Filed Pursuant to Rule 424(b)(5)​

 Registration No. 333-258378​

Prospectus Supplement
(To Prospectus dated August 2, 2021)

Li Auto Inc.

Up to US$2,000,000,000
of American Depositary Shares
Representing Class A Ordinary Shares

We have entered into an equity distribution agreement with Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited, or the sales agents, relating to the American depositary shares, or ADSs, each representing two Class A ordinary shares, par value US$0.0001 per share, of Li Auto Inc. The ADSs are offered by this prospectus supplement and the accompanying prospectus. In accordance with the terms of the equity distribution agreement, we may offer and sell the ADSs with an aggregate offering price of up to US$2,000,000,000 from time to time on the Nasdaq Global Select Market for the ADSs through the sales agents acting as our agents.

The ADSs are listed on the Nasdaq Global Select Market under the symbol “LI.” On June 27, 2022, the last reported trading price of the ADSs on the Nasdaq Global Select Market was US$39.13 per ADS. The Class A ordinary shares are listed on the Stock Exchange of Hong Kong Limited, or the Hong Kong Stock Exchange, under the stock code “2015.” On June 28, 2022, the last reported trading price of the Class A ordinary shares on the Hong Kong Stock Exchange was HK$158.30 per share, or US$40.42 per ADS based on an exchange rate of HK$7.8325 to US$1.00 as of March 31, 2022. Our outstanding share capital consists of Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and is not convertible into Class B ordinary shares under any circumstances. Each Class B ordinary share is entitled to ten votes, subject to certain conditions, and is convertible into one Class A ordinary share at any time by the holder thereof.

Sales of the ADSs pursuant to this prospectus supplement and the accompanying prospectus will be made in sales deemed to be “at the market offerings” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, or the Securities Act, by means of ordinary brokers’ transactions, to or through a market maker, on or through the Nasdaq Global Select Market for the ADSs, or as otherwise agreed with the sales agents. The sales agents are not required to sell any specific number or dollar amount of the ADSs, but will use their reasonable efforts consistent with their normal trading and sales practices and applicable laws and regulations to sell ADSs designated by us in accordance with the equity distribution agreement. There is no arrangement for funds to be received in any escrow, trust, or similar arrangement.

We will designate the maximum number of ADSs to be sold through the sales agents on a daily basis or otherwise as we and the sales agents agree and the minimum price per ADSs at which such ADSs may be sold. We may instruct the sales agents not to sell any ADSs if the sales cannot be effected at or above the price designated by us in any such instruction. We or any sales agent, with respect to itself only, may suspend the ADS offering by notifying the other parties.

The sales agents will be entitled to compensation at a commission rate of up to 1.3% of the gross sales price per ADS sold. In connection with the sales of the ADSs on our behalf, the sales agents may be deemed to be “underwriters” within the meaning of the Securities Act, and the compensation of the sales agents may be deemed to be underwriting commissions or discounts. The net proceeds that we receive will be the gross proceeds received from such sales less the sales agents’ fees and commissions and any other expenses that we may incur in the sales of ADSs. See “Plan of Distribution” for further information.

We have applied to list the Class A ordinary shares represented by the ADSs subject to this offering on the Hong Kong Stock Exchange pursuant to the Hong Kong Stock Exchange Listing Rules.

Investing in the ADSs involves a high degree of risk. See “Risk Factors” beginning on page S-23 of this prospectus supplement, in the accompanying prospectus, and in any documents incorporated by reference into this prospectus supplement.

Li Auto Inc. is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in VIEs and their subsidiaries. We conduct our operations in China through (i) our PRC subsidiaries and (ii) the VIEs, with which we have maintained contractual arrangements, and their subsidiaries. PRC laws and regulations restrict and impose conditions on foreign investment in value-added telecommunication services and certain other businesses. Accordingly, we operate these businesses in China through the VIEs and their subsidiaries, and rely on contractual arrangements among our PRC subsidiaries, the VIEs, and their nominee shareholders, which provide our subsidiary with a controlling financial interest in the VIEs as that term is defined in FASB ASC 810 making it the primary beneficiary of the VIEs and enable us to consolidate their operating results in our financial statements under U.S. GAAP. Revenues contributed by the VIEs accounted for 100.0%, 84.6%, and 23.3% of our total revenues in 2019, 2020, and 2021, respectively. As used in this prospectus supplement, “we,” “us,” “our company,” “our,” or “Li Auto” refers to Li Auto Inc., its subsidiaries, and, in the context of describing our operations and consolidated financial information, the VIEs in China, including but not limited to Beijing CHJ Information Technology Co., Ltd., or Beijing CHJ, and Beijing Xindian Transport Information Technology Co., Ltd., or Xindian Information. Investors in the ADSs are not purchasing equity interest in the VIEs in China but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands.

Our corporate structure is subject to risks relating to our contractual arrangements with the VIEs. If the PRC government deems that our contractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our Cayman Islands holding company, PRC subsidiaries, and the VIEs and their subsidiaries, and investors of Li Auto Inc. face uncertainties relating to potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and Li Auto Inc. as a whole. For a detailed description of the risks associated with our corporate structure, see “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Corporate Structure” in our annual report on Form 20-F for the fiscal year ended December 31, 2021, or our 2021 Annual Report, which is incorporated by reference in this prospectus supplement and the accompanying prospectus.

We face various risks and uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks relating to regulatory approvals on overseas offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, as well as the lack of inspection on our auditor by the Public Company Accounting Oversight Board, or the PCAOB, which may impact our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on a United States or another foreign exchange. These risks could result in a material adverse change in our operations and the value of the ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risks relating to doing business in China, see “Item 3.D. Key Information — Risk Factors — Risks Relating to Doing Business in China” in the 2021 Annual Report.

The PCAOB is currently unable to inspect our auditor in relation to its audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections. The ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, if the PCAOB is unable to inspect or fully investigate auditors located in China. On December 16, 2021, PCAOB issued the HFCAA Determination Report, according to which our auditor is subject to the determinations that the PCAOB is unable to inspect or investigate completely. Under the current law, delisting and prohibition from over-the-counter trading in the United States could take place in 2024. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. In addition, the proposed changes to the law would decrease the number of non-inspection years from three years to two, thus reducing the time period before the ADSs may be prohibited from over-the-counter trading or delisted. If the proposed provision is enacted, the ADS could be delisted from the exchange and prohibited from over-the-counter trading in the United States in 2023. Li Auto Inc. was named by the Securities and Exchange Commission, or the SEC, as a Commission-Identified Issuer shortly following the filing of the 2021 Annual Report. For more details, see “Prospectus Supplement Summary — The Holding Foreign Companies Accountable Act.”

Li Auto Inc. is a Cayman Islands holding company with no operations of its own. We conduct our operations in China through our PRC subsidiaries and the VIEs and their subsidiaries. As a result, although other means are available for us to obtain financing at the Cayman Islands holding company level, Li Auto Inc.’s ability to pay dividends to the shareholders and to service any debt that it may incur may depend upon dividends paid by our PRC subsidiaries and service fees paid by the VIEs and their subsidiaries. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Li Auto Inc. In addition, under PRC laws and regulations, our PRC subsidiaries are permitted to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Furthermore, our PRC subsidiaries and the VIEs and their subsidiaries are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Prospectus Supplement Summary — Cash and Asset Flows Through Our Organization” in this prospectus supplement.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined that this prospectus supplement or the accompanying prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

Goldman Sachs (Asia) L.L.C.UBS Investment Bank Barclays CICC

Prospectus Supplement dated June 28, 2022.

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

PROSPECTUS

You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus, or any other offering materials that we file with the SEC. We have not, and the sales agents have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the sales agents are not, making an offer to sell the ADSs in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference is accurate only as of each of their respective dates. Our business, financial condition, results of operations, and prospects may have changed since those dates. Neither this prospectus supplement nor the accompanying prospectus constitutes an offer, or an invitation on our behalf or the sales agents to subscribe for and purchase, any of the ADSs and they may not be used for or in connection with an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

S-i

 

ABOUT THIS PROSPECTUS SUPPLEMENT

This document consists of two parts. The first part is this prospectus supplement, which describes the specific terms of the offering and other matters relating to us and our financial condition. The second part, the base prospectus, presents more general information about this offering. The base prospectus was included in the registration statement on Form F-3 (File No. 333-258378) that we filed with the SEC on August 2, 2021 and has been updated since that time with additional information that is incorporated by reference. Generally, when we refer only to the “prospectus,” we are referring to both parts combined, and when we refer to the “accompanying prospectus,” we are referring to the base prospectus as updated through incorporation by reference.

If information in this prospectus supplement differs from information in the accompanying prospectus, you should rely on the information in this prospectus supplement.

You should not consider any information in this prospectus supplement or the accompanying prospectus to be investment, legal, or tax advice. You should consult your own counsel, accountants, and other advisors for legal, tax, business, financial, and related advice regarding the purchase of any of the securities offered by this prospectus supplement.

In this prospectus supplement, unless otherwise indicated or unless the context otherwise requires,

•

“ADAS” refers to advanced driver-assistance systems;

​

•

“ADSs” refers to the American depositary shares, each of which represents two Class A ordinary shares;

​

•

“China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this prospectus supplement only, Hong Kong, Macau, and Taiwan;

​

•

“Class A ordinary shares” refers to our Class A ordinary shares with a par value of US$0.0001 per share;

​

•

“Class B ordinary shares” refers to our Class B ordinary shares with a par value of US$0.0001 per share;

​

•

“CLTC” refers to China Light Vehicle Test Cycle;

​

•

“FOTA” refers to firmware over-the-air, a technology that updates vehicle firmware and software remotely through cloud network;

​

•

“ICE” refers to internal combustion engine;

​

•

“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

​

•

“Hong Kong Listing Rules” refers to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to time;

​

•

“Hong Kong Stock Exchange” refers to The Stock Exchange of Hong Kong Limited;

​

•

“HPC” refers to high-power charging;

​

•

“Li Auto,” “we,” “us,” “our company,” or “our” refers to Li Auto Inc., our Cayman Islands holding company, and its subsidiaries and, when describing our operations and consolidated financial information, also including the VIEs and their respective subsidiaries;

​

•

“NEVs” refers to new energy passenger vehicles, primarily including (i) “BEVs,” which refers to battery electric passenger vehicles, (ii) “EREVs,” which refers to extended-range electric passenger vehicles, (iii) “PHEVs,” which refers to plug-in hybrid electric passenger vehicles, and (iv) “FCEVs,” which refers to fuel-cell electric passenger vehicles;

​

•

“ordinary shares” or “shares” refers to our Class A ordinary shares and Class B ordinary shares, par value US$0.0001 per share;

​

•

“Renminbi” or “RMB” refers to the legal currency of China;

​

 

S-1

 

•

“SUVs” refers to sport utility vehicles;

​

•

“U.S. dollars” or “US$” refers to the legal currency of the United States;

​

•

“VIEs” refers to variable interest entities, and “the VIEs” refers to Beijing CHJ and Xindian Information; and

​

•

“WLTC” refers to worldwide harmonized light vehicle test cycles.

​

Our reporting currency is Renminbi. Unless otherwise noted, all translations from Renminbi to U.S. dollars in this prospectus supplement are made at a rate of RMB6.3393 to US$1.00, the exchange rate in effect as of March 31, 2022 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. We make no representation that any RMB amounts could have been, or could be, converted into U.S. dollars at any particular rate, or at all. On June 17, 2022, the exchange rate was RMB6.7160 to US$1.00.

All discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

 

S-2

 

SPECIAL NOTES REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein and therein may contain forward-looking statements that involve risks and uncertainties and reflect our current expectations and views of future events. All statements other than statements of historical facts are forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as “may,” “will,” “expect,” “anticipate,” “aim,” “intend,” “plan,” “believe,” “estimate,” “is/are likely to,” “future,” “potential,” “continue,” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements include statements relating to, among other things:

•

our goals and strategies;

​

•

our future business development, financial conditions, and results of operations;

​

•

the expected outlook of the automotive market including the NEV market in China;

​

•

our expectations regarding demand for and market acceptance of our products;

​

•

our expectations regarding our relationships with customers, suppliers, third-party service providers, strategic partners, and other stakeholders;

​

•

competition in our industry;

​

•

our proposed use of proceeds;

​

•

relevant government policies and regulations relating to our industry;

​

•

general economic and business conditions globally and in China; and

​

•

assumptions underlying or related to any of the foregoing.

​

The forward-looking statements included in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein and therein are subject to risks, uncertainties, and assumptions about our company. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations may differ materially from the forward-looking statements as a result of the risk factors disclosed in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein and therein. We qualify all of our forward-looking statements by these cautionary statements.

This prospectus supplement contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also includes projections based on a number of assumptions. The automotive market or any segment thereof may not grow at the rate projected by market data, or at all. Failure of these markets or segments to grow at the projected rate may have a material and adverse effect on our business and the market price of the ADSs. In addition, the rapidly evolving nature of the NEV industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions.

We would like to caution you not to place undue reliance on these forward-looking statements. You should read these statements in conjunction with the risk factors disclosed in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein and therein for a more complete discussion of the risks of an investment in our securities. We operate in a rapidly evolving environment. New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law.

 

S-3

 

​

S-4

 

S-5

 

S-6

 

​	Key Specifications and Features of Li L9				​
​	Form Factors	​	​	5,218 mm (L) × 1,998 mm (W) × 1,800 mm (H)	​
​	Wheelbase	​	​	3,105 mm	​
​	Range	​	​	Composite: 1,315 km (CLTC) / 1,100 km (WLTC) EV Mode: 215 km (CLTC) / 180 km (WLTC)	​
​	Range Extension System	​	​	1.5-L four-cylinder turbo-charged engine • 40.5% maximum thermal efficiency ​ • 5.9 L/100 km fuel consumption under the CLTC standard operating conditions ​ Capable of external supply of electricity at up to 3.5 kW	​
​	Electric Motors	​	​	Dual-motor all-wheel drive: • Maximum power: 330 kW ​ • Maximum torque: 620 Nm ​	​
​	Battery Pack	​	​	Capacity: 44.5 kWh New-generation NCM lithium battery	​
​	Acceleration (0-100 km/h)	​	​	5.3 s	​
​	Suspension	​	​	Double-wishbone (front) and five-link (rear) Smart air spring Continuous damping control (CDC) system	​
​	Autonomous Driving System	​	​	Li AD Max: full-stack self-developed Perception hardware: • Forward 128-line LiDAR (×1) ​ • 8-megapixel cameras (×6) ​ • 2-megapixel cameras (×5) ​ • Forward millimeter wave radar (×1) ​ • Ultrasonic sensors (×12) ​ Computing and data processing capabilities: • Qualcomm Snapdragon automotive-grade 8155 chips (×2) ​ • Dual 5G operator switching ​	​
​	Intelligent and Comfortable Cabin	​	​	3D in-car interactions: • 6 microphones ​ • 3D ToF transmitters ​ • Deep learning-based multimodal 3D interactive technology ​ Multimedia: • Super-sized head-up display (HUD) ​ • Interactive safe driving screen on the steering wheel ​ • 15.7-inch automotive-grade 3K OLED screens (× 3) ​ Premium passenger comfort: • Automatic seat adjustment and heating (all three rows) ​ • Seat ventilation and spa-level massage across ten acupressure points (first and second rows) ​	​

S-7

 

S-8

 

​

S-9

 

S-10

 

​

S-11

 

S-12

 

S-13

 

S-14

 

S-15

 

S-16

 

S-17

 

S-18

 

S-19

 

​

​

​

For the Year Ended December 31,

​

​

For the Three Months Ended March 31,

​

​

​

​

2019

​

​

2020

​

​

2021

​

​

2021

​

​

2022

​

​

​

​

​

RMB

​

​

RMB

​

​

RMB

​

​

US$

​

​

RMB

​

​

RMB

​

​

US$

​

​

​

​

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(unaudited)

​

​

​

​

​

​

​

​

Summary Consolidated Statements of Comprehensive Loss Data:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revenues:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

–Vehicle sales

​

​

​

​

280,967

​

​

​

​

​

9,282,703

​

​

​

​

​

26,128,469

​

​

​

​

​

4,100,127

​

​

​

​

​

3,463,673

​

​

​

​

​

9,308,609

​

​

​

​

​

1,468,397

​

​

​

–Other sales and services

​

​

​

​

3,400

​

​

​

​

​

173,906

​

​

​

​

​

881,310

​

​

​

​

​

138,297

​

​

​

​

​

111,528

​

​

​

​

​

253,427

​

​

​

​

​

39,977

​

​

​

Total revenues

​

​

​

​

284,367

​

​

​

​

​

9,456,609

​

​

​

​

​

27,009,779

​

​

​

​

​

4,238,424

​

​

​

​

​

3,575,201

​

​

​

​

​

9,562,036

​

​

​

​

​

1,508,374

​

​

​

Cost of sales(1):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

–Vehicle sales

​

​

​

​

(279,555)

​

​

​

​

​

(7,763,628)

​

​

​

​

​

(20,755,578)

​

​

​

​

​

(3,257,003)

​

​

​

​

​

(2,878,994)

​

​

​

​

​

(7,219,912)

​

​

​

​

​

(1,138,913)

​

​

​

–Other sales and services

​

​

​

​

(4,907)

​

​

​

​

​

(143,642)

​

​

​

​

​

(492,747)

​

​

​

​

​

(77,323)

​

​

​

​

​

(79,474)

​

​

​

​

​

(178,269)

​

​

​

​

​

(28,121)

​

​

​

Total cost of sales

​

​

​

​

(284,462)

​

​

​

​

​

(7,907,270)

​

​

​

​

​

(21,248,325)

​

​

​

​

​

(3,334,326)

​

​

​

​

​

(2,958,468)

​

​

​

​

​

(7,398,181)

​

​

​

​

​

(1,167,034)

​

​

​

Gross (loss)/profit

​

​

​

​

(95)

​

​

​

​

​

1,549,339

​

​

​

​

​

5,761,454

​

​

​

​

​

904,098

​

​

​

​

​

616,733

​

​

​

​

​

2,163,855

​

​

​

​

​

341,340

​

​

​

Operating expenses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

–Research and development(1)

​

​

​

​

(1,169,140)

​

​

​

​

​

(1,099,857)

​

​

​

​

​

(3,286,389)

​

​

​

​

​

(515,706)

​

​

​

​

​

(514,500)

​

​

​

​

​

(1,373,962)

​

​

​

​

​

(216,737)

​

​

​

–Selling, general and administrative(1)

​

​

​

​

(689,379)

​

​

​

​

​

(1,118,819)

​

​

​

​

​

(3,492,385)

​

​

​

​

​

(548,031)

​

​

​

​

​

(509,924)

​

​

​

​

​

(1,202,967)

​

​

​

​

​

(189,763)

​

​

​

Total operating expenses

​

​

​

​

(1,858,519)

​

​

​

​

​

(2,218,676)

​

​

​

​

​

(6,778,774)

​

​

​

​

​

(1,063,737)

​

​

​

​

​

(1,024,424)

​

​

​

​

​

(2,576,929)

​

​

​

​

​

(406,500)

​

​

​

Loss from operations

​

​

​

​

(1,858,614)

​

​

​

​

​

(669,337)

​

​

​

​

​

(1,017,320)

​

​

​

​

​

(159,639)

​

​

​

​

​

(407,691)

​

​

​

​

​

(413,074)

​

​

​

​

​

(65,160)

​

​

​

Other (expense)/income:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest expense

​

​

​

​

(83,667)

​

​

​

​

​

(66,916)

​

​

​

​

​

(63,244)

​

​

​

​

​

(9,924)

​

​

​

​

​

(14,582)

​

​

​

​

​

(10,138)

​

​

​

​

​

(1,599)

​

​

​

Interest income and investment income, net

​

​

​

​

79,631

​

​

​

​

​

254,916

​

​

​

​

​

740,432

​

​

​

​

​

116,190

​

​

​

​

​

178,472

​

​

​

​

​

162,874

​

​

​

​

​

25,693

​

​

​

Changes in fair value of warrants and derivative liabilities

​

​

​

​

(426,425)

​

​

​

​

​

272,327

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

Others, net

​

​

​

​

(128,799)

​

​

​

​

​

20,133

​

​

​

​

​

187,320

​

​

​

​

​

29,395

​

​

​

​

​

(90,211)

​

​

​

​

​

279,703

​

​

​

​

​

44,122

​

​

​

(Loss)/Income before income tax expense

​

​

​

​

(2,417,874)

​

​

​

​

​

(188,877)

​

​

​

​

​

(152,812)

​

​

​

​

​

(23,978)

​

​

​

​

​

(334,012)

​

​

​

​

​

19,365

​

​

​

​

​

3,056

​

​

​

Net loss

​

​

​

​

(2,438,536)

​

​

​

​

​

(151,657)

​

​

​

​

​

(321,455)

​

​

​

​

​

(50,442)

​

​

​

​

​

(359,967)

​

​

​

​

​

(10,866)

​

​

​

​

​

(1,713)

​

​

​

Net loss attributable to ordinary shareholders of Li Auto Inc.

​

​

​

​

(3,281,607)

​

​

​

​

​

(791,985)

​

​

​

​

​

(321,455)

​

​

​

​

​

(50,442)

​

​

​

​

​

(359,967)

​

​

​

​

​

(10,866)

​

​

​

​

​

(1,713)

​

​

​

Weighted average number of ordinary shares used in computing net loss per share

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic and diluted

​

​

​

​

255,000,000

​

​

​

​

​

870,003,278

​

​

​

​

​

1,853,320,448

​

​

​

​

​

1,853,320,448

​

​

​

​

​

1,809,393,256

​

​

​

​

​

1,929,740,892

​

​

​

​

​

1,929,740,892

​

​

​

Net loss per share attributable to ordinary shareholders

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic and diluted

​

​

​

​

(12.87)

​

​

​

​

​

(0.91)

​

​

​

​

​

(0.17)

​

​

​

​

​

(0.03)

​

​

​

​

​

(0.20)

​

​

​

​

​

(0.01)

​

​

​

​

​

(0.00)

​

​

​

Net loss

​

​

​

​

(2,438,536)

​

​

​

​

​

(151,657)

​

​

​

​

​

(321,455)

​

​

​

​

​

(50,442)

​

​

​

​

​

(359,967)

​

​

​

​

​

(10,866)

​

​

​

​

​

(1,713)

​

​

​

Total other comprehensive income/(loss), net of tax

​

​

​

​

2,851

​

​

​

​

​

(1,020,728)

​

​

​

​

​

(516,687)

​

​

​

​

​

(81,079)

​

​

​

​

​

107,644

​

​

​

​

​

(85,116)

​

​

​

​

​

(13,427)

​

​

​

Total comprehensive loss, net of tax

​

​

​

​

(2,435,685)

​

​

​

​

​

(1,172,385)

​

​

​

​

​

(838,142)

​

​

​

​

​

(131,521)

​

​

​

​

​

(252,323)

​

​

​

​

​

(95,982)

​

​

​

​

​

(15,140)

​

​

​

Comprehensive loss attributable to ordinary shareholders of Li Auto Inc.

​

​

​

​

(3,278,756)

​

​

​

​

​

(1,812,713)

​

​

​

​

​

(838,142)

​

​

​

​

​

(131,521)

​

​

​

​

​

(252,323)

​

​

​

​

​

(95,982)

​

​

​

​

​

(15,140)

​

​

​

Non-GAAP Financial Measure:(2)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Adjusted net (loss)/income

​

​

​

​

(2,012,111)

​

​

​

​

​

(281,189)

​

​

​

​

​

779,901

​

​

​

​

​

122,385

​

​

​

​

​

(177,039)

​

​

​

​

​

477,085

​

​

​

​

​

75,259

​

​

​

​

S-20

 

​

​

​

For the Year Ended December 31,

​

​

For the Three Months Ended March 31,

​

​

​

​

2019

​

​

2020

​

​

2021

​

​

2021

​

​

2022

​

​

​

​

RMB

​

​

RMB

​

​

RMB

​

​

US$

​

​

RMB

​

​

RMB

​

​

US$

​

​

​

​

(in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cost of sales

​

​

​

​

—

​

​

​

​

​

1,515

​

​

​

​

​

26,713

​

​

​

​

​

4,192

​

​

​

​

​

6,209

​

​

​

​

​

10,665

​

​

​

​

​

1,682

​

​

Research and development expenses

​

​

​

​

—

​

​

​

​

​

60,789

​

​

​

​

​

741,793

​

​

​

​

​

116,404

​

​

​

​

​

116,609

​

​

​

​

​

324,532

​

​

​

​

​

51,194

​

​

Selling, general and administrative expenses

​

​

​

​

—

​

​

​

​

​

80,491

​

​

​

​

​

332,850

​

​

​

​

​

52,231

​

​

​

​

​

60,110

​

​

​

​

​

152,754

​

​

​

​

​

24,096

​

​

Total

​

​

​

​

—

​

​

​

​

​

142,795

​

​

​

​

​

1,101,356

​

​

​

​

​

172,827

​

​

​

​

​

182,928

​

​

​

​

​

487,951

​

​

​

​

​

76,972

​

​

​

​

​

As of December 31,

​

​

As of March 31,

​

​

​

​

2019

​

​

2020

​

​

2021

​

​

2022

​

​

​

​

RMB

​

​

RMB

​

​

RMB

​

​

US$

​

​

RMB

​

​

US$

​

​

​

​

(in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(unaudited)

​

Summary Consolidated Balance Sheets Data:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

​

​

​

1,296,215

​

​

​

​

​

8,938,341

​

​

​

​

​

27,854,224

​

​

​

​

​

4,370,936

​

​

​

​

​

32,055,546

​

​

​

​

​

5,056,638

​

​

Restricted cash

​

​

​

​

140,027

​

​

​

​

​

1,234,178

​

​

​

​

​

2,638,840

​

​

​

​

​

414,092

​

​

​

​

​

2,661,026

​

​

​

​

​

419,767

​

​

Time deposits and short-term investments

​

​

​

​

2,272,653

​

​

​

​

​

19,701,382

​

​

​

​

​

19,668,239

​

​

​

​

​

3,086,376

​

​

​

​

​

16,471,460

​

​

​

​

​

2,598,309

​

​

Total assets

​

​

​

​

9,513,422

​

​

​

​

​

36,373,276

​

​

​

​

​

61,848,913

​

​

​

​

​

9,705,443

​

​

​

​

​

65,794,345

​

​

​

​

​

10,378,800

​

​

Total liabilities

​

​

​

​

4,932,291

​

​

​

​

​

6,569,679

​

​

​

​

​

20,784,611

​

​

​

​

​

3,261,558

​

​

​

​

​

24,337,583

​

​

​

​

​

3,839,157

​

​

Total mezzanine equity

​

​

​

​

10,255,662

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

Total shareholders’ (deficit)/equity

​

​

​

​

(5,674,531)

​

​

​

​

​

29,803,597

​

​

​

​

​

41,064,302

​

​

​

​

​

6,443,885

​

​

​

​

​

41,456,762

​

​

​

​

​

6,539,643

​

​

Total liabilities, mezzanine equity and shareholders’ (deficit)/equity

​

​

​

​

9,513,422

​

​

​

​

​

36,373,276

​

​

​

​

​

61,848,913

​

​

​

​

​

9,705,443

​

​

​

​

​

65,794,345

​

​

​

​

​

10,378,800

​

​

S-21

​

​

​

For the Year Ended December 31,

​

​

For the Three Months Ended March 31,

​

​

​

​

2019

​

​

2020

​

​

2021

​

​

2021

​

​

2022

​

​

​

​

RMB

​

​

RMB

​

​

RMB

​

​

US$

​

​

RMB

​

​

RMB

​

​

US$

​

​

​

​

(in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(unaudited)

​

​

​

​

​

​

​

Summary Consolidated Cash Flow Data:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net cash (used in)/provided by operating activities

​

​

​

​

(1,793,710)

​

​

​

​

​

3,139,804

​

​

​

​

​

8,340,385

​

​

​

​

​

1,308,788

​

​

​

​

​

926,343

​

​

​

​

​

1,833,769

​

​

​

​

​

289,270

​

​

Net cash (used in)/provided by investing activities

​

​

​

​

(2,574,836)

​

​

​

​

​

(18,737,725)

​

​

​

​

​

(4,257,244)

​

​

​

​

​

(668,054)

​

​

​

​

​

(2,892,396)

​

​

​

​

​

1,564,251

​

​

​

​

​

246,755

​

​

Net cash provided by financing activities

​

​

​

​

5,655,690

​

​

​

​

​

24,710,697

​

​

​

​

​

16,709,533

​

​

​

​

​

2,622,090

​

​

​

​

​

—

​

​

​

​

​

902,991

​

​

​

​

​

142,443

​

​

Effects of exchange rate changes on cash and cash equivalents and restricted cash

​

​

​

​

53,722

​

​

​

​

​

(376,646)

​

​

​

​

​

(472,129)

​

​

​

​

​

(74,086)

​

​

​

​

​

(24,104)

​

​

​

​

​

(77,503)

​

​

​

​

​

(12,226)

​

​

Net increase/(decrease) in cash, cash equivalents and restricted cash

​

​

​

​

1,340,866

​

​

​

​

​

8,736,130

​

​

​

​

​

20,320,545

​

​

​

​

​

3,188,738

​

​

​

​

​

(1,990,157)

​

​

​

​

​

4,223,508

​

​

​

​

​

666,242

​

​

Cash, cash equivalents and restricted cash at the beginning of the year/period

​

​

​

​

95,523

​

​

​

​

​

1,436,389

​

​

​

​

​

10,172,519

​

​

​

​

​

1,596,290

​

​

​

​

​

10,172,519

​

​

​

​

​

30,493,064

​

​

​

​

​

4,810,163

​

​

Cash, cash equivalents and restricted cash at the end of the year/period

​

​

​

​

1,436,389

​

​

​

​

​

10,172,519

​

​

​

​

​

30,493,064

​

​

​

​

​

4,785,028

​

​

​

​

​

8,182,362

​

​

​

​

​

34,716,572

​

​

​

​

​

5,476,405

​

​

S-22

 

RISK FACTORS

An investment in the ADSs involves significant risks. You should carefully consider the risks described below together with the risks described in our 2021 Annual Report, and the other information contained in this prospectus supplement and the accompanying prospectus, including the documents incorporated by reference. Any of these risks could have a material adverse effect on our business, financial condition, and results of operations. In any such case, the market price of the ADSs could decline, and you may lose all or part of your investment.

Please see “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” for information on where you can find the documents that we have filed with or furnished to the SEC and which are incorporated by reference in this prospectus supplement.

Risks Relating to Doing Business in China

Approval, filing, or other administration procedures by or with the CSRC or other PRC regulatory authorities may be required in connection with this offering under PRC law.

The M&A Rules requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and this offering may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, such CSRC approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for this offering, or a rescission of such CSRC approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

Our PRC legal counsel has advised us that, based on its understanding of the current PRC laws and regulations, we will not be required to submit an application to the CSRC for the approval of the listing and trading of the ADSs or our Class A ordinary shares because (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus supplement are subject to this regulation, (ii) our wholly-owned PRC subsidiaries were not established through a merger or requisition of the equity or assets of a “PRC domestic company” as such term is defined under the M&A Rules, and (iii) no provision in this regulation clearly classifies contractual arrangements as a type of transaction subject to its regulation. However, we cannot assure you that relevant PRC government authorities, including the CSRC, would reach the same conclusion as our PRC legal counsel. If it is determined that the CSRC approval is required for this offering, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory authorities.

Furthermore, in July 2021, the relevant PRC government authorities issued Opinions on Lawfully and Strictly Cracking Down Illegal Securities Activities. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. These opinions further stipulated that the special provisions of the State Council on overseas offerings and listings by those companies limited by shares will be revised and therefore the duties of domestic industry-competent authorities and regulatory authorities will be clarified.

 

S-23

 

On December 24, 2021, the CSRC published the Administrative Provisions of the State Council on the Overseas Offering and Listing of Securities by Domestic Companies (Draft for Comments), or the Draft Overseas Listing Provisions, and the Measures of Record Filing for Overseas Offering and Listing of Securities by Domestic Companies (Draft for Comments), or the Draft Filing Measures. See “Item 4. Information on the Company — 4.B. Business Overview — Regulation — M&A Rules and Overseas Listing” in our 2021 Annual Report. Pursuant to these drafts, PRC domestic companies that directly or indirectly offer or list their securities in an overseas market, including a PRC company limited by shares and an offshore company whose main business operations are in China and that intends to offer shares or be listed in an overseas market based on its onshore equities, assets, incomes, or other similar interests, are required to file with the CSRC within three business days after submitting their listing application documents to the regulator in the place of intended listing. Pursuant to the Draft Filing Measures, a China-based company that has been listed in an overseas market is also required to file with the CSRC within three business days for its follow-on offering of securities in the overseas market after the completion of the issuance. In addition, at a press conference for these draft measures held on December 24, 2021, CSRC officials clarified that if the Draft Overseas Listing Provisions and the Draft Filing Measures become effective in their current forms, the initial public offerings by PRC domestic companies and financing by existing overseas-listed PRC domestic companies will be required to complete the filing process, and the existing overseas-listed PRC domestic companies that do not have subsequent financing activities will be allowed to complete the filing within a transition period. As of the date of this prospectus supplement, there is no schedule for the adoptions of such drafts. As it remains unclear whether the formal version to be adopted in the future will have any further material changes, it is uncertain how the measures will be enacted, interpreted, or implemented and how they will affect us.

In addition, pursuant to Cybersecurity Review Measures issued by the CAC on December 28, 2021 and effective on February 15, 2022, network platform operators holding over one million users’ personal information must apply with the Cybersecurity Review Office for a cybersecurity review before listing on a foreign stock exchange. In addition, the relevant government authorities may initiate the cybersecurity review against the relevant operators if the authorities believe that the network products or services or data processing activities of such operators affect or may affect national security. The cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal information being affected, controlled or maliciously used by foreign governments and the cyber information security risk in connection with the listing. However, given the Cybersecurity Review Measures were recently promulgated, there are substantial uncertainties as to the interpretation, application, and enforcement of the Cybersecurity Review Measures. In particular, it remains uncertain as to how to determine what constitutes “affecting national security.” We cannot assure you whether we would be subject to cybersecurity review for this offering and whether we would be able to complete the applicable cybersecurity review procedures in a timely manner, or at all, if we are required to do so. Further, on November 14, 2021, the CAC published the Administrative Regulations on Internet Data Security (Draft for Comments), which reiterates the circumstances under which data processors must apply for cybersecurity review, including, among others, the data processors who process personal information of at least one million users apply for listing on a foreign stock exchange, and the data processors’ listing in Hong Kong affects or may possibly affect national security. There is no timetable as to when such draft measures will be enacted. Therefore, it remains uncertain how the measures will be enacted, interpreted, or implemented and how they will affect this offering. We are closely monitoring regulatory developments in China regarding any necessary approval, filing, or other administrative procedures by or with the CSRC, the CAC, or other PRC regulatory authorities required for overseas listings and offerings.

 

S-24

 

If the CSRC or other relevant PRC regulatory authorities subsequently determine that prior approval, filing, or other administrative procedure is required for any of our overseas offerings of securities or to maintain the listing status of our ADSs, we cannot guarantee that we will be able to obtain such approval, complete such filing, or comply with such administrative procedure in a timely manner, or at all. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, not to proceed with such offering or maintain the listing status of our ADSs. If we proceed with any such offering or maintain the listing status of our ADSs without obtaining the CSRC’s approval to the extent it is required, or if we are unable to comply with any new requirements that might be adopted for offerings that we have completed prior to the adoption of the above-referenced measures, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from overseas securities offerings into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations, and prospects, as well as the trading price of the ADSs.

We are or may be subject to risks associated with strategic alliances or acquisitions.

We have entered into and may in the future enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose from time to time. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by third parties, and increases in expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these third parties suffers negative publicity or harm to their reputation from events relating to their businesses, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

In addition, we may have to complete certain administrative procedures with the relevant PRC government authorities for strategic alliances and comply with any applicable PRC rules and regulations. For example, the PRC Anti-Monopoly Law requires that the anti-monopoly authority be notified in advance of any concentration of undertaking if certain thresholds are triggered. Recently, the SAMR imposed administrative penalties on us for failure to file prior notification of concentrations of undertaking for two of our past transactions even though neither transaction had an effect of excluding or limiting competition, resulting in a RMB400,000 fine for each case. We cannot assure you that we will not be involved in or subject to other investigations, inquiries, claims, or other administrative proceedings or requirements relating to anti-monopoly laws and regulations in the future. Pursuant to the PRC Anti-Monopoly Law, if the anti-monopoly authority determines that a business operator fails to file prior notification of concentrations of undertaking, the business operator may be subject to administrative penalties, including a fine of up to RMB500,000, and in extreme case it may be ordered to terminate or unwind the contemplated transaction, or to dispose of the relevant assets or shares or transfer the relevant business within a specified period. The Anti-Monopoly Law, which was amended in June 2022 and will become effective on August 1, 2022, increases the fines for illegal concentration of business operators to no more than 10% of the business operator’s sales revenue in the previous year if the concentration of business operator has or may have an effect of excluding or limiting competitions, or a fine of up to RMB5,000,000 if the concentration of business operator does not have an effect of excluding or limiting competition.

 

S-25

 

Furthermore, if appropriate opportunities arise, we may acquire additional assets, products, technologies, or businesses that are complementary to our existing business. In addition to possible shareholder approval, we may have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable PRC laws and regulations, which could result in increasing delay and costs, and may derail our business strategy if we fail to do so. Moreover, the costs of identifying and consummating acquisitions may be significant. Furthermore, past and future acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the financial results that we expect, or may be involved in potential legal risks that negatively affect our business. Acquisitions could result in the use of substantial amount of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets, and exposure to potential unknown liabilities of the acquired business. Any acquired business may be involved in legal proceedings originating from historical periods prior to the acquisition, and we may not be fully indemnified, or at all, for any damage to us resulting from such legal proceedings, which could materially and adversely affect our financial position and results of operations.

Risks Relating to Our Ordinary Shares, the ADSs, and This Offering

The ADSs offered hereby will be sold in an “at-the-market offering” and investors who buy ADSs at different times will likely pay different prices.

Investors who purchase ADSs in this offering at different times will likely pay different prices, and accordingly may experience different levels of dilution and different outcomes in their investment results. In addition, investors may experience a decline in the value of the ADSs that they purchase in this offering as a result of sales made at prices lower than the prices they paid.

The trading price of our ADSs has been and may be, and the trading price of our Class A ordinary shares can be, volatile, which could result in substantial losses to investors.

The trading price of our ADSs has been volatile since our ADSs started to trade on the Nasdaq Global Select market, and could fluctuate widely due to factors beyond our control. The trading price of our Class A ordinary shares, likewise, can be volatile for similar or different reasons. This may happen because of broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in Hong Kong or the United States. The securities of some of these companies have experienced significant volatility, including price declines in connection with their public offerings. The trading performances of these Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in Hong Kong or the United States in general and consequently may impact the trading performance of our Class A ordinary shares or ADSs, regardless of our actual operating performance.

In addition to market and industry factors, the price and trading volume for our Class A ordinary shares or ADSs may be highly volatile for factors specific to our own operations, including the following:

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variations in our revenues, earnings and cash flow;

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announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;

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announcements of new services and expansions by us or our competitors;

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changes in financial estimates by securities analysts;

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detrimental adverse publicity about us, our services or our industry;

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additions or departures of key personnel;

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release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;

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actual or potential litigation or regulatory investigations; and

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regulatory developments affecting us, our users, suppliers, or our industry.

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S-26

 

Any of these factors may result in large and sudden changes in the volume and price at which our Class A ordinary shares or ADSs will trade.

In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares or ADSs may view as beneficial.

Pursuant to our fifth amended and restated memorandum and articles of association, our authorized and issued ordinary shares consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, holders of Class A ordinary shares and Class B ordinary shares vote together as a single class except as may otherwise be required by law, and holders of Class A ordinary shares will be entitled to one vote per share while holders of Class B ordinary shares will be entitled to ten votes per share. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Class B ordinary shares shall only be held by the Founder (as defined in our fifth amended and restated memorandum and articles of association) or a Director Holding Vehicle (as defined in our fifth amended and restated memorandum and articles of association). Subject to the Hong Kong Listing Rules or other applicable laws or regulations, each Class B ordinary share shall be automatically converted into one Class A ordinary share upon the occurrence of any of the following events: (i) the death of the holder of such Class B ordinary share (or, where the holder is a Director Holding Vehicle, the death of the Founder); (ii) the holder of such Class B ordinary share ceasing to be a Director or a Director Holding Vehicle for any reason; (iii) the holder of such Class B ordinary share (or, where the holder is a Director Holding Vehicle, the Founder) being deemed by the Hong Kong Stock Exchange to be incapacitated for the purpose of performing his duties as a Director; (iv) the holder of such Class B ordinary share (or, where the holder is a Director Holding Vehicle, the Founder) being deemed by the Hong Kong Stock Exchange to no longer meet the requirements of a director set out in the Hong Kong Listing Rules; or (v) any direct or indirect sale, transfer, assignment, or disposition of the beneficial ownership of, or economic interest in, such Class B ordinary share or the control over the voting rights attached to such Class B Ordinary Share through voting proxy or otherwise to any person, including by reason that a Director Holding Vehicle no longer complies with Rule 8A.18(2) of the Hong Kong Listing Rules (in which case the Company and the Founder or the Director Holding Vehicle must notify the Hong Kong Stock Exchange as soon as practicable with details of the non-compliance), other than a transfer of the legal title to such Class B ordinary share by the Founder to a Director Holding Vehicle wholly-owned and wholly controlled by him, or by a Director Holding Vehicle to the Founder or another Director Holding Vehicle wholly-owned and wholly controlled by the Founder.

As of April 30, 2022, Mr. Xiang Li, our chairman and chief executive officer, beneficially owned 355,812,080 Class B ordinary shares and 108,557,400 Class A ordinary shares constituting the CEO Award Shares, representing 69.3% of the aggregate voting power of our total issued and outstanding ordinary shares assuming none of the performance-based conditions is met and no award premium is paid in respect of all CEO Award Shares, due to the disparate voting powers associated with our dual-class voting structure. Mr. Li will continue to have considerable influence over matters requiring shareholder approval. This concentration of ownership may discourage, delay, or prevent a change of control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our Class A ordinary shares or ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover, or other change of control transactions that holders of Class A ordinary shares or ADSs may view as beneficial.

 

S-27

 

Our dual-class voting structure may render the ADSs representing our Class A ordinary shares ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of the ADSs.

Certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices. For example, S&P Dow Jones and FTSE Russell have changed their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. As a result, our dual-class voting structure may prevent the inclusion of the ADSs representing our Class A ordinary shares in such indices, which could adversely affect the trading price and liquidity of the ADSs representing our Class A ordinary shares.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our Class A ordinary shares or ADSs, the market price for our Class A ordinary shares or ADSs and trading volume could decline.

The trading market for our Class A ordinary shares or ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our Class A ordinary shares or ADSs, the market price for our Class A ordinary shares or ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our Class A ordinary shares or ADSs to decline.

The sale or availability for sale of a substantial number of our Class A ordinary shares or ADSs could adversely affect their market price.

Sales of a substantial number of our Class A ordinary shares or ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of our Class A ordinary shares or ADSs and could materially impair our ability to raise capital through equity offerings in the future. Shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our Class A ordinary shares or ADSs.

We may need additional capital, and the sale of additional ADSs or other equity securities could result in additional dilution to our shareholders, and the incurrence of additional indebtedness could increase our debt service obligations.

We may require additional cash resources due to changed business conditions, strategic acquisitions, or other future developments. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity and equity-linked securities could result in additional dilution to our shareholders. The sale of substantial number of ADSs could dilute the interests of our shareholders and ADS holders and adversely affect the market price of the ADSs. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Our management has broad discretion over the use of proceeds from this offering and may not apply the proceeds in ways that increase the value of your investment.

Our management will have significant discretion in applying the net proceeds that we receive from this offering. Although we intend to use the net proceeds from this offering as described in “Use of Proceeds,” our management retains significant discretion with respect to the use of proceeds. Our management might not apply the net proceeds from this offering in ways that increase the value of your investment. You may not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. The net proceeds from this offering may be used in a manner that does not generate favorable returns.

 

S-28

 

Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Class A ordinary shares or ADSs for return on your investment.

We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our Class A ordinary shares or ADSs as a source for any future dividend income.

Our board of directors has complete discretion as to whether to distribute dividends. Our shareholders may also by ordinary resolution declare dividends, but no dividend can exceed the amount recommended by our board of directors. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our Class A ordinary shares or ADSs will likely depend entirely upon any future price appreciation of our Class A ordinary shares or ADSs. There is no guarantee that our Class A ordinary shares or ADSs will appreciate in value or even maintain the price at which you purchased the Class A ordinary shares or ADSs. You may not realize a return on your investment in our Class A ordinary shares or ADSs and you may even lose your entire investment in our Class A ordinary shares or ADSs.

There can be no assurance that we will not be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or Class A ordinary shares.

A non-U.S. corporation, such as our company, will be classified as a passive foreign investment company, or PFIC, for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income (the “income test”); or (ii) at least 50% of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”). Although the law in this regard is not entirely clear, we treat our consolidated VIEs and their subsidiaries as being owned by us for U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated with them. As a result, we consolidated their results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that we are not the owner of the consolidated VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for the current taxable year and any subsequent taxable year. Assuming that we are the owner of our consolidated VIEs and their subsidiaries for U.S. federal income tax purposes, and based on the current and anticipated value of our assets and composition of our income and assets, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future.

While we do not expect to be or become a PFIC, no assurance can be given in this regard because the determination of whether we are or will become a PFIC for any taxable year is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition and classification of our income and assets. Fluctuations in the market prices of our ADSs and Class A ordinary shares may cause us to be or become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined by reference to the market price of our ADSs or Class A ordinary shares from time to time (which may be volatile). The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets.

If we were to be or become a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information — E. Taxation — United States Federal Income Tax Considerations”) holds our ADSs or Class A ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Item 10. Additional Information — E. Taxation — United States Federal Income Tax Considerations — Passive Foreign Investment Company Rules.”

 

S-29

 

Our fifth amended and restated memorandum and articles of association give us power to take certain actions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares, including Class A ordinary shares and ADSs, at a premium.

Our fifth amended and restated memorandum and articles of association give us power to take certain actions that could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Subject to the conditions that (i) no new class of shares with voting rights superior to those of Class A ordinary shares will be created and (ii) any variations in the relative rights as between the different classes will not result in the creation of new class of shares with voting rights superior to those of Class A ordinary shares, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our Class A ordinary shares, in the form of ADSs or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our Class A ordinary shares or ADSs may fall and the voting and other rights of the holders of our Class A ordinary shares or ADSs may be materially and adversely affected. However, our exercise of any such power that may limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions under the memorandum and articles after our listing on the Hong Kong Stock Exchange is subject to our overriding obligations to comply with all applicable Hong Kong laws and regulations, the Hong Kong Listing Rules, and the Codes on Takeovers and Mergers and Share Buy-backs. We have adopted our fifth amended and restated memorandum and articles of association in our extraordinary general meeting of shareholders held on November 16, 2021 to comply with such obligations.

You may face difficulties in protecting your interests, and your ability to protect your rights through Hong Kong or U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in Hong Kong or some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than Hong Kong or the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a Hong Kong court or a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than copies of the memorandum and articles of association, the register of mortgages and charges, and any special resolutions passed by the shareholders) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

 

S-30

 

Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as Hong Kong or the United States. If we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in Hong Kong or the United States.

Your investment in our Class A ordinary shares or ADSs may be impacted if we are encouraged to issue CDRs in the future.

PRC government authorities have issued new rules that allow PRC technology companies listed outside China to list on the mainland stock market through the creation of Chinese Depositary Receipts, or CDRs. However, as the CDR mechanism is newly established, there are substantial uncertainties in the interpretation and implementation of these rules. We might consider and be encouraged by the evolving PRC governmental policies to issue CDRs and allow investors to trade our CDRs on PRC stock exchanges in the future. However, there are uncertainties as to whether a pursuit of CDRs in China would bring positive or negative impact on your investment in our Class A ordinary shares or ADSs.

The conversion of the 2028 Notes or any convertible notes that we may issue in the future may dilute the ownership interest of the existing shareholders and existing ADS holders, including holders who had previously converted their notes.

We issued US$862.5 million 0.25% convertible senior notes due 2028, or the 2028 Notes, in April 2021, which may be converted, at an initial conversion rate of 35.2818 ADSs per US$1,000 principal amount of notes (which represents an initial conversion price of 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, or at the option of the holders upon satisfaction of certain conditions and during certain periods prior to the close of business on the business day immediately preceding November 1, 2027. As the conversion of the 2028 Notes may take place anytime during such periods if the relevant conditions are fulfilled, the conversion of the 2028 Notes and any convertible notes that we may issue in the future will dilute the ownership interests of existing shareholders and existing ADS holders. Any sales in the public market of the ADSs issuable upon such conversion may increase the opportunities to create short positions with respect to the ADSs, which could adversely affect prevailing trading prices of our ADSs. In addition, the existence of such convertible notes may encourage short selling by market participants because the conversion of such notes could depress the price of our ADSs. The price of our ADSs could be affected by possible sales of our ADSs by investors who view the convertible notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity, which we expect to occur involving our ADSs.

 

S-31

 

We may not have the ability to raise the funds necessary to settle conversion of the convertible notes in cash, to repurchase the convertible notes upon a fundamental change, to repurchase the convertible notes on May 1, 2024 and May 1, 2026, and our future debt may contain limitations on our ability to pay cash upon conversion or to repurchase the convertible notes.

Holders of the 2028 Notes have the right to require us to repurchase their notes on May 1, 2024 and May 1, 2026 or upon the occurrence of a fundamental change (as defined in the indenture), in each case, at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the notes surrendered therefor or to settle the notes being converted. Our failure to repurchase the notes at a time when the repurchase is required by the indenture governing the notes or to pay any cash payable on future conversions of the notes as required by the indenture governing the notes would constitute a default under the indenture. A default under the indenture or a fundamental change itself could also lead to a default under agreements governing any of our future indebtedness outstanding at the time. If the repayment of any outstanding future indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof.

Techniques employed by short sellers may drive down the market price of our Class A ordinary shares or ADSs.

Short selling is the practice of selling securities that a seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding relevant issuers and their business prospects in order to create negative market momentum and generate profits for themselves after selling securities short.

Public companies listed in the United States that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits or SEC enforcement actions.

It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law, or issues of commercial confidentiality. Such a situation could be costly and time-consuming and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations and shareholders’ equity, and any investment in our Class A ordinary shares or ADSs could be greatly reduced or rendered worthless.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, subject to the depositary’s right to require a claim to be submitted to arbitration, the federal or state courts in the City of New York have exclusive jurisdiction to hear and determine claims arising under the deposit agreement (including claims arising under the Exchange Act or the Securities Act) and in that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our Class A ordinary shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.

 

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If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.

Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs shall relieve us or the depositary from our respective obligations to comply with the Securities Act and Exchange Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands exempted company and the majority of our assets are located outside of Hong Kong or the United States. Substantially all of our operations are conducted in China. In addition, most of our current directors and officers are nationals and residents of countries other than Hong Kong or the United States. Substantially all of the assets of these persons may be located outside Hong Kong or the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in Hong Kong or the United States in the event that you believe that your rights have been infringed under Hong Kong laws, the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

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the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC;

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the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

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the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

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the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

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We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the Nasdaq Global Select Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely than that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq listing standards.

As a Cayman Islands exempted company listed on the Nasdaq Global Select Market, we are subject to Nasdaq listing standards. However, the Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq listing standards. For example, neither the Companies Act (As Revised) of the Cayman Islands nor our fifth amended and restated memorandum and articles of association requires a majority of our directors to be independent and we could include non-independent directors as members of our compensation committee and nominating committee under the Nasdaq listing standards, and our independent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present. As a result of certain home country practices we may follow in the future, our shareholders may be afforded less protection than they otherwise would under the Nasdaq listing standards applicable to U.S. domestic issuers. In addition, if we are subject to listing standards or other rules or regulations of other jurisdictions in the future, those requirements may further change the degree of protection for our shareholders to the extent they differ from the Nasdaq listing standards applicable to U.S. domestic issuers.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct how the Class A ordinary shares represented by your ADSs are voted.

Holders of ADSs do not have the same rights as our registered shareholders. As a holder of ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights that are carried by the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary. If we instruct the depositary to ask for your instructions, then upon receipt of your voting instructions, the depositary will try, as far as practicable, to vote the underlying Class A ordinary shares represented by your ADSs in accordance with these instructions. If we do not instruct the depositary to ask for your voting instructions, the depositary may still vote in accordance with the instructions you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to the underlying Class A ordinary shares represented by your ADSs unless you withdraw the shares and become a registered holder of such shares prior to the record date for the general meeting. Under our fifth amended and restated memorandum and articles of association, an annual general meeting must be called by not less than 21 days’ notice in writing and any other general meeting (including an extraordinary general meeting) must be called by not less than 14 days’ notice in writing.

 

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When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw the Class A ordinary shares underlying your ADSs and become the registered holder of such shares to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our fifth amended and restated memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the Class A ordinary shares underlying your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We have agreed to give the depositary sufficient prior notice of shareholder meetings. Nevertheless, we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the Class A ordinary shares represented by your ADSs are voted and you may have no legal remedy if the Class A ordinary shares represented by your ADSs are not voted as you requested.

The depositary for our ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect your interests.

Under the deposit agreement for the ADSs, if you do not vote, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs at shareholders’ meetings unless:

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we have failed to timely provide the depositary with notice of meeting and related voting materials;

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•

we have instructed the depositary that we do not wish a discretionary proxy to be given;

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•

we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;

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•

a matter to be voted on at the meeting would have a material adverse impact on shareholders; or

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the voting at the meeting is to be made on a show of hands.

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The effect of this discretionary proxy is that if you do not vote at shareholders’ meetings, you cannot prevent our Class A ordinary shares underlying your ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of our Class A ordinary shares are not subject to this discretionary proxy.

Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.

Under the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted in a state or federal court in New York, New York, and you, as a holder of our ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding.

The depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the deposit agreement be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreement. These arbitration provisions govern such dispute or difference and do not, in any event, preclude you from pursuing claims under the Securities Act or the Exchange Act in state or federal courts.

 

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You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, Class A ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, Class A ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our Class A ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

You may experience dilution of your holdings due to inability to participate in rights offerings.

We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

 

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We have incurred and may continue to incur increased costs as a result of being a public company.

We are a public company and have incurred, and may continue to incur, significant legal, accounting, and other expenses that we had not incurred as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq Global Select Market, impose various requirements on the corporate governance practices of public companies. As we are no longer an “emerging growth company” since December 31, 2020, we incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. For example, as a result of becoming a public company, we increased the number of independent directors and adopted policies regarding internal controls and disclosure controls and procedures. In addition, we have incurred, and expect to continue to incur, additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations as of and for the three months ended March 31, 2021 and 2022 in conjunction with the unaudited condensed consolidated financial statements and the related notes for the same periods included in Exhibit 99.1 to our current report on Form 6-K furnished to the SEC on June 28, 2022 and “Item 5. Operating and Financial Review and Prospects” in our 2021 Annual Report, both of which are incorporated by reference in this prospectus supplement. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk factors” or in other parts of this prospectus supplement.

Impact of the COVID-19 Pandemic on Our Operations and Financial Performance

In late March and April 2022, the COVID-19 resurgence affected China’s automotive industry in general and our company and our suppliers in particular, resulting in severe industry-wide disruptions in supply chain, logistics, and production. The resurgence of the COVID-19 cases caused by the Omicron variants has incapacitated some of our suppliers in the Yangtze Delta region and adversely affected the supply of certain parts for our production, and materially affected our production in April, resulting in delayed deliveries for some of our users. Some of our supplier chain partners are in key industrial sectors identified by local authorities and thus are prioritized in restoring regular operations. We are working with all of our supply chain partners to restore production capacity and aim to shorten the delivery waiting time for Li ONE users. The COVID-19 resurgence also adversely affected our retail store expansion. With the COVID-19 resurgence gradually under control, we plan to continue to expand our sales network to meet the increasing demands from our users. Despite the impact of COVID-19 resurgence, we delivered 31,716 vehicles in the first quarter of 2022, representing a 152.1% year-over-year increase. Our total revenues increased from RMB3.6 billion for the three months ended March 31, 2021 to RMB9.6 billion (US$1.5 billion) for the three months ended March 31, 2022, representing a 167.5% year-over-year increase.

The extent to which the COVID-19 pandemic affects our financial condition, results of operations, and cash flows in the future will depend on the future developments of the pandemic, including the extent and severity of new waves of outbreak in China and other countries, the development and progress of distribution of COVID-19 vaccine and other medical treatment and the effectiveness of such vaccine and other medical treatment, and the actions taken by government authorities to contain the outbreak, all of which are highly uncertain, unpredictable, and beyond our control. In addition, our financial condition, results of operations, and cash flows could be adversely affected to the extent that the pandemic harms the Chinese economy in general. As of March 31, 2022, we had a total of RMB51.2 billion (US$8.1 billion) in cash and cash equivalents, restricted cash, and time deposits and short-term investments. We believe that this level of liquidity is sufficient to successfully navigate an extended period of uncertainty.

In light of the uncertainties in the global market and economic conditions attributable to the COVID-19 pandemic, we will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic to our financial condition and liquidity. See also “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Industry — Pandemics and epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could disrupt our production, delivery, and operations, which could materially and adversely affect our business, financial condition, and results of operations” in our 2021 Annual Report.

Results of Operations for the Three Months Ended March 31, 2022

Set forth below is a discussion of our unaudited consolidated statements of comprehensive loss data for the three months ended March 31, 2021 and 2022. The discussion of our audited financial information for each of the three years ended December 31, 2021 and as of December 31, 2020 and 2021 is set forth in “Item 5. Operating and Financial Review and Prospectus” in our 2021 Annual Report, which is incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

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Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Revenues

Our total revenues increased from RMB3.6 billion for the three months ended March 31, 2021 to RMB9.6 billion (US$1.5 billion) for the three months ended March 31, 2022, primarily due to an increase in revenues from vehicle sales.

Revenues from vehicle sales increased from RMB3.5 billion for the three months ended March 31, 2021 to RMB9.3 billion (US$1.5 billion) for the three months ended March 31, 2022, primarily attributable to an increase in deliveries for the three months ended March 31, 2022.

Revenues from other sales and services increased from RMB111.5 million for the three months ended March 31, 2021 to RMB253.4 million (US$40.0 million) for the three months ended March 31, 2022, primarily attributable to increases in sales of charging stalls, accessories, and services in line with higher accumulated vehicle sales.

Cost of Sales

Our cost of sales increased from RMB3.0 billion for the three months ended March 31, 2021 to RMB7.4 billion (US$1.2 billion) for the three months ended March 31, 2022, due to the increase in sales volume of vehicles.

Gross Profit

As a result of the foregoing, our gross profit increased from RMB616.7 million for the three months ended March 31, 2021 to RMB2.2 billion (US$341.3 million) for the three months ended March 31, 2022. Gross profit from vehicle sales increased from RMB584.7 million for the three months ended March 31, 2021 to RMB2.1 billion (US$329.5 million) for the three months ended March 21, 2022. Gross profit from other sales and services increased from RMB32.1 million for the three months ended March 31, 2021 to RMB75.2 million (US$11.9 million) for the three months ended March 31, 2022. The increase in gross profit for the three months ended March 31, 2022 was primarily attributable to the increase in vehicle deliveries.

Research and Development Expenses

Our research and development expenses increased from RMB514.5 million for the three months ended March 31, 2021 to RMB1.4 billion (US$216.7 million) for the three months ended March 31, 2022, primarily attributable to an increase in employee compensation as a result of growing number of research and development staff as well as an increase in costs associated with new product development.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses increased from RMB509.9 million for the three months ended March 31, 2021 to RMB1.2 billion (US$189.8 million) for the three months ended March 31, 2022, primarily attributable to the increase in employee compensation as a result of growing number of staff as well as an increase in marketing and promotional activities and rental expenses associated with the expansion of our sales network.

Loss from Operations

As a result of the foregoing, the operating loss increased from RMB407.7 million for the three months ended March 31, 2021 to RMB413.1 million (US$65.2 million) for the three months ended March 31, 2022.

Interest Income and Investment Income, Net

Our net interest income and investment income decreased from RMB178.5 million for the three months ended March 31, 2021 to RMB162.9 million (US$25.7 million) for the three months ended March 31, 2022.

 

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Others, Net

Other income/(loss) increased from RMB90.2 million loss for the three months ended March 31, 2021 to RMB279.7 million income for the three months ended March 31, 2022, primarily attributable to an increase of refund on value-added tax payment and reimbursement paid to us by the depositary of our ADS program.

Net Loss

As a result of the foregoing, we incurred net loss of RMB10.9 million (US$1.7 million) for the three months ended March 31, 2022, compared with net loss of RMB360.0 million for the three months ended March 31, 2021.

Cash Flows and Working Capital

As of March 31, 2022, we had RMB51.2 billion (US$8.1 billion) in cash and cash equivalents, restricted cash, time deposits, and short-term investments. Our cash and cash equivalents primarily consist of cash on hand, time deposits, and highly-liquid investments placed with banks or other financial institutions, which are unrestricted for withdrawal or use and have original maturities of three months or less.

Our net operating cash inflow for the three months ended March 31, 2022 was RMB1.8 billion (US$289.3 million), compared with RMB926.3 million for the three months ended March 31, 2021. We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements, capital expenditures, and debt repayment obligations for at least the next 12 months. We may decide to enhance our liquidity position or increase our cash reserve for future operations and investments through additional financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increasing fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Cash Flow

The following table sets forth a summary of our cash flows for the periods indicated.

 

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Net cash provided by operating activities for the three months ended March 31, 2022 was RMB1.8 billion (US$289.3 million), primarily attributable to our net loss of RMB10.9 million (US$1.7 million) adjusted for (i) non-cash items of RMB726.1 million (US$114.5 million), which primarily consisted of share-based compensation expenses, depreciation and amortization, and unrealized investment loss and (ii) a net decrease in operating assets and liabilities of RMB1.1 billion (US$176.4 million). The net decrease in operating assets and liabilities was primarily the result of (i) an increase in trade and notes payable of RMB1.7 billion (US$274.1 million) mainly consisting of notes payable and (ii) an increase in other non-current liabilities of RMB337.5 million (US$53.2 million) mainly consisting of accrued warranty and deferred government grants, partially offset by (iii) an increase in inventory of RMB353.2 million (US$55.7 million), which was primarily attributable to increased raw materials due to increased demands and (iv) an increase in prepayments and other current assets of RMB341.8 million (US$53.9 million), which was primarily attributable to an increase in notes receivable from the sale of certain production facilities and equipment in Changzhou manufacturing base, an increases in deductible value-added tax, and an increase in prepayment to vendors.

Net cash provided by investing activities for the three months ended March 31, 2022 was RMB1.6 billion (US$246.8 million). This was primarily attributable to (i) our net redemption of short-term investments and time deposits of RMB3.1 billion (US$494.9 million), partially offset by (ii) purchase of property, plant and equipment and intangible assets of RMB1.3 billion (US$210.1 million) and (iii) our investment in long-term investments of RMB241.0 million (US$38.0 million).

Net cash provided by financing activities for the three months ended March 31, 2022 was RMB903.0 million (US$142.4 million), primarily attributable to (i) proceeds from borrowings of RMB900.0 million (US$142.0 million) by Chongqing Lixiang with a commercial bank in China in February 2022 and (ii) proceeds from exercise of share options of RMB3.0 million (US$472.0 thousand).

Material Cash Requirements

Our material cash requirements as of March 31, 2022 and any subsequent interim period primarily include the cash needs in our business operations and capital expenditures.

Capital Expenditures

Our capital expenditures were RMB 356.1 million and RMB1.3 billion (US$210.1 million) for the three months ended 2021 and 2022, respectively. In these periods, our capital expenditures were primarily used for the acquisition of factory buildings, equipment, tooling and leasehold improvements mainly for retail stores and delivery and servicing centers, laboratories, and production facilities. We plan to continue to incur capital expenditures in the future to meet our business growth. We intend to fund our future capital expenditures with net proceeds from equity and debt offerings, loan financings, existing cash on hand, and cash from sales of vehicles. We expect that our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a limited operating history means that we have limited historical data on the demand for our products and services. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate.

Non-GAAP Financial Measure

We use adjusted net (loss)/income, a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. By excluding the impact of share-based compensation expenses, we believe that the non-GAAP financial measure helps identify underlying trends in our business and enhance the overall understanding of our past performance and future prospects. We also believe that the non-GAAP financial measure allows for greater visibility with respect to key metrics used by our management in our financial and operational decision-making.

The non-GAAP financial measure is 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 measure has limitations as analytical tools and when assessing our operating performance, investors should not consider it in isolation, or as a substitute for net loss or other consolidated statements of comprehensive loss data prepared in accordance with U.S. GAAP. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

We mitigate these limitations by reconciling the non-GAAP financial measure to the most comparable U.S. GAAP performance measure, all of which should be considered when evaluating our performance.

 

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The following table reconciles our adjusted net (loss)/income to net loss, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, for the periods indicated.

 

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USE OF PROCEEDS

In this offering, we may offer and sell our ADSs having an aggregate offering price of up to US$2,000,000,000. Because there is no minimum offering amount required as a condition to close this offering, the actual total offering amount, commissions, and proceeds to us are not determinable at this time.

We currently expect to use the net proceeds from this offering for (i) research and development of next-generation electric vehicle technologies including technologies for BEVs, smart cabin, and autonomous driving, (ii) development and manufacture of future platforms and car models, and (iii) working capital needs and general corporate purposes.

The foregoing represents our current intentions to use and allocate the net proceeds of this offering based upon our present plans and business conditions. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus supplement.

 

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CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2022:

•

on an actual basis; and

​

•

on an adjusted basis giving effect to our issuance and sale of 107,671,600 Class A ordinary shares represented by 53,835,800 ADSs pursuant to this prospectus supplement, at an assumed offering price of US$37.15 per ADS, which was the average closing price of the ADSs on the Nasdaq Global Select Market for the 5 trading days preceding June 24, 2022, resulting in estimated net proceeds of US$1.97 billion, after deducting the sales agents’ fees and commissions and estimated offering expenses payable by us.

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This table should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and the related notes in our 2021 Annual Report and our unaudited condensed consolidated financial statements and the related notes included in Exhibit 99.1 to our current report on Form 6-K furnished to the SEC on June 28, 2022, both of which are incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

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DILUTION

If you purchase the ADSs in this offering, your interest will be diluted to the extent of the excess of the public offering price per ADS over our net tangible book value per ADS after this offering. Our net tangible book value as of March 31, 2022 was RMB40.7 billion (US$6.4 billion), or RMB21.08 (US$3.33) per ordinary share and RMB42.16 (US$6.66) per ADS. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities.

After (i) giving effect to the sale of the ADSs in the aggregate amount of US$2.0 billion at an assumed offering price of US$37.15 per ADS issued and outstanding, which was the average closing price of the ADSs on the Nasdaq Global Select Market for the 5 trading days preceding June 24, 2022 and (ii) deducting the sales agents’ fees and commissions and estimated offering expenses of US$27.4 million payable by us, we would have had a net tangible book value as of March 31, 2022 of US$8.4 billion, or US$4.12 per ordinary share and US$8.24 per ADS. This represents an immediate increase in the net tangible book value of US$0.79 per ordinary share and US$1.58 per ADS to our existing shareholders and ADS holders, respectively, and an immediate and substantial dilution in net tangible book value of US$14.46 per ordinary share and US$28.91 per ADS to new investors. The following table illustrates this per ADS dilution:

The table above assumes for illustrative purposes that an aggregate of 53,835,800 of the ADSs are sold at a price of US$37.15 per ADS, which was the average closing price of the ADSs on the Nasdaq Global Select Market for the 5 trading days preceding June 24, 2022, for aggregate gross proceeds of US$2.0 billion. The ADSs sold in this offering, if any, will be sold from time to time at various prices. An increase of US$1.00 per ADS in the price at which the ADSs are sold from the assumed offering price of US$37.15 per ADS shown in the table above, assuming all of the ADSs in the aggregate amount of US$2.0 billion are sold at that price, would increase the dilution in net tangible book value per ordinary share and per ADS to new investors in this offering to US$14.96 per ordinary share and US$29.92 per ADS, after deducting the sales agents’ fees and commissions and estimated aggregate offering expenses payable by us. A decrease of US$1.00 per ADS in the price at which the ADSs are sold from the assumed offering price of US$37.15 per ADS shown in the table above, assuming all of our ADSs in the aggregate amount of US$2.0 billion are sold at that price, would decrease the dilution in net tangible book value per ordinary share and per ADS to new investors in this offering to US$13.97 per ordinary share and US$27.94 per ADS, after deducting commissions and estimated aggregate offering expenses payable by us. This information is supplied for illustrative purposes only.

The calculations above are based upon 1,930,336,458 ordinary shares issued and outstanding as of March 31, 2022, excluding (i) 26,821,552 Class A ordinary shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under our share incentive plans, and (ii) 108,557,400 Class A ordinary shares underlying awards granted under our 2021 Share Incentive Plan to Mr. Xiang Li, our chairman and chief executive officer, with certain performance-based vesting conditions. To the extent that outstanding options are exercised, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, our shareholders and ADS holders will experience further dilution.

 

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DIVIDEND POLICY

Our board of directors has discretion on whether to distribute dividends, subject to certain requirements of Cayman Islands law, namely that our company may only pay dividends out of profits or share premium account, and provided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay our debts as they fall due in the ordinary course of business. In addition, our shareholders may declare a dividend by ordinary resolution, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to pay dividends on our Class A ordinary shares, the form, frequency, and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors our board of directors may deem relevant.

We do not expect to pay any cash dividends on our Class A ordinary shares in the foreseeable future after this offering. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us.

If we pay any dividends on our Class A ordinary shares, we will also pay those dividends that are payable in respect of the Class A ordinary shares underlying our ADSs to the depositary, as the registered holder of such Class A ordinary shares, and the depositary then will pay such amounts to holders of ADSs in proportion to the Class A ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our Class A ordinary shares, if any, will be paid in U.S. dollars.

 

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DESCRIPTION OF THE SECURITIES OFFERED UNDER THIS PROSPECTUS SUPPLEMENT

In this offering, we may offer and sell the ADSs having an aggregate offering price of up to US$2,000,000,000 from time to time on the Nasdaq Global Select Market for the ADSs through Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited acting as our sales agents. As of June 22, 2022, our authorized share capital consists of (i) 4,500,000,000 Class A ordinary shares of a par value of US$0.0001 each, 1,709,903,330 of which are issued and outstanding and (ii) 500,000,000 Class B ordinary shares of a par value of US$0.0001 each, 355,812,080 of which are issued and outstanding. As of June 22, 2022, there are vested and exercisable options to purchase 44,660,370 ordinary shares. The material terms and conditions of our ordinary shares are described under the caption “Description of Share Capital,” starting from page 29 of the accompanying prospectus. The material terms and conditions of our ADSs are described under the caption “Description of American Depositary Shares,” starting from page 43 of the accompanying prospectus.

 

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PLAN OF DISTRIBUTION

Sales of the ADSs under this prospectus supplement and the accompanying prospectus may include ordinary brokers’ transactions, to or through a market maker, on or through the Nasdaq Global Select Market for the ADSs, or as otherwise agreed with the sales agents.

Upon written instruction from us, Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited, as the sales agents, will use their reasonable efforts to sell on our behalf, as our agents, the ADSs offered hereby as agreed upon by us and the sales agents. We will designate the maximum number of ADSs to be sold through the sales agents, on a daily basis or otherwise as we and the sales agents agree. Subject to the terms and conditions of the equity distribution agreement, the sales agents will use their reasonable efforts to sell, as our sales agents and on our behalf, all of the designated ADSs. We may instruct the sales agents not to sell ADSs if the sales cannot be effected at or above the price designated by us in any such instruction. We may suspend the offering of ADSs under the equity distribution agreement by notifying the sales agents. Likewise, the sales agents may suspend the offering of ADSs under the equity distribution agreement by notifying us of such suspension.

The sales agents will provide written confirmations to us following the close of trading on the Nasdaq Global Select Market each day on which the ADSs are sold under the equity distribution agreement. Each confirmation will include the number of ADSs sold on that day, the gross offering proceeds received from such sale, and the compensation payable by us to the sales agents in connection with such sales. We will report the number of ADSs sold through the sales agents under the equity distribution agreement, the proceeds to us (before expenses), and the compensation paid by us to the sales agents in connection with the sales of the ADSs.

The sales agents are expected to make offers and sales through their respective affiliates or other registered broker-dealers or selling agents. Any offers or sales in the United States will be conducted by broker-dealers registered with the SEC. Goldman Sachs (Asia) L.L.C. will offer ADSs in the United States through its SEC-registered broker-dealer affiliate in the United States, Goldman Sachs & Co. LLC. China International Capital Corporation Hong Kong Securities Limited is not a broker-dealer registered with the SEC and, to the extent that its conduct may be deemed to involve participation in offers or sales of ADSs in the United States, those offers or sales will be made through one or more SEC-registered broker-dealers in compliance with the applicable laws and regulations.

We will pay the sales agents at a commission rate of up to 1.3% of the gross offering proceeds from securities that we sold through them as the sales agents under the equity distribution agreement. Our net proceeds from the offering of securities hereunder will equal the gross proceeds, less the sales agents’ fees and commissions and any expenses payable by us and any transaction fees imposed by any government or self-regulatory organization in connection with the sales.

Settlement for sales of ADSs will occur on or before the second business day following the date on which any sales were made in return for payment of the net proceeds to us. There is no arrangement for funds to be received in an escrow, trust, or similar arrangement.

As our sales agents, Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited will not engage in any transactions that stabilize the market price of the ADSs.

In connection with the sale of the ADSs on our behalf, the sales agents may be deemed to be “underwriters” within the meaning of the Securities Act, and the compensation paid to them may be deemed to be underwriting commissions or discounts. We have agreed to provide indemnification and contribution to the sales agents against certain civil liabilities, including liabilities under the Securities Act.

Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited, and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing, and brokerage activities. Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc.,

 

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and China International Capital Corporation Hong Kong Securities Limited, and certain of their affiliates have from time to time performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or may in the future receive customary fees and expenses.

In the ordinary course of their respective various business activities, Goldman Sachs (Asia) L.L.C., UBS Securities LLC, and Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited, and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their respective customers, and such investment and securities activities may involve securities and/or instruments of our company or our affiliates. If Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited, or any of their affiliates have a lending relationship with us, the sales agents or their affiliates routinely hedge or may hedge their credit exposure to us consistent with their customary risk management policies. Typically, Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited, and their affiliates would hedge such exposure by entering into transactions that consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the ADSs offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the ADSs offered hereby. Goldman Sachs (Asia) L.L.C., UBS Securities LLC, Barclays Capital Inc., and China International Capital Corporation Hong Kong Securities Limited, and their affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

If the sales agents or we have reason to believe that the ADSs do not satisfy the exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act for an “actively traded security,” that party will promptly notify the other party and sales of the ADSs under the equity distribution agreement will be suspended until that or other exemptive provisions have been satisfied in the judgment of the sales agents and us.

The sales agents agree, on a pro rata basis, to reimburse us for certain of our expenses incurred in connection with this offering in an aggregate amount up to US$1,500,000.

The offering of ADSs pursuant to the equity distribution agreement will terminate upon the earlier of (i) the sale of all the ADSs subject to the distribution agency agreement or (ii) the termination of the distribution agency agreement by us or by the sales agents.

The address of Goldman Sachs (Asia) L.L.C. is 68th Floor, Cheung Kong Center, 2 Queens Road Central, Hong Kong. The address of UBS Securities LLC is 1285 Avenue of the Americas, New York, NY 10019, U.S.A. The address of Barclays Capital Inc. is 745 Seventh Avenue, New York, NY 10019, U.S.A. The address of China International Capital Corporation Hong Kong Securities Limited is 29th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong.

Notice to Hong Kong Investors

Our Class A ordinary shares are listed on the Main Board of the Hong Kong Stock Exchange under the stock code “2015.” For purposes of this offering, this prospectus supplement has not been and will not be registered with the Registrar of Companies in Hong Kong. The ADSs to be offered in this offering have not been, and will not be, offered or sold by means of any document other than (i) in circumstances that do not result in the document offering any shares or debentures to the public for subscription or purchase for cash or other consideration or calculated to invite offers by the public to subscribe for or purchase for cash or other consideration any shares or debentures or otherwise constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) (the “SFO”) and any rules made thereunder, or (iii) in other circumstances that do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up

 

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and Miscellaneous Provisions) Ordinance (Cap. 32, Laws of Hong Kong). No advertisement, invitation, or document relating to the ADSs or this offering has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the ADSs that are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO.

 

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TAXATION

Cayman Islands

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains, or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties, which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. Payments of dividends and capital in respect of our ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares, nor will gains derived from the disposal of our ordinary shares be subject to Cayman Islands income or corporate tax. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

PRC Taxation

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside China with “de facto management body” within China is considered a resident enterprise. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the STA issued a circular, known as STA Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the STA’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to STA Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in China; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in China; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in China; and (iv) at least 50% of voting board members or senior executives habitually reside in China.

We believe that Li Auto Inc. is not a PRC resident enterprise for PRC tax purposes. Li Auto Inc. is not controlled by a PRC enterprise or PRC enterprise group and we do not believe that Li Auto Inc. meets all of the conditions above. Li Auto Inc. is a company incorporated outside China. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside China. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with ours.

If the PRC tax authorities determine that Li Auto Inc. is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs. In addition, non-PRC resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within China. It is unclear whether our non-PRC resident individual shareholders (including our ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC resident individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% (and in the case of dividends, may be withheld at source). Any PRC tax liability may be reduced under an applicable tax treaty. However, it is unclear whether non-PRC shareholders of Li Auto Inc. would be able to obtain the benefits of any tax treaties between their country of tax residence and China in the event that Li Auto Inc. is treated as a PRC resident enterprise. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business

 

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in China — If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders” in our 2021 Annual Report.

United States Federal Income Tax Considerations

The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our ADSs or Class A ordinary shares by a U.S. Holder (as defined below) that holds our ADSs as “capital assets” ​(generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing U.S. federal tax law, which is subject to differing interpretations or change, possibly with retroactive effect. There can be no assurance that the IRS or a court will not take a contrary position. This discussion, moreover, does not address the U.S. federal estate, gift, alternative minimum tax, and other non-income tax considerations, the Medicare tax on certain net investment income, or any state, local or non-U.S. tax considerations, relating to the ownership or disposition of our ADSs or Class A ordinary shares. The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:

•

banks and other financial institutions;

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•

insurance companies;

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•

pension plans;

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•

cooperatives;

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•

regulated investment companies;

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•

real estate investment trusts;

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•

broker-dealers;

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•

traders that elect to use a mark-to-market method of accounting;

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•

certain former U.S. citizens or long-term residents;

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•

tax-exempt entities (including private foundations);

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•

holders who acquire their ADSs or Class A ordinary shares pursuant to any employee share option or otherwise as compensation; investors that will hold their ADSs or Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction for U.S. federal income tax purposes;

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•

investors that have a functional currency other than the U.S. dollar;

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•

persons holding ADSs or Class A ordinary shares in connection with a trade or business outside the United States;

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•

persons that actually or constructively own ADSs or ordinary shares representing 10% or more of our stock (by vote or value); or

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•

partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding ADSs or Class A ordinary shares through such entities,

​

all of whom may be subject to tax rules that differ significantly from those discussed below.

Each U.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal taxation to its particular circumstances, and the state, local, non-U.S. and other tax considerations of the ownership and disposition of our ADSs or Class A ordinary shares.

General

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or Class A ordinary shares that is, for U.S. federal income tax purposes:

 

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•

an individual who is a citizen or resident of the United States;

​

•

a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under the law of the United States or any state thereof or the District of Columbia;

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•

an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or

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•

a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as a U.S. person under the Code.

​

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ADSs or Class A ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our ADSs or Class A ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ADSs or Class A ordinary shares.

For U.S. federal income tax purposes, it is generally expected that a U.S. Holder of ADSs will be treated as the beneficial owner of the underlying shares represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated in this manner. Accordingly, deposits or withdrawals of Class A ordinary shares for ADSs will generally not be subject to U.S. federal income tax.

Passive Foreign Investment Company Considerations

A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income (the “income test”) or (ii) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”). For this purpose, cash and assets readily convertible into cash are generally categorized as passive assets and the company’s goodwill and other unbooked intangibles are taken into account. Passive income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.

Although the law in this regard is not entirely clear, we treat our consolidated VIEs and their subsidiaries as being owned by us for U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated with them. As a result, we consolidated their results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that we are not the owner of the VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for the current taxable year and any subsequent taxable year.

Assuming that we are the owner of the VIEs and their subsidiaries for U.S. federal income tax purposes, and based upon our current and projected income and assets, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. While we do not expect to be or become a PFIC, no assurance can be given in this regard because the determination of whether we will be or become a PFIC for any taxable year is a fact intensive determination made annually that depends, in part, upon the composition of our income and assets. Fluctuations in the market prices of our ADSs and Class A ordinary shares may cause us to be or become classified as a PFIC for the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market prices of our ADSs and Class A ordinary shares from time to time (which may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we have taken into account our current market capitalization. If our market capitalization subsequently declines, we may be or become classified as a PFIC for the current taxable year or future taxable years. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets. Under circumstances where revenues from activities that produce passive income significantly increase relative to our revenues from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of being or becoming classified as a PFIC may substantially increase. Because PFIC status is a factual determination made annually after the

 

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close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, the PFIC rules discussed below under “— Passive Foreign Investment Company Rules” generally will apply to such U.S. Holder for such taxable year, and unless the U.S. Holder makes certain elections, will apply in future years even if we cease to be a PFIC.

The discussion below under “— Dividends” and “— Sale or Other Disposition” is written on the basis that we will not be or become classified as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply generally if we are treated as a PFIC for any taxable year are discussed below under “— Passive Foreign Investment Company Rules.”

Dividends

Any cash distributions (including the amount of any PRC tax withheld) paid on our ADSs or Class A ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case of Class A ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes. Dividends received on our ADSs or Class A ordinary shares will not be eligible for the dividends received deduction generally allowed to corporations. A non-corporate U.S. Holder will be subject to tax at the lower capital gain tax rate applicable to “qualified dividend income,” provided that certain conditions are satisfied, including that (1) our ADSs or Class A ordinary shares on which the dividends are paid are readily tradeable on an established securities market in the United States, or, in the event that we are deemed to be a PRC resident enterprise under the PRC tax law, we are eligible for the benefits of the United States-PRC income tax treaty (the “Treaty”), (2) we are neither a PFIC nor treated as such with respect to such a U.S. Holder for our taxable year in which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. Our ADSs (but not our Class A ordinary shares), which are listed on the Nasdaq Global Select Market, are considered readily tradeable on an established securities market in the United States. There can be no assurance, however, that our ADSs will be considered readily tradeable on an established securities market in later years.

In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “— PRC Taxation”), we may be eligible for the benefits of the Treaty. If we are eligible for such benefits, dividends we pay on our Class A ordinary shares, regardless of whether such shares are represented by the ADSs, would be eligible for the reduced rates of taxation described in the preceding paragraph provided that all other applicable conditions for the reduced rates are met.

Dividends paid on our ADSs or Class A ordinary shares, if any, will generally be treated as income from foreign sources and will generally constitute passive category income for U.S. foreign tax credit purposes. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any nonrefundable foreign withholding taxes (not in excess of any applicable Treaty rate) imposed on dividends received on our ADSs or Class A ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign taxes withheld may (subject to applicable limitations) instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding, but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and their outcome depends in large part on the U.S. Holder’s individual facts and circumstances. Accordingly, U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Sale or Other Disposition

A U.S. Holder will generally recognize capital gain or loss upon the sale or other disposition of ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or Class A ordinary shares. Any capital gain or loss will be long-term if the ADSs or Class A ordinary shares have been held for more than one year and will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes. Long-term capital gain of

 

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non-corporate U.S. Holders will generally be eligible for a reduced rate of taxation. In the event that gain from the disposition of the ADSs or Class A ordinary shares is subject to tax in China, a U.S. Holder may elect to treat such gain as PRC-source gain under the Treaty. Pursuant to recently issued Treasury Regulations, however, if a U.S. Holder is not eligible for the benefits of the Treaty or does not elect to apply the Treaty, then such holder may not be able to claim a foreign tax credit arising from any PRC tax imposed on the disposition of the ADSs or Class A ordinary shares. The deductibility of a capital loss may be subject to limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or Class A ordinary shares, including the availability of the foreign tax credit or deduction under their particular circumstances, their eligibility for benefits under the Treaty and the potential impact of the recently issued Treasury Regulations.

Any Hong Kong stamp duty imposed on dealings in our Class A ordinary shares or ADSs will not be creditable against a U.S. Holder’s U.S. federal income tax liability. U.S. Holders should consult their tax advisers regarding whether any stamp duty may be deductible, or reduce the amount of gain (or increase the amount of loss) recognized upon the disposition of the Class A ordinary shares or ADSs.

Passive Foreign Investment Company Rules

If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, and unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules on (i) any excess distribution that we make to the U.S. Holder (which generally means the total amount of distributions paid during a taxable year to a U.S. Holder to the extent that they exceed 125 percent of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the ADSs or Class A ordinary shares), and (ii) any gain realized on the sale or other disposition of ADSs or Class A ordinary shares. Under the PFIC rules:

•

the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or Class A ordinary shares;

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•

the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”) will be taxable as ordinary income;

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the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individuals or corporations, as appropriate, for that year; and

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an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year.

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If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our subsidiaries, our consolidated VIEs or any of their subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries, our consolidated VIEs, or their subsidiaries.

As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to such stock, provided that such stock is regularly traded on a qualified exchange or other market, as defined in applicable United States Treasury Regulations. Our ADSs are listed on the Nasdaq Global Select Market, which is a qualified exchange for these purposes, and our Class A ordinary shares are listed on the Hong Kong Stock Exchange, which should constitute a qualified exchange or other market. We anticipate that our ADSs and Class A ordinary shares should qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. Holder makes a valid mark-to-market election, the holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs or Class A ordinary shares held at the end of the taxable year over the adjusted tax basis of such ADSs or Class A ordinary shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs or Class A ordinary shares over the fair market value of such ADSs or Class A ordinary shares held at the end of the taxable year, but such deduction will only be allowed

 

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to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSs or Class A ordinary shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the holder will not be required to take into account the gain or loss described above during any period that such corporation is not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our ADSs or Class A ordinary shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election, and any reaming loss will be a capital loss.

Because a mark-to-market election technically cannot be made for any lower-tier PFICs that we may own, a U.S. Holder that makes the mark-to-market election may continue to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.

We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.

If a U.S. Holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the holder must generally file an annual IRS Form 8621. You should consult your tax advisors regarding the U.S. federal income tax consequences of owning and disposing of our ADSs or Class A ordinary shares if we are or become a PFIC.

 

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LEGAL MATTERS

We are being represented by Skadden, Arps, Slate, Meagher & Flom LLP with respect to certain legal matters as to United States federal securities law and New York State law. We are being represented by Skadden, Arps, Slate, Meagher & Flom with respect to certain legal matters as to Hong Kong law. The sales agent is being represented by Davis Polk & Wardwell LLP with respect to certain legal matters as to United States federal securities law, New York State law, and Hong Kong law. The validity of the ordinary shares represented by the ADSs offered in this offering will be passed upon for us by Maples and Calder (Hong Kong) LLP. Certain legal matters as to PRC law will be passed upon for us by Han Kun Law Offices and for the sales agent by King & Wood Mallesons. Skadden, Arps, Slate, Meagher & Flom LLP and Skadden, Arps, Slate, Meagher & Flom may rely upon Maples and Calder (Hong Kong) LLP with respect to matters governed by Cayman Islands law and Han Kun Law Offices with respect to matters governed by PRC law. Davis Polk & Wardwell LLP may rely upon King & Wood Mallesons with respect to matters governed by PRC law.

 

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EXPERTS

The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report on Internal Control over Financial Reporting) incorporated in this prospectus supplement and the accompanying prospectus by reference to the annual report on Form 20-F for the year ended December 31, 2021 have been so incorporated in reliance on the report of PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The registered business address of PricewaterhouseCoopers Zhong Tian LLP is 6/F, DBS Bank Tower, 1318 Lu Jia Zui Ring Road, Pudong New Area, Shanghai, People’s Republic of China.

 

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WHERE YOU CAN FIND MORE INFORMATION

We are subject to the reporting requirements of the Exchange Act and, in accordance with the Exchange Act, we file annual reports and other information with the SEC. Information that we file with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov.

This prospectus supplement is part of a registration statement that we filed with the SEC, using a “shelf” registration process under the Securities Act of 1933, as amended, or the Securities Act, relating to the securities to be offered. This prospectus supplement does not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information with respect to Li Auto Inc. and the securities, reference is hereby made to the registration statement and the prospectus contained therein. The registration statement, including the exhibits thereto, may be inspected on the SEC’s website.

 

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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to “incorporate by reference” the information that we file with or furnish to the SEC, which means that we can disclose important information to you by referring you to those documents that are considered part of this prospectus supplement and the accompanying prospectus. Each document incorporated by reference is current only as of the date of such document, and the incorporation by reference of such documents should not create any implication that there has been no change in our affairs since such date. Information that we file with or furnish to the SEC in the future and incorporate by reference will automatically update and supersede the previously filed information. See “Incorporation of Certain Documents by Reference” in the accompanying prospectus for more information. All of the documents incorporated by reference are available at www.sec.gov under Li Auto Inc., CIK number 0001791706.

We incorporate by reference the documents listed below in this prospectus supplement.

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Our annual report on Form 20-F for the fiscal year ended December 31, 2021 filed with the SEC on April 19, 2022 (File No. 001-39407), or our 2021 Annual Report;

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Our current report on Form 6-K furnished to the SEC on June 28, 2022 (File No. 001-39407), including the exhibit thereto; and

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With respect to the offering of the securities under this prospectus supplement, all subsequent reports on Form 20-F, and any report on Form 6-K that indicates it (or any applicable portions thereof) is being incorporated by reference that we file with or furnish to the SEC on or after the date hereof and until the termination or completion of the offering by means of this prospectus supplement.

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As you read the documents incorporated by reference, you may find inconsistencies in information from one document to another. If you find inconsistencies, you should rely on the statements made in the most recent document.

We will provide a copy of any or all of the information that has been incorporated by reference into the accompanying prospectus, other than exhibits to those documents unless such exhibits are specially incorporated by reference in this prospectus supplement, upon written or oral request, to any person, including any beneficial owner of the securities, to whom a copy of this prospectus supplement is delivered, at no cost to such person. You may make such a request by writing or telephoning us at the following mailing address or telephone number:

Li Auto Inc.
11 Wenliang Street
Shunyi District, Beijing 101399
People’s Republic of China
+86 (10) 8742-7209
Attention: Investor Relations

 

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PROSPECTUS

Li Auto Inc.

Class A Ordinary Shares

We may from time to time in one or more offerings offer and sell our Class A ordinary shares, including Class A ordinary shares represented by American depositary shares, or ADSs.

In addition, from time to time, selling shareholders named in a prospectus supplement may offer and sell our Class A ordinary shares held by them. We will not receive any proceeds from the sale of our Class A ordinary shares by selling shareholders.

We will provide specific terms of any offering in a supplement to this prospectus. Any prospectus supplement may also add, update, or change information contained in this prospectus. You should carefully read this prospectus and the applicable prospectus supplement as well as the documents incorporated or deemed to be incorporated by reference in this prospectus before you purchase any of the securities offered hereby.

These securities may be offered and sold in the same offering or in separate offerings; to or through underwriters, dealers, and agents; or directly to purchasers. The names of any underwriters, dealers, or agents involved in the sale of our securities, their compensation and any options to purchase additional securities held by them will be described in the applicable prospectus supplement. For a more complete description of the plan of distribution of these securities, see the section entitled “Plan of Distribution” beginning on page 57 of this prospectus.

The ADSs are listed on the Nasdaq Global Select Market under the symbol “LI.” On July 30, 2021, the last reported sale price of the ADSs on the Nasdaq Global Select Market was US$33.39 per ADS.

Investing in our securities involves a high degree of risk. You should carefully consider the risks described under “Risk Factors” starting on page 4 of this prospectus, included in any prospectus supplement or in the documents incorporated by reference into this prospectus before you invest in our securities.

This prospectus may not be used to offer or sell any securities unless accompanied by a prospectus supplement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is August 2, 2021

 

TABLE OF CONTENTS

 

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ABOUT THIS PROSPECTUS

We are a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act. This prospectus is part of an automatic shelf registration statement that we filed with the Securities and Exchange Commission, or the SEC. By using an automatic shelf registration statement, we or any selling shareholder may, at any time and from time to time, sell the securities described in this prospectus in one or more offerings. We may also add, update or change information contained in this prospectus by means of a prospectus supplement or by incorporating by reference information that we file or furnish to the SEC. As allowed by the SEC rules, this prospectus and any accompanying prospectus supplement do not contain all of the information included in the registration statement. For further information, we refer you to the registration statement, including its exhibits. Statements contained in this prospectus or any prospectus supplement about the provisions or contents of any agreement or other document are not necessarily complete. If the SEC’s rules and regulations require that an agreement or document be filed as an exhibit to the registration statement, please see that agreement or document for a complete description of these matters.

You should carefully read this document and any applicable prospectus supplement. You should also read the documents we have referred you to under “Where You Can Find More Information About Us” and “Incorporation of Documents by Reference” below for information on our company, the risks we face and our financial statements. The registration statement and exhibits can be read on the SEC’s website as described under “Where You Can Find More Information About Us.”

In this prospectus, unless otherwise indicated or unless the context otherwise requires:

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“ADSs” refers to our American depositary shares, each of which represents two Class A ordinary shares;

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•

“China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this prospectus only, Taiwan, Hong Kong, and Macau;

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•

“shares” or “ordinary shares” refers to our Class A and Class B ordinary shares, par value US$0.0001 per share;

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“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States; and

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“we,” “us,” “our company” and “our” refer to Li Auto Inc., a Cayman Islands exempted company, and its subsidiaries and its VIEs and their respective subsidiaries, as the context requires.

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FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference in this prospectus may contain forward-looking statements that reflect our current or then-current expectations and views of future events. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

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our goals and strategies;

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our future business development, financial conditions and results of operations;

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the expected outlook of the automotive market including the NEV market in China;

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our expectations regarding demand for and market acceptance of our products;

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our expectations regarding our relationships with customers, suppliers, third-party service providers, strategic partners and other stakeholders;

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competition in our industry;

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relevant government policies and regulations relating to our industry;

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general economic and business conditions globally and in China; and

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assumptions underlying or related to any of the foregoing.

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The forward-looking statements included in this prospectus and the documents incorporated by reference are subject to risks, uncertainties and assumptions about our company. Our actual results of operations may differ materially from the forward-looking statements as a result of the risk factors disclosed in the documents incorporated by reference in this prospectus or in any accompanying prospectus supplement.

We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in the documents incorporated by reference in this prospectus or in any accompanying prospectus supplement for a more complete discussion of the risks of an investment in our securities. The forward-looking statements included in this prospectus or incorporated by reference into this prospectus are made only as of the date of this prospectus or the date of the incorporated document, and we do not undertake any obligation to update the forward-looking statements except as required under applicable law.

 

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CORPORATE INFORMATION

Our principal executive offices are located at 11 Wenliang Street, Shunyi District, Beijing 101399, People’s Republic of China. Our telephone number at this address is +86 (10) 8742-7209. Our registered office in the Cayman Islands is located at PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. We have appointed Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States in connection with offerings of securities registered by the registration statement of which this prospectus is a part.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. You can also find information on our website at http://ir.lixiang.com. The information contained on our website is not a part of this prospectus.

 

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RISK FACTORS

Please see the factors set forth under “Item 3. Key Information — D. Risk Factors” in our annual report on Form 20-F for the year ended December 31, 2020, which is incorporated by reference in this prospectus, and any accompanying prospectus supplement before investing in any securities that may be offered pursuant to this prospectus.

Summary of Risk Factors

Below please find a summary of the principal risks we face, organized under relevant headings.