 million) in the fourth quarter of 2021, representing an increase of 228.5% from RMB724.6 million in the fourth quarter of 2020 and an increase of 31.3% from RMB1.81 billion in the third quarter of 2021.

Gross margin was 22.4% in the fourth quarter of 2021, compared with 17.5% in the fourth quarter of 2020 and 23.3% in the third quarter of 2021.

¹All translations from Renminbi (“RMB”) to U.S. dollar (“US$”) are made at a rate of RMB6.3726 to US$1.00, the noon buying rate in effect on December 30, 2021 as set forth in the H.10 statistical release of the Federal Reserve Board.

²Vehicle margin is the margin of vehicle sales, which is calculated based on revenues and cost of sales derived from vehicle sales only.

Income from operations was RMB24.1 million (US$3.8 million) in the fourth quarter of 2021, compared with RMB78.9 million loss from operations in the fourth quarter of 2020 and RMB97.8 million loss from operations in the third quarter of 2021. Non-GAAP income from operations³was RMB415.0 million (US$65.1 million) in the fourth quarter of 2021, compared with RMB71.1 million Non-GAAP loss from operations3 in the fourth quarter of 2020 and RMB259.4 million Non-GAAP income from operations in the third quarter of 2021.

Net Income was RMB295.5 million (US$46.4 million) in the fourth quarter of 2021, compared with RMB107.5 million net income in the fourth quarter of 2020 and RMB21.5 million net loss in the third quarter of 2021. Non-GAAP net income³ was RMB686.4 million (US$107.7 million) in the fourth quarter of 2021, representing an increase of 494.7% from RMB115.4 million in the fourth quarter of 2020 and an increase of 104.5% from RMB335.7 million in the third quarter of 2021.

Operating cash flow was RMB3.84 billion (US$602.1 million) in the fourth quarter of 2021, representing an increase of 110.7% from RMB1.82 billion in the fourth quarter of 2020 and an increase of 76.9% from RMB2.17 billion in the third quarter of 2021.

Free cash flow⁴ was RMB1.62 billion (US$253.5 million) in the fourth quarter of 2021, compared with RMB1.60 billion in the fourth quarter of 2020 and RMB1.16 billion in the third quarter of 2021.

Key Financial Results

(in millions, except for percentages)

	For the Three Months Ended									% Change⁵
	December 31, 2020			September 30, 2021			December 31, 2021			YoY			QoQ
	RMB			RMB			RMB
Vehicle sales		4,057.7			7,385.8			10,375.7			155.7	%		40.5	%
Vehicle margin		17.1	%		21.1	%		22.3	%		5.2	%		1.2	%

Total revenues		4,146.9			7,775.2			10,620.5			156.1	%		36.6	%
Gross profit		724.6			1,812.0			2,380.0			228.5	%		31.3	%
Gross margin		17.5	%		23.3	%		22.4	%		4.9	%		(0.9	)%

(Loss)/Income from operations		(78.9	)		(97.8	)		24.1			N/A			N/A
Non-GAAP (loss)/income from operations		(71.1	)		259.4			415.0			N/A			60.0	%

Net income/(loss)		107.5			(21.5	)		295.5			174.9	%		N/A
Non-GAAP net income		115.4			335.7			686.4			494.8	%		104.5	%

Operating cash flow		1,821.3			2,169.5			3,836.9			110.7	%		76.9	%
Free cash flow		1,599.1			1,165.0			1,615.4			1.0	%		38.7	%

3 The Company’s Non-GAAP financial measures exclude share-based compensation expenses, changes in fair value of warrants and derivative liabilities, accretion on convertible redeemable preferred shares to redemption value, and the effect of exchange rate changes on convertible redeemable preferred shares. See “Unaudited Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this press release.

4 Free cash flow represents operating cash flow less capital expenditures, which is considered a Non-GAAP financial measure.

5 Except for vehicle margin and gross margin, where absolute changes instead of percentage changes are presented.

Financial Highlights for the Full Year 2021

Vehicle sales were RMB26.13 billion (US$4.10 billion) in 2021, representing an increase of 181.5% from RMB9.28 billion in 2020.

Vehicle margin was 20.6% in 2021, compared with 16.4% in 2020.

Total revenues were RMB27.01 billion (US$4.24 billion) in 2021, representing an increase of 185.6% from RMB9.46 billion in 2020.

Gross profit was RMB5.76 billion (US$904.1 million) in 2021, representing an increase of 271.9% from RMB1.55 billion in 2020.

Gross margin was 21.3% in 2021, compared with 16.4% in 2020.

Loss from operations was RMB1.02 billion (US$159.6 million) in 2021, representing an increase of 52.0% from RMB669.3 million in 2020. Non-GAAP income from operations was RMB84.0 million (US$13.2 million) in 2021, compared with RMB526.5 million Non-GAAP loss from operations in 2020.

Net loss was RMB321.5 million (US$50.4 million) in 2021, representing an increase of 111.9% from RMB151.7 million in 2020. Non-GAAP net income was RMB779.9 million (US$122.4 million) in 2021, compared with RMB281.2 million Non-GAAP net loss3 in 2020.

Operating cash flow was RMB8.34 billion (US$1.31 billion) in 2021, representing an increase of 165.6% from RMB3.14 billion in 2020.

Free cash flow was RMB4.33 billion (US$679.9 million) in 2021, representing an increase of 75.8% from RMB2.46 billion in 2020.

Key Financial Results

(in millions, except for percentages)

	For the Year Ended						% Change⁵
	December 31, 2020			December 31, 2021			YoY
	RMB			RMB
Vehicle sales		9,282.7			26,128.5			181.5	%
Vehicle margin		16.4	%		20.6	%		4.2	%

Total revenues		9,456.6			27,009.8			185.6	%
Gross profit		1,549.3			5,761.5			271.9	%
Gross margin		16.4	%		21.3	%		4.9	%

Loss from operations		(669.3	)		(1,017.3	)		52.0	%
Non-GAAP (loss)/income from operations		(526.5	)		84.0			N/A

Net loss		(151.7	)		(321.5	)		111.9	%
Non-GAAP net (loss)/income		(281.2	)		779.9			N/A

Operating cash flow		3,139.8			8,340.4			165.6	%
Free cash flow		2,464.6			4,332.7			75.8	%

Recent Developments

Deliveries Update

In January 2022, the Company delivered 12,268 Li ONEs, representing a 128.1% increase from January 2021. As of January 31, 2022, the Company had 220 retail stores covering 105 cities, in addition to 276 servicing centers and Li Auto-authorized body and paint shops operating in 204 cities.

OTA 3.0 Release

In December 2021, the Company released the OTA 3.0 update to all Li ONE users, further enhancing their in-car experience. This update features the Navigation on ADAS (NOA) and vision-enhanced Automatic Emergency Braking (AEB) functions for the 2021 Li ONE. The OTA 3.0 update also includes an upgraded version of Li ONE’s smart in-car voice assistant, Li Xiang Tong Xue（理想同学）, which now supports more advanced voice instructions for in-car applications and vehicle control settings.

Chongqing Manufacturing Base

In December 2021, the Company agreed to establish a strategic cooperation framework with the Chongqing municipal government to build its Chongqing manufacturing base in the Liangjiang New Area. The addition of this manufacturing base will further enhance the Company’s ability to meet increasingly strong market demand and cement its foundation for continued growth.

CEO and CFO Comments

Mr. Xiang Li, founder, chairman, and chief executive officer of Li Auto, commented, “We achieved profitability and RMB3.8 billion operating cash flow in the fourth quarter even as we accelerated the pace of R&D investment and sales network expansion – a significant reflection of our operating excellence.

“In December 2021, we introduced the OTA 3.0 update to all our Li ONE users, which features our full-stack self-developed NOA and full AEB functions enhanced by vision perception algorithm to enable safer and easier driving. It made us the third automaker in the world capable of full-stack self-development of NOA. Due to its outstanding AEB performance, Li ONE was awarded Champion of the Year 2021 accolade during a third-party AEB test, where it was the only assessed model capable of accurately identifying crossing vehicles and two-wheelers, demonstrating our strong ADAS R&D capabilities. As of January 31, 2022, we provided NOA to over 70,000 family users. In 2022, we will remain focused on R&D investment, further elevating our capabilities to provide our users with products and services that offer greater safety, convenience and comfort.”

“Our robust performance in the fourth quarter of 2021 capped a remarkable year of growth for Li Auto,” added Mr. Tie Li, Li Auto’s chief financial officer. “Driven by an impressive number of vehicle deliveries, we achieved revenues of RMB10.6 billion for the fourth quarter and RMB27.0 billion for the full year of 2021, up 156.1% and 185.6% year over year, respectively. Our vehicle margin in the fourth quarter increased to 22.3% and full-year vehicle margin came in at 20.6%, boosted by our outstanding operating efficiency in manufacturing and supply chain management. Additionally, as we continued to scale up deliveries while remaining highly focused on disciplined execution, our full-year operating cash flow reached RMB8.3 billion, providing us with strong support for R&D investment and business growth.”

Financial Results for the Fourth Quarter of 2021

Revenues

Vehicle sales were RMB10.38 billion (US$1.63 billion) in the fourth quarter of 2021, representing an increase of 155.7% from RMB4.06 billion in the fourth quarter of 2020 and an increase of 40.5% from RMB7.39 billion in the third quarter of 2021. The increase in revenue from vehicle sales over the fourth quarter of 2020 and the third quarter of 2021 was mainly attributable to the increase of vehicle deliveries in the fourth quarter of 2021.

Other sales and services were RMB244.7 million (US$38.4 million) in the fourth quarter of 2021, representing an increase of 174.5% from RMB89.2 million in the fourth quarter of 2020 and a decrease of 37.1% from RMB389.4 million in the third quarter of 2021. The increase in revenue from other sales and services over the fourth quarter of 2020 was mainly attributable to increased sales of charging stalls, accessories and services in line with higher accumulated vehicle sales. The decrease in revenue from other sales and services over the third quarter of 2021 was attributable to the sales of automotive regulatory credits in the third quarter of 2021, which did not recur in the fourth quarter of 2021.

