UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2022
Commission File Number: 001-39407
Li Auto Inc.
(Registrant’s Name)
11 Wenliang Street
Shunyi District, Beijing 101399
People’s Republic of China
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ⌧ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
EXPLANATORY NOTE
Exhibits 99.1 and 99.2 to this current report on Form 6-K are incorporated by reference into the registration statement on Form F-3 of Li Auto Inc. (File No. 333-258378) that was filed on August 2, 2021 and shall be a part thereof from the date on which this current report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
EXHIBIT INDEX
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Li Auto Inc. | |||
| By | /s/ Tie Li | ||
| Name | : | Tie Li | |
| Title | : | Director and Chief Financial Officer | |
Date: August 15, 2022
Exhibit 99.1
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
F-1
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except for share and per share data)
| As of | ||||||||||||
| December 31, | June 30, | |||||||||||
| 2021 | 2022 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Note 2(e) | ||||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | 27,854,224 | 33,888,442 | 5,059,411 | |||||||||
| Restricted cash | 2,638,840 | 3,206,578 | 478,729 | |||||||||
| Time deposits and short-term investments | 19,668,239 | 16,553,080 | 2,471,310 | |||||||||
| Trade receivable, net of allowance for credit losses of RMB467, and RMB206 as of December 31, 2021 and June 30, 2022, respectively | 120,541 | 81,773 | 12,208 | |||||||||
| Inventories | 1,617,890 | 3,006,695 | 448,888 | |||||||||
| Prepayments and other current assets, net of allowance for credit losses of RMB2,192, and RMB5,154 as of December 31, 2021 and June 30, 2022, respectively | 480,680 | 1,149,869 | 171,671 | |||||||||
| Total current assets | 52,380,414 | 57,886,437 | 8,642,217 | |||||||||
| Non-current assets: | ||||||||||||
| Long-term investments | 156,306 | 709,121 | 105,869 | |||||||||
| Property, plant and equipment, net | 4,498,269 | 7,367,707 | 1,099,970 | |||||||||
| Operating lease right-of-use assets, net | 2,061,492 | 3,117,056 | 465,364 | |||||||||
| Intangible assets, net | 751,460 | 801,940 | 119,726 | |||||||||
| Deferred tax assets | 19,896 | 11,652 | 1,740 | |||||||||
| Other non-current assets, net of allowance for credit losses of RMB3,757, and RMB4,962 as of December 31, 2021 and June 30, 2022, respectively | 1,981,076 | 2,593,042 | 387,131 | |||||||||
| Total non-current assets | 9,468,499 | 14,600,518 | 2,179,800 | |||||||||
| Total assets | 61,848,913 | 72,486,955 | 10,822,017 | |||||||||
| LIABILITIES | ||||||||||||
| Current liabilities: | ||||||||||||
| Short-term borrowings | 37,042 | 387,346 | 57,829 | |||||||||
| Trade and notes payable | 9,376,050 | 13,090,146 | 1,954,307 | |||||||||
| Amounts due to related parties | 37,455 | 6,176 | 922 | |||||||||
| Deferred revenue, current | 305,092 | 346,306 | 51,702 | |||||||||
| Operating lease liabilities, current | 473,245 | 567,559 | 84,734 | |||||||||
| Accruals and other current liabilities | 1,879,368 | 3,414,526 | 509,777 | |||||||||
| Total current liabilities | 12,108,252 | 17,812,059 | 2,659,271 | |||||||||
| Non-current liabilities: | ||||||||||||
| Long-term borrowings | 5,960,899 | 8,040,405 | 1,200,401 | |||||||||
| Deferred revenue, non-current | 389,653 | 548,272 | 81,855 | |||||||||
| Operating lease liabilities, non-current | 1,369,825 | 1,712,981 | 255,741 | |||||||||
| Deferred tax liabilities | 153,723 | 122,430 | 18,278 | |||||||||
| Other non-current liabilities | 802,259 | 1,599,082 | 238,736 | |||||||||
| Total non-current liabilities | 8,676,359 | 12,023,170 | 1,795,011 | |||||||||
| Total liabilities | 20,784,611 | 29,835,229 | 4,454,282 | |||||||||
| Commitments and contingencies (Note 25) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
LI AUTO INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(All amounts in thousands, except for share and per share data)
| As of | ||||||||||||
| December 31, | June 30, | |||||||||||
| 2021 | 2022 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Note 2(e) | ||||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Class A Ordinary Shares | ||||||||||||
| (US$0.0001 par value; 4,500,000,000 shares authorized, 1,709,903,330 shares issued and 1,573,750,346 shares outstanding as of December 31, 2021 and 4,500,000,000 shares authorized, 1,710,731,950 shares issued and 1,576,829,458 shares outstanding as of June 30, 2022) | 1,176 | 1,176 | 176 | |||||||||
| Class B Ordinary Shares | ||||||||||||
| (US$0.0001 par value; 500,000,000 shares authorized, 355,812,080 shares issued and outstanding as of December 31, 2021 and June 30, 2022) | 235 | 235 | 35 | |||||||||
| Treasury Shares | (89 | ) | (86 | ) | (13 | ) | ||||||
| Additional paid-in capital | 49,390,486 | 50,338,059 | 7,515,274 | |||||||||
| Accumulated other comprehensive loss | (1,521,871 | ) | (548,779 | ) | (81,931 | ) | ||||||
| Accumulated deficit | (6,805,635 | ) | (7,434,467 | ) | (1,109,937 | ) | ||||||
| Total Li Auto Inc. shareholders’ equity | 41,064,302 | 42,356,138 | 6,323,605 | |||||||||
| Noncontrolling interests | — | 295,588 | 44,130 | |||||||||
| Total shareholders’ equity | 41,064,302 | 42,651,726 | 6,367,735 | |||||||||
| Total liabilities and shareholders’ equity | 61,848,913 | 72,486,955 | 10,822,017 | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
(All amounts in thousands, except for share and per share data)
| For the Six Months Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Note 2(e) | ||||||||||||
| Revenues: | ||||||||||||
| Vehicle sales | 8,366,968 | 17,792,221 | 2,656,309 | |||||||||
| Other sales and services | 247,185 | 502,436 | 75,012 | |||||||||
| Total revenues | 8,614,153 | 18,294,657 | 2,731,321 | |||||||||
| Cost of sales: | ||||||||||||
| Vehicle sales | (6,867,603 | ) | (13,907,185 | ) | (2,076,288 | ) | ||||||
| Other sales and services | (177,037 | ) | (345,317 | ) | (51,554 | ) | ||||||
| Total cost of sales | (7,044,640 | ) | (14,252,502 | ) | (2,127,842 | ) | ||||||
| Gross profit | 1,569,513 | 4,042,155 | 603,479 | |||||||||
| Operating expenses: | ||||||||||||
| Research and development | (1,167,938 | ) | (2,905,606 | ) | (433,796 | ) | ||||||
| Selling, general and administrative | (1,345,201 | ) | (2,528,080 | ) | (377,432 | ) | ||||||
| Total operating expenses | (2,513,139 | ) | (5,433,686 | ) | (811,228 | ) | ||||||
| Loss from operations | (943,626 | ) | (1,391,531 | ) | (207,749 | ) | ||||||
| Other (expense)/income | ||||||||||||
| Interest expense | (34,323 | ) | (31,310 | ) | (4,674 | ) | ||||||
| Interest income and investment income, net | 410,994 | 412,536 | 61,590 | |||||||||
| Others, net | 30,688 | 384,398 | 57,389 | |||||||||
| Loss before income tax expense | (536,267 | ) | (625,907 | ) | (93,444 | ) | ||||||
| Income tax expense | (59,189 | ) | (26,005 | ) | (3,882 | ) | ||||||
| Net loss | (595,456 | ) | (651,912 | ) | (97,326 | ) | ||||||
| Less: Net loss attributable to noncontrolling interests | — | (23,080 | ) | (3,446 | ) | |||||||
| Net loss attributable to ordinary shareholders of Li Auto Inc. | (595,456 | ) | (628,832 | ) | (93,880 | ) | ||||||
| Weighted average number of ordinary shares used in computing net loss per share | ||||||||||||
| Basic | 1,809,695,350 | 1,930,269,050 | 1,930,269,050 | |||||||||
| Diluted | 1,809,695,350 | 1,930,269,050 | 1,930,269,050 | |||||||||
| Net loss per share attributable to ordinary shareholders | ||||||||||||
| Basic | (0.33 | ) | (0.33 | ) | (0.05 | ) | ||||||
| Diluted | (0.33 | ) | (0.33 | ) | (0.05 | ) | ||||||
| Net loss | (595,456 | ) | (651,912 | ) | (97,326 | ) | ||||||
| Other comprehensive (loss)/income | ||||||||||||
| Foreign currency translation adjustment, net of tax | (198,585 | ) | 973,092 | 145,279 | ||||||||
| Total other comprehensive (loss)/income | (198,585 | ) | 973,092 | 145,279 | ||||||||
| Total comprehensive (loss)/income | (794,041 | ) | 321,180 | 47,953 | ||||||||
| Less: Net loss attributable to noncontrolling interests | — | (23,080 | ) | (3,446 | ) | |||||||
| Comprehensive (loss)/income attributable to ordinary shareholders of Li Auto Inc. | (794,041 | ) | 344,260 | 51,399 | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(All amounts in thousands, except for share and per share data)
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
| Class A Ordinary Shares | Class B Ordinary Shares | Treasury Shares | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||
| Number | Number | Paid-in | Comprehensive | Accumulated | Noncontrolling | Shareholders’ | ||||||||||||||||||||||||||||||||||||||
| of Shares | Amount | of Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Interests | Equity | ||||||||||||||||||||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | 1,453,476,230 | 1,010 | 355,812,080 | 235 | — | — | 37,289,761 | (1,005,184 | ) | (6,482,225 | ) | — | 29,803,597 | |||||||||||||||||||||||||||||||
| Cumulative effect of adoption of credit loss guidance (Note 2(h)) | — | — | — | — | — | — | — | — | (1,955 | ) | — | (1,955 | ) | |||||||||||||||||||||||||||||||
| Issuance of ordinary shares as treasury shares | 34,000,000 | 22 | 108,557,400 | 70 | (142,557,400 | ) | (92 | ) | 70 | — | — | — | 70 | |||||||||||||||||||||||||||||||
| Exercise of share options | — | — | — | — | 1,042,422 | — | 678 | — | — | — | 678 | |||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | 353,319 | — | — | — | 353,319 | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | (198,585 | ) | — | — | (198,585 | ) | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | (595,456 | ) | — | (595,456 | ) | |||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | 1,487,476,230 | 1,032 | 464,369,480 | 305 | (141,514,978 | ) | (92 | ) | 37,643,828 | (1,203,769 | ) | (7,079,636 | ) | — | 29,361,668 | |||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | 1,709,903,330 | 1,176 | 355,812,080 | 235 | (136,152,984 | ) | (89 | ) | 49,390,486 | (1,521,871 | ) | (6,805,635 | ) | — | 41,064,302 | |||||||||||||||||||||||||||||
| Exercise of share options | — | — | — | — | 3,079,112 | 3 | 2,014 | — | — | — | 2,017 | |||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | 945,559 | — | — | — | 945,559 | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | 973,092 | — | — | 973,092 | |||||||||||||||||||||||||||||||||
| Capital injection by noncontrolling interests | — | — | — | — | — | — | — | — | — | 318,668 | 318,668 | |||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | (628,832 | ) | (23,080 | ) | (651,912 | ) | ||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | 1,709,903,330 | 1,176 | 355,812,080 | 235 | (133,073,872 | ) | (86 | ) | 50,338,059 | (548,779 | ) | (7,434,467 | ) | 295,588 | 42,651,726 | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands, except for share and per share data)
| For the Six Months Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Note 2(e) | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | (595,456 | ) | (651,912 | ) | (97,326 | ) | ||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 225,391 | 405,349 | 60,517 | |||||||||
| Share-based compensation expenses | 353,319 | 945,559 | 141,168 | |||||||||
| Foreign exchange loss | 65,358 | 2,140 | 319 | |||||||||
| Unrealized investment loss | 39,338 | 16,090 | 2,402 | |||||||||
| Interest expense | 32,091 | 12,173 | 1,817 | |||||||||
| Share of loss of equity method investees | 642 | (410 | ) | (61 | ) | |||||||
| Impairment loss related to the property, plant and equipment | 26,718 | — | — | |||||||||
| Allowance for credit losses | 884 | 3,906 | 583 | |||||||||
| Deferred income tax, net | 59,189 | (23,049 | ) | (3,441 | ) | |||||||
| Loss on disposal of property, plant and equipment | 19,843 | 53,802 | 8,032 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepayments and other current assets | (247,703 | ) | (398,601 | ) | (59,510 | ) | ||||||
| Inventories | (95,196 | ) | (1,438,620 | ) | (214,780 | ) | ||||||
| Operating lease right-of-use assets | (282,606 | ) | (344,861 | ) | (51,486 | ) | ||||||
| Operating lease liabilities | 303,488 | 437,470 | 65,313 | |||||||||
| Other non-current assets | (325,776 | ) | (340,923 | ) | (50,898 | ) | ||||||
| Trade receivable | (4,389 | ) | 38,129 | 5,693 | ||||||||
| Deferred revenue | 147,706 | (227,799 | ) | (34,009 | ) | |||||||
| Trade and notes payable | 1,878,611 | 3,336,217 | 498,081 | |||||||||
| Amounts due to related parties | (13,638 | ) | (31,280 | ) | (4,670 | ) | ||||||
| Accruals and other current liabilities | 576,383 | 647,221 | 96,628 | |||||||||
| Other non-current liabilities | 169,773 | 522,575 | 78,018 | |||||||||
| Net cash provided by operating activities | 2,333,970 | 2,963,176 | 442,390 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Purchase of property, plant and equipment and intangible assets | (781,619 | ) | (1,972,743 | ) | (294,523 | ) | ||||||
| Disposal of property, plant and equipment | — | 704 | 105 | |||||||||
| Purchase of long-term investments | — | (650,305 | ) | (97,088 | ) | |||||||
| Placement of time deposits | (797,268 | ) | — | — | ||||||||
| Redemption of time deposits | 129,643 | 514,242 | 76,774 | |||||||||
| Placement of short-term investments | (166,520,607 | ) | (31,713,590 | ) | (4,734,714 | ) | ||||||
| Redemption of short-term investments | 163,927,277 | 34,682,250 | 5,177,924 | |||||||||
| Cash paid related to acquisition of Chongqing Zhizao Automobile Co., Ltd. (“Chongqing Zhizao”), net of cash acquired | (67,580 | ) | — | — | ||||||||
| Cash paid related to acquired insurance agent license | — | (36,825 | ) | (5,498 | ) | |||||||
| Net cash (used in)/provided by investing activities | (4,110,154 | ) | 823,733 | 122,980 | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-6
LI AUTO INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(All amounts in thousands, except for share and per share data)
| For the Six Months Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Note 2(e) | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from issuance of convertible debt | 5,533,238 | — | — | |||||||||
| Proceeds from exercise of share options | 454 | 3,692 | 551 | |||||||||
| Proceeds from borrowings | — | 1,861,916 | 277,977 | |||||||||
| Payment of borrowings | — | (24,925 | ) | (3,721 | ) | |||||||
| Payment of issuance costs | — | (837 | ) | (125 | ) | |||||||
| Capital injection from noncontrolling interest | — | 90,000 | 13,437 | |||||||||
| Proceeds from issuance of ordinary shares | 70 | — | — | |||||||||
| Net cash provided by financing activities | 5,533,762 | 1,929,846 | 288,118 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (103,039 | ) | 885,201 | 132,157 | ||||||||
| Net increase in cash, cash equivalents and restricted cash | 3,654,539 | 6,601,956 | 985,645 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 10,172,519 | 30,493,064 | 4,552,495 | |||||||||
| Cash, cash equivalents and restricted cash at end of the period | 13,827,058 | 37,095,020 | 5,538,140 | |||||||||
| Supplemental schedule of non-cash investing and financing activities | ||||||||||||
| Payable related to purchase of property, plant and equipment | (191,721 | ) | (1,764,993 | ) | (263,507 | ) | ||||||
| Notes receivable related to the secured borrowing (Note 13) | — | 299,106 | 44,655 | |||||||||
| Property, plant and equipment and other assets related to capital injection by noncontrolling interest shareholders | — | 228,668 | 34,139 | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-7
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
| 1. | Organization and Nature of Operations |
(a) Principal activities
Li Auto Inc. (“Li Auto”, or the “Company”) was incorporated under the laws of the Cayman Islands in April 2017 as an exempted company with limited liability. The Company, through its consolidated subsidiaries and the consolidated variable interest entities (the “VIEs”) and the VIEs’ subsidiaries (collectively, the “Group”), is primarily engaged in the design, development, manufacturing, and sales of new energy vehicles in the People’s Republic of China (the “PRC”).
(b) History of the Group and basis of presentation for the Reorganization
Prior to the incorporation of the Company and starting in April 2015, the Group’s business was carried out under Beijing CHJ Information Technology Co., Ltd. (or “Beijing CHJ”) and its subsidiaries. Concurrently with the incorporation of the Company in April 2017, Beijing CHJ, through one of its wholly-owned subsidiaries, entered into a shareholding entrustment agreement with the management team (the legal owners of the Company at that time) to obtain full control over the Company (the “Cayman Shareholding Entrustment Agreement”). In the same year, the Company set up its subsidiaries Leading Ideal HK Limited (“Leading Ideal HK”), Beijing Co Wheels Technology Co., Ltd. (“Wheels Technology” or “WOFE”), and a consolidated VIE, Beijing Xindian Transport Information Technology Co., Ltd. (“Xindian Information”). The Company, together with its subsidiaries and the VIE, were controlled and consolidated by Beijing CHJ prior to the reorganization.
The Group underwent a reorganization (the “2019 Reorganization”) in July 2019. The major reorganization steps are described as follows:
| · | Beijing CHJ terminated the Cayman Shareholding Entrustment Agreement, and concurrently the WOFE entered into contractual agreements with Beijing CHJ and its legal shareholders so that Beijing CHJ became a consolidated VIE of the WOFE; |
| · | the Company issued ordinary shares and Series Pre-A, A-1, A-2, A-3, B-1, B-2 and B-3 convertible redeemable preferred shares to shareholders of Beijing CHJ in exchange for respective equity interests that they held in Beijing CHJ immediately before the 2019 Reorganization. |
All 2019 Reorganization related contracts were signed by all relevant parties on July 2, 2019, and all administrative procedures of the 2019 Reorganization, including but not limited to remitting share capital of Beijing CHJ overseas for reinjecting into the Company were completed by December 31, 2019.
As the shareholdings in the Company and Beijing CHJ were with a high degree of common ownership immediately before and after the 2019 Reorganization, even though no single investor controlled Beijing CHJ or Li Auto, the transaction of the 2019 Reorganization was determined to be a recapitalization with lack of economic substance, and was accounted for in a manner similar to a common control transaction. Consequently, the financial information of the Group is presented on a carryover basis for all periods presented. The number of outstanding shares in the unaudited condensed consolidated balance sheets, the unaudited condensed consolidated statements of changes in shareholders’ equity, and per share information including the net loss per share have been presented retrospectively as of the beginning of the earliest period presented on the unaudited condensed consolidated financial statements to be comparable with the final number of shares issued in the 2019 Reorganization. Accordingly, the effect of the ordinary shares and the preferred shares issued by the Company pursuant to the 2019 Reorganization have been presented retrospectively as of the beginning of the earliest period presented in the unaudited condensed consolidated financial statement or the original issue date, whichever is later, as if such shares were issued by the Company when the Group issued such interests.
F-8
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
1. Organization and Nature of Operations (Continued)
In preparation for the Listing on the main board of the Stock Exchange of Hong Kong Limited (“HKEx”), the Group underwent reorganization of its corporate structure (the “2021 Reorganization”) in the second quarter of 2021. The major reorganization steps are described as follows:
| · | In accordance with the requirements under the Listing Decision LD43-3 of HKEx to the extent practicable, the Company underwent reorganization of the holding structure of its onshore subsidiaries and consolidated affiliated entities. The 2021 Reorganization mainly involved changing certain consolidated affiliated entities controlled through contractual arrangements to wholly owned or partly-owned subsidiaries of the Company, to the extent permitted under the relevant PRC laws and regulations. Please refer to Note 1 (b) (i) and (ii). |
| · | In April, 2021, the certain new contractual arrangements were entered into to replace the original contractual arrangements in place before the completion of 2021 Reorganization. |
The transactions of 2021 Reorganization was accounted for a common control transaction within the Group. The financial information of the Group at the consolidation level does not have a material impact accordingly.
For the six months ended June 30, 2022, Beijing CHJ transferred its equity interest of Chongqing Lixiang Automobile to Leading Ideal HK’s subsidiary. Consequently, Chongqing Lixiang Automobile became a wholly owned subsidiary of the Company. The transaction was accounted for a common control transaction within the Group. The financial information of the Group at the consolidation level does not have a material impact accordingly.
The Group’s unaudited condensed consolidated financial statements include the financial statements of the Company, its subsidiaries, the consolidated VIEs and the VIEs’ subsidiaries.
F-9
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
1. Organization and Nature of Operations (Continued)
As of June 30, 2022, the Company’s principal subsidiaries, the consolidated VIEs and the VIEs’ subsidiaries are as follows:
| Equity Interest Held | Date of Incorporation or Date of Acquisition | Place of Incorporation | Principal Activities | Notes | ||||||||
| Subsidiaries | ||||||||||||
| Leading Ideal HK Limited (“Leading Ideal HK”) | 100 | % | May 15, 2017 | Hong Kong, China | Investment holding | |||||||
| Beijing Co Wheels Technology Co., Ltd. (“Wheels Technology”) | 100 | % | December 19, 2017 | Beijing, PRC | Technology development and corporate management | |||||||
| Beijing Leading Automobile Sales Co., Ltd.(“Beijing Leading”) | 100 | % | August 6, 2019 | Beijing, PRC | Sales and after sales management | |||||||
| Jiangsu Xindian Interactive Sales and Services Co., Ltd. (“Jiangsu XD”) | 100 | % | May 08, 2017 | Changzhou, PRC | Sales and after sales management | (i) | ||||||
| Jiangsu CHJ Automobile Co., Ltd. (“Jiangsu CHJ”) | 100 | % | June 23, 2016 | Changzhou, PRC | Purchase of manufacturing equipment | (i) | ||||||
| Lixiang Zhizao Automobile Sales & Services (Beijing) Co., Ltd | 100 | % | July 13, 2018 | Beijing, PRC | Sales and after sales management | (i) | ||||||
| Lixiang Zhixing Automobile Sales & Services (Shanghai) Co., Ltd | 100 | % | April 12, 2019 | Shanghai, PRC | Sales and after sales management | (i) | ||||||
| Lixiang Zhizao Automobile Sales & Services (Chengdu) Co., Ltd | 100 | % | July 9, 2018 | Chengdu, PRC | Sales and after sales management | (i) | ||||||
| Chongqing Lixiang Automobile Co., Ltd. (“Chongqing Lixiang Automobile”) | 100 | % | October 11, 2019 | Chongqing, PRC | Manufacturing of automobile | (ii) | ||||||
| Suzhou Sike Semiconductor Limited (“Sike”) | 70 | % | March 23, 2022 | Suzhou, PRC | Manufacturing of semiconductor and related material | (iii) | ||||||
| Sichuan Li Xinchen Technology Co, Ltd (“Sichuan Li Xinchen”) | 51 | % | October 22, 2021 | Mianyang, PRC | Manufacturing and sales of range extender engines and parts | (iv) | ||||||
| Date of Incorporation | Place of Incorporation | Principal Activities | Notes | |||||||||
| The VIEs | ||||||||||||
| Beijing CHJ Information Technology Co., Ltd. (“Beijing CHJ”) | April 10, 2015 | Beijing, PRC | Technology development | |||||||||
| Beijing Xindian Transport Information Technology Co., Ltd. (“Xindian Information”) | March 27, 2017 | Beijing, PRC | Technology development | |||||||||
Notes:
| (i) | All the subsidiaries were the VIE’s subsidiaries before the 2021 Reorganization. |
F-10
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| (ii) | Upon the completion of 2021 Reorganization, Beijing CHJ and Leading Ideal HK’s subsidiary each held 50% of equity interest of Chongqing Lixiang Automobile which was previously a wholly owned subsidiary of Beijing CHJ. For the six months ended June 30, 2022, Beijing CHJ transferred its equity interest of Chongqing Lixiang Automobile to Leading Ideal HK’s subsidiary. Consequently, Chongqing Lixiang Automobile became a wholly owned subsidiary of the Company. |
| (iii) | In December 2021, the Group entered into an investment agreement with Hunan San'an Semiconductor Co. LTD (“San’an” or “noncontrolling interest shareholder”) relating to the formation of Suzhou Sike Semiconductor Limited (“Sike”). According to the investment agreement, the Group has a 70% equity and controlling interest in Sike. In April 2022, Sike received a capital contribution of RMB90,000 from the noncontrolling interest shareholder and completed the necessary legal procedures, therefore, Sike became a partially owned subsidiary of the Group. |
| (iv) | On August 27, 2021, Beijing CHJ entered into an investment agreement with Mianyang Xinchen (“Xinchen”), a wholly owned subsidiary of Xinchen China Power Holdings Limited, relating to the formation of Sichuan Li Xinchen Technology Co., Ltd (“Sichuan Li Xinchen”) in Mianyang, Sichuan Province, China. According to the investment agreement, Bejing CHJ has a 51% equity interest in Sichuan Li Xinchen and has the right to nominate three board members(out of five), therefore, providing Beijing CHJ with a controlling interest over Sichuan Li Xinchen. In June 2022, Sichuan Li Xinchen received a capital contribution of RMB228,668 with long-lived assets from Xinchen and completed the necessary legal procedures, therefore, Sichuan Li Xinchen became a partially owend subsidiary of the Group. |
F-11
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
1. Organization and Nature of Operations (Continued)
(c) Impact of the COVID-19
Due to the COVID-19 pandemic and the related nationwide precautionary and control measures that were adopted in China starting in January 2020, the Company postponed the production in its Changzhou manufacturing facility after the Chinese New Year holiday in February 2020, and also experienced short term delays in the suppliers’ delivery of certain raw materials needed for production. As a result of varying levels of travel and other restrictions for public health concerns in various regions of China, the Group also temporarily postponed the delivery of Li ONE to customers. Following this temporary closure in February 2020, the Group reopened the retail stores and delivery and servicing centers and have resumed vehicle delivery to customers. Subsequent to March 31, 2020, the Group continuously increased their production capacity and delivery to normal level as the Group had recovered from the adverse impact of COVID-19 across China until the third quarter of 2021.
Since October 2021, the supply of semiconductor chips used for automotive manufacturing has experienced a global shortage following the disruption to semiconductor manufacturers due to the COVID-19 pandemic and an increase in global demand for personal computers for work-from-home economies. For example, due to the COVID-19 pandemic in Malaysia, the production of chips dedicated for the Group’s millimeter-wave radar supplier had been severely hampered, and the production and deliveries for the third quarter of 2021 had been adversely affected. Subsequent to December, 2021, the Group gradually resumed normal vehicle production by continuing to obtain the chips or other semiconductor components at a reasonable cost from multiple sources. The Group concluded that there would be no material impact on the Group’s long-term forecast.
In late March and April 2022, the COVID-19 resurgence in the Yangtze Delta region of China caused renewed and severe industry-wide disruptions in supply chain, logistics and production. The Group’s Changzhou manufacturing base is located in the center of the Yangtze Delta region, which is home to over 80% of the Group’s parts suppliers, especially in Shanghai and Kunshan. Certain suppliers in Shanghai and Kunshan temporarily terminated the production or delivery of their products completely, resulting in the Group unable to maintain adequate inventory for production demand. This had a material adverse impact on production in April 2022, resulting in delayed deliveries for customers. The Group has been working with vendors to restore production capacity with the objective to shorten the delivery waiting time for Li ONE customers. Desipte the significant ongoing industry-wide parts supply chain challenges resulting from the COVID-19 pandemic, the Group’s production and delivery of vehicles gradually began to resume and sustain pre-pandemic levels beginning in May 2022.
2. Summary of Significant Accounting Policies
(a) Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with US GAAP have been condensed or omitted consistent with Article 10 of Regulation S-X. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments as necessary for the fair statement of the Company's financial position as of December 31, 2021 and June 30, 2022, results of operations and cash flows for the six months ended June 30, 2021 and 2022. The consolidated balance sheet at December 31, 2021 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by US GAAP. The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the unaudited condensed consolidated financial statements have read or have access to the audited consolidated financial statements for the preceding fiscal years. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes for the year ended December 31, 2021. The accounting policies applied are consistent with those of the audited consolidated financial statements for the preceding fiscal year. Interim results of operations are not necessarily indicative of the results expected for the full fiscal year or for any future period.
F-12
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
(b) Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIEs and the VIEs’ subsidiaries for which the Company is the ultimate primary beneficiary.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors (the “Board”); to cast majority of votes at the meeting of the Board or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity.
All significant transactions and balances between the Company, its subsidiaries, the VIEs and the VIEs’ subsidiaries have been eliminated upon consolidation.
(c) Use of estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue and expenses during the reported period in the unaudited condensed consolidated financial statements and accompanying notes.
Significant accounting estimates reflected in the Group’s unaudited condensed consolidated financial statements mainly include, but are not limited to, standalone selling price of each distinct performance obligation in revenue recognition and determination of the amortization period of these obligations, the valuation of share-based compensation arrangements, fair value of investments and derivative instruments, fair value of warrant liabilities and derivative liabilities, useful lives of property, plant and equipment, useful lives of intangible assets, assessment for impairment of long-lived assets and intangible assets with indefinite lives, the provision for credit losses of financial assets, inventory valuation for excess and obsolete inventories, lower of cost and net realizable value of inventories, product warranties, determination of vendor rebates, assessment of variable lease payments, and valuation allowance for deferred tax assets. Actual results could differ from those estimates.
F-13
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(d) Functional currency and foreign currency translation
The Group’s reporting currency is the Renminbi (“RMB”). The functional currency of the Company and its subsidiary which is incorporated in Hong Kong is United States dollars (“US$”). The functional currencies of the other subsidiaries, the VIEs and the VIEs’ subsidiaries are their respective local currencies (“RMB”). The determination of the respective functional currency is based on the criteria set out by ASC 830, Foreign Currency Matters.
Transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into functional currency using the applicable exchange rates at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are measured using the exchange rates at the dates of the initial transactions. Exchange gains or losses arising from foreign currency transactions are included in the unaudited condensed consolidated statements of comprehensive (loss)/income.
The financial statements of the Group’s entities of which the functional currency is not RMB are translated from their respective functional currency into RMB. Assets and liabilities denominated in foreign currencies are translated into RMB at the exchange rates at the balance sheet date. Equity accounts other than earnings generated in current period are translated into RMB at the appropriate historical rates. Income and expense items are translated into RMB using the periodic average exchange rates. The resulting foreign currency translation adjustments are recorded in other comprehensive income/(loss) in the unaudited condensed consolidated statements of comprehensive (loss)/income, and the accumulated foreign currency translation adjustments are presented as a component of accumulated other comprehensive income/(loss) in the unaudited condensed consolidated statements of shareholders’ equity. Total foreign currency translation adjustment loss was RMB198,585 for the six months ended June 30, 2021 and the foreign currency translation adjustment income was RMB973,092 for the six months ended June 30, 2022 respectively.
(e) Convenience translation
Translations of balances in the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of comprehensive (loss)/income and unaudited condensed consolidated statements of cash flows from RMB into US$ as of and for the six months ended June 30, 2022 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB 6.6981, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on June 30, 2022. No representation is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2022, or at any other rate.
(f) Cash, cash equivalents and restricted cash
Cash and cash equivalents represent cash on hand, time deposits and highly liquid investments placed with banks or other financial institutions, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less. As of December 31, 2021 and June 30, 2022, the Group had cash held in accounts managed by online payment platforms such as China Union Pay in connection with the collection of vehicle sales for a total amount of RMB33,540 and RMB59,635, respectively, which have been classified as cash and cash equivalents on the unaudited condensed consolidated balance sheets.
Cash that is restricted as to withdrawal for use or pledged as security is reported separately on the face of the unaudited condensed consolidated balance sheets and is not included in the total cash and cash equivalents in the unaudited condensed consolidated statements of cash flows. The Group’s restricted cash mainly represents (a) the secured deposits held in designated bank accounts for issuance of letter of credit, bank guarantee and bank acceptance bill; (b) the deposits held in designated bank accounts for security of the repayment of the notes payable (Note 14).
F-14
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Cash, cash equivalents and restricted cash as reported in the unaudited condensed consolidated statements of cash flows are presented separately on our unaudited condensed consolidated balance sheets as follows:
| As of | ||||||||
| December 31, | June 30, | |||||||
| 2021 | 2022 | |||||||
| Cash and cash equivalents | 27,854,224 | 33,888,442 | ||||||
| Restricted cash | 2,638,840 | 3,206,578 | ||||||
| Total cash, cash equivalents and restricted cash | 30,493,064 | 37,095,020 | ||||||
(g) Time deposits and short-term investments
Time deposits are those balances placed with the banks with original maturities longer than three months but less than one year.
Short-term investments are investments in financial instruments with variable interest rates. These financial instruments have maturity dates within one year and are classified as short-term investments. The Group elected the fair value method at the date of initial recognition and carried these investments subsequently at fair value. Fair value is estimated based on quoted prices of similar financial products provided by financial institutions at the end of each period. Changes in the fair value are reflected in the unaudited condensed consolidated statements of comprehensive (loss)/income as “Interest income and investment income, net.”
(h) Trade receivables and current expected credit losses
Trade receivable primarily include amounts of vehicle sales related to government subsidies to be collected from the government on behalf of customers. The Group provides an allowance against trade receivable based on the expected credit loss approach (see below) and writes off trade receivable when they are deemed uncollectible. No material allowance for credit loss on trade receivable was recognized for the six months ended June 30, 2021 and 2022.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses, which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including, but not limited to, trade and other receivables and net investments in leases. The Group assessed that trade receivable, other current assets, and other non-current assets are within the scope of ASC 326. The Group has identified the relevant risk characteristics of trade receivables, other current assets, and other non-current assets which include size, type of the services or the products the Group provides, or a combination of these characteristics, the historical credit loss experience, current economic conditions, supportable forecasts of future economic conditions, and any recoveries in assessing the lifetime expected credit losses, etc. Other key factors that influence the expected credit loss analysis include industry-specific factors that could impact the credit quality of the Group’s receivables. This is assessed at each quarter based on the Group’s specific facts and circumstances. All forward looking statements are, by their nature, subject to risks and uncertainties, many of which are beyond the Group’s control. Considering the macroeconomic and market turmoil caused by COVID-19, the Group is continuously monitoring data and trends and took the latest available information into consideration.
The Group adopted ASC 326 and several associated ASUs on January 1, 2021 using a modified retrospective approach with a cumulative effect recorded as an increase of accumulated deficit in the amount of RMB1,955. As of January 1, 2021, upon the adoption, the expected credit loss provisions for the current assets and non-current assets were RMB972 and RMB983, respectively. For the six months ended June 30, 2021 and 2022, the Group recorded RMB884 and RMB3,906 in expected credit losses in selling, general and administrative expenses, respectively. As of December 31, 2021 and June 30, 2022, the expected credit loss reserves recorded in current assets were RMB2,659 and RMB5,360, and recorded in non-current assets were RMB3,757 and RMB4,962, respectively.
F-15
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The Group typically does not carry significant trade receivable related to vehicle sales and related sales as customer payments are due prior to vehicle delivery, except for amounts of vehicle sales in relation to government subsidies to be collected from the government on behalf of customers. Other current assets and other non-current assets primarily consist of other receivables and deposits. The following table summarizes the activity in the allowance for credit losses related to trade receivable, other current assets and other non-current assets for the six months ended June 30, 2021 and 2022:
| For the Six Months Ended | ||||||||
| June 30, 2021 | June 30, 2022 | |||||||
| Balance as of the beginning of the period | 1,955 | 6,416 | ||||||
| Provisions | 1,142 | 5,832 | ||||||
| Reversal | (258 | ) | (1,926 | ) | ||||
| Balance as of the end of the period | 2,839 | 10,322 | ||||||
(i) Derivative instruments
Derivative instruments are measured at fair value and recognized as either assets or liabilities on the consolidated balance sheets in either other current or non-current assets or other current liabilities or non-current liabilities depending upon maturity and commitment. Changes in the fair value of derivatives are either recognized periodically in the unaudited condensed consolidated statements of comprehensive (loss)/income or in other comprehensive income/(loss) depending on the use of the derivatives and whether they qualify for hedge accounting.
The Group selectively uses financial instruments to manage market risk associated with exposure to fluctuations in foreign currency rates with foreign exchange forwards and option contracts. These financial exposures are monitored and managed by the Group as an integral part of its risk management program. The Group does not engage in derivative instruments for speculative or trading purposes. The Group’s derivative instruments are not qualified for hedge accounting, thus changes in fair value are recognized in “Interest income and investment income, net” in the unaudited condensed consolidated statements of comprehensive (loss)/income. The cash flows of derivative financial instruments are classified in the same category as the cash flows from the items subject to the economic hedging relationships. The estimated fair value of the derivatives is determined based on relevant market information. These estimates are calculated with reference to the market rates using industry standard valuation techniques.
Derivative instruments are presented as net if rights of setoff exist, with all of the following conditions met: (a) each of two parties owes the other determinable amounts; (b) the reporting party has the right to set off the amount owed with the amount owed by the other party; (c) the reporting party intends to set off; and (d) the right of setoff is enforceable at law.
The Group did not have any outstanding derivative account balances instruments as of June 30, 2022 due to related maturities prior to December 31, 2021. The Group recorded fair value gain of RMB55,069 and nil in Interest income and investment income, net on the unaudited condensed consolidated statement of comprehensive loss for the six months ended June 30, 2021 and 2022, respectively.
F-16
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(j) Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is calculated on the weighted average basis and includes all costs to acquire and other costs to bring the inventories to their present location and condition. The Group records inventory write-downs for excess or obsolete inventories based upon assumptions on current and future demand forecasts. If the inventory on hand is in excess of future demand forecast, the excess amounts are written off. The Group also reviews inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires the determination of the estimated selling price of the vehicles less the estimated cost to convert inventory on hand into a finished product. Once inventory is written-down, a new, lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. No inventory write downs were recognized for the six months ended June 30, 2021 and 2022.
(k) Product warranties
The Group provides product warranties on all new vehicles based on the contracts with its customers at the time of sale of vehicles. The Group accrues a warranty reserve for the vehicles sold by multiplying the expected unit costs for warranty services by the sales volume, which includes the best estimate of projected costs to repair or replace items under warranties. These estimates are primarily based on the estimates of the nature, frequency and average costs of future claims. These estimates are inherently uncertain given the Group’s relatively short history of sales, and changes to the historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within the accrued and other current liabilities while the remaining balance is included within other non-current liabilities in the unaudited condensed consolidated balance sheets. Warranty cost is recorded as a component of cost of sales in the unaudited condensed consolidated statements of comprehensive (loss)/income. The Group reevaluates the adequacy of the warranty accrual on a regular basis.
The Group recognizes the benefit from a recovery of the costs associated with the warranty when specifics of the recovery have been agreed with the Group’s suppliers and the amount of the recovery is virtually certain.
The accrued warranty activity consists of the following:
| For the Six Months Ended | ||||||||
| June 30, 2021 | June 30, 2022 | |||||||
| Accrued warranty at beginning of the period | 233,366 | 842,345 | ||||||
| Warranty cost incurred | (8,351 | ) | (21,430 | ) | ||||
| Provision for warranty | 210,445 | 319,169 | ||||||
| Accrued warranty at end of the period | 435,460 | 1,140,084 | ||||||
| Including: Accrued warranty, current | 94,100 | 147,518 | ||||||
| Accrued warranty, non-current | 341,360 | 992,566 | ||||||
(l) Convertible debt
The Group recognized convertible debt issued in 2021 in the long-term borrowings on the unaudited condensed consolidated balance sheets.
F-17
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
In August 2020, the FASB issued ASU 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)(the “ASU 2020-06”). The Group determined to early adopt ASU 2020-06 from January 1, 2021. Since the ASU 2020-06 amended the guidance on convertible debt instruments by removing accounting models for the instruments with beneficial conversion features and cash conversion features. Accordingly, there is no need to consider beneficial conversion feature or cash conversion features for the convertible debt.
The Group assessed the convertible debt under ASC 815 and concluded that:
(i) Since the conversion option is considered indexed to the Company’s own stock and classified in shareholders’ (deficit)/ equity, bifurcation of conversion option from the convertible debt is not required as the scope exception prescribed in ASC 815-10-15-74 is met;
(ii) The repurchase option is considered clearly and closely related to its debt host and does not meet the requirement for bifurcation.
(iii) The Group presented the issuance costs of debt as a direct deduction from the related debt during the periods presented and subsequently amortized as interest expense over the contractual life.
(iv) The related accretion is recorded as interest expense in the unaudited condensed consolidated statement of comprehensive income over the estimated term using the effective interest method.
(m) Revenue recognition
The Group launched the first volume manufactured extended-range electric vehicle, Li ONE, to the public in October 2018 and started making deliveries to customers in the fourth quarter of 2019. The Group released the 2021 Li ONE in May 2021, which is upgraded version of Li ONE and terminated the production of the first model Li ONE in May, 2021(Note 8). Revenues of the Group are primarily derived from sales of vehicle, along with multiple distinct performance obligations within each sale of vehicle, as well as the sales of Li Plus Membership.
The Group adopted ASC 606, Revenue from Contracts with Customers, on January 1, 2018 by applying the full retrospective method.
Revenue is recognized when or as the control of the goods or services is transferred to a customer. Depending on the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and services is transferred over time if the Group’s performance:
| · | provides all of the benefits received and consumed simultaneously by the customer; |
| · | creates and enhances an asset that the customer controls as the Group performs; or |
| · | does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. |
If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and services.
F-18
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Contracts with customers may include multiple performance obligations. For such arrangements, the Group allocates revenue to each performance obligation based on its relative standalone selling price. The Group generally determines standalone selling prices based on the prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin, depending on the availability of observable information. Assumptions and estimations have been made in estimating the relative selling price of each distinct performance obligation, and changes in judgments on these assumptions and estimates may impact the revenue recognition.
When either party to a contract has performed, the Group presents the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment.
A contract asset is the Group’s right to consideration in exchange for goods and services that the Group has transferred to a customer. A receivable is recorded when the Group has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due.
If a customer pays consideration or the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer, the Group presents the contract liability when the payment is made, or a receivable is recorded (whichever is earlier). A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.
Vehicle sales
The Group generates revenue from sales of vehicles, currently the Li ONE, together with a number of products and services. There are multiple distinct performance obligations explicitly stated in the sales contracts including sales of Li ONE, charging stalls, vehicle internet connection services, firmware over-the-air upgrades (or “FOTA upgrades”) and initial owner extended lifetime warranty subject to certain conditions, which are accounted for in accordance with ASC 606. The standard warranty provided by the Group is accounted for in accordance with ASC 460, Guarantees, and the estimated costs are recorded as a liability when the Group transfers the control of Li ONE to a customer.
Customers only pay the amount after deducting the government subsidies to which they are entitled for the purchase of new energy vehicles, which is applied on their behalf and collected by the Group from the government according to the applicable government policy. The Group has concluded that government subsidies should be considered as a part of the transaction price it charges the customers for the new energy vehicles, as the subsidy is granted to the purchaser of the new energy vehicles and the purchaser remains liable for such amount in the event the subsidies were not received by the Group due to his fault such as refusal or delay of providing application information. Since July 2020, the Group was no longer eligible for the government subsidies as the Group’s selling price of vehicles is higher than threshold in the circular issued by the certain PRC authorities.
The overall contract price is allocated to each distinct performance obligation based on the relative estimated standalone selling price in accordance with ASC 606. The revenue for sales of the Li ONE and charging stalls are recognized at a point in time when the control of the product is transferred to the customer. For the vehicle internet connection service and FOTA upgrades, the Group recognizes the revenue using a straight-line method over the service period. As for the initial owner extended lifetime warranty, given the limited operating history and lack of historical data, the Group recognizes the revenue over time based on a straight-line method over the extended warranty period initially, and will continue monitoring the cost pattern periodically and adjust the revenue recognition pattern to reflect the actual cost pattern as it becomes available.
As the contract price for the vehicle and all embedded products and services must be paid in advance, which means the payments are received prior to the transfer of goods or services by the Group, the Group records a contract liability (deferred revenue) for the allocated amount regarding those unperformed obligations.
F-19
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Sales of Li Plus Membership
The Group also sells the Li Plus Membership to enrich the ownership experience of customers. Total Li Plus Membership fee is allocated to each performance obligation based on the relative estimated standalone selling price. And the revenue for each performance obligation is recognized either over the service period or at a point in time when the relevant goods or service is delivered or when the membership expired, whichever is earlier.
Customer loyalty points
Beginning in January 2020, the Group offers customer loyalty points, which can be used in the Group’s online store to redeem the Group’s merchandise or services. The Group determines the value of each customer loyalty point based on cost of the Group’s merchandise or service that can be obtained through redemption of customer loyalty points.
The Group concludes the customer loyalty points offered to customers in connection with the purchase of the Li ONE is a material right and is considered as a separate performance obligation according to ASC 606, and should be taken into consideration when allocating the transaction price of the sales of vehicle. The amount allocated to the customer loyalty points as separate performance obligation is recorded as contract liability (deferred revenue) and revenue should be recognized when the customer loyalty points are used or expired.
Customers or users of the mobile application can also obtain customer loyalty points through other ways, such as referring new customers to purchase the vehicles via the mobile application. The Group offers these customer loyalty points to encourage user engagement and generate market awareness. As a result, the Group accounts for such points as selling and marketing expenses with a corresponding liability recorded under accruals and other current liabilities upon the points offering.
F-20
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2.Summary of Significant Accounting Policies (Continued)
Sales of Automotive Regulatory Credits
Pursuant to the measurements and policies promulgated by China’s Ministry of Industry and Information Technology (“MIIT”), each of the vehicle manufacturers or importers above a certain scale is able to earn Automotive Regulatory Credits by manufacturing or importing New Energy Vehicle (“NEV”). The Automotive Regulatory Credits are tradable and sold to other companies through a credit management system established by MIIT. The Group earns the tradable new energy vehicle credits from the production of the Group’s electric vehicles. The Group sells these credits at agreed price to other regulated entities who can use the credits to comply with the regulatory requirements. The Group recognized revenue on the sale of Automotive Regulatory Credits at the time control of the Automotive Regulatory Credits were transferred to the purchasing party in September 2021 as MIIT has completed the review and approved the sale of Automotive Regulatory Credits, the related NEV Credits have been transferred to purchasing party. The full consideration for sale of Automotive Regulatory Credits was collected by the Group in the fourth quarter of 2021.
Practical expedients and exemptions
The Group elects to expense the costs to obtain a contract as incurred given the majority of the contract considerations for vehicle sales are allocated to the sales of Li ONE and recognized as revenue upon transfer of control of the vehicles, which is within one year after entering the sales contracts.
(n) Government grants
The Group’s PRC based subsidiaries received government subsidies from certain local governments. The Group’s government subsidies consist of specific subsidies and other subsidies. Specific subsidies are subsidies that the local government has provided for a specific purpose, such as research and development purpose, construction of production plants and facilities and capacity subsidies related to the Chongqing Manufacturing Base. Other subsidies are the subsidies that the local government has not specified its purpose for and are not tied to future trends or performance of the Group, receipt of such subsidy income is not contingent upon any further actions or performance of the Group and the amounts do not have to be refunded under any circumstances. The Group recorded specific purpose subsidies as a non-current liability if the amount is received in advance. For specific subsidies, upon government acceptance of the related project construction or asset acquisition, the specific purpose subsidies are recognized to reduce the cost of asset acquisition. Other subsidies are recognized as Others, net upon receipt as further performance by the Group is not required.
As of December 31, 2021 and June 30, 2022, other non-current liabilities included nil and RMB406,674 in deferred government grants relating to specific government subsidies for construction production plants and facilities and product development, respectively. These government grants are expected to be amortized using the straight-line method as a deduction of the depreciation expense of these assets over their useful lives upon contruction and when placed in use.
F-21
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(o) Fair value
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurement for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Group considers the principal or most advantageous market in which it would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2—Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.
Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.
F-22
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(p) Loss per share
Basic net loss per share is computed using the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to share in the loss. Diluted net loss per share is computed using the weighted average number of ordinary shares and potential ordinary shares outstanding during the period. Potential ordinary shares include ordinary shares issuable upon the exercise of outstanding share options using the treasury stock method and ordinary shares issuable upon the conversion of convertible debt using the if-converted method. Potential ordinary shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.
(q) Segment reporting
ASC 280, Segment Reporting, establishes standards for companies to report in their financial statements information about operating segments, products, services, geographic areas, and major customers.
Based on the criteria established by ASC 280, the Group’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole, and hence, the Group has only one reportable segment. The Group does not distinguish between markets or segments for the purpose of internal reporting. As the Group’s long-lived assets are substantially located in the PRC, no geographical segment information is presented.
3. Recent Accounting Pronouncements
Recently adopted accounting pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, to remove specific exceptions to the general principles in Topic 740 and to simplify accounting for income taxes. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Group adopted this ASU from January 1, 2021. The ASU did not have a material impact on the unaudited condensed consolidated financial statements.
In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments clarified that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments also clarified that for the purpose of applying paragraph 815-10-15-141(a) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825. An entity also would evaluate the remaining characteristics in paragraph 815-10-15-141 to determine the accounting for those forward contracts and purchased options. The Group adopted ASU No. 2020-01 from January 1, 2021, which did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
F-23
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
4. Concentration and Risks
(a) Concentration of credit risk
Assets that potentially subject the Group to significant concentrations of credit risk primarily consist of cash and cash equivalents, restricted cash, time deposits and short-term investments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2021 and June 30, 2022, most of the Group’s cash and cash equivalents, restricted cash and time deposits and short-term investments were held by major financial institutions located in the PRC and Hong Kong which management believes are of high credit quality. On May 1, 2015, China’s new Deposit Insurance Regulation came into effect, pursuant to which banking financial institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign currency placed with them. This Deposit Insurance Regulation would not be effective in providing complete protection for the Group’s accounts, as its aggregate deposits are much higher than the compensation limit. However, the Group believes that the risk of failure of any of these PRC banks is remote. The Group expects that there is no significant credit risk associated with cash and cash equivalents and short-term investments which are held by reputable financial institutions in the jurisdictions where the Company, its subsidiaries and the VIEs are located. The Group believes that it is not exposed to unusual risks as these financial institutions have high credit quality. The Group has no significant concentrations of credit risk with respect to the assets mentioned above.
The Group relies on a limited number of third parties to provide payment processing services (“payment service providers”) to collect amounts due from customers. Payment service providers are financial institutions, credit card companies and mobile payment platforms such as Alipay and WeChat Pay, which the Group believes are of high credit quality.
(b) Currency convertibility risk
The PRC government imposes controls on the convertibility of RMB into foreign currencies. The Group’s cash and cash equivalents, restricted cash and time deposits and short-term investments denominated in RMB that are subject to such government controls amounted to RMB24,509,656 and RMB37,704,511 as of December 31, 2021 and June 30, 2022, respectively. The value of RMB is subject to changes in the central government policies and to international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (the “PBOC”). Remittances in currencies other than RMB by the Group in the PRC must be processed through PBOC or other Chinese foreign exchange regulatory bodies which require certain supporting documentation in order to process the remittance.
(c) Foreign currency exchange rate risk
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. The appreciation of the RMB against the US$ was approximately 1.0% for the six months ended June 30, 2021. The depreciation of the RMB against the US$ was approximately 5.3% for the six months ended June 30, 2022. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the US$ in the future.
F-24
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
5. Trade receivable
An aging analysis of the trade receivable as of December 31, 2021 and June 30, 2022, based on the recognition date and net of credit loss provisions, is as follows:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Within 3 months | 16,462 | 28,215 | ||||||
| Between 3 months and 6 months | 890 | 67 | ||||||
| Between 6 months and 1 year | — | 575 | ||||||
| More than 1 year | 103,189 | 52,916 | ||||||
| Total | 120,541 | 81,773 | ||||||
6. Inventories
Inventories consist of the following:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Raw materials, work in process and supplies | 1,468,801 | 2,535,484 | ||||||
| Finished products | 149,089 | 471,211 | ||||||
| Total | 1,617,890 | 3,006,695 | ||||||
Raw materials, work in process and supplies as of December 31, 2021 and June 30, 2022 primarily consist of materials for volume production which will be transferred into production cost when incurred as well as spare parts used for after sales services.
Finished products include vehicles ready for transit at production plants, vehicles in transit to fulfil customers’ orders, new vehicles available for immediate sales at the Group’s sales and servicing center locations.
7. Prepayments and Other Current Assets
Prepayments and other current assets consist of the following:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Prepayments to vendors | 218,660 | 370,750 | ||||||
| Note receivable (Note 13) | — | 299,106 | ||||||
| Prepaid rental and deposits | 48,929 | 245,440 | ||||||
| Deductible VAT input | 118,177 | 119,272 | ||||||
| Receivables related to rebate | 28,491 | — | ||||||
| Others | 68,615 | 120,455 | ||||||
| Less:Allowance for Credit Losses | (2,192 | ) | (5,154 | ) | ||||
| Total | 480,680 | 1,149,869 | ||||||
F-25
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
8. Property, Plant and Equipment, Net
Property, plant and equipment and related accumulated depreciation were as follows:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Construction in process (i) | 1,942,953 | 2,476,709 | ||||||
| Production machineries and facilities | 804,281 | 2,023,532 | ||||||
| Mold and tooling | 1,098,392 | 1,945,393 | ||||||
| Leasehold improvements | 660,902 | 834,981 | ||||||
| Buildings | 409,123 | 718,032 | ||||||
| Equipment | 266,745 | 387,066 | ||||||
| Buildings improvements | 297,163 | 313,384 | ||||||
| Motor vehicles | 59,702 | 99,538 | ||||||
| Total | 5,539,261 | 8,798,635 | ||||||
| Less: Accumulated depreciation | (983,222 | ) | (1,373,158 | ) | ||||
| Less: Accumulated impairment loss (ii) | (57,770 | ) | (57,770 | ) | ||||
| Total property, plant and equipment, net | 4,498,269 | 7,367,707 | ||||||
The Group recorded depreciation expense of RMB220,344 and RMB396,154 for the six months ended June 30, 2021 and 2022 respectively.
| (i) | Construction in process is primarily comprised of production facilities, equipment and mold and tooling related to manufacturing of the extended-range eletric SUV vehicles and BEV models and a portion of Changzhou Manufacturing Base construction. | |
| In July 2021, the Group signed a memorandum and a series of agreements (collectively “Beijing Manufacturing Base Agreements”) for collaboration on a construction and expansion project of an automobile manufacturing plant, for the Group’s’specific use, in Shunyi District, Beijing, with an enterprise affiliated with the Beijing local government (“the Developer Enterprise”). Beginning in May, 2022, an agreement will become effective whereby the Group will lease the plant facility from the Developer Enterprise (responsible for the construction of the plant). The Group has agreed to acquire the plant in September 2028. In October 2021, construction commenced on the Beijing Manufacturing Base, which is scheduled to be operational in 2023. As of June 30, 2022, RMB 260,546 of construction in process and along with RMB 180,546 of other non-current liabilities were recognized in the unaudited condensed consolidated balance sheet. |
| (ii) | The Group launched 2021 Li ONE in May 2021, consequently, the production volume of the first model Li ONE is expected to gradually decrease in line with sales volume. As of December 31, 2021, the Group recorded an impairment loss of RMB26,718 on its production facilities and mold and tooling used in the production of the first model Li ONE as a significant portion of the carrying value of these assets are not expected to be recovered in the foreseeable future. The Group recorded an impairment loss of RMB26,718 and nil for property, plant and equipment for the six months ended June 30, 2021 and 2022, respectively. |
F-26
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
9. Intangible Assets, Net
Intangible assets and related accumulated amortization were as follows:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Automotive Manufacturing Permission | 647,174 | 647,174 | ||||||
| Insurance Agent License | — | 35,000 | ||||||
| Indefinite-lived intangible assets | 647,174 | 682,174 | ||||||
| Software | 137,576 | 162,251 | ||||||
| Patents | 694 | 694 | ||||||
| Definite-lived intangible assets | 138,270 | 162,945 | ||||||
| Less: Accumulated amortization | ||||||||
| Software | (33,290 | ) | (42,485 | ) | ||||
| Patents | (694 | ) | (694 | ) | ||||
| Accumulated amortization | (33,984 | ) | (43,179 | ) | ||||
| Definite-lived intangible assets, net | 104,286 | 119,766 | ||||||
| Total intangible assets, net | 751,460 | 801,940 | ||||||
The newly acquired Insurance Agent License is considered to be an indefinite lived intangible asset and is carried at cost less any subsequent impairment loss. The Group believes, based upon regulatory precedent, that ongoing required license renewals (as approved by government authorities) is a perfuntory activity, those providing the basis for the indefinite life assumption.
The Group recorded amortization expense of RMB5,047 and RMB9,195 for the six months ended June 30, 2021 and 2022, respectively.
As of June 30, 2022, amortization expense related to intangible assets for future periods are estimated to be as follows:
| As of June 30, | ||||
| 2022 | ||||
| Year ending June 30, 2023 | 18,131 | |||
| Year ending June 30, 2024 | 15,097 | |||
| Year ending June 30, 2025 | 12,674 | |||
| Year ending June 30, 2026 | 12,052 | |||
| Thereafter | 61,812 | |||
| Total | 119,766 | |||
10. Leases
Acquisition of Changzhou Manufacturing Base Phase I and Phase II and termination of lease agreements
In November 2021, Jiangsu CHJ, as a subsidary of the Group, entered into an equity transfer agreement to acquire an 100% equity interest in Changzhou Chehejin which owns the legal title of Changzhou Manufacturing Base Phase I and Phase II Land use rights and Plants. According to the equity transfer agreement, the total consideration for this transaction was RMB567,118 in cash, of which RMB537,009 was paid as of June 30, 2022. Upon the completion of the transaction, the legal titles of Changzhou Manufacturing Base Phase I and II, including Land use rights and Plants, were transferred to the Group, and the original lease agreements were terminated accordingly.
F-27
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
10. Leases (Continued)
There were no inputs and susbstantive processes acquired to siginificantly contribute to the ability to create outputs (no workforce or revenue supporting processes were acquired in connection with this transaction).Accordingly, this transaction was accounted for as an asset acquisition.
According to ASC 842-20-40-2, the termination of a lease that results from the purchase of an underlying asset by the lessee is not the type of termination of a lease contemplated but, rather, is an integral part of the purchase of the underlying asset. Upon the Group's purchase of the Changzhou Manufacturing Base Phase I and II Land use right and Plants, the difference between the total consideration of this transaction and the carrying amount of the lease liabilities arising from Phase I assets and short-term borrowings arising from Phase II assets immediately prior to the transaction was recorded as an adjustment of the carrying amount of the asset, with an amount of RMB47,876 on the consolidated balance sheet as of December 31, 2021.
Acquistion of land use rights in Changzhou and Chongqing
For the six months ended June 30, 2022, the Group acquired land use rights to construct production plants and facilities for manufacturing vehicles of the Group in Changzhou and Chongqing province, the PRC. The total consideration of land use rights was RMB683,433.
Land use rights are classified as an operating lease and are recorded at cost, as a right of use asset less accumulated amortization. Amortization is provided on a straight-line basis over the estimated useful lives which are 50 years that represent the terms of land use rights certificate. The Group recorded amortization of these land use rights of RMB5,695 for the six months ended June 30, 2022.
11. Other Non-current Assets
Other non-current assets consist of the following:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Prepayments for purchase of property, plant and equipment (i) | 1,051,415 | 1,260,232 | ||||||
| Long-term deposits | 653,030 | 987,127 | ||||||
| Deductible VAT input, non-current | 263,390 | 328,341 | ||||||
| Others | 16,998 | 22,304 | ||||||
| Less: Allowance for credit losses | (3,757 | ) | (4,962 | ) | ||||
| Total | 1,981,076 | 2,593,042 | ||||||
| (i) | Prepayments for purchase of property, plants and equipment primarily consists of production facilities, leasehold improvements, equipment and mold and tooling related to manufacturing of the extended-range eletric SUV vehicles and BEV models,a portion of Beijing, Chongqing and Changzhou Manufacturing Bases construction and production facilities and equipment relating to manufacturing of engines and parts of Sichuan Li Xinchen. |
F-28
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
12. Long-term Investments
The Group’s long-term investments on the consolidated balance sheets consisted of the following:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Equity Method | 34,704 | 185,114 | ||||||
| Equity Security With Readily Determinable Fair Values | 28,452 | 21,461 | ||||||
| Equity Securities Without Readily Determinable Fair Values | 93,150 | 502,546 | ||||||
| Total Long-term Investments | 156,306 | 709,121 | ||||||
Equity Method
On September 11, 2018, the Group acquired a 49% entity interest in Beijing Judianchuxing Technology Limited (“Beijing Judianchuxing”), which is a joint venture with another shareholder holding a 51% interest. The Group paid cash consideration of RMB98,000 for its equity interest, On January 30, 2019, the Group invested another RMB98,000 into the same venture proportionately with the other investor thereby maintaining its 49% equity interest. The Group has significant influence over the venture and applies the equity method in accounting for this investment. The proportionate share of the net loss or income of equity method investees are recorded in “Others, net” in the consolidated statements of comprehensive loss. As of June 30, 2022, the Group’s share of the venture’s cumulative net losses have exceeded its cost basis, thereby resulting in a carrying value of RMB0.
In July 2021, the Group entered into an agreement with Suzhou Huichuan United Power System Co., LTD (“Suzhou Huichuan”) to establish Changzhou Huixiang New Energy Auto Parts Co., LTD (“Changzhou Huixiang” or “Joint Venture”). The Group should pay RMB73,500 in registered capital, representing a 49% equity interest in Changzhou Huixiang , while Suzhou Huichuan should pay RMB76,500 in registered capital, representing a 51% equity interest in Changzhou Huixiang. The Group has significant influence in Changzhou Huixiang and therefore the investment is accounted for using the equity method. As of June 30, 2022, the Group paid RMB30,000 out of its total RMB73,500 investment commitment. The Group performs an impairment assessment of its equity method investments whenever events or changes in circumstances indicate that the carrying value of the investment may not be fully recoverable. No impairment of equity method investments was recognized for the six months ended June 30, 2021 and 2022.
F-29
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
12. Long-term Investments (Continued)
Equity Security with Readily Determinable Fair Values
Equity security with readily determinable fair values are marketable equity securities which are publicly traded stocks measured at fair value.
The following table shows the carrying amount and fair value of equity securities with readily determinable fair values:
| Cango Inc. | Cost Basis | Unrealized Loss | Foreign Currency Translation | Fair Value | ||||||||||||
| As of December 31, 2021 | 100,303 | (73,535 | ) | 1,684 | 28,452 | |||||||||||
| As of June 30, 2022 | 100,303 | (81,732 | ) | 2,890 | 21,461 | |||||||||||
The Company purchased 2,633,644 shares of Series C preferred shares issued by Cango Inc. (“Cango”), with a total cash consideration of US$15,634 (RMB100,303) in 2018. This investment was initially recorded as an equity holding without a readily determinable fair value given Cango was still a privately held company at that time. In July 2018, Cango completed its listing on the New York Stock Exchange (“Cango IPO”) and the Series C preferred shares held by the Company were converted to Class A ordinary shares of Cango.
Upon the completion of Cango IPO, the Company reclassified this investment from equity securities without readily determinable fair value to equity securities with readily determinable fair value. These securities are valued using the market approach based on the quoted prices in active markets at the reporting date. The Company classifies the valuation techniques that use these inputs as Level 1 of fair value measurements.
Any unrealized gain or loss is recognized in investment income, net in the consolidated statements of comprehensive income/loss.
Equity Securities without Readily Determinable Fair Values
Equity securities without determinable fair value represent investments in privately held companies with no readily determinable fair value. The Group’s investments are preferred shares, which are not considered as common stock or in substance common stock . Upon adoption of ASU 2016-01 on January 1, 2018, the Group elected the measurement alternative and recorded these investments at cost, less impairment (if any), adjusted for subsequent observable price changes.
In March 2022, one of the Group’s subsidiaries—Chongqing Chezhiyuan, entered into an agreement with Xin Wang Da Electronics Limited (“Xin Wang Da Electronics”), an A-share listed company engaging in design, production and sale of lithium battery cells and modules to purchase certain Series Pre-A preferred shares of Xin Wang Da Electric Vehicle and Battery Limited (“the investee”), a subsidiary of Xin Wang Da Electronics. This transaction, with a total consideration of RMB400,000, resulted in the Group’s 3.2% equity ownership in the investee. As of June 30,2022, Chongqing Chezhiyuan has fully paid the investment consideration of RMB400,000.
Impairment charges of nil and nil were recorded in investment income, net in the consolidated statements of comprehensive loss for the six months ended June 30, 2021 and 2022, respectively.
F-30
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
13. Short-term Borrowings and Long-term Borrowings
Borrowings consist of the following:
| As of | ||||||||||||||||||||
| Maturity Date | Classification | Principal Amount | Interest Rate Per Annum | December 31, 2021 | June 30, 2022 | |||||||||||||||
| Convertible debt (1) | May 1, 2028 | Non-current | US$ | 862,500 | 0.25% | 5,397,941 | 5,690,428 | |||||||||||||
| Secured bank loan (2) | February 15, 2027 | Non-current | RMB | 900,000 | 5-year LPR -0.40% | — | 900,000 | |||||||||||||
| Credit guaranteed borrowing (3) | June 29, 2024 | Current and Non-current | US$ | 100,000 | SOFR | — | 671,140 | |||||||||||||
| Secured bank loan (4) | September 28, 2029 | Current and Non-current | RMB | 600,000 | 4.80% | 600,000 | 600,000 | |||||||||||||
| Secured borrowing (5) | March 25, 2025 | Current and non-current | RMB | 274,180 | 4.00% | — | 274,180 | |||||||||||||
| Unsecured borrowing (6) | April 19, 2023 | Current | RMB | 237,180 | 1-year LPR -0.20% | — | 237,180 | |||||||||||||
| Secured borrowing (7) | June 21, 2034 | Non-current | RMB | 54,823 | 5-year LPR -0.60% | — | 54,823 | |||||||||||||
| Total borrowings | 5,997,941 | 8,427,751 | ||||||||||||||||||
The total borrowings are classified as short-term borrowings and long-term borrowings:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Short-term borrowings: | ||||||||
| Unsecured borrowing (6) | — | 237,180 | ||||||
| Current portion of Secured borrowing (5) | — | 99,702 | ||||||
| Current portion of Secured bank loan (4) | 37,042 | 37,042 | ||||||
| Current portion of Credit guaranteed borrowing (3) | — | 13,422 | ||||||
| Total short-term borrowings | 37,042 | 387,346 | ||||||
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Long-term borrowings: | ||||||||
| Convertible debt (1) | 5,397,941 | 5,690,428 | ||||||
| Secured bank loan (2) | — | 900,000 | ||||||
| Non-current portion of Credit guaranteed borrowing (3) | — | 657,718 | ||||||
| Non-current portion of Secured bank loan (4) | 562,958 | 562,958 | ||||||
| Non-current portion of Secured borrowing (5) | — | 174,478 | ||||||
| Secured borrowing (7) | — | 54,823 | ||||||
| Total long-term borrowings | 5,960,899 | 8,040,405 | ||||||
| Total borrowings | 5,997,941 | 8,427,751 | ||||||
| (1) | In April 2021, the Company issued and sold convertible debt in an aggregate principal of US$862,500 through a private placement. The convertible debt will mature in 2028, bearing the interest at a rate of 0.25% per annum. The related interest is payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2021. The net proceeds from this offering were approximately US$844,876, equivalent to RMB5,533,238. |
F-31
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
The convertible debt may be converted, at an initial conversion rate of 35.2818 American depositary shares (the “ADSs”) per US$1,000 principal amount (which represents an initial conversion price of approximately US$28.34 per ADSs) at each holder’s option at any time on or after November 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date of May 1, 2028. Upon conversion, the Company will pay or deliver to such converting holders, as the case may be, either cash, ADSs, or a combination of cash and ADSs, at its election.
The initial conversion price of US$28.34 per ADSs, or US$14.17 per Class A Ordinary Share (the latter represents the effective cost per Class A Ordinary Share), represents a discount of approximately 26.56% to the maximum Public Offer Price of HK$150.00 per Class A Ordinary Share. The initial conversion rate may be adjusted in certain circumstances, including but not limited to when the Company effects a share split or share combination. As of June 30, 2022, no adjustment had been made to the initial conversion rate.
Holders of the convertible debt have the rights to require the Company to repurchase all or a portion for their convertible debt on May 1, 2024 and May 1, 2026 or in the event of certain fundamental changes, at a repurchase price equal to 100% of the principal amount of the convertible debt to be repurchased, plus accrued and unpaid interest.
The Company accounted for the convertible debt as a single instrument measured at its amortized cost as long-term borrowings on the unaudited condensed consolidated balance sheets. The issuance costs were recorded as an adjustment to the long-term borrowings and are amortized as interest expense using the effective interest method over the contractual life to the maturity date (i.e., May 1, 2028). For the six months ended June 30, 2021 and 2022, the convertible debt related interest expense was US$1,011 (RMB6,531) and US$2,235 (RMB14,973), respectively. As of December 31, 2021 and June 30, 2022, the principal amount of the convertible debt was RMB5,499,041 and RMB5,788,583, and the unamortized debt issuance cost was RMB101,100 and RMB98,155, respectively.
F-32
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
13. Short-term Borrowings and Long-term Borrowings (Continued)
| (2) | In February, 2022, the Group entered into a 5-year pledged loan agreement with a commercial bank in the PRC, with total principal of RMB900,000. This loan was pledged by certain manufacturing facilitites of the Group. As of June 30, 2022, the interest rate was between 4.05% to 4.20% per annum and all principal amount was presented as a long-term borrowing. | |
The borrowing contain covenants which includes limitations on certain asset sales and a requirement to maintain current assets above RMB5,000. The Group is in compliance with all of the loan covenants as of June 30, 2022. |
| (3) | In June 2022, the Group entered into loan agreements with a commercial bank pursuant to which the Group is entitled to borrow the group of banks from time to time until June 2024 up to an aggregate of US$200,000. In June 2022, the Group made the drawdown in the amount of US$100,000 (RMB671,140). Interest accrues on the principal amounts of the loans outstanding at an annual rate equal to the SOFR. As of June 30, 2022, the outstanding loan principal of RMB13,422 is due within 12 months, which is classified as current portion of long-term borrowing and the remaining portion of principal of RMB657,718 is presented as a long-term borrowing. |
| (4) | In September 2021, the Group entered into a loan facility agreement with a commercial bank in the PRC, which allows the Group to draw borrowings up to RMB1,009,900 as of periods ended September 28, 2029. The borrowings bear annual interest rate of 4.8% and were guaranteed by certain production facilities and toolings of the Group. As of June 30, 2022, the outstanding loan principal was RMB600,000, of which RMB37,042 will be due within 12 months, which is classified as current portion of long-term borrowing and the remaining balance of RMB562,958 will be due in July 1, 2023 and thereafter, which is classified as long-term borrowing. The unused credit limits under these facilities was RMB409,900 as of June 30, 2022. |
| (5) | In February 2022, the Group entered into an asset transfer agreement with a finance lease company to sell certain production facilities and equipment in Changzhou Production Base with a total consideration of RMB299,106. Immediately after the transfer, the Group entered into a lease agreement to lease back the production facilities and equipment for the period starting from March 25, 2022 to March 25, 2025, and further obtained an option to repurchase the production facilities and equipment with the notional amount of RMB0.001 on March 25, 2025. |
As the repurchase option is not at the fair value of the assets when the option is exercised, and the assets repurchased are designed for the use of the Group, and no alternative assets that are substantially the same as the transferred assets are readily available in the market, as a result, the transaction did not qualify for the sales accounting, and was accounted for as a financing transaction and the Group recorded the sales proceeds as a borrowing in the unaudited condensed consolidated balance sheets. The Group repaid a portion of the principal in the amount of RMB24,926 for the six months ended June 30, 2022. As of June 30, 2022, outstanding loan principal of RMB99,702 is due within 12 months, which is classified as current portion of long-term borrowing and the remaining portion of principal of RMB174,478 is presented as a long-term borrowing.
Considering the above arrangement, The Group received RMB299,106 in acceptance bills issued by the finance lease Company through its contracted financial institution that entitles the Group to receive the full face amount at maturity, which generally ranges within one year from the date of issuance. Accordingly, the Group recognized the notes receivable in Prepayments and Other Current Assets as of June 30, 2022 (Note 7).
| (6) | In December 2021 and April 2022, the Group entered into 1-year loan agreement and supplemental agreement with a commercial bank in the PRC, with total principal of RMB500,000. As of June 30, 2022, the annual interest rate was 1-year Loan Prime Rate (“LPR”) published by the National Interbank Funding Center, minus 0.2% per annum and all outstanding loan principal of RMB237,180 was presented as a short-term borrowing. |
| (7) | In June 2022, the Group entered into a credit agreement with a group of banks pursuant to which the Group is entitled to borrow from the group of banks from time to time up to an aggregate of RMB3,000,000 until April 2024. The related principle and interest is payable semiannually in arrears on June and December of each year, beginning from June 2025, until June 2034. In June 2022, the Group made an initial drawdown in the amount of RMB54,823 which is due and matures on June 20, 2025. The loan is secured by the pledge of certain Groups land use rights and property relating to the production of electric vehicles, when the certificates of land use rights and property are approved and provided by the local authorities. Interest accrues on the principal amounts of the loans outstanding at an annual rate equal to the 5-year Loan Prime Rate (“LPR”) published by the National Interbank Funding Center, minus 0.6%. Borrowings under this credit agreement are classified as long-term. |
F-33
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
14. Trade and Notes Payable
Trade and notes payable consist of the following:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Trade payable for raw materials | 7,089,370 | 7,839,630 | ||||||
| Notes payable | 2,286,680 | 5,250,516 | ||||||
| Total | 9,376,050 | 13,090,146 | ||||||
An aging analysis of the trade and notes payable as at December 31, 2021 and June 30, 2022, based on the recognition date, is as follows:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Within 3 months | 7,539,833 | 11,658,250 | ||||||
| Between 3 months and 6 months | 1,639,286 | 1,341,226 | ||||||
| Between 6 months and 1 year | 161,913 | 45,665 | ||||||
| More than 1 year | 35,018 | 45,005 | ||||||
| Total | 9,376,050 | 13,090,146 | ||||||
15. Accruals and Other Current Liabilities
Accruals and other current liabilities consist of the following:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Payables for purchase of property, plant and equipment | 456,395 | 1,387,107 | ||||||
| Salaries and benefits payable | 417,449 | 538,244 | ||||||
| Tax payable | 277,233 | 326,963 | ||||||
| Payables for research and development expenses | 94,517 | 194,631 | ||||||
| Advances from customers | 10,262 | 183,033 | ||||||
| Payables for logistics expenses | 143,632 | 169,183 | ||||||
| Accrued warranty | 154,276 | 147,518 | ||||||
| Payables for marketing and promotional expenses | 96,945 | 143,658 | ||||||
| Deposits from vendors | 27,716 | 26,305 | ||||||
| Other payables | 200,943 | 297,884 | ||||||
| Total | 1,879,368 | 3,414,526 | ||||||
F-34
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
16. Revenue Disaggregation
Revenues by source consist of the following:
| For the Six Months Ended June 30 | ||||||||
| 2021 | 2022 | |||||||
| Vehicle sales | 8,366,968 | 17,792,221 | ||||||
| Other sales and services | 247,185 | 502,436 | ||||||
| Total | 8,614,153 | 18,294,657 | ||||||
Revenue by timing of recognition is analyzed as follows:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Revenue recognized at a point in time | 8,578,671 | 18,223,658 | ||||||
| Including: Vehicle sales | 8,366,968 | 17,792,221 | ||||||
| Other sales and services | 211,703 | 431,437 | ||||||
| Revenue recognized over time | 35,482 | 70,999 | ||||||
| Total | 8,614,153 | 18,294,657 | ||||||
Revenues arising from vehicle sales are recognized at a point in time when the control of the products are transferred to the users. Revenues from other sales and services which are recognized at a point in time include (i) sales and installment of charging piles, (ii) sales of goods from online store, (iii) certain services under the Li Plus Membership, and (iv) sales of Automotive Regulatory Credits. In such instances, revenue is recognized at a point in time when the control of the products and services are transferred to the users.
Certain revenue arising from other sales and services is recognized over time, including vehicle internet connection services, FOTA upgrades and certain services under the Li Plus Membership.
17. Deferred Revenue
The following table includes a rollforward of the deferred revenue balance for each period presented:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Deferred revenue—at beginning of the period | 407,168 | 694,745 | ||||||
| Additions | 8,884,806 | 18,434,602 | ||||||
| Recognition | (8,737,100 | ) | (18,234,769 | ) | ||||
| Deferred revenue—at end of the period | 554,874 | 894,578 | ||||||
| Including: Deferred revenue, current | 283,156 | 346,306 | ||||||
| Deferred revenue, non-current | 271,718 | 548,272 | ||||||
Deferred revenue represents contract liabilities allocated to the performance obligations that are unsatisfied, or partially satisfied which primarily resulted from undelivered vehicles, uninstalled charging piles and other performance obligations identified in the vehicle sales contracts.
The Group expects that RMB346,306 of the transaction price allocated to unsatisfied performance obligation as of June 30, 2022 will be recognized as revenue during the period from July 1, 2022 to June 30, 2023. The remaining RMB548,272 will be recognized in July 1, 2023 and thereafter.
F-35
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
18. Research and Development Expenses
Research and development expense consist of the following:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Employee compensation | 713,611 | 1,837,448 | ||||||
| Design and development expense | 380,491 | 897,108 | ||||||
| Rental and related expense | 23,734 | 49,668 | ||||||
| Depreciation and amortization expense | 24,959 | 38,092 | ||||||
| Travel expense | 14,972 | 29,191 | ||||||
| Others | 10,171 | 54,099 | ||||||
| Total | 1,167,938 | 2,905,606 | ||||||
19. Selling, General and Administrative Expense
Selling, general and administrative expenses consist of the following:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Employee compensation | 485,626 | 1,320,923 | ||||||
| Marketing and promotional expense | 540,511 | 394,880 | ||||||
| Rental and related expense | 119,772 | 279,783 | ||||||
| Depreciation and amortization expense | 28,613 | 87,795 | ||||||
| Travel expense | 21,827 | 40,246 | ||||||
| Expected credit losses | 884 | 3,906 | ||||||
| Others | 147,968 | 400,547 | ||||||
| Total | 1,345,201 | 2,528,080 | ||||||
20. Ordinary Shares
In April 2017, the Company was incorporated as a limited liability company in the Cayman Islands. In July 2019, the Company became the holding company of the Group pursuant to the Reorganization described in Note 1. In connection with the Reorganization and issuance of Series C convertible redeemable preferred shares (“Series C Preferred Shares”), 3,830,157,186 authorized shares of the Company were designated as Class A Ordinary Shares, and 240,000,000 authorized shares were designated as Class B ordinary shares. 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. Upon the Reorganization, the Company issued ordinary shares and Series Pre-A, A-1, A-2, A-3, B-1, B-2 and B-3 convertible redeemable preferred shares (the “Series Pre-A, A-1, A-2, A-3, B-1, B-2 and B-3 Preferred Shares”) to shareholders of Beijing CHJ in exchange for respective equity interests that they held in Beijing CHJ immediately before the Reorganization. Series Pre-A, A-1, A-2, A-3, B-1, B-2 and B-3 Preferred Shares would be converted into Class A Ordinary Shares based on the then-effective conversion price.
F-36
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
20. Ordinary Shares (Continued)
On July 4, 2016, Beijing CHJ issued Series Pre-A shares (“Series Pre-A Ordinary Shares”) with cash consideration of RMB100,000. Series Pre-A Ordinary Shares were classified as equity as they were not redeemable. In July 2017, upon Series A-2 financing, certain rights were granted to holders of Series Pre-A Ordinary Shares, including contingent redemption rights. Series Pre-A Ordinary Shares were effectively re-designated to Series Pre-A Preferred Shares. Such re-designation was accounted for as a repurchase and cancellation of Series Pre-A Ordinary Shares and a separate issuance of Series Pre-A Preferred Shares. Accordingly, the excess of fair value of the Series Pre-A Preferred Shares over the fair value of the Series Pre-A Ordinary Shares repurchased from employee shareholders was recorded as an employee compensation. While for other non-employee Series Pre-A shareholders, such difference was recognized as a deemed dividend given to these shareholders. The excess of the fair value of all Series Pre-A Ordinary Shares over the carrying value of these shares was accounted for as a retirement of the Series Pre-A Ordinary Shares. The Company elected to charge the excess entirely to accumulated deficits.
In August 2020, the Company completed its US IPO and 190,000,000 Class A Ordinary Shares were issued with proceeds of US$1,042,137, net of underwriter commissions and relevant offering expenses. Concurrently with completion of the IPO, 66,086,955 Class A Ordinary Shares were issued for a consideration of US$380,000. On August 7, 2020, the Company issued an additional 28,500,000 Class A Ordinary Shares upon the exercise of underwriters’ over-allotment option for a consideration of US$157,320.
All of the Preferred Shares (other than those beneficially owned by Mr. Li Xiang, the founder and the CEO of the Company) were automatically converted to 1,045,789,275 Class A Ordinary Shares immediately upon the completion of the IPO. Concurrently, all Preferred Shares beneficially owned by Mr. Li Xiang were automatically converted to 115,812,080 Class B Ordinary Shares.
In December 2020, the Company completed a follow-on offering of 108,100,000 Class A Ordinary Shares, which included 14,100,000 Class A Ordinary Shares issued in connection with the underwriters’ full exercise of their over-allotment option.
In February 2021, the Company issued 34,000,000 Class A Ordinary Shares as treasury shares for future exercise of share options.
In May 2021, the Company issued 108,557,400 Class B Ordinary Shares as treasury shares to Mr. Li Xiang, the Company’s founder and chief executive officer, pursuant to the Company’s 2021 Share Incentive Plan.
In August 2021, the Company completed its HK IPO and 100,000,000 Class A Ordinary Shares were issued with proceeds of HK$11,633,130, net of underwriter commissions and relevant offering expenses. In September 2021, the Company issued an additional 13,869,700 Class A Ordinary Shares upon the exercise of underwriters’ over-allotment option for a consideration of HK$1,634,462.
As of June 30, 2022, 9,483,528 share options that fulfilled the vesting conditions were exercised.
On June 28, 2022, the Company filed a prospectus supplement in the United States to sell up to an aggregate of US$ 2,000,000 of ADSs, each representing two Class A Ordinary Shares, through an at-the-market equity offering program (the “ATM Offering”) on the Nasdaq Global Select Market. As of June 30, 2022, 828,620 Class A Ordinary Shares were legally issued but the proceeds has not been received by the Company. Therefore, nil Class A Ordinary Shares were recognized as outstanding for accounting purposes at June 30, 2022. On July 4, 2022, the Company received the gross proceeds of US$15,802 from the ATM Offering, and will settle the underwriter commissions upon the completion of the ATM Offering.
As of December 31, 2021 and June 30, 2022, the Company had issued and outstanding ordinary shares of 1,929,562,426 and 1,932,641,538, respectively.
F-37
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
21. Loss Per Share
Basic loss per share and diluted loss per share have been calculated in accordance with ASC 260 for the six months ended June 30, 2021 and 2022 as follows:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Numerator: | ||||||||
| Net loss | (595,456 | ) | (651,912 | ) | ||||
| Less: Net loss attributable to noncontrolling interests | — | (23,080 | ) | |||||
| Net loss attributable to ordinary shareholders of Li Auto Inc. | (595,456 | ) | (628,832 | ) | ||||
| Denominator: | ||||||||
| Weighted average ordinary shares outstanding—basic and diluted | 1,809,695,350 | 1,930,269,050 | ||||||
| Basic and diluted net loss per share attributable to ordinary shareholders of Li Auto Inc. | (0.33 | ) | (0.33 | ) | ||||
For the six months ended June 30, 2021 and 2022, the Company had ordinary equivalent shares, including options and RSUs granted and convertible debt issued (shares subject to conversion) in April 2021 (Note 13). As the Group incurred a loss for each of the periods ended June 30, 2021 and 2022, these ordinary equivalent shares were determined to be anti-dilutive and excluded from the calculation of diluted loss per share of the Company. The weighted average numbers of options and RSUs granted and convertible debt (shares subject to conversion) excluded from the calculation of diluted loss per share of the Company were 61,478,317 and 28,581,182 for the six months ended June 30, 2021 and 86,223,898 and 60,861,105 for the six months ended June 30, 2022, respectively.
22. Share-based Compensation
Compensation expense recognized for share-based awards granted by the Company were as follows:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Research and development expense | 226,380 | 625,981 | ||||||
| Selling, general and administrative expense | 114,526 | 299,612 | ||||||
| Cost of sales | 12,413 | 19,966 | ||||||
| Total | 353,319 | 945,559 | ||||||
F-38
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
22. Share-based Compensation (Continued)
| (i) | 2019 and 2020 Share Incentive Plan |
In July 2019, the Group adopted the 2019 Share Incentive Plan (the “2019 Plan”), which allows the Company to grant options of the Group to its employees, directors and consultants. As of June 30, 2022, the maximum number of Class A ordinary shares that may be issued under the 2019 Plan is 141,083,452.
The Group began to grant share options to employees from 2015. In conjunction with the Company’s Reorganization in July 2019, the Group transferred share options from Beijing CHJ to the Company according to the 2019 Plan. The share options of the Group under the 2019 Plan have a contractual term of ten years from the grant date. The options granted have both service and performance condition. The options are generally scheduled to be vested over five years, one-fifth of the awards shall be vested upon the end of the calendar year in which the awards were granted. Meanwhile, the options granted are only exercisable upon the occurrence of an IPO by the Group.
These awards have a service condition and a performance condition related to an IPO. For share options granted with performance condition, the share-based compensation expenses are recorded when the performance condition is considered probable. As a result, the cumulative share-based compensation expenses for these options that have satisfied the service condition were recorded upon the completion of the US IPO in the third quarter of 2020. The Group recognized the share options of the Company granted to the employees using graded-vesting method over the vesting term of the awards, net of estimated forfeitures.
In July 2020, the Group adopted the 2020 Share Incentive Plan (the “2020 Plan”), which allows the Company to grant options and RSUs of the Group to its employees, directors and consultants. As of June 30, 2022, the maximum number of Class A ordinary shares that may be issued under the 2020 Plan is 165,696,625. The Group began to grant share options from January 1, 2021 and ceased to grant options from July 2, 2021 under the 2020 Plan. The Company commenced to grant RSUs from July 1, 2021 under the 2020 plan. The contractual term is ten years from the grant date and the options and RSUs granted only have service conditions. The options and RSUs are generally scheduled to be vested over five years, one-fifth of the awards shall be vested upon the end of the calendar year in which the awards were granted.
F-39
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
22. Share-based Compensation (Continued)
| (a) | The following table summarizes Company share option activity under the 2019 Plan and 2020 Plan for the six months ended June 30, 2021 and 2022: |
| Weighted | ||||||||||||||||
| Number of | Weighted | Average | Aggregate | |||||||||||||
| Options | Average | Remaining | Intrinsic | |||||||||||||
| and Shares | Exercise Price | Contractual Life | Value | |||||||||||||
| US$ | In Years | US$ | ||||||||||||||
| Outstanding as of December 31, 2020 | 56,914,000 | 0.10 | 5.95 | 814,724 | ||||||||||||
| Granted | 19,134,700 | 0.10 | ||||||||||||||
| Exercised | (1,042,422 | ) | 0.10 | |||||||||||||
| Forfeited | (1,822,000 | ) | 0.10 | |||||||||||||
| Outstanding as of June 30, 2021 | 73,184,278 | 0.10 | 6.42 | 1,271,211 | ||||||||||||
| Outstanding as of December 31, 2021 | 83,391,284 | 0.10 | 7.66 | 1,330,091 | ||||||||||||
| Granted | — | 0.10 | ||||||||||||||
| Exercised | (3,079,112 | ) | 0.10 | |||||||||||||
| Forfeited | (1,977,000 | ) | 0.10 | |||||||||||||
| Outstanding as of June 30, 2022 | 78,335,172 | 0.10 | 6.13 | 1,492,677 | ||||||||||||
| Vested and expected to vest as of June 30, 2021 | 70,027,007 | 0.10 | 6.31 | 1,216,369 | ||||||||||||
| Exercisable as of June 30, 2021 | 42,897,578 | 0.10 | 4.90 | 745,131 | ||||||||||||
| Vested and expected to vest as of June 30, 2022 | 75,132,525 | 0.10 | 6.03 | 1,431,650 | ||||||||||||
| Exercisable as of June 30, 2022 | 44,128,372 | 0.10 | 4.30 | 840,866 | ||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the estimated fair value of the underlying stock at each reporting date.
The weighted-average grant date fair value for options granted under the Company’s 2019 Plan and 2020 Plan for the six months ended June 30, 2021 was US$14.41, computed using the binomial option pricing model. No share options were granted for the six months ended June 30, 2022.
F-40
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
22. Share-based Compensation (Continued)
The Company did not grant options under 2019 plan and 2020 plan since July 2, 2021. The fair value of each option granted under the Company’s 2019 Plan and 2020 Plan for the six months ended June 30, 2021 was estimated on the date of each grant using the binomial option pricing model with the assumptions (or ranges thereof) in the following table:
| For the Six Months Ended June 30, | ||||
| 2021 | ||||
| Exercise price (US$) | 0.10 | |||
| Fair value of the ordinary shares on the date of option grant (US$) | 14.42 | |||
| Risk-free interest rate | 0.93 | % | ||
| Expected term (in years) | 10.00 | |||
| Expected dividend yield | 0 | % | ||
| Expected volatility | 47 | % | ||
The risk-free interest rate is estimated based on the yield curve of US Sovereign Bond as of the option valuation date. The expected volatility at the grant date and each option valuation date is estimated based on annualized standard deviation of daily stock price return of comparable companies with a time horizon close to the expected expiry of the term of the options. The Group has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments in the foreseeable future. Expected term is the contract life of the options.
As of June 30, 2022, there were US$147,157 of unrecognized compensation expenses related to the share options granted to the Group’s employees, which are expected to be recognized over a weighted-average period of 3.81 years and may be adjusted for future changes in forfeitures.
| (b) | The following table summarizes Company’s RSU activity under the 2020 Plan for the six months ended June 30, 2021 and 2022: |
| Number of Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life | ||||||||||
| US$ | (In years) | |||||||||||
| Unvested as of December 31, 2020 | — | — | — | |||||||||
| Granted | — | — | — | |||||||||
| Forfeited | — | — | — | |||||||||
| Unvested as of June 30, 2021 | — | — | — | |||||||||
| Unvested as of December 31, 2021 | 8,586 | 17.25 | 9.50 | |||||||||
| Granted | 22,210,200 | 16.05 | ||||||||||
| Forfeited | (1,754,800 | ) | 16.05 | |||||||||
| Unvested as of June 30, 2022 | 20,463,986 | 16.05 | 9.51 | |||||||||
As of June 30, 2022, there was US$182,212 in unrecognized compensation expense related to RSUs granted to the Group’s employees, which are expected to be recognized over a weighted-average period of 4.50 years and may be adjusted for future changes in forfeitures.
| (ii) | 2021 Share Incentive Plan |
In March 2021, the Group adopted the 2021 Share Incentive Plan (the “2021 Plan”), which granted options to purchase 108,557,400 Class B ordinary shares to Mr. Li Xiang, the Company’s founder and chief executive officer. The exercise price of the options is US$14.63 per share, or US$29.26 per ADS. The date of expiration for this grant is March 8, 2031. The granted options are subject to performance-based vesting conditions. The granted options are divided into six equal tranches, or 18,092,900 each. The first tranche will become vested when the aggregate number of the Group’s vehicle deliveries in any 12 consecutive months exceeds 500,000. The second to sixth tranches will become vested when the aggregate number of vehicle deliveries in any 12 consecutive months exceeds 1,000,000, 1,500,000, 2,000,000, 2,500,000 and 3,000,000, respectively.
F-41
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
On May 5, 2021, the board of directors of the Company approved to replace the options to purchase 108,557,400 Class B ordinary shares of the Company under the Company’s 2021 Share Incentive Plan previously granted to Mr. Li Xiang on March 8, 2021 with the same amount of restricted Class B ordinary shares (the ”Award Shares”) under the same plan, all of which will become legally vested upon grant on May 5, 2021. However, Mr. Li Xiang has also agreed, undertaken, and covenanted not to transfer or dispose of, directly or indirectly, any interest in the Class B ordinary shares acquired upon vesting of the Award Shares, which are still subject to certain restrictions, terms and performance conditions substantially similar to the vesting conditions of the options being replaced. In addition to the performance conditions, Mr. Li Xiang is required to pay US$14.63 per share, which is equal to the exercise price of the options being replaced, to have the relevant tranche of the Award Shares released from the restrictions. Mr. Li Xiang also has agreed, undertaken, and covenanted not to cast any vote or claim any dividend paid on any Award Shares before such number of Award Shares are released from the restrictions. Any Award Shares that are not released from the restrictions by March 8, 2031 are subject to compulsory repurchase by the Company at their par value.
F-42
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
22. Share-based Compensation (Continued)
In July 2021, all such 108,557,400 Award Shares were converted from Class B Ordinary Shares (10 votes per share) to Class A Ordinary Shares (1 vote per share) on one-to-one basis with effect immediately upon the Company’s listng on the Main Board of HKEx in August 2021. The modification is solely subjected to satisfy HKEx’s requirement from legal perspective. Pursuant to the grant of the Award shares, Mr. Li Xiang has undertaken and covenanted that unless and until, in respect of any tranche of Award Shares,(a) the relevant performance condition has been met and (b) the relevant exercise price (US$14.63) has been paid, Mr. Li Xiang will not offer, pledge, sell any relating award shares and claim dividend or voting rights in respect of the Award Shares.
As of June 30, 2022, the Group did not recognize any compensation expense for shares granted to Mr. Li Xiang, because the Group considers it is not probable, as of June 30, 2022, that the performance-based vesting conditions will be satisfied. Therefore, there were US$538,445 of unrecognized compensation expenses related to the restricted shares granted under 2021 Plan as of June 30, 2022.
The following table summarizes Company performance-based restricted share activity under the 2021 Plan for the six months ended June 30, 2021 and 2022:
| Number of | Weighted | Weighted Average | ||||||||||||||
| Shares | Average Exercise | Remaining | Aggregate | |||||||||||||
| Granted | Price | Contractual Life | Intrinsic Value | |||||||||||||
| US$ | In Years | US$ | ||||||||||||||
| December 31, 2020 | — | — | — | — | ||||||||||||
| Granted | 108,557,400 | 14.63 | ||||||||||||||
| June 30, 2021 | 108,557,400 | 14.63 | 9.69 | — | ||||||||||||
| December 31, 2021 | 108,557,400 | 14.63 | 9.19 | — | ||||||||||||
| Granted | — | — | ||||||||||||||
| June 30, 2022 | 108,557,400 | 14.63 | 8.69 | — | ||||||||||||
The weighted-average grant date fair value for restricted shares granted under the Company’s 2021 Plan for the six months ended June 30, 2021 and 2022 were both US$4.96, computed using the binomial pricing model.
The fair value of the restricted shares granted under the Company’s 2021 Plan was estimated on the date of grant using the binomial pricing model with the assumptions (or ranges thereof) in the following table (no new grants during the comparative June 30, 2022 period):
| For the Six Months Ended | ||||
| June 30, 2021 | ||||
| Exercise price (US$) | 14.63 | |||
| Fair value of the ordinary shares on the date of restricted shares grant (US$) | 10.67 | |||
| Risk-free interest rate | 1.59 | % | ||
| Expected term (in years) | 10.00 | |||
| Expected dividend yield | 0 | % | ||
| Expected volatility | 47 | % | ||
Risk-free interest rate is estimated based on the yield curve of US Sovereign Bond as of the valuation date. The expected volatility at the grant date and each valuation date is estimated based on annualized standard deviation of daily stock price return of comparable companies with a time horizon close to the expected expiry of the term of the restricted shares. The Group has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments in the foreseeable future. Expected term is the contract life of the restricted shares.
F-43
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
23. Taxation
(a) Value added tax
The Group is subject to statutory VAT rate of 13% for revenue from sales of vehicles and spare parts in the PRC.
Wheels Technology is subject to 13% VAT for software research and development and relevant services. Wheels Technology is entitled to a VAT refund in excess of 3% output VAT on the total VAT payable from April 2021, after completing the registration with relevant authorities and obtaining a refund approval from local tax bureau. For the six months ended June 30, 2021 and 2022, nil and RMB170,958 of VAT refunds were received and were recorded as Others, net.
(b) Income taxes
Cayman Islands
The Company is incorporated in the Cayman Islands and conducts most of its business through its subsidiaries located in Mainland China and Hong Kong. Under the current laws of the Cayman Islands, the Company is not subject to tax on either income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
PRC
Beijing CHJ and Wheels Technology are qualified as a “high and new technology enterprise” under the EIT Law and are eligible for a preferential enterprise income tax rate of 15%, respectively. The high and new technology enterprise certificate is effective for a period of three years. Other Chinese companies are subject to enterprise income tax (“EIT”) at a uniform rate of 25% as of June 30, 2022.
Wheels Technology, which is our wholly-owned entity primarily engaged in the operations of technology, software research and development and relevant services, was awarded as a Software Enterprise and was thereby entitled to an income tax exemption for two years beginning from its first profitable calendar year since 2021, and a 50% reduction in the standard statutory rate for the subsequent three consecutive years.
Under the EIT Law enacted by the National People’s Congress of PRC on March 16, 2007 and its implementation rules which became effective on January 1, 2008, dividends generated after January 1, 2008 and payable by a foreign investment enterprise in the PRC to its foreign investors who are non-resident enterprises are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement. Under the taxation arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the “beneficial owner” and directly holds 25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. The Cayman Islands, where the Company was incorporated, does not have a tax treaty with PRC.
The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” Based on a review of surrounding facts and circumstances, the Group does not believe that it is likely that its operations outside of the PRC will be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, there is uncertainty as to the application of the EIT Law. Should the Company be treated as a resident enterprise for PRC tax purposes, the Company will be subject to PRC income tax on worldwide income at a uniform tax rate of 25%.
F-44
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
23. Taxation (Continued)
According to relevant laws and regulations promulgated by the State Administration of Tax of the PRC, enterprises engaging in research and development activities were entitled to claim 150% of their research and development expenses incurred as tax deductible expenses when determining their assessable profits for that year (the “R&D Deduction”). The State Taxation Administration of the PRC announced in September 2018 that enterprises engaging in research and development activities would be entitled to claim 175% of their research and development expenses as R&D Deduction from January 1, 2018 to December 31, 2023.
Withholding tax on undistributed dividends
According to the current EIT Law and its implementation rules, foreign enterprises, which have no establishment or place in China but derive dividends, interest, rents, royalties and other income (including capital gains) from sources in China or which have an establishment or place in China but the aforementioned incomes are not connected with the establishment or place shall be subject to the PRC withholding tax (“WHT”) at 10% (a further reduced WHT rate may be available according to the applicable double tax treaty or arrangement provided that the foreign enterprise is the tax resident of the jurisdiction where it is located and it is the beneficial owner of the dividends, interest and royalties income).
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, the subsidiaries of the Group incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.
Composition of income tax expense and income tax benefit for the periods presented is as follows:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Current income tax expense | — | 49,054 | ||||||
| Deferred income tax expense/(benefit) | 59,189 | (23,049 | ) | |||||
| Total | 59,189 | 26,005 | ||||||
A reconciliation of the income tax expense computed by applying the PRC statutory income tax rate of 25% to the Group’s income tax expense for each of the periods presented is as follows:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Loss before income tax expense | (536,267 | ) | (625,907 | ) | ||||
| Income tax credit computed at PRC statutory income tax rate of 25% | (134,067 | ) | (156,477 | ) | ||||
| Tax effects of tax-exempt entity and preferential tax rate | (54,798 | ) | (173,511 | ) | ||||
| Tax effect of R&D deduction and others | (62,602 | ) | (137,700 | ) | ||||
| Non-deductible expenses | 70,264 | 297,478 | ||||||
| Change in valuation allowance | 240,391 | 196,215 | ||||||
| Income tax expense | 59,189 | 26,005 | ||||||
(c) Consumption tax
Chongqing Lixiang Automobile Co Ltd (“Chongqing Lixiang Automobile”), as a subsidiary of the Company, is eligible for consumption tax rate of 3% and related surcharge. The consumption tax is calculated based on the sales price of its self-manufactured vehicles at 3% consumption tax rate from August 2021.
F-45
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
24. Fair Value Measurement
Assets and liabilities measured at fair value on a recurring basis
Assets and liabilities measured at fair value on a recurring basis include: short-term investments and investment in equity securities with readily determinable fair values.
The following table presents the major financial instruments measured at fair value, by level within the fair value hierarchy as of December 31, 2021 and June 30, 2022.
| Fair Value Measurement at Reporting Date Using | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| Fair Value as of | in Active Markets for | Significant Other | Significant | |||||||||||||
| December 31, | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Short-term investments | 19,157,428 | — | 19,157,428 | — | ||||||||||||
| Equity securities with readily determinable fair value | 28,452 | 28,452 | — | — | ||||||||||||
| Total assets | 19,185,880 | 28,452 | 19,157,428 | — | ||||||||||||
| Fair Value Measurement at Reporting Date Using | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| Fair Value as of | in Active Markets for | Significant Other | Significant | |||||||||||||
| June 30, | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
| 2022 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Short-term investments | 16,548,045 | — | 16,548,045 | — | ||||||||||||
| Equity securities with readily determinable fair value | 21,461 | 21,461 | — | — | ||||||||||||
| Total assets | 16,569,506 | 21,461 | 16,548,045 | — | ||||||||||||
Valuation Techniques
Short-term investments: Short-term investments are investments in financial instruments with variable interest rates and maturity dates within one year. Fair value is estimated based on quoted prices of similar financial products provided by the banks at the end of each period (Level 2). The related gain/(loss) amounts are recognized in “interest income and investment income, net” in the unaudited condensed consolidated statements of comprehensive (loss)/income.
Equity securities with readily determinable fair value: Equity securities with readily determinable fair values are marketable equity securities which are publicly traded stocks measured at fair value. These securities are valued using the market approach based on the quoted prices in active markets at the reporting date. The Group classifies the valuation techniques that use these inputs as Level 1 of fair value measurements. The related gain/(loss) amounts are recognized in “interest income and investment income, net” in the unaudited condensed consolidated statements of comprehensive (loss)/income.
F-46
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
24. Fair Value Measurement (Continued)
Assets measured at fair value on a nonrecurring basis
Assets measured at fair value on a non-recurring basis include: investments in equity securities without readily determinable fair value and equity method investments. For investments in equity securities without readily determinable fair value, no measurement event occurred during the periods presented. The equity securities without readily determinable fair value were RMB93,150 and RMB502,546 as of December 31, 2021 and June 30, 2022. No impairment charges were recognized for the six months ended June 30, 2021 and 2022. For equity method investments, no impairment loss was recognized for all periods presented. The Group recorded nil impairment loss of long-lived assets for the six months ended June 30, 2021 and 2022.
Assets and liabilities not measured at fair value but fair value disclosure is required
Financial assets and liabilities not measured at fair value include cash equivalents, time deposits, restricted cash, trade receivable, amounts due from related parties, prepayments and other current assets, short-term borrowings, trade and notes payable, amounts due to related parties, accruals and other current liabilities, other non-current assets, other non-current liabilities, and long-term borrowings.
The Group values its time deposits held in certain bank accounts using quoted prices for securities with similar characteristics and other observable inputs, and accordingly, the Group classifies the valuation techniques that use these inputs as Level 2. The Group classifies the valuation techniques that use the inputs as Level 2 for short-term borrowing as the rates of interest under the loan agreements with the lending banks were determined based on the prevailing interest rates in the market.
Trade receivable, amounts due from related parties, prepayments and other current assets, trade and notes payable, amounts due to related parties and accruals and other current liabilities are measured at amortized cost, their fair values approximate their carrying values given their short maturities.
Borrowings and convertible debt are measured at amortized cost. Their fair values were estimated by discounting the scheduled cash flows through to estimated maturity using estimated discount rates based on current offering rates of comparable institutions with similar services. The fair value of these borrowings obligations approximate their carrying value as the borrowing rates are similar to the market rates that are currently available to the Group for financing obligations with similar terms and credit risks and represent a level 2 measurement.
25. Commitments and Contingencies
(a) Capital commitments
The Group’s capital commitments primarily relate to commitments on construction and purchase of production facilities, equipment and tooling. Total capital commitments contracted but not yet reflected in the unaudited condensed consolidated financial statements as of June 30, 2022 were as follows:
| Total | Less than One Year | 1-3 Years | 3-5 Years | Over 5 Years | ||||||||||||||||
| Capital commitments | 5,776,897 | 5,317,925 | 458,972 | — | — | |||||||||||||||
F-47
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
25. Commitments and Contingencies (Continued)
(b) Purchase obligations
The Group’s purchase obligations primarily relate to commitments on purchase of raw materials. Total purchase obligations contracted but not yet reflected in the unaudited condensed consolidated financial statements as of June 30, 2022 were as follows:
| Total | Less than One Year | 1-3 Years | 3-5 Years | Over 5 Years | ||||||||||||||||
| Purchase obligations | 16,626,135 | 16,626,135 | — | — | — | |||||||||||||||
(c) Legal proceedings
The Group records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Group reviews the need for any such liability on a regular basis.
Chongqing Zhizao was subject to ongoing legal proceedings arising from disputes of contracts entered into prior to the Group’s acquisition of Chongqing Zhizao in December 2018. Most of these legal proceedings were still at preliminary stages, and the Group was unable to predict the outcome of these cases, or reasonably estimate a range of the possible loss, if any, given the current status of the proceedings. Other than the unpaid contract amount that the Group assumed from Lifan Acquisition and included as the Retained Assets and Liabilities, the Group did not record any accrual for expected loss payments with respect to these cases as of December 26, 2019. The unpaid contract amounts were immaterial as of December 31, 2021 and June 30, 2022. In addition to the indemnification of the Retained Assets and Liabilities the Group obtained from Lifan Passenger Vehicle, Lifan Industry also agreed in the Lifan Acquisition Agreement that, it will indemnify any damages and loss arising from disputes of contracts entered into by Chongqing Zhizao prior to the Group’s acquisition of Chongqing Zhizao, including but not limited to above legal proceedings.
On December 26, 2019, the Group disposed 100% equity interest of Chongqing Zhizao, and the ongoing legal proceedings of Chongqing Zhizao were transferred out to Lifan Industry and Lifan Passenger Vehicle.
Other than the above legal proceedings, the Group does not have any material litigation, and has not recorded any material liabilities in this regard as of December 31, 2021 and June 30, 2022.
26. Related Party Balances and Transactions
The principal related parties with which the Group had transactions during the periods presented are as follows:
| Name of Entity or Individual | Relationship with the Company | |
| Beijing Yihang Intelligent Technology Co., Ltd. (“Beijing Yihang”) | Affiliate | |
| Neolix Technologies Co., Ltd. (“Neolix Technologies”) | Affiliate | |
| Airx (Beijing) Technology Co., Ltd. (“Airx”) | Affiliate | |
| Beijing Judianchuxing Technology Limited (“Beijing Judianchuxing”) | Affiliate | |
| Beijing Sankuai Online Technology Co., Ltd. (“Beijing Sankuai ”) | Controlled by Principal Shareholder | |
| Suzhou Yihang Intelligent Technology Co., Ltd. (“Suzhou Yihang”) | Affiliate | |
| Changzhou Huixiang New Energy Auto Parts Co., Ltd. (“Changzhou Huixiang”) | Affiliate | |
| Hanhai Information Technology (Shanghai) Co., Ltd. (“Hanhai”) | Controlled by Principal Shareholder |
F-48
LI AUTO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
26. Related Party Balances and Transactions (Continued)
The Group entered into the following related party transactions:
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Purchased services from Beijing Sankuai | 16 | 2,321 | ||||||
| Purchased R&D services from Beijing Yihang | — | 281 | ||||||
| Purchased services from Hanhai | — | 240 | ||||||
| Purchased materials from Beijing Yihang | 30,231 | 68 | ||||||
The Group had the following related party balances:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Due from Neolix Technologies | 678 | 678 | ||||||
| Due from Hanhai | — | 135 | ||||||
| Due from Beijing Yihang | 334 | 6 | ||||||
| Total | 1,012 | 819 | ||||||
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Due to Beijing Yihang | 7,102 | 5,921 | ||||||
| Due to Beijing Sankuai | 330 | 232 | ||||||
| Due to Airx | 23 | 23 | ||||||
| Due to Changzhou Huixiang | 30,000 | — | ||||||
| Total | 37,455 | 6,176 | ||||||
F-49
Exhibit 99.2
Li Auto Inc. Updated Disclosures
Recent Developments
Vehicle Delivery
We delivered 13,024 and 10,422 Li ONEs in June and July 2022, respectively. As of July 31, 2022, we had delivered 194,913 Li ONEs in total.
As of July 31, 2022, we had 259 retail stores in 118 cities, as well as 311 servicing centers and Li Auto-authorized body and paint shops operating in 226 cities.
At-The-Market Offering
On June 28, 2022, we announced the at-the-market offering program to sell up to US$2,000,000,000 of ADSs, each representing two Class A ordinary shares of Li Auto Inc.
As of the date of this document, we have sold 9,431,282 ADSs representing 18,862,564 Class A ordinary shares of Li Auto Inc. under this at-the-market offering program raising gross proceeds of US$366.5 million before deducting fees and commissions payable to the distribution agents of up to US$4.8 million and certain other offering expenses.
Results of Operations for the Six Months Ended June 30, 2022
Set forth below is a discussion of our unaudited consolidated statements of comprehensive loss/income data for the six months ended June 30, 2021 and 2022. All translations from Renminbi to U.S. dollars are made at a rate of RMB6.6981 to US$1.00, the exchange rate in effect on June 30, 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.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
Revenues
Our total revenues increased from RMB8.6 billion for the six months ended June 30, 2021 to RMB18.3 billion (US$2.7 billion) for the six months ended June 30, 2022, primarily due to an increase in revenues from vehicle sales.
Revenues from vehicle sales increased from RMB8.4 billion for the six months ended June 30, 2021 to RMB17.8 billion (US$2.7 billion) for the six months ended June 30, 2022, primarily attributable to an increase in deliveries for the six months ended June 30, 2022.
Revenues from other sales and services increased from RMB247.2 million for the six months ended June 30, 2021 to RMB502.4 million (US$75.0 million) for the six months ended June 30, 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 RMB7.0 billion for the six months ended June 30, 2021 to RMB14.3 billion (US$2.1 billion) for the six months ended June 30, 2022, due to the increase of vehicle deliveries as described above.
Gross Profit
As a result of the foregoing, our gross profit increased from RMB1.6 billion for the six months ended June 30, 2021 to RMB4.0 billion (US$603.5 million) for the six months ended June 30, 2022. Gross profit from vehicle sales increased from RMB1.5 billion for the six months ended June 30, 2021 to RMB3.9 billion (US$580.0 million) for the six months ended June 30, 2022. Gross profit from other sales and services increased from RMB70.1 million for the six months ended June 30, 2021 to RMB157.1 million (US$23.5 million) for the six months ended June 30, 2022. The increase in gross profit for the six months ended June 30, 2022 was primarily attributable to the increase in vehicle deliveries.
Research and Development Expenses
Our research and development expenses increased from RMB1.2 billion for the six months ended June 30, 2021 to RMB2.9 billion (US$433.8 million) for the six months ended June 30, 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 expenses associated with new models to be introduced in the future.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses increased from RMB1.3 billion for the six months ended June 30, 2021 to RMB2.5 billion (US$377.4 million) for the six months ended June 30, 2022, primarily attributable to the increase in employee compensation as a result of growing number of staff as well as an increase in rental expenses associated with the expansion of our sales network.
Loss from Operations
As a result of the foregoing, operating loss increased from RMB943.6 million for the six months ended June 30, 2021 to RMB1.4 billion (US$207.7 million) for the six months ended June 30, 2022.
Interest Income and Investment Income, Net
Our net interest income and investment income slightly increased from RMB411.0 million for the six months ended June 30, 2021 to RMB412.5 million (US$61.6 million) for the six months ended June 30, 2022.
Others, Net
Other income increased from RMB30.7 million for the six months ended June 30, 2021 to RMB384.4 million (US$57.4 million) for the six months ended June 30, 2022, primarily attributable to an increase in value-added tax refunds and ADS program reimbursements.
Net Loss
As a result of the foregoing, we incurred a net loss of RMB651.9 million (US$97.3 million) for the six months ended June 30, 2022, compared with a net loss of RMB595.5 million for the six months ended June 30, 2021.
Cash Flows and Working Capital
As of June 30, 2022, we had RMB53.6 billion (US$8.0 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 six months ended June 30, 2022 was RMB3.0 billion (US$442.4 million), compared with RMB2.3 billion for the six months ended June 30, 2021. We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements, capital expenditures, and debt repayment obligations for at least the next 12 months. We may decide to enhance our liquidity position or increase our cash reserve for future operations and investments through additional financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increasing fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
| 2 |
Cash Flow
The following table sets forth a summary of our cash flow for the periods indicated.
| For the Six Months Ended June 30, | ||||||||||||
| 2021 | 2022 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| (in thousands, unaudited) | ||||||||||||
| Selected Consolidated Cash Flow Data: | ||||||||||||
| Net cash provided by operating activities | 2,333,970 | 2,963,176 | 442,390 | |||||||||
| Net cash (used in)/provided by investing activities | (4,110,154 | ) | 823,733 | 122,980 | ||||||||
| Net cash provided by financing activities | 5,533,762 | 1,929,846 | 288,118 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (103,039 | ) | 885,201 | 132,157 | ||||||||
| Net increase in cash, cash equivalents and restricted cash | 3,654,539 | 6,601,956 | 985,645 | |||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 10,172,519 | 30,493,064 | 4,552,495 | |||||||||
| Cash, cash equivalents and restricted cash at the end of the period | 13,827,058 | 37,095,020 | 5,538,140 | |||||||||
Net cash provided by operating activities for the six months ended June 30, 2022 was RMB3.0 billion (US$442.4 million), primarily attributable to our net loss of RMB651.9 million (US$97.3 million) adjusted for (i) non-cash items of RMB1.4 billion (US$211.3 million), which primarily consisted of share-based compensation expenses and depreciation and amortization and (ii) a net change in operating assets and liabilities of RMB2.2 billion (US$328.4 million). The net change in operating assets and liabilities was primarily the result of (i) an increase in trade and notes payable of RMB3.3 billion (US$498.1 million) mainly consisting of notes payable and trade payable for raw materials, (ii) an increase in accruals and other current liabilities of RMB647.2 million (US$96.6 million) mainly consisting of payables for purchase of property, plant and equipment, advances from customers, and payables for salaries and benefits and (iii) an increase in other non-current liabilities of RMB522.6 million (US$78.0 million), partially offset by (iv) an increase in inventory of RMB1.4 billion (US$214.8 million), which was primarily attributable to increased raw materials due to increased demands and (v) an increase in prepayments and other current assets of RMB398.6 million (US$59.5 million), which was primarily attributable to an increase in notes receivable, an increase in prepaid rental and deposits, and an increase in prepayments to vendors.
Net cash provided by investing activities for the six months ended June 30, 2022 was RMB823.7 million (US$123.0 million). This was primarily attributable to (i) our redemption of short-term investments of RMB34.7 billion (US$5.2 billion), partially offset by (ii) our investment in short-term investments of RMB31.7 billion (US$4.7 billion) and (iii) purchase of property, plant and equipment and intangible assets of RMB2.0 billion (US$300.0 million).
Net cash provided by financing activities for the six months ended June 30, 2022 was RMB1.9 billion (US$288.1 million), primarily attributable to (i) proceeds from borrowings of RMB1.9 billion (US$278.0 million) with several commercial banks in China and (ii) capital injection from noncontrolling interest of RMB90.0 million (US$13.4 million).
Material Cash Requirements
Our material cash requirements as of June 30, 2022 and any subsequent interim period primarily include the cash needs in our business operations and capital expenditures.
| 3 |
Capital Expenditures
Our capital expenditures were RMB781.6 million and RMB2.0 billion (US$300.0 million) for the six months ended June 30, 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 enhances 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.
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.
| For the Six Months Ended June 30, | ||||||||||||
| 2021 | 2022 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| (in thousands, unaudited) | ||||||||||||
| Net loss | (595,456 | ) | (651,912 | ) | (97,326 | ) | ||||||
| Shared-based compensation expenses | 353,319 | 945,559 | 141,168 | |||||||||
| Adjusted net (loss)/income | (242,137 | ) | 293,647 | 43,842 | ||||||||
| 4 |
Exhibit 99.3
Li Auto Inc. Announces Unaudited Second Quarter 2022 Financial Results
Quarterly total revenues reached RMB8.73 billion (US$1.30 billion)1
Quarterly deliveries reached 28,687 vehicles
Quarterly gross margin reached 21.5%
BEIJING, China, August 15, 2022 — Li Auto Inc. ("Li Auto" or the "Company") (Nasdaq: LI; HKEX: 2015), a leader in China’s new energy vehicle market, today announced its unaudited financial results for the quarter ended June 30, 2022.
Operating Highlights for the Second Quarter of 2022
| · | Deliveries of Li ONE were 28,687 vehicles in the second quarter of 2022, representing a 63.2% year-over-year increase. |
| Deliveries | 2022 Q2 | 2022 Q1 | 2021 Q4 | 2021 Q3 | |||
| 28,687 | 31,716 | 35,221 | 25,116 |
| Deliveries | 2021 Q2 | 2021 Q1 | 2020 Q4 | 2020 Q3 | |||
| 17,575 | 12,579 | 14,464 | 8,660 |
| · | As of June 30, 2022, the Company had 247 retail stores covering 113 cities, as well as 308 servicing centers and Li Auto-authorized body and paint shops operating in 226 cities. |
Financial Highlights for the Second Quarter of 2022
| · | Vehicle sales were RMB8.48 billion (US$1.27 billion) in the second quarter of 2022, representing an increase of 73.0% from RMB4.90 billion in the second quarter of 2021 and a decrease of 8.9% from RMB9.31 billion in the first quarter of 2022. |
| · | Vehicle margin2 was 21.2% in the second quarter of 2022, compared with 18.7% in the second quarter of 2021 and 22.4% in the first quarter of 2022. |
| · | Total revenues were RMB8.73 billion (US$1.30 billion) in the second quarter of 2022, representing an increase of 73.3% from RMB5.04 billion in the second quarter of 2021 and a decrease of 8.7% from RMB9.56 billion in the first quarter of 2022. |
| · | Gross profit was RMB1.88 billion (US$280.4 million) in the second quarter of 2022, representing an increase of 97.1% from RMB952.8 million in the second quarter of 2021 and a decrease of 13.2% from RMB2.16 billion in the first quarter of 2022. |
| · | Gross margin was 21.5% in the second quarter of 2022, compared with 18.9% in the second quarter of 2021 and 22.6% in the first quarter of 2022. |
1 All translations from Renminbi (“RMB”) to U.S. dollar (“US$”) are made at a rate of RMB6.6981 to US$1.00, the noon buying rate in effect on June 30, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board.
2 Vehicle margin is the margin of vehicle sales, which is calculated based on revenues and cost of sales derived from vehicle sales only.
1
| · | Loss from operations was RMB978.5 million (US$146.1 million) in the second quarter of 2022, representing an increase of 82.6% from RMB535.9 million in the second quarter of 2021 and an increase of 136.9% from RMB413.1 million in the first quarter of 2022. Non-GAAP loss from operations3 was RMB520.8 million (US$77.8 million) in the second quarter of 2022, representing an increase of 42.5% from RMB365.5 million in the second quarter of 2021, and compared with RMB74.9 million non-GAAP income from operations3 in the first quarter of 2022. |
| · | Net loss was RMB641.0 million (US$95.7 million) in the second quarter of 2022, representing an increase of 172.2% from RMB235.5 million in the second quarter of 2021, and compared with RMB10.9 million net loss in the first quarter of 2022. Non-GAAP net loss3 was RMB183.4 million (US$27.4 million) in the second quarter of 2022, representing an increase of 181.7% from RMB65.1 million in the second quarter of 2021, and compared with RMB477.1 million non-GAAP net income3 in the first quarter of 2022. |
| · | Operating cash flow was RMB1.13 billion (US$168.6 million) in the second quarter of 2022, representing a decrease of 19.8% from RMB1.41 billion in the second quarter of 2021 and a decrease of 38.4% from RMB1.83 billion in the first quarter of 2022. |
| · | Free cash flow4 was RMB451.7 million (US$67.4 million) in the second quarter of 2022, representing a decrease of 54.0% from RMB982.1 million in the second quarter of 2021 and a decrease of 10.0% from RMB502.0 million in the first quarter of 2022. |
Key Financial Results
(in millions, except for percentages)
| For the Three Months Ended | % Change5 | |||||||||||||||||||
June 30, 2021 | March 31, 2022 | June 30, 2022 | YoY | QoQ | ||||||||||||||||
| RMB | RMB | RMB | ||||||||||||||||||
| Vehicle sales | 4,903.3 | 9,308.6 | 8,483.6 | 73.0 | % | (8.9 | )% | |||||||||||||
| Vehicle margin | 18.7 | % | 22.4 | % | 21.2 | % | 2.5 | % | (1.2 | )% | ||||||||||
| Total revenues | 5,039.0 | 9,562.0 | 8,732.6 | 73.3 | % | (8.7 | )% | |||||||||||||
| Gross profit | 952.8 | 2,163.9 | 1,878.3 | 97.1 | % | (13.2 | )% | |||||||||||||
| Gross margin | 18.9 | % | 22.6 | % | 21.5 | % | 2.6 | % | (1.1 | )% | ||||||||||
| Loss from operations | (535.9 | ) | (413.1 | ) | (978.5 | ) | 82.6 | % | 136.9 | % | ||||||||||
| Non-GAAP (loss)/income from operations | (365.5 | ) | 74.9 | (520.8 | ) | 42.5 | % | N/A | ||||||||||||
| Net loss | (235.5 | ) | (10.9 | ) | (641.0 | ) | 172.2 | % | N/A | |||||||||||
| Non-GAAP net (loss)/income | (65.1 | ) | 477.1 | (183.4 | ) | 181.7 | % | N/A | ||||||||||||
| Operating cash flow | 1,407.6 | 1,833.8 | 1,129.4 | (19.8 | )% | (38.4 | )% | |||||||||||||
| Free cash flow | 982.1 | 502.0 | 451.7 | (54.0 | )% | (10.0 | )% | |||||||||||||
3 The Company’s non-GAAP financial measures exclude share-based compensation expenses. See “Unaudited Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this press release.
4 Free cash flow represents operating cash flow less capital expenditures, which is considered a non-GAAP financial measure.
5 Except for vehicle margin and gross margin, where absolute changes instead of percentage changes are presented.
2
Recent Developments
Delivery Update
| · | In July 2022, the Company delivered 10,422 Li ONEs, representing a 21.3% increase from July 2021. As of July 31, 2022, the Company had 259 retail stores covering 118 cities, in addition to 311 servicing centers and Li Auto-authorized body and paint shops operating in 226 cities. |
Li L9
| · | On June 21, 2022, the Company officially unveiled Li L9, the flagship smart SUV for families. Li L9 is a six-seat, full-size flagship SUV, offering superior space and comfort for family users. Its self-developed flagship range extension and chassis systems provide excellent drivability with a CLTC range of 1,315 kilometers and a WLTC range of 1,100 kilometers. With a 44.5 kilowatt-hour new-generation NCM lithium battery, it can support a CLTC range of 215 kilometers and a WLTC range of 180 kilometers under the EV mode. Li L9 also features top-notch vehicle safety measures and the Company’s self-developed autonomous driving system, Li AD Max, powered by dual Orin-X chips with 508 TOPS of computing power to protect every family passenger. Li L9’s innovative five-screen, three-dimensional interactive intelligent cockpit brings a new level of driving and entertainment experience. Li L9 comes standard with over 100 flagship features at a retail price of RMB459,800. |
At-The-Market Offering
| · | On June 28, 2022, the Company announced an at-the-market offering program (the “ATM Offering”) to sell up to US$2,000,000,000 of American depositary shares (“ADSs”), each representing two Class A ordinary shares of the Company. |
As of the date of this press release, the Company has sold 9,431,282 ADSs representing 18,862,564 Class A ordinary shares of the Company under the ATM Offering raising gross proceeds of US$366.5 million before deducting fees and commissions payable to the distribution agents of up to US$4.8 million and certain other offering expenses.
CEO and CFO Comments
Mr. Xiang Li, founder, chairman, and chief executive officer of Li Auto, commented, “We delivered solid second quarter results in an environment with challenges and uncertainties through operational and product excellence. Our vehicles continued to win family users, not only illustrating the strength of our vehicle and the growing appeal of our brand, but also reaffirming the effectiveness of our strategy.”
“Our second model, Li L9, a flagship smart SUV for families, has received positive feedback from our users since its launch on June 21, as evidenced by the especially strong number of non-refundable orders received for the vehicle. The great perception and vehicle control capabilities of our self-developed autonomous driving system, Li AD Max, the excellent drivability empowered by our flagship range extension system, and the all new entertainment experience featured in Li L9’s innovative, interactive space, have all garnered highly positive reviews from users in test drives.”
Mr. Tie Li, chief financial officer of Li Auto, added, “We are pleased with our solid second quarter results in the face of numerous pandemic-related challenges. Driven by our strong vehicle deliveries, our revenues reached RMB8.73 billion for the second quarter, up 73.3% year over year. The power of our product, our execution consistency, and operational resilience enabled us to mitigate the cost inflation affecting the entire industry. As a result, our second quarter gross margin remained relatively solid at 21.5%, up 2.6 percentage points year over year, and our cash flow from operations reached RMB1.13 billion. In addition, with the ongoing at-the-market offering of up to US$2.0 billion of American depositary shares, we are further strengthening our capital base to support our robust growth trajectory going forward.”
3
Financial Results for the Second Quarter of 2022
Revenues
| · | Total revenues were RMB8.73 billion (US$1.30 billion) in the second quarter of 2022, representing an increase of 73.3% from RMB5.04 billion in the second quarter of 2021 and a decrease of 8.7% from RMB9.56 billion in the first quarter of 2022. |
| · | Vehicle sales were RMB8.48 billion (US$1.27 billion) in the second quarter of 2022, representing an increase of 73.0% from RMB4.90 billion in the second quarter of 2021 and a decrease of 8.9% from RMB9.31 billion in the first quarter of 2022. The increase in revenue from vehicle sales over the second quarter of 2021 was mainly attributable to the increase in vehicle deliveries in the second quarter of 2022. The decrease in revenue from vehicle sales over the first quarter of 2022 was mainly attributable to the decrease in vehicle deliveries, which was affected by supply shortage due to the COVID-19 resurgence in the second quarter of 2022. |
| · | Other sales and services were RMB249.0 million (US$37.2 million) in the second quarter of 2022, representing an increase of 83.6% from RMB135.7 million in the second quarter of 2021 and a decrease of 1.7% from RMB253.4 million in the first quarter of 2022. The increase in revenue from other sales and services over the second quarter of 2021 was mainly attributable to increased sales of charging stalls, accessories, and services in line with higher accumulated vehicle sales. |
Cost of Sales and Gross Margin
| · | Cost of sales was RMB6.85 billion (US$1.02 billion) in the second quarter of 2022, representing an increase of 67.7% from RMB4.09 billion in the second quarter of 2021 and a decrease of 7.4% from RMB7.40 billion in the first quarter of 2022. The increase in cost of sales over the second quarter of 2021 was mainly driven by the increase in vehicle deliveries in the second quarter of 2022. The decrease in cost of sales over the first quarter of 2022 was mainly due to the decrease in vehicle deliveries in the second quarter of 2022. |
| · | Gross profit was RMB1.88 billion (US$280.4 million) in the second quarter of 2022, representing an increase of 97.1% from RMB952.8 million in the second quarter of 2021 and a decrease of 13.2% from RMB2.16 billion in the first quarter of 2022. |
| · | Vehicle margin was 21.2% in the second quarter of 2022, compared with 18.7% in the second quarter of 2021 and 22.4% in the first quarter of 2022. The increase in vehicle margin over the second quarter of 2021 was primarily driven by a higher average selling price attributable to the increase of vehicle deliveries of 2021 Li ONE since its release in May 2021. |
| · | Gross margin was 21.5% in the second quarter of 2022, compared with 18.9% in the second quarter of 2021 and 22.6% in the first quarter of 2022. |
4
Operating Expenses
| · | Operating expenses were RMB2.86 billion (US$426.5 million) in the second quarter of 2022, representing an increase of 91.9% from RMB1.49 billion in the second quarter of 2021 and an increase of 10.9% from RMB2.58 billion in the first quarter of 2022. |
| · | Research and development expenses were RMB1.53 billion (US$228.7 million) in the second quarter of 2022, representing an increase of 134.4% from RMB653.4 million in the second quarter of 2021 and an increase of 11.5% from RMB1.37 billion in the first quarter of 2022. The increase in research and development expenses over the second quarter of 2021 and the first quarter of 2022 was primarily driven by increased employee compensation as a result of our growing number of research and development staff as well as increased expenses associated with new models to be introduced in the future. |
| · | Selling, general and administrative expenses were RMB1.33 billion (US$197.8 million) in the second quarter of 2022, representing an increase of 58.6% from RMB835.3 million in the second quarter of 2021 and an increase of 10.2% from RMB1.20 billion in the first quarter of 2022. The increase in selling, general and administrative expenses over the second quarter of 2021 and the first quarter of 2022 was primarily driven by increased employee compensation as a result of our growing number of staff, as well as increased rental expenses associated with the expansion of the Company’s sales network. |
Loss from Operations
| · | Loss from operations was RMB978.5 million (US$146.1 million) in the second quarter of 2022, representing an increase of 82.6% from RMB535.9 million in the second quarter of 2021 and an increase of 136.9% from RMB413.1 million in the first quarter of 2022. Non-GAAP loss from operations was RMB520.8 million (US$77.8 million) in the second quarter of 2022, representing an increase of 42.5% from RMB365.5 million in the second quarter of 2021, and compared with RMB74.9 million non-GAAP income from operations in the first quarter of 2022. |
Net Loss and Net Loss Per Share
| · | Net loss was RMB641.0 million (US$95.7 million) in the second quarter of 2022, representing an increase of 172.2% from RMB235.5 million in the second quarter of 2021, and compared with RMB10.9 million net loss in the first quarter of 2022. Non-GAAP net loss was RMB183.4 million (US$27.4 million) in the second quarter of 2022, representing an increase of 181.7% from RMB65.1 million in the second quarter of 2021, and compared with RMB477.1 million non-GAAP net income in the first quarter of 2022. |
| · | Basic and diluted net loss per ADS6 attributable to ordinary shareholders were both RMB0.64 (US$0.10) in the second quarter of 2022, compared with both RMB0.26 in the second quarter of 2021, and both RMB0.01 in the first quarter of 2022. Non-GAAP basic and diluted net loss per ADS attributable to ordinary shareholders3 were both RMB0.17 (US$0.02) in the second quarter of 2022, compared with both RMB0.07 in the second quarter of 2021, and RMB0.49 and RMB0.47 non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders3 in the first quarter of 2022, respectively. |
Cash Position, Operating Cash Flow and Free Cash Flow
| · | Balance of cash and cash equivalents, restricted cash, time deposits and short-term investments was RMB53.65 billion (US$8.01 billion) as of June 30, 2022. |
| · | Operating cash flow was RMB1.13 billion (US$168.6 million) in the second quarter of 2022, representing a decrease of 19.8% from RMB1.41 billion in the second quarter of 2021 and a decrease of 38.4% from RMB1.83 billion in the first quarter of 2022. |
| · | Free cash flow was RMB451.7 million (US$67.4 million) in the second quarter of 2022, representing a decrease of 54.0% from RMB982.1 million in the second quarter of 2021 and a decrease of 10.0% from RMB502.0 million in the first quarter of 2022. |
6 Each ADS represents two Class A ordinary shares.
5
Business Outlook
For the third quarter of 2022, the Company expects:
| · | Deliveries of vehicles to be between 27,000 and 29,000 vehicles, representing an increase of 7.5% to 15.5% from the third quarter of 2021. |
| · | Total revenues to be between RMB8.96 billion (US$1.34 billion) and RMB9.56 billion (US$1.43 billion), representing an increase of 15.3% to 22.9% from the third quarter of 2021. |
This business outlook reflects the Company’s current and preliminary view on the business situation and market condition, which is subject to change.
Conference Call
Management will hold a conference call at 8:00 a.m. U.S. Eastern Time on Monday, August 15, 2022 (8:00 p.m. Beijing Time on August 15, 2022) to discuss financial results and answer questions from investors and analysts.
For participants who wish to join the call, please complete online registration using the link provided below prior to the scheduled call start time. Upon registration, participants will receive the conference call access information, including dial-in numbers, passcode, and a unique access PIN. To join the conference, please dial the number provided, enter the passcode followed by your PIN, and you will join the conference instantly.
Participant Online Registration: https://s1.c-conf.com/diamondpass/10024172-3mfk5a.html
A replay of the conference call will be accessible through August 22, 2022, by dialing the following numbers:
| United States: | +1-855-883-1031 |
| Mainland China: | +86-400-1209-216 |
| Hong Kong, China: | +852-800-930-639 |
| International: | +61-7-3107-6325 |
| Replay PIN: | 10024172 |
Additionally, a live and archived webcast of the conference call will be available on the Company’s investor relations website at http://ir.lixiang.com.
6
Non-GAAP Financial Measure
The Company uses non-GAAP financial measures, such as non-GAAP cost of sales, non-GAAP research and development expenses, non-GAAP selling, general and administrative expenses, non-GAAP income/loss from operations, non-GAAP net income/loss, non-GAAP net income/loss attributable to ordinary shareholders, non-GAAP basic and diluted net earnings/loss per ADS attributable to ordinary shareholders and free cash flow, in evaluating its operating results and for financial and operational decision-making purposes. By excluding the impact of share-based compensation expenses, the Company believes that the non-GAAP financial measures help identify underlying trends in its business and enhance the overall understanding of the Company’s past performance and future prospects. The Company also believes that the non-GAAP financial measures allow for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making.
The non-GAAP financial measures are not presented in accordance with U.S. GAAP and may be different from non-GAAP methods of accounting and reporting used by other companies. The non-GAAP financial measures have limitations as analytical tools and when assessing the Company’s operating performance, investors should not consider them in isolation, or as a substitute for net loss or other consolidated statements of comprehensive loss data prepared in accordance with U.S. GAAP. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.
The Company mitigates these limitations by reconciling the non-GAAP financial measures to the most comparable U.S. GAAP performance measures, all of which should be considered when evaluating the Company’s performance.
For more information on the non-GAAP financial measures, please see the table captioned “Unaudited Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this press release.
About Li Auto Inc.
Li Auto Inc. is a leader in China’s new energy vehicle market. The Company designs, develops, manufactures, and sells premium smart electric vehicles. Its mission is: Create a Mobile Home, Create Happiness (创造移动的家, 创造幸福的家). Through innovations in product, technology, and business model, the Company provides families with safe, convenient, and comfortable products and services. Li Auto is a pioneer to successfully commercialize extended-range electric vehicles in China. The Company started volume production in November 2019. Its model lineup includes Li ONE, a six-seat, large premium smart electric SUV, and Li L9, a six-seat, full-size, flagship smart SUV. The Company leverages technology to create value for its users. It concentrates its in-house development efforts on its proprietary range extension system, next-generation electric vehicle technology, and smart vehicle solutions while expanding its product line by developing new BEVs and EREVs to target a broader user base.
For more information, please visit: http://ir.lixiang.com.
7
Safe Harbor Statement
This press release contains statements that may constitute “forward-looking” statements pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “likely to,” and similar statements. Li Auto may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”) and The Stock Exchange of Hong Kong Limited (the “HKEX”), in its annual report to shareholders, in press releases and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Statements that are not historical facts, including statements about Li Auto’s beliefs, plans, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Li Auto’s strategies, future business development, and financial condition and results of operations; Li Auto’s limited operating history; risks associated with extended-range electric vehicles, Li Auto’s ability to develop, manufacture, and deliver vehicles of high quality and appeal to customers; Li Auto’s ability to generate positive cash flow and profits; product defects or any other failure of vehicles to perform as expected; Li Auto’s ability to compete successfully; Li Auto’s ability to build its brand and withstand negative publicity; cancellation of orders for Li Auto’s vehicles; Li Auto’s ability to develop new vehicles; and changes in consumer demand and government incentives, subsidies, or other favorable government policies. Further information regarding these and other risks is included in Li Auto’s filings with the SEC and the HKEX. All information provided in this press release is as of the date of this press release, and Li Auto does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
For investor and media inquiries, please contact:
Li Auto Inc.
Investor Relations
Email: ir@lixiang.com
The Piacente Group, Inc.
Yang Song
Tel: +86-10-6508-0677
Email: Li@tpg-ir.com
Brandi Piacente
Tel: +1-212-481-2050
Email: Li@tpg-ir.com
8
Li Auto Inc.
Unaudited Condensed Consolidated Statements of Comprehensive (Loss)/Income
(All amounts in thousands, except for ADS/ordinary share and per ADS/ordinary share data)
| For the Three Months Ended | ||||||||||||||||
| June 30, 2021 | March 31, 2022 | June 30, 2022 | June 30, 2022 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Revenues: | ||||||||||||||||
| Vehicle sales | 4,903,295 | 9,308,609 | 8,483,612 | 1,266,570 | ||||||||||||
| Other sales and services | 135,657 | 253,427 | 249,009 | 37,176 | ||||||||||||
| Total revenues | 5,038,952 | 9,562,036 | 8,732,621 | 1,303,746 | ||||||||||||
| Cost of sales: | ||||||||||||||||
| Vehicle sales | (3,988,609 | ) | (7,219,912 | ) | (6,687,273 | ) | (998,384 | ) | ||||||||
| Other sales and services | (97,563 | ) | (178,269 | ) | (167,048 | ) | (24,940 | ) | ||||||||
| Total cost of sales | (4,086,172 | ) | (7,398,181 | ) | (6,854,321 | ) | (1,023,324 | ) | ||||||||
| Gross profit | 952,780 | 2,163,855 | 1,878,300 | 280,422 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | (653,438 | ) | (1,373,962 | ) | (1,531,644 | ) | (228,668 | ) | ||||||||
| Selling, general and administrative | (835,277 | ) | (1,202,967 | ) | (1,325,113 | ) | (197,834 | ) | ||||||||
| Total operating expenses | (1,488,715 | ) | (2,576,929 | ) | (2,856,757 | ) | (426,502 | ) | ||||||||
| Loss from operations | (535,935 | ) | (413,074 | ) | (978,457 | ) | (146,080 | ) | ||||||||
| Other (expense)/income: | ||||||||||||||||
| Interest expense | (19,741 | ) | (10,138 | ) | (21,172 | ) | (3,161 | ) | ||||||||
| Interest income and investment income, net | 232,522 | 162,874 | 249,662 | 37,274 | ||||||||||||
| Others, net | 120,899 | 279,703 | 104,695 | 15,631 | ||||||||||||
| (Loss)/Income before income tax expense | (202,255 | ) | 19,365 | (645,272 | ) | (96,336 | ) | |||||||||
| Income tax (expense)/benefit | (33,234 | ) | (30,231 | ) | 4,226 | 631 | ||||||||||
| Net loss | (235,489 | ) | (10,866 | ) | (641,046 | ) | (95,705 | ) | ||||||||
| Less: Net loss attributable to noncontrolling interests | – | – | (23,080 | ) | (3,446 | ) | ||||||||||
| Net loss attributable to ordinary shareholders of Li Auto Inc. | (235,489 | ) | (10,866 | ) | (617,966 | ) | (92,259 | ) | ||||||||
| Net loss | (235,489 | ) | (10,866 | ) | (641,046 | ) | (95,705 | ) | ||||||||
| Other comprehensive (loss)/income | ||||||||||||||||
| Foreign currency translation adjustment, net of tax | (306,229 | ) | (85,116 | ) | 1,058,208 | 157,986 | ||||||||||
| Total other comprehensive (loss)/income | (306,229 | ) | (85,116 | ) | 1,058,208 | 157,986 | ||||||||||
| Total comprehensive (loss)/income | (541,718 | ) | (95,982 | ) | 417,162 | 62,281 | ||||||||||
| Less: Net loss attributable to noncontrolling interests | – | – | (23,080 | ) | (3,446 | ) | ||||||||||
| Comprehensive (loss)/income attributable to ordinary shareholders of Li Auto Inc. | (541,718 | ) | (95,982 | ) | 440,242 | 65,727 | ||||||||||
| Weighted average number of ADSs | ||||||||||||||||
| Basic | 904,997,063 | 964,870,446 | 965,395,732 | 965,395,732 | ||||||||||||
| Diluted | 904,997,063 | 964,870,446 | 965,395,732 | 965,395,732 | ||||||||||||
| Net loss per ADS attributable to ordinary shareholders | ||||||||||||||||
| Basic | (0.26 | ) | (0.01 | ) | (0.64 | ) | (0.10 | ) | ||||||||
| Diluted | (0.26 | ) | (0.01 | ) | (0.64 | ) | (0.10 | ) | ||||||||
| Weighted average number of ordinary shares | ||||||||||||||||
| Basic | 1,809,994,125 | 1,929,740,892 | 1,930,791,463 | 1,930,791,463 | ||||||||||||
| Diluted | 1,809,994,125 | 1,929,740,892 | 1,930,791,463 | 1,930,791,463 | ||||||||||||
| Net loss per share attributable to ordinary shareholders | ||||||||||||||||
| Basic | (0.13 | ) | (0.01 | ) | (0.32 | ) | (0.05 | ) | ||||||||
| Diluted | (0.13 | ) | (0.01 | ) | (0.32 | ) | (0.05 | ) | ||||||||
9
Li Auto Inc.
Unaudited Condensed Consolidated Balance Sheets
(All amounts