Cost of Sales and Gross Margin

Cost of sales was RMB8.24 billion (US$1.29 billion) in the fourth quarter of 2021, representing an increase of 140.8% from RMB3.42 billion in the fourth quarter of 2020 and an increase of 38.2% from RMB5.96 billion in the third quarter of 2021. The increase in cost of sales over the fourth quarter of 2020 and the third quarter of 2021 was in line with revenue growth, which was mainly driven by the increase in vehicle deliveries in the fourth quarter of 2021.

Vehicle margin was 22.3% in the fourth quarter of 2021, compared with 17.1% in the fourth quarter of 2020 and 21.1% in the third quarter of 2021. The increase in vehicle margin over the fourth quarter of 2020 was primarily driven by higher average selling price attributable to the increase of vehicle deliveries of 2021 Li ONE since its release in May 2021.

Gross margin was 22.4% in the fourth quarter of 2021, compared with 17.5% in the fourth quarter of 2020 and 23.3% in the third quarter of 2021.

Operating Expenses

Operating expenses were RMB2.36 billion (US$369.7 million) in the fourth quarter of 2021, representing an increase of 193.2% from RMB803.5 million in the fourth quarter of 2020 and an increase of 23.4% from RMB1.91 billion in the third quarter of 2021.

Research and development expenses were RMB1.23 billion (US$193.0 million) in the fourth quarter of 2021, representing an increase of 228.7% from RMB374.2 million in the fourth quarter of 2020 and an increase of 38.4% from RMB888.5 million in the third quarter of 2021. The increase in research and development expenses over the fourth quarter of 2020 and the third quarter of 2021 was primarily driven by increased employee compensation as a result of growing number of research and development staff as well as increased costs associated with new products developments.

Selling, general and administrative expenses were RMB1.13 billion (US$176.7 million) in the fourth quarter of 2021, representing an increase of 162.2% from RMB429.3 million in the fourth quarter of 2020 and an increase of 10.2% from RMB1.02 billion in the third quarter of 2021. The increase in selling, general and administrative expenses over the fourth quarter of 2020 was primarily driven by increased employee compensation as a result of growing number of staff, as well as increased marketing and promotional activities and rental expenses associated with the expansion of the Company’s sales network.

Income/Loss from Operations

Income from operations was RMB24.1 million (US$3.8 million) in the fourth quarter of 2021, compared with RMB78.9 million loss from operations in the fourth quarter of 2020 and RMB97.8 million loss from operations in the third quarter of 2021. Non-GAAP income from operations was RMB415.0 million (US$65.1 million) in the fourth quarter of 2021, compared with RMB71.1 million Non-GAAP loss from operations in the fourth quarter of 2020 and RMB259.4 million Non-GAAP income from operations in the third quarter of 2021.

Net Income/Loss and Net Earnings/Loss Per Share

Net Income was RMB295.5 million (US$46.4 million) in the fourth quarter of 2021, compared with RMB107.5 million net income in the fourth quarter of 2020 and RMB21.5 million net loss in the third quarter of 2021. Non-GAAP net income was RMB686.4 million (US$107.7million) in the fourth quarter of 2021, representing an increase of 494.7% from RMB115.4 million in the fourth quarter of 2020 and an increase of 104.5% from RMB335.7 million in the third quarter of 2021.

Basic and diluted net earnings per ADS⁶ attributable to ordinary shareholders were RMB0.31 (US$0.05) and RMB0.29 (US$0.05), respectively in the fourth quarter of 2021. Non-GAAP basic and diluted net earnings per ADS attributable to ordinary shareholders3 were RMB0.71 (US$0.11) and RMB0.68 (US$0.11), respectively in the fourth quarter of 2021.

Cash Position, Operating Cash Flow and Free Cash Flow

Balance of cash and cash equivalents, restricted cash, time deposits and short-term investments was RMB50.16 billion (US$7.87 billion) as of December 31, 2021.

Free cash flow was RMB1.62 billion (US$253.5 million) in the fourth quarter of 2021, compared with RMB1.60 billion in the fourth quarter of 2020 and RMB1.16 billion in the third quarter of 2021.

⁶ Each ADS represents two Class A ordinary shares.

Financial Results for the Full Year 2021

Revenues

Total revenues were RMB27.01 billion (US$4.24 billion) in 2021, representing an increase of 185.6% from RMB9.46 billion in 2020.

Vehicle sales were RMB26.13 billion (US$4.10 billion) in 2021, representing an increase of 181.5% from RMB9.28 billion in 2020. The increase in revenue from vehicle sales was mainly attributable to the increase of vehicle deliveries in 2021.

Other sales and services were RMB881.3 million (US$138.3 million) in 2021, representing an increase of 406.8% from RMB173.9 million in 2020. The increase in revenue from other sales and services was mainly attributable to increased sales of charging stalls, accessories and services in line with higher accumulated vehicle sales, and the sales of automotive regulatory credits.

Cost of Sales and Gross Margin

Cost of sales was RMB21.25 billion (US$3.33 billion) in 2021, representing an increase of 168.7% from RMB7.91 billion in 2020. The increase in cost of sales was in line with revenue growth, which was mainly driven by the increase in vehicle deliveries in 2021.

Gross profit was RMB5.76 billion (US$904.1 million) in 2021, representing an increase of 271.9% from RMB1.55 billion in 2020.

Vehicle margin was 20.6% in 2021, compared with 16.4% in 2020. The increase in vehicle margin was primarily driven by improved cost control in supply chain management and higher average selling price attributable to the increase of vehicle deliveries in 2021, with the launch of the 2021 Li ONE in May 2021.

Gross margin was 21.3% in 2021, compared with 16.4% in 2020. The increase was mainly driven by the increase of vehicle margin.

Operating Expenses

Operating expenses were RMB6.78 billion (US$1.06 billion) in 2021, representing an increase of 205.5% from RMB2.22 billion in 2020.

Research and development expenses were RMB3.29 billion (US$515.7 million) in 2021, representing an increase of 198.8% from RMB1.10 billion in 2020. The increase in research and development expenses was primarily attributable to increased employee compensation as a result of growing number of research and development staff as well as increased costs associated with new products developments.

Selling, general and administrative expenses were RMB3.49 billion (US$548.0 million) in 2021, representing an increase of 212.1% from RMB1.12 billion in 2020. The increase in selling, general and administrative expenses was primarily driven by increased employee compensation as a result of growing number of staff, as well as increased marketing and promotional activities and rental expenses associated with the expansion of the Company’s sales network.

Income/Loss from Operations

Net Income/Loss and Net Earnings/Loss Per Share

Basic and diluted loss per ADS attributable to ordinary shareholders were both RMB0.35 (US$0.05) in 2021. Non-GAAP basic and diluted net earnings per ADS attributable to ordinary shareholders were RMB0.84 (US$0.13) and RMB0.81 (US$0.13), respectively in 2021. As of December 31, 2021, the Company had 1,929,562,426 ordinary shares outstanding.

Operating Cash Flow and Free Cash Flow

Operating cash flow was RMB8.34 billion (US$1.31 billion) in 2021, representing an increase of 165.6% from RMB3.14 billion in 2020.

Free cash flow was RMB4.33 billion (US$679.9 million) in 2021, representing an increase of 75.8% from RMB2.46 billion in 2020.

Employees

As of December 31, 2021, the Company had a total of 11,901 employees.

Business Outlook

For the first quarter of 2022, the Company expects:

Deliveries of vehicles to be between 30,000 and 32,000 vehicles, representing an increase of 138.5% to 154.4% from the first quarter of 2021.

Total revenues to be between RMB8.84 billion (US$1.39 billion) and RMB9.43 billion (US$1.48 billion), representing an increase of 147.2% to 163.7% from the first quarter of 2021.

This business outlook reflects the Company’s current and preliminary view on the business situation and market condition, which is subject to change.

Conference Call

Management will hold a conference call at 7:30 a.m. U.S. Eastern Time on Friday, February 25, 2022 (8:30 p.m. Beijing Time on February 25, 2022) to discuss financial results and answer questions from investors and analysts.

For participants who wish to join the call, please complete online registration using the link provided below at least 20 minutes prior to the scheduled call start time. Upon registration, participants will receive the conference call access information, including dial-in numbers, Direct Event passcode, a unique registrant ID and an e-mail with detailed instructions to join the conference call.

Participant Online Registration: http://apac.directeventreg.com/registration/event/8046297

A replay of the conference call will be accessible through March 6, 2022, by dialing the following numbers:

United States:	+1-855-452-5696
Mainland China:	+86-400-602-2065
Hong Kong, China:	+852-3051-2780
International:	+61-2-8199-0299
Conference ID:	8046297

Additionally, a live and archived webcast of the conference call will be available on the Company’s investor relations website at http://ir.lixiang.com.

Non-GAAP Financial Measure

The Company uses Non-GAAP measures, such as Non-GAAP income/loss from operations, Non-GAAP net income/loss, Non-GAAP basic and diluted net earnings/loss per ADS attributable to ordinary shareholders and free cash flow, in evaluating its operating results and for financial and operational decision-making purposes. By excluding the impact of share-based compensation expenses, changes in fair value of warrants and derivative liabilities, accretion on convertible redeemable preferred shares to redemption value and the effect of exchange rate changes on convertible redeemable preferred shares, the Company believes that the Non-GAAP financial measures help identify underlying trends in its business and enhance the overall understanding of the Company’s past performance and future prospects. The Company also believes that the Non-GAAP financial measures allow for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making.

The Non-GAAP financial measures are not presented in accordance with U.S. GAAP and may be different from Non-GAAP methods of accounting and reporting used by other companies. The Non-GAAP financial measures have limitations as analytical tools and when assessing the Company’s operating performance, investors should not consider them in isolation, or as a substitute for net loss or other consolidated statements of comprehensive loss data prepared in accordance with U.S. GAAP. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.

The Company mitigates these limitations by reconciling the Non-GAAP financial measures to the most comparable U.S. GAAP performance measures, all of which should be considered when evaluating the Company’s performance.

For more information on the Non-GAAP financial measures, please see the table captioned “Unaudited Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this press release.

About Li Auto Inc.

For more information, please visit: http://ir.lixiang.com.

Safe Harbor Statement

This press release contains statements that may constitute “forward-looking” statements pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “likely to,” and similar statements. Li Auto may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”) and The Stock Exchange of Hong Kong Limited (the “HKEX”), in its annual report to shareholders, in press releases and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Statements that are not historical facts, including statements about Li Auto’s beliefs, plans, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Li Auto’s strategies, future business development, and financial condition and results of operations; Li Auto’s limited operating history; risks associated with extended-range electric vehicles, Li Auto’s ability to develop, manufacture, and deliver vehicles of high quality and appeal to customers; Li Auto’s ability to generate positive cash flow and profits; product defects or any other failure of vehicles to perform as expected; Li Auto’s ability to compete successfully; Li Auto’s ability to build its brand and withstand negative publicity; cancellation of orders for Li Auto’s vehicles; Li Auto’s ability to develop new vehicles; and changes in consumer demand and government incentives, subsidies, or other favorable government policies. Further information regarding these and other risks is included in Li Auto’s filings with the SEC and the HKEX. All information provided in this press release is as of the date of this press release, and Li Auto does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

Li Auto Inc.

Investor Relations

Email: ir@lixiang.com

The Piacente Group, Inc.

Yang Song

Tel: +86-10-6508-0677

Email: Li@tpg-ir.com

Brandi Piacente

Tel: +1-212-481-2050

Email: Li@tpg-ir.com

Li Auto Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss)

(All amounts in thousands, except for ADS/ordinary share and per ADS/ordinary share data)

	For the Three Months Ended												For the Year Ended
	December 31, 2020			September 30, 2021			December 31, 2021			December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2021
	RMB			RMB			RMB			US$			RMB			RMB			US$
Revenues:
Vehicle sales		4,057,737			7,385,785			10,375,716			1,628,176			9,282,703			26,128,469			4,100,127
Other sales and services		89,160			389,389			244,736			38,404			173,906			881,310			138,297
Total revenues		4,146,897			7,775,174			10,620,452			1,666,580			9,456,609			27,009,779			4,238,424
Cost of sales:
Vehicle sales		(3,362,111	)		(5,830,322	)		(8,057,653	)		(1,264,422	)		(7,763,628	)		(20,755,578	)		(3,257,003	)
Other sales and services		(60,189	)		(132,890	)		(182,820	)		(28,688	)		(143,642	)		(492,747	)		(77,323	)
Total cost of sales		(3,422,300	)		(5,963,212	)		(8,240,473	)		(1,293,110	)		(7,907,270	)		(21,248,325	)		(3,334,326	)
Gross profit		724,597			1,811,962			2,379,979			373,470			1,549,339			5,761,454			904,098
Operating expenses:
Research and development		(374,200	)		(888,460	)		(1,229,991	)		(193,012	)		(1,099,857	)		(3,286,389	)		(515,706	)
Selling, general and administrative		(429,335	)		(1,021,299	)		(1,125,885	)		(176,676	)		(1,118,819	)		(3,492,385	)		(548,031	)
Total operating expenses		(803,535	)		(1,909,759	)		(2,355,876	)		(369,688	)		(2,218,676	)		(6,778,774	)		(1,063,737	)
(Loss)/Income from operations		(78,938	)		(97,797	)		24,103			3,782			(669,337	)		(1,017,320	)		(159,639	)
Other (expense)/income:
Interest expense		(13,123	)		(19,236	)		(9,685	)		(1,520	)		(66,916	)		(63,244	)		(9,924	)
Interest income and investment income, net		169,284			150,123			179,315			28,138			254,916			740,432			116,190
Changes in fair value of warrants and derivative liabilities		—			—			—			—			272,327			—			—
Others, net		7,477			67,595			89,037			13,972			20,133			187,320			29,395
Income/(Loss) before income tax expense		84,700			100,685			282,770			44,372			(188,877	)		(152,812	)		(23,978	)
Income tax benefit/(expense)		22,847			(122,195	)		12,741			1,999			22,847			(168,643	)		(26,464	)
Net income/(loss) from continuing operations		107,547			(21,510	)		295,511			46,371			(166,030	)		(321,455	)		(50,442	)
Net income from discontinued operations, net of tax		—			—			—			—			14,373			—			—
Net income/(loss)		107,547			(21,510	)		295,511			46,371			(151,657	)		(321,455	)		(50,442	)
Accretion on convertible redeemable preferred shares to redemption value		—			—			—			—			(651,190	)		—			—
Effect of exchange rate changes on convertible redeemable preferred shares		—			—			—			—			10,862			—			—
Net income/(loss) attributable to ordinary shareholders		107,547			(21,510	)		295,511			46,371			(791,985	)		(321,455	)		(50,442	)

Net income/(loss)		107,547			(21,510	)		295,511			46,371			(151,657	)		(321,455	)		(50,442	)
Other comprehensive (loss)/income
Foreign currency translation adjustment, net of nil tax		(642,349	)		53,965			(372,067	)		(58,385	)		(1,020,728	)		(516,687	)		(81,079	)
Total other comprehensive (loss)/income		(642,349	)		53,965			(372,067	)		(58,385	)		(1,020,728	)		(516,687	)		(81,079	)
Total comprehensive (loss)/income		(534,802	)		32,455			(76,556	)		(12,014	)		(1,172,385	)		(838,142	)		(131,521	)
Accretion on convertible redeemable preferred shares to redemption value		—			—			—			—			(651,190	)		—			—
Effect of exchange rate changes on convertible redeemable preferred shares		—			—			—			—			10,862			—			—
Comprehensive (loss)/income attributable to ordinary shareholders		(534,802	)		32,455			(76,556	)		(12,014	)		(1,812,713	)		(838,142	)		(131,521	)
Weighted average number of ADSs
Basic		863,519,155			933,507,739			962,726,533			962,726,533			435,001,639			926,660,224			926,660,224
Diluted		891,416,573			933,507,739			1,027,358,848			1,027,358,848			435,001,639			926,660,224			926,660,224
Net earnings/(loss) per ADS attributable to ordinary shareholders
Basic		0.12			(0.02	)		0.31			0.05			(1.82	)		(0.35	)		(0.05	)
Diluted		0.12			(0.02	)		0.29			0.05			(1.82	)		(0.35	)		(0.05	)
Weighted average number of ordinary shares
Basic		1,727,038,310			1,867,015,478			1,925,453,066			1,925,453,066			870,003,278			1,853,320,448			1,853,320,448
Diluted		1,782,833,146			1,867,015,478			2,054,717,696			2,054,717,696			870,003,278			1,853,320,448			1,853,320,448
Net earnings/(loss) per share attributable to ordinary shareholders
Basic		0.06			(0.01	)		0.15			0.02			(0.91	)		(0.17	)		(0.03	)
Diluted		0.06			(0.01	)		0.15			0.02			(0.91	)		(0.17	)		(0.03	)

Li Auto Inc.

Unaudited Condensed Consolidated Balance Sheets

(All amounts in thousands)

	As of
	December 31, 2020		December 31, 2021		December 31, 2021
	RMB		RMB		US$
ASSETS
Current assets:
Cash and cash equivalents		8,938,341		27,854,224		4,370,936
Restricted cash		1,234,178		2,638,840		414,092
Time deposits and short-term investments		19,701,382		19,668,239		3,086,376
Trade receivable		115,549		120,541		18,916
Inventories		1,048,004		1,617,890		253,882
Prepayments and other current assets		353,655		480,680		75,429
Total current assets		31,391,109		52,380,414		8,219,631
Non-current assets:
Long-term investments		162,853		156,306		24,528
Property, plant and equipment, net		2,478,687		4,498,269		705,877
Operating lease right-of-use assets, net		1,277,006		2,061,492		323,493
Intangible assets, net		683,281		751,460		117,920
Deferred tax assets		59,156		19,896		3,122
Other non-current assets		321,184		1,981,076		310,872
Total non-current assets		4,982,167		9,468,499		1,485,812
Total assets		36,373,276		61,848,913		9,705,443
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings		—		37,042		5,813
Trade and notes payable		3,160,515		9,376,050		1,471,307
Amounts due to related parties		19,206		37,455		5,878
Deferred revenue, current		271,510		305,092		47,876
Operating lease liabilities, current		210,531		473,245		74,262
Accruals and other current liabilities		647,459		1,879,368		294,914
Total current liabilities		4,309,221		12,108,252		1,900,050
Non-current liabilities:
Long-term borrowings		511,638		5,960,899		935,395
Deferred revenue, non-current		135,658		389,653		61,145
Operating and finance lease liabilities, non-current		1,392,136		1,369,825		214,955
Deferred tax liabilities		36,309		153,723		24,122
Other non-current liabilities		184,717		802,259		125,891
Total non-current liabilities		2,260,458		8,676,359		1,361,508
Total liabilities		6,569,679		20,784,611		3,261,558
Total shareholders’ equity		29,803,597		41,064,302		6,443,885
Total liabilities and shareholders’ equity		36,373,276		61,848,913		9,705,443

Li Auto Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(All amounts in thousands)

	For the Three Months Ended												For the Year Ended
	December 31, 2020			September 30, 2021			December 31, 2021			December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2021
	RMB			RMB			RMB			US$			RMB			RMB			US$
Net cash provided by operating activities		1,821,341			2,169,517			3,836,898			602,093			3,139,804			8,340,385			1,308,788
Net cash (used in)/provided by investing activities		(8,300,693	)		6,962,534			(7,109,624	)		(1,115,655	)		(18,737,725	)		(4,257,244	)		(668,054	)
Net cash provided by financing activities		9,990,955			11,010,741			165,030			25,897			24,710,697			16,709,533			2,622,090
Effect of exchange rate changes		(149,910	)		(8,659	)		(360,431	)		(56,559	)		(376,646	)		(472,129	)		(74,086	)
Net change in cash, cash equivalents and restricted cash		3,361,693			20,134,133			(3,468,127	)		(544,224	)		8,736,130			20,320,545			3,188,738
Cash, cash equivalents and restricted cash at beginning of period		6,810,826			13,827,058			33,961,191			5,329,252			1,436,389			10,172,519			1,596,290
Cash, cash equivalents and restricted cash at end of period		10,172,519			33,961,191			30,493,064			4,785,028			10,172,519			30,493,064			4,785,028

Net cash provided by operating activities		1,821,341			2,169,517			3,836,898			602,093			3,139,804			8,340,385			1,308,788
Capital expenditures		(222,228	)		(1,004,543	)		(2,221,529	)		(348,606	)		(675,187	)		(4,007,691	)		(628,894	)
Free cash flow		1,599,113			1,164,974			1,615,369			253,487			2,464,617			4,332,694			679,894

Li Auto Inc.

Unaudited Reconciliation of GAAP and Non-GAAP Results

(All amounts in thousands, except for ADS/ordinary share and per ADS/ordinary share data)

	For the Three Months Ended										For the Year Ended
	December 31, 2020			September 30, 2021			December 31, 2021		December 31, 2021		December 31, 2020			December 31, 2021			December 31, 2021
	RMB			RMB			RMB		US$		RMB			RMB			US$
(Loss)/Income from operations		(78,938	)		(97,797	)		24,103		3,782		(669,337	)		(1,017,320	)		(159,639	)
Shared-based compensation expenses		7,862			357,181			390,856		61,333		142,795			1,101,356			172,827
Non-GAAP (loss)/income from operations		(71,076	)		259,384			414,959		65,115		(526,542	)		84,036			13,188

Net income/(loss)		107,547			(21,510	)		295,511		46,371		(151,657	)		(321,455	)		(50,442	)
Shared-based compensation expenses		7,862			357,181			390,856		61,333		142,795			1,101,356			172,827
Changes in fair value of warrants and derivative liabilities		—			—			—		—		(272,327	)		—			—
Non-GAAP net income/(loss)		115,409			335,671			686,367		107,704		(281,189	)		779,901			122,385

Net income/(loss) attributable to ordinary shareholders		107,547			(21,510	)		295,511		46,371		(791,985	)		(321,455	)		(50,442	)
Shared-based compensation expenses		7,862			357,181			390,856		61,333		142,795			1,101,356			172,827
Changes in fair value of warrants and derivative liabilities		—			—			—		—		(272,327	)		—			—
Accretion on convertible redeemable preferred shares to redemption value		—			—			—		—		651,190			—			—
Effect of exchange rate changes on convertible redeemable preferred shares		—			—			—		—		(10,862	)		—			—
Non-GAAP net income/(loss) attributable to ordinary shareholders		115,409			335,671			686,367		107,704		(281,189	)		779,901			122,385

Weighted average number of ADSs (Non-GAAP)
Basic		863,519,155			933,507,739			962,726,533		962,726,533		435,001,639			926,660,224			926,660,224
Diluted		891,416,573			1,000,412,702			1,027,358,848		1,027,358,848		435,001,639			985,482,839			985,482,839
Non-GAAP net earnings/(loss) per ADS attributable to ordinary shareholders
Basic		0.13			0.36			0.71		0.11		(0.65	)		0.84			0.13
Diluted		0.13			0.34			0.68		0.11		(0.65	)		0.81			0.13
Weighted average number of ordinary shares (Non-GAAP)
Basic		1,727,038,310			1,867,015,478			1,925,453,066		1,925,453,066		870,003,278			1,853,320,448			1,853,320,448
Diluted		1,782,833,146			2,000,825,404			2,054,717,696		2,054,717,696		870,003,278			1,970,965,679			1,970,965,679
Non-GAAP net earnings/(loss) per share attributable to ordinary shareholders⁷
Basic		0.07			0.18			0.36		0.06		(0.33	)		0.42			0.07
Diluted		0.06			0.17			0.34		0.05		(0.33	)		0.41			0.06

⁷Non-GAAP basic net earnings/loss per ordinary share attributable to ordinary shareholders is calculated by dividing Non-GAAP net income/loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the periods. Non-GAAP diluted net earnings/loss per ordinary share attributable to ordinary shareholders is calculated by dividing Non-GAAP net income/loss attributable to ordinary shareholders by the weighted average number of ordinary shares and dilutive potential ordinary shares outstanding during the periods, including the dilutive effects of convertible redeemable preferred shares and convertible senior notes as determined under the if-converted method, and dilutive effect of share-based awards as determined under the treasury stock method.

Exhibit 99.3

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Li Auto Inc.

理想汽車

(A company controlled through weighted voting rights and incorporated in the Cayman Islands with limited liability)

(Stock Code: 2015)

ANNUAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED DECEMBER 31, 2021

The board (the “Board”) of directors (the “Directors”) of Li Auto Inc. (the “Company”) is pleased to announce the unaudited annual consolidated results of the Company for the year ended December 31, 2021 (the “Reporting Period”), together with the comparative figures for the corresponding period in 2020. These annual results have been prepared under generally accepted accounting principles in the United States (the “U.S. GAAP”) and reviewed by the audit committee (the “Audit Committee”) of the Board.

In this announcement, “we,” “us,” and “our” refer to the Company and where the context otherwise requires, the Group (as defined under the “General Information” section).

FINANCIAL PERFORMANCE HIGHLIGHTS

	For the Year Ended December 31,
	2020			2021			Change (%)
	(RMB in thousands, except percentages)

Revenues		9,456,609			27,009,779			185.6	%
Gross profit		1,549,339			5,761,454			271.9	%
Loss from operations		(669,337	)		(1,017,320	)		52.0	%
Loss before income tax		(188,877	)		(152,812	)		(19.1	%)
Net loss		(151,657	)		(321,455	)		112.0	%
Comprehensive loss attributable to the ordinary shareholders of Li Auto Inc.		(1,812,713	)		(838,142	)		(53.8	%)
Non-GAAP Financial Measures:
Non-GAAP (loss)/income from operations		(526,542	)		84,036			N/A
Non-GAAP net (loss)/income		(281,189	)		779,901			N/A

Non-GAAP Financial Measures

The Company uses Non-GAAP financial measures, such as Non-GAAP (loss)/income from operations and Non-GAAP net (loss)/income, in evaluating its operating results and for financial and operational decision-making purposes. By excluding the impact of share-based compensation expenses and changes in fair value of warrants and derivative liabilities, the Company believes that the Non-GAAP financial measures help identify underlying trends in its business and enhance the overall understanding of the Company’s past performance and future prospects. The Company also believes that the Non-GAAP financial measures allow for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making.

The following table sets forth unaudited reconciliation of GAAP and non-GAAP results for the period indicated.

	For the Year Ended, December 31,
	2020			2021
	(RMB in thousands)

Loss from operations		(669,337	)		(1,017,320	)
Shared-based compensation expenses		142,795			1,101,356

Non-GAAP (loss)/income from operations		(526,542	)		84,036

Net loss		(151,657	)		(321,455	)
Shared-based compensation expenses		142,795			1,101,356
Changes in fair value of warrants and derivative liabilities		(272,327	)		–

Non-GAAP net (loss)/income		(281,189	)		779,901

BUSINESS REVIEW AND OUTLOOK

Business review for the Reporting Period

We have achieved strong business performance in 2021 which demonstrated the competitive strength and appeal of Li ONE to our customers. Despite the impact of industry-wide supply chain shortages and the COVID-19 pandemic, our total deliveries of Li ONE in 2021 increased 177.4% year over year to 90,491 vehicles and our total revenues amounted to RMB27.01 billion, representing a 185.6% year-over-year increase. The cumulative deliveries of Li ONE since its market debut have reached 124,088 vehicles as of the end of 2021, demonstrating our users’ endorsement of the brand-new in-vehicle driving and riding experience Li ONE offers in this era of autonomous technology.

During the reporting period, we remained dedicated to serving the mobility needs of families in China by continually optimizing products and services, accelerating the expansion of direct sales and servicing network, and increasing the investment in autonomous driving and smart cabin technologies while always prioritizing user safety and experience.

Product

We believe that automotive technologies will continue to evolve, and as new technologies enable us to create more compelling products to address users’ needs, we will continue to evolve our products, aiming to provide our users with greater safety, convenience, and comfort.

On May 25, 2021, we released the 2021 Li ONE, which is equipped with navigation on ADAS (NOA) as a standard configuration and features comprehensive upgrades, including an enhanced NEDC range of 1,080 kilometers, optimized travel comfort, and more intelligent cockpit. Through the release of the 2021 Li ONE, we have brought these premium features to our users at a selling price of RMB338,000.

In November 2021, Li ONE became the first domestic branded model priced above RMB300,000 to achieve the 10,000 monthly deliveries. We believe this is another milestone for Li ONE to qualify as a blockbuster model.

We continuously optimize our product through OTA releases. In September and December 2021, we upgraded the smart in-car voice assistant, Li Xiang Tong Xue (理想同學). In September, we launched a new application store via an OTA update. The upgrade in December 2021 also featured the NOA and vision-enhanced Automatic Emergency Braking (AEB) functions.

Direct Sales and Servicing Network

Our direct sales and servicing network is an integral component of our closed-loop, integrated online and offline platform, which provides users with superior purchasing experiences consistent with our values and brand image and offers us with profound consumer insights as we constantly pursue improvement of products and services.

In 2021, we significantly expanded our direct sales and servicing network, almost quadrupling the number of retail stores. We aim to provide our users with a more convenient, efficient and pleasant purchasing and user experience by strengthening our online operations, as well as continuously adding physical touchpoints close to our users. We plan to further enlarge our footprint in 2022 to cater to user demand growth and capture an increasing NEV market share.

As of December 31, 2021, we had 206 retail stores in 102 cities, as well as 278 servicing centers and Li Auto-authorized body and paint shops operating in 204 cities.

Research and Development

We regard our strong research and development capabilities as the core competency to establish and strengthen our market position. In 2021, we made good progress in developing the upgraded EREV platform and high-power charging BEV platforms and optimizing our autonomous driving and smart cabin solutions leveraging full-stack proprietary software development capabilities.

With the release of NOA and vision-enhanced AEB functions for the 2021 Li ONE in December, we became the third automaker in the world capable of full-stack self-development of NOA. During a recent third-party AEB test, Li ONE was ranked No. 1 and was the only assessed model capable of accurately identifying crossing vehicles and two-wheelers. Both of the achievements demonstrated our strong ADAS research and development capabilities.

Manufacturing Base

We are adopting the advanced production technology for our production lines, expanding our capacity at the Changzhou factory, constructing our Beijing manufacturing base and having established a strategic cooperation framework agreement with the local government to build Chongqing manufacturing base.

Beijing Manufacturing Base

In October 2021, we officially commenced construction of our Beijing manufacturing base which is scheduled to be operational in 2023. It will serve as an important manufacturing base for premium BEVs, allowing us to meet rising market demand with a more diversified product lineup.

Aligned with our ESG goals, the Beijing manufacturing base will be built on and leverage the existing site’s infrastructure to achieve high reutilization. It will also adopt leading environmentally friendly production processes in addition to being highly automated, intelligent, and flexible.

Changzhou Manufacturing Base

In November 2021, we acquired from Changzhou Wunan New Energy Vehicle Investment Co., Ltd. 100% of the equity interest in Changzhou Chehejin Standard Factory Construction Co., Ltd. (“Chehejin”), which owns the land use rights and plants that previously had been leased to us for the current Changzhou manufacturing base. This transaction strengthens our control of the Changzhou manufacturing base.

Chongqing Manufacturing Base

In December 2021, we agreed to establish a strategic cooperation framework agreement with the Chongqing municipal government to build our Chongqing manufacturing base in the Liangjiang New Area. The addition of this manufacturing base will further enhance our ability to meet increasingly strong market demand and cement the foundation for continued growth.

Recent developments after the Reporting Period

In January 2022, we delivered 12,268 Li ONEs, representing a 128.1% increase from January 2021.

As of January 31, 2022, we had 220 retail stores covering 105 cities, in addition to 276 servicing centers and Li Auto-authorized body and paint shops operating in 204 cities.

Business outlook

Looking ahead to 2022, in the second quarter, we plan to release our next model, a full-size premium extended-range electric SUV with next generation EREV powertrain system and innovative smart cabin and autonomous driving technology, which will further enhance families’ in-vehicle driving and riding experience. We are also developing our BEV models which will support ultra-fast charging and will provide users with an extraordinary battery charging experience in terms of charging time. We will also remain focused on investing in the R&D of smart cabin and autonomous driving with a goal to further elevate our capabilities to provide our users with products and services that offer greater safety, convenience and comfort, creating homes on the move that bring happiness to the entire family.

Additionally, challenges to the overall NEV supply chain will likely become a prolonged and industry-wide obstacle, affecting the supply of chips, batteries and potentially other auto parts given the continuous accelerating development of the NEV industry may soon outpace the expansion of production capacity of our supply chain partners. Going forward, we will continue to collaborate closely with these supply chain partners to mitigate such risks.

MANAGEMENT DISCUSSION AND ANALYSIS

	For the Year Ended December 31,
	2020			2021
	(RMB in thousands)

Revenues:
Vehicle sales		9,282,703			26,128,469
Other sales and services		173,906			881,310

Total revenues		9,456,609			27,009,779

Cost of sales:
Vehicle sales		(7,763,628	)		(20,755,578	)
Other sales and services		(143,642	)		(492,747	)

Total cost of sales		(7,907,270	)		(21,248,325	)

Gross profit		1,549,339			5,761,454

Operating expenses:
Research and development		(1,099,857	)		(3,286,389	)
Selling, general and administrative		(1,118,819	)		(3,492,385	)

Total operating expenses		(2,218,676	)		(6,778,774	)

Loss from operations		(669,337	)		(1,017,320	)
Other (expense)/income:
Interest expense		(66,916	)		(63,244	)
Interest income and investment income, net		254,916			740,432
Changes in fair value of warrants and derivative liabilities		272,327			–
Others, net		20,133			187,320

Loss before income tax expense		(188,877	)		(152,812	)
Income tax benefit/(expense)		22,847			(168,643	)

Net loss from continuing operations		(166,030	)		(321,455	)
Net income from discontinued operations, net of tax		14,373			–

Net loss		(151,657	)		(321,455	)

Other comprehensive loss, net of tax
Foreign currency translation adjustment, net of tax		(1,020,728	)		(516,687	)

Total comprehensive loss, net of tax		(1,172,385	)		(838,142	)

Accretion on convertible redeemable preferred shares to redemption value		(651,190	)		–

Effect of exchange rate changes on convertible redeemable preferred shares		10,862			–

Comprehensive loss attributable to ordinary shareholders of Li Auto Inc.		(1,812,713	)		(838,142	)

Revenue

Total revenue increased by 185.6% from RMB9.46 billion for the year ended December 31, 2020 to RMB27.01 billion for the year ended December 31, 2021.

Revenue from vehicle sales increased by 181.5% from RMB9.28 billion for the year ended December 31, 2020 to RMB26.13 billion for the year ended December 31, 2021, primarily attributable to the increased deliveries in 2021.

Revenue from other sales and services increased by 406.8% from RMB173.9 million for the year ended December 31, 2020 to RMB881.3 million for the year ended December 31, 2021, primarily attributable to increased sales of charging stalls, accessories and services in line with higher accumulated vehicle sales, and the sales of automotive regulatory credits.

Cost of Sales

Cost of sales increased by 168.7% from RMB7.91 billion for the year ended December 31, 2020 to RMB21.25 billion for the year ended December 31, 2021, in line with revenue growth, which was mainly driven by the increase in vehicle deliveries in 2021.

Gross Profit and Gross Margin

As a result of the foregoing, gross profit increased by 271.9% from RMB1.55 billion for the year ended December 31, 2020 to RMB5.76 billion for the year ended December 31, 2021. The increase in gross margin from 16.4% for the year ended December 31, 2020 to 21.3% for the year ended December 31, 2021 was mainly driven by the increase of vehicle margin over previous year.

Vehicle margin increased from 16.4% for the year ended December 31, 2020 to 20.6% for the year ended December 31, 2021 primarily driven by improved cost control in supply chain management and higher average selling price attributable to the increase of vehicle deliveries in 2021, with the launch of the 2021 Li ONE in May 2021.

Research and Development Expenses

Research and development expenses increased by 198.8% from RMB1.10 billion for the year ended December 31, 2020 to RMB3.29 billion for the year ended December 31, 2021, primarily attributable to increased employee compensation as a result of growing number of research and development staff as well as increased costs associated with new products developments.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 212.1% from RMB1.12 billion for the year ended December 31, 2020 to RMB3.49 billion for the year ended December 31, 2021, driven by increased employee compensation as a result of growing number of staff, as well as increased marketing and promotional activities and rental expenses associated with the expansion of the Company’s sales network.

Loss from Operations

As a result of the foregoing, loss from operation increased by 52.0% from RMB669.3 million for the year ended December 31, 2020 to RMB1.02 billion for the year ended December 31, 2021.

Interest income and investment income, Net

Interest income and investment income, net increased by 190.5% from RMB254.9 million for the year ended December 31, 2020 to RMB740.4 million for the year ended December 31, 2021, primarily attributable to a significant expansion in the scale of our investment in wealth management products.

Change in fair value of warrants and derivative liabilities

We recorded RMB272.3 million fair value gain of warrants and derivative liabilities for the year ended December 31, 2020, and these warrants and derivative liabilities were expired or exercised upon the completion of the initial public offering in the United States in July 2020.

Net loss

As a result of the foregoing, net loss increased by 112.0% from RMB151.7 million for the year ended December 31, 2020 to RMB321.5 million for the year ended December 31, 2021.

Liquidity and Source of Funding and Borrowing

As at December 31, 2021, cash and cash equivalents, restricted cash, time deposits and short-term investment increased by 67.9% from RMB29.87 billion as at December 31, 2020, to RMB50.16 billion. The increase is primarily attributable to the offering of US$862.5 million convertible senior notes due 2028 in April 2021 and the net proceeds of HK$13.27 billion from the initial public offering in Hong Kong in August 2021.

Significant Investments

The Company did not make or hold any significant investments during the year ended December 31, 2021.

Material Acquisitions and Disposals

In November 2021, the Company acquired from Changzhou Wunan New Energy Vehicle Investment Co., Ltd. 100% of the equity interest in Changzhou Chehejin Standard Factory Construction Co., Ltd. (“Chehejin”), which owns the land use rights and plants that previously had been leased to the Company for the current Changzhou manufacturing base. This transaction strengthens the Company’s control of the Changzhou manufacturing base.

Pledge of Assets

As of December 31, 2021, we pledged a restricted deposit of RMB2.64 billion, compared with RMB1.23 billion as of December 31, 2020. We also had secured certain production equipment amounting to RMB470.5 million for borrowings as of December 31, 2021.

Gearing Ratio

As at December 31, 2021, the Company’s gearing ratio (i.e. total liabilities divided by total assets, in percentage) was 33.6% (as at December 31, 2020: 18.1%).

Foreign Exchange Exposure

Our expenditures are mainly denominated in Renminbi and, therefore, we are exposed to risks related to movements between Renminbi and U.S. dollars. Our exposure to U.S. dollars exchange rate fluctuation arises from the Renminbi-denominated cash and cash equivalents, restricted cash, time deposits, and short-term investments held by us and our subsidiaries whose functional currency is U.S. dollars, and the U.S. dollar-denominated cash and cash equivalents, restricted cash, time deposits, and short-term investments held by our subsidiaries whose functional currency is Renminbi. We enter into hedging transactions in an effort to reduce our exposure to foreign currency exchange risk when we deem appropriate. To the extent that we need to convert U.S. dollars or other currencies into Renminbi for our operations, appreciation of Renminbi against U.S. dollars would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars or other currency for the purpose of making payments to suppliers or for dividends on our Class A ordinary shares or ADSs or for other business purposes, appreciation of U.S. dollars against Renminbi would have a negative effect on the U.S. dollar amounts available to us.

Contingent Liabilities

The Company had no material contingent liabilities as at December 31, 2021.

Capital Commitment

For the year ended December 31, 2021, capital commitment of the Company was RMB2.92 billion (for the year ended December 31, 2020: RMB259.2 million), mainly on construction and purchase of production facilities, equipment and tooling.

Employees and Remuneration

As at December 31, 2021, the Company had a total of 11,901 employees. The following table sets forth the total number of employees by function as of December 31, 2021:

Function		As of December 31, 2021

Research and Development		3,415
Production		1,880
Sales and Marketing		6,019
General and Administrative Support		587

Total		11,901

The Company also has adopted a post-IPO share option scheme and a share award scheme.

CORPORATE GOVERNANCE

The Board is committed to achieving high corporate governance standards. The Board believes that high corporate governance standards are essential in providing a framework for the Company to safeguard the interests of shareholders and to enhance corporate value and accountability.

Compliance with the Code on Corporate Governance Practices

After the Listing, we have complied with all the code provisions of the Corporate Governance Code set forth in Appendix 14 to the Listing Rules (the “Corporate Governance Code”), save for the following.

Code provision C.2.1 of the Corporate Governance Code, recommends, but does not require, that the roles of chairman and chief executive officer should be separate and should not be performed by the same person. The Company deviates from this provision because Mr. Li Xiang (“Mr. Li”) performs both the roles of the chairman of the Board and the chief executive officer of the Company. Mr. Li is our founder and has extensive experience in our business operations and management. Our Board believes that vesting the roles of both chairman and chief executive officer to Mr. Li has the benefit of ensuring consistent leadership within our Company and enables more effective and efficient overall strategic planning. This structure will enable our Company to make and implement decisions promptly and effectively.

Our Board considers that the balance of power and authority will not be impaired due to this arrangement. In addition, all major decisions are made in consultation with members of the Board, including the relevant Board committees, and three independent non-executive Directors. Our Board will reassess the division of the roles of chairman and the chief executive officer from time-to-time, and may recommend dividing the two roles between different people in the future, taking into account the circumstances of our Company as a whole.

Compliance with the Model Code for Securities Transactions by Directors

The class A ordinary shares of the Company (“Class A Ordinary Shares”) were only listed on the Stock Exchange on August 12, 2021, since which time the Model Code has been applicable to the Company.

The Company has adopted the Management Trading of Securities Policy (the “Code”), with terms no less exacting that the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, as its own securities dealing code to regulate all dealings by Directors and relevant employees of securities in the Company and other matters covered by the Code.

Specific enquiry has been made of all the Directors and the relevant employees and they have confirmed that they have complied with the Code since the Listing Date up to the date of this announcement.

BOARD COMMITTEES

The Board has established three committees, namely, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, for overseeing particular aspects of the Company’s affairs. Each of these committees is established with defined written terms of reference. The terms of reference of the Board committees are available on the websites of the Company and the Stock Exchange.

Audit Committee

The Company has established an Audit Committee in compliance with Rule 3.21 of the Listing Rules and the Corporate Governance Code.

The primary duties of the Audit Committee are to review and supervise the financial reporting process and the risk management and internal control systems of the Company, review and approve connected transactions and provide advice and comments to the Board.

The Audit Committee comprises three independent non-executive Directors, being Mr. Jiang Zhenyu, Prof. Xiao Xing, Mr. Zhao Hongqiang (being the Company’s independent non-executive Director with the appropriate professional qualifications) as the chairman of the Audit Committee.

The Audit Committee has reviewed the unaudited annual results of the Company for the year ended December 31, 2021 and has met with the independent auditor, PricewaterhouseCoopers. The Audit Committee has also discussed matters with respect to the accounting policies and practices adopted by the Company and internal control and financial reporting matters with senior management members of the Company.

The unaudited financial information disclosed in this announcement is preliminary. The audit of the financial statements and related notes to be included in the Company’s annual report to shareholders for the year ended December 31, 2021 is still in progress. The figures in respect of the Company’s unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of comprehensive loss, unaudited condensed consolidated statements of cash flows and the related notes thereto for the year ended December 31, 2021 as set out in the preliminary announcement have been agreed by the Company’s auditor, PricewaterhouseCoopers, to the amounts set out in the Company’s draft consolidated financial statements for the year. The work performed by PricewaterhouseCoopers in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by PricewaterhouseCoopers on the preliminary announcement.

Adjustments to the financial statements may be identified when the audit work is completed, which could result in significant differences between the Company’s audited financial statements and this preliminary unaudited financial information.

Compensation Committee

The Company has established a Compensation Committee in compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code.

The primary duties of the Compensation Committee are to review and make recommendations to the Board with respect to director compensation, evaluate the performance of our chief executive officer and chief financial officer and review and make recommendations to the Board regarding the terms of their compensation, and review and approve the compensation of our other executive officers and senior management. The Compensation Committee comprises three Directors, being Mr. Li, Mr. Zhao Hongqiang and Mr. Jiang Zhenyu, with Mr. Zhao as the chairman of the Compensation Committee.

Nominating and Corporate Governance Committee

The Company has established a Nominating and Corporate Governance Committee in compliance with the Corporate Governance Code and Rule 3.27A and Rule 8A.30 of the Listing Rules.

The primary duties of the Nominating and Corporate Governance Committee were, among other things, in respect of its nomination functions, to develop and recommend to the Board criteria for board and committee membership, recommend to the Board the persons to be nominated for election as Directors and to each of the Board’s committees, and develop and recommend to the Board a set of corporate governance guidelines; and in respect of its corporate governance functions, to ensure that the Company is operated and managed for the benefit of all shareholders and to ensure the Company’s compliance with the Listing Rules and safeguards relating to the weighted voting rights structures of the Company.

The Nominating and Corporate Governance Committee comprises three independent non-executive Directors, namely Mr. Zhao Hongqiang, Mr. Jiang Zhenyu and Prof. Xiao Xing, Mr. Jiang as the chairman of the Nominating and Corporate Governance Committee.

OTHER INFORMATION

Purchase, Sale or Redemption of the Company’s Listed Securities

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s securities listed on the Stock Exchange since the Listing Date up to December 31, 2021.

Material Litigation

The Company was not involved in any material litigation or arbitration during the year ended December 31, 2021. The Directors are also not aware of any material litigation or claims that are pending or threatened against the Group since the Listing Date and up to the date of this announcement.

Dividend Declaration of Annual Dividend and Closure of Register of Members

The Board does not recommend the distribution of an annual dividend for the year ended December 31, 2021.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE Loss

(All amounts in thousands, except for share and per share data)

			For the year ended December 31,
	Note		2020			2021
			RMB			RMB
Revenues:
Vehicle sales				9,282,703			26,128,469
Other sales and services				173,906			881,310

Total revenues		9		9,456,609			27,009,779

Cost of sales:
Vehicle sales				(7,763,628	)		(20,755,578	)
Other sales and services				(143,642	)		(492,747	)

Total cost of sales				(7,907,270	)		(21,248,325	)

Gross profit				1,549,339			5,761,454
Operating expenses:
Research and development		10		(1,099,857	)		(3,286,389	)
Selling, general and administrative		11		(1,118,819	)		(3,492,385	)

Total operating expenses				(2,218,676	)		(6,778,774	)

Loss from operations				(669,337	)		(1,017,320	)
Other (expense)/income:
Interest expense				(66,916	)		(63,244	)
Interest income and investment income, net				254,916			740,432
Changes in fair value of warrants and derivative liabilities				272,327			–
Others, net				20,133			187,320

Loss before income tax expense				(188,877	)		(152,812	)
Income tax benefit/(expense)		13		22,847			(168,643	)

Net loss from continuing operations				(166,030	)		(321,455	)
Net income from discontinued operations, net of tax				14,373			–

Net loss				(151,657	)		(321,455	)

Accretion on convertible redeemable preferred shares to redemption value				(651,190	)		–
Effect of exchange rate changes on convertible redeemable preferred shares				10,862			–

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE Loss (Continued)

(All amounts in thousands, except for share and per share data)

			For the year ended December 31,
	Note		2020			2021
			RMB			RMB

Net loss attributable to ordinary shareholders of Li Auto Inc.				(791,985	)		(321,455	)

Including: Net loss from continuing operations attributable to ordinary shareholders				(806,358	)		(321,455	)
Net income from discontinued operations attributable to ordinary shareholders				14,373			–

Weighted average number of ordinary shares used in computing net loss per share
Basic and diluted		12		870,003,278			1,853,320,448

Net (loss)/earnings per share attributable to ordinary shareholders
Basic and diluted
Continuing operations		12		(0.93	)		(0.17	)
Discontinued operations		12		0.02			–

Net loss per share		12		(0.91	)		(0.17	)

Net loss				(151,657	)		(321,455	)
Other comprehensive loss, net of tax
Foreign currency translation adjustment, net of tax				(1,020,728	)		(516,687	)

Total other comprehensive loss, net of tax				(1,020,728	)		(516,687	)

Total comprehensive loss, net of tax				(1,172,385	)		(838,142	)
Accretion on convertible redeemable preferred shares to redemption value				(651,190	)		–
Effect of exchange rate changes on convertible redeemable preferred shares				10,862			–

Comprehensive loss attributable to ordinary shareholders of Li Auto Inc.				(1,812,713	)		(838,142	)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)

			As of December 31,		As of December 31,
	Note		2020		2021
			RMB		RMB

Assets
Current assets:
Cash and cash equivalents				8,938,341		27,854,224
Restricted cash				1,234,178		2,638,840
Time deposits and short-term investments				19,701,382		19,668,239
Trade receivable		3		115,549		120,541
Inventories		4		1,048,004		1,617,890
Prepayments and other current assets		5		353,655		480,680

Total current assets				31,391,109		52,380,414

Non-current assets:
Long-term investments				162,853		156,306
Property, plant and equipment, net				2,478,687		4,498,269
Operating lease right-of-use assets, net				1,277,006		2,061,492
Intangible assets, net				683,281		751,460
Deferred tax assets				59,156		19,896
Other non-current assets				321,184		1,981,076

Total non-current assets				4,982,167		9,468,499

Total assets				36,373,276		61,848,913

Liabilities
Current liabilities:
Short-term borrowings				–		37,042
Trade and notes payable		7		3,160,515		9,376,050
Amounts due to related parties				19,206		37,455
Deferred revenue, current				271,510		305,092
Operating lease liabilities, current				210,531		473,245
Accruals and other current liabilities		6		647,459		1,879,368

Total current liabilities				4,309,221		12,108,252

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(All amounts in thousands, except for share and per share data)

			As of December 31,		As of December 31,
	Note		2020		2021
			RMB		RMB
Non-current liabilities:
Long-term borrowings		8		511,638		5,960,899
Deferred revenue, non-current				135,658		389,653
Operating and finance lease liabilities, non-current				1,392,136		1,369,825
Deferred tax liabilities				36,309		153,723
Other non-current liabilities				184,717		802,259

Total non-current liabilities				2,260,458		8,676,359

Total liabilities				6,569,679		20,784,611

Total shareholders’ equity				29,803,597		41,064,302

Total liabilities and shareholders’ equity				36,373,276		61,848,913

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands, except for share and per share data)

	For the year ended December 31,
	2020			2021
	RMB			RMB
Net cash provided by operating activities		3,139,804			8,340,385
Net cash used in investing activities		(18,737,725	)		(4,257,244	)
Net cash provided by financing activities		24,710,697			16,709,533
Effects of exchange rate changes on cash and cash equivalents and restricted cash		(376,646	)		(472,129	)

Net increase in cash, cash equivalents and restricted cash		8,736,130			20,320,545
Cash, cash equivalents and restricted cash at beginning of the year		1,436,389			10,172,519

Cash, cash equivalents and restricted cash at end of the year		10,172,519			30,493,064

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

(All amounts in thousands, except for share and per share data)

GENERAL INFORMATION

Li Auto Inc. (“Li Auto”, or the “Company”) was incorporated under the laws of the Cayman Islands in April 2017 as an exempted company with limited liability. The Company, through its consolidated subsidiaries and consolidated variable interest entities (the “VIEs”) and VIEs’ subsidiaries (collectively, the “Group”), is primarily engaged in the design, development, manufacturing, and sales of new energy vehicles in the People’s Republic of China (the “PRC”).

In preparation for the initial public offering and listing of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited (the “HKEx”), the Group underwent a reorganization (the “Reorganization”) to establish the Company as the ultimate holding company of the companies now comprising the Group which conduct the Group’s Business. Details of the Group’s Reorganization have been disclosed in the section headed “HISTORY, REORGANIZATION AND CORPORATE STRUCTURE” of the Prospectus.

The Company’s shares have been listed on the HKEx since August 12, 2021.

This unaudited financial information and related notes for the year ended December 31, 2021 is presented in Renminbi and all values are rounded to the nearest thousand (RMB’000) unless otherwise indicated.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Basis of presentation

The accompanying unaudited financial information have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and the disclosure requirements of the Rules Governing the Listing of Securities on The HKEx, as amended, supplemented or otherwise modified from time to time (the “HK Listing Rules”).

(b)

Use of estimates

The preparation of the unaudited financial information in conformity with U.S. GAAP requires 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 in the unaudited financial information and accompanying notes.

Significant accounting estimates reflected in the Group’s unaudited financial information mainly include, but are not limited to, standalone selling price of each distinct performance obligation in revenue recognition and determination of the amortization period of these obligations, the valuation of share-based compensation arrangements, fair value of investments and derivative instruments, fair value of warrant liabilities and derivative liabilities, useful lives of property, plant and equipment, useful lives of intangible assets, assessment for impairment of long-lived assets and intangible assets, the provision for financial assets, lower of cost and net realizable value of inventories, product warranties, determination of vendor rebate, assessment of variable lease payment, and valuation allowance for deferred tax assets. Actual results could differ from those estimates.

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

(c)

Segment reporting

ASC 280, Segment Reporting, establishes standards for companies to report in their financial statements information about operating segments, products, services, geographic areas, and major customers.

Based on the criteria established by ASC 280, the Group’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews unaudited condensed consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole, and hence, the Group has only one reportable segment. The Group does not distinguish between markets or segments for the purpose of internal reporting. As the Group’s long-lived assets are substantially located in the PRC, no geographical segments are presented.

TRADE RECEIVABLE

An aging analysis of the trade receivable as of December 31, 2020 and 2021, based on the invoice date and net of provisions, is as follows:

	As of December 31,		As of December 31,
	2020		2021
Within 3 months		10,429		16,462
Between 3 months and 6 months		18,914		890
Between 6 months and 1 year		77,903		–
More than 1 year		8,303		103,189

Total		115,549		120,541

INVENTORIES

Inventories consist of the following:

	As of December 31,		As of December 31,
	2020		2021
Raw materials, work in process and supplies		227,836		1,468,801
Finished products		820,168		149,089

Total		1,048,004		1,617,890

Raw materials, work in process and supplies as of December 31, 2020 and 2021 primarily consist of materials for volume production which will be transferred into production cost when incurred as well as spare parts used for after sales services.

Finished products included vehicles ready for transit at production plants, vehicles in transit to fulfill customers’ orders, new vehicles available for immediate sales at the Group’s sales and servicing center locations.

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets consist of the following:

	As of December 31,		As of December 31,
	2020		2021
Prepayments to vendors		104,271		218,660
Deductible VAT input		196,021		118,177
Prepaid rental and deposits		30,357		48,929
Loan receivable from Lifan Holdings⁽¹⁾		8,000		–
Others		15,006		97,106
Less: Allowance for credit losses		–		(2,192	)

Total		353,655		480,680

(1)

Loan receivable from Lifan Holdings was settled against the consideration payables for acquisition of Chongqing Zhizao in April 2021.

ACCRUALS AND OTHER CURRENT LIABILITIES

Accruals and other current liabilities consist of the following:

	As of December 31,		As of December 31,
	2020		2021
Payables for purchase of property, plant and equipment		118,181		456,395
Salaries and benefits payable		187,972		417,449
Tax payable		50,088		277,233
Accrued warranty⁽¹⁾		55,138		154,276
Payables for logistics expenses		43,571		143,632
Payables for research and development expenses		35,032		94,517
Deposits from vendors		9,120		27,716
Advance from customers		9,285		10,262
Payables for acquisition of Chongqing Zhizao		79,552		2,000
Other payables		59,520		295,888

Total		647,459		1,879,368

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

(1)

The Company provides product warranties on new vehicles based on the contracts with its customers at the time of sale of vehicles. The Company accrues a warranty reserve for the vehicles sold, which includes the best estimate of projected costs to repair or replace items under warranties. These estimates are primarily based on the estimates of the nature, frequency and average costs of future claims. 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.

	As of December 31,		As of December 31,
	2020		2021
Accrued warranty
Current portion		55,138		154,276
Non-current portion		178,228		688,069

Total		233,366		842,345

TRADE AND NOTES PAYABLE

Trade and notes payable consist of the following:

	As of December 31,		As of December 31,
	2020		2021
Trade payable for raw materials		2,991,538		7,089,370
Notes payable		168,977		2,286,680

Total		3,160,515		9,376,050

An aging analysis of the trade payable as at December 31, 2020 and 2021, based on the invoice date, is as follows:

	As of December 31,		As of December 31,
	2020		2021
Within 3 months		3,118,840		7,539,833
Between 3 months and 6 months		18,537		1,639,286
Between 6 months and 1 year		10,676		161,913
More than 1 year		12,462		35,018

Total		3,160,515		9,376,050

The trade payable is non-interest-bearing and are normally settled on 30-90 day terms.

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

BORROWINGS

Borrowings consist of the following:

	Maturity date	Principal amount	Interest rate per annum			As of December 31,		As of December 31,
						2020		2021
Convertible senior notes⁽¹⁾	May 1, 2028	US$862,500		0.25	%		–		5,397,941
Secured borrowing	December 31, 2022	RMB94,550		6.1750	%		98,717		–
Unsecured corporate loan	June 30, 2022	RMB401,073		6.1750	%		412,921		–
Secured borrowing⁽²⁾	September 28, 2029	RMB600,000		4.8000	%		–		600,000

Total							511,638		5,997,941

Classified as:

	As of December 31, 2020		As of December 31, 2021
– Short-term borrowings		–		37,042
– Long-term borrowings		511,638		5,960,899

Total		511,638		5,997,941

(1)

In April 2021, the Company issued and sold convertible debt in an aggregate principal of US$862,500 through a private placement. The convertible debt will mature in 2028, bearing the interest at a rate of 0.25% per annum. The related interest is payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2021. The net proceeds from this offering were approximately US$844,876, equivalent to RMB5,457,984.

The convertible debt may be converted, at an initial conversion rate of 35.2818 ADS per US$1,000 principal amount (which represents an initial conversion price of approximately US$28.34 per ADS) at each holder’s option at any time on or after November 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date of May 1, 2028. Upon conversion, the Company will pay or deliver to such converting holders, as the case may be, either cash, ADSs, or a combination of cash and ADSs, at its election.

Holders of the convertible debt have the rights to require the Company to repurchase all or partial for their convertible debt on May 1, 2024 and May 1, 2026 or in the event of certain fundamental changes, at a repurchase price equal to 100% of the principal amount of the convertible debt to be repurchased, plus accrued and unpaid interest.

The Company accounted for the convertible debt as single instruments measured at its amortized cost as long-term borrowings on the unaudited condensed consolidated balance sheets. The issuance costs were recorded as an adjustment to the long-term borrowings and are amortized as interest expense using the effective interest method over the contractual life to the maturity date (i.e., May 1, 2028). For the year ended December 31, 2021, the convertible debt related interest expense was RMB21,369 (US$3,353). As of December 31, 2021, the principal amount of the convertible debt was RMB5,499,041 and the unamortized debt issuance cost was RMB101,100, respectively.

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

(2)

As of December 31, 2020 and 2021, the secured borrowing was classified as follows:

	As of December 31,		As of December 31,
	2020		2021

Secured borrowing
Current portion		–		37,042
Non-current portion		–		562,958

Total		–		600,000

9 REVENUE DISAGGREGATION

Revenues by source consist of the following:

	For the year ended December 31,
	2020		2021

Vehicle sales		9,282,703		26,128,469
Other sales and services		173,906		881,310

Total		9,456,609		27,009,779

Revenue by timing of recognition is analyzed as follows:

	For the year ended December 31,
	2020		2021

Revenue recognized at a point in time		9,436,095		26,917,836
Revenue recognized over time		20,514		91,943

Total		9,456,609		27,009,779

Revenues arising from vehicle sales are recognized at a point in time when the control of the products are transferred to the users. Included in revenues from other sales and services are (i) sales of automotive regulatory credits, (ii) revenue arising from sales of charging stalls and certain services under the Li Plus Membership which are recognized at a point in time when the control of the products and services are transferred to the users; and (iii) revenue arising from vehicle internet connection services, FOTA upgrades and certain services under the Li Plus Membership are recognized over time throughout the service period.

Sales of Automotive Regulatory Credits

Pursuant to the measurements and policies promulgated by China’s Ministry of Industry and Information Technology (“MIIT”), each of the vehicle manufacturers or importers above a certain scale is able to earn Automotive Regulatory Credits by manufacturing or importing New Energy Vehicle (“NEV”). The Automotive Regulatory Credits are tradable and sold to other companies through a credit management system established by MIIT. The Company earns the tradable new energy vehicle credits from the production of the Company’s electric vehicles. The Company sells these credits at agreed price to other regulated entities who can use the credits to comply with the regulatory requirements. The Company recognized revenue on the sale of Automotive Regulatory Credits at the time control of the Automotive Regulatory Credits are transferred to the purchasing party in September 2021 as MIIT has completed the review and approved the sale of Automotive Regulatory Credits, the related NEV Credits has been transferred to purchasing party. The full consideration for Automotive Regulatory Credits were received in the fourth quarter of 2021.

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

10 RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses consist of the following:

	For the year ended December 31,
	2020		2021

Employee compensation		580,157		2,079,948
Design and development expenses		406,216		835,113
Depreciation and amortization expenses		44,977		54,110
Rental and related expenses		18,818		52,985
Travel expenses		9,360		52,307
Others		40,329		211,926

Total		1,099,857		3,286,389

11 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of the following:

	For the year ended December 31,
	2020		2021

Employee compensation		449,109		1,414,177
Marketing and promotional expenses		264,814		1,100,769
Rental and related expenses		162,907		324,655
Depreciation and amortization expenses		37,923		82,777
Travel expenses		20,806		69,079
Expected credit losses		–		6,415
Impairment of property, plant and equipment		30,381		–
Others		152,879		494,513

Total		1,118,819		3,492,385

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

12 LOSS PER SHARE

Basic loss per share and diluted loss per share have been calculated in accordance with ASC 260 for the year ended December 31, 2020 and 2021 as follows:

	For the year ended December 31,
	2020			2021

Numerator:
Net loss		(151,657	)		(321,455	)
Accretion on convertible redeemable preferred shares to redemption value		(651,190	)		–
Effect of exchange rate changes on convertible redeemable preferred shares		10,862			–

Net loss attributable to ordinary shareholders of Li Auto Inc.		(791,985	)		(321,455	)

Including:
Net loss from continuing operations attributable to ordinary shareholders of Li Auto Inc.		(806,358	)		(321,455	)
Net income from discontinued operations attributable to ordinary shareholders of Li Auto Inc.		14,373			–
Net loss attributable to ordinary shareholders of Li Auto Inc.		(791,985	)		(321,455	)

Denominator:
Weighted average ordinary shares outstanding – basic and diluted		870,003,278			1,853,320,448

Basic and diluted net loss per share from continuing operations attributable to ordinary shareholders of Li Auto Inc.		(0.93	)		(0.17	)
Basic and diluted net income per share from discontinued operations attributable to ordinary shareholders of Li Auto Inc.		0.02			–

Basic and diluted net loss per share attributable to ordinary shareholders of Li Auto Inc.		(0.91	)		(0.17	)

For year ended December 31, 2020 and 2021, the Company had ordinary equivalent shares, including preferred shares, options granted, convertible loan and convertible debt. As the Group incurred loss for the year ended December 31, 2020 and 2021, these ordinary equivalent shares were anti-dilutive and excluded from the calculation of diluted loss per share of the Company. The weighted average numbers of preferred shares, options granted, convertible loan issued in November 2017, and convertible debt issued in April 2021 excluded from the calculation of diluted loss per share of the Company were 669,666,355, 54,605,925, 22,639,154 and nil for the year ended December 31, 2020 and nil, 72,791,430, nil and 44,853,801 for the year ended December 31, 2021, respectively.

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

13 TAXATION

(a) Value added tax

The Group is subject to statutory VAT rate of 13% for revenue from sales of vehicles and spare parts in the PRC.

(b) Income taxes

Cayman Islands

The Company was incorporated in the Cayman Islands and conducts most of its business through its subsidiaries located in Mainland China and Hong Kong. Under the current laws of the Cayman Islands, the Company is not subject to tax on either income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.

PRC

Beijing CHJ Information Technology Co., Ltd. (a limited liability company established under the laws of the PRC on April 10, 2015 and a consolidated affiliated entity of our Company) and Beijing Co Wheels Technology Co., Ltd. (“Wheels Technology”) are qualified as a “high and new technology enterprise” under the EIT Law and is eligible for a preferential enterprise income tax rate of 15%. Other Chinese companies are subject to enterprise income tax (“EIT”) at a uniform rate of 25%.

Under the EIT Law enacted by the National People’s Congress of PRC on March 16, 2007 and its implementation rules which became effective on January 1, 2008, dividends generated after January 1, 2008 and payable by a foreign investment enterprise in the PRC to its foreign investors who are non-resident enterprises are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement. Under the taxation arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the “beneficial owner” and directly holds 25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. The Cayman Islands, where the Company was incorporated, does not have a tax treaty with PRC.

The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” Based on a review of surrounding facts and circumstances, the Group does not believe that it is likely that its operations outside of the PRC will be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, there is uncertainty as to the application of the EIT Law. Should the Company be treated as a resident enterprise for PRC tax purposes, the Company will be subject to PRC income tax on worldwide income at a uniform tax rate of 25%.

NOTES TO THE UNAUDITED FINANCIAL INFORMATION (Continued)

(All amounts in thousands, except for share and per share data)

According to relevant laws and regulations promulgated by the State Administration of Tax of the PRC effective from 2008 onwards, enterprises engaging in R&D activities are entitled to claim 175% of their qualified research and development expenses so incurred as tax deductible expenses when determining their assessable profits for the year (‘Super Deduction’). The additional deduction of 75% of qualified research and development expenses can only be claimed directly in the annual EIT filing and subject to the approval from the relevant tax authorities.

Hong Kong

Under the current Hong Kong Inland Revenue Ordinance, the subsidiaries of the Group incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.

Composition of income tax expense for the years presented is as follows:

	For the year ended December 31,
	2020		2021

Deferred income tax(benefit)/expense	(22,847	)	168,643

(c) Consumption tax

Chongqing Lixiang Automobile Co Ltd (“Chongqing Lixiang Automobile”), as a subsidiary of the Company, is eligible for consumption tax rate of 3% and related surcharge. The consumption tax is calculated based on the sales price of its self-manufactured vehicles and 3% consumption tax rate from August 2021.

14 DIVIDEND

The Board did not recommend the distribution of any dividend for the year ended December 31, 2020 and 2021.

PUBLICATION OF THE ANNUAL RESULTS ANNOUNCEMENT AND ANNUAL REPORT

This annual results announcement is published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (https://ir.lixiang.com/). The annual report for the year ended December 31, 2021 will be dispatched to the Company’s shareholders and made available for review on the same websites in due course.

	By order of the Board
	Li Auto Inc.
	Li Xiang
	Chairman

Hong Kong, February 25, 2022

As at the date of this announcement, the board of directors of the Company comprises Mr. Li Xiang, Mr. Shen Yanan and Mr. Li Tie as executive directors, Mr. Wang Xing and Mr. Fan Zheng as non-executive directors, and Mr. Zhao Hongqiang, Mr. Jiang Zhenyu and Prof. Xiao Xing as independent non-executive directors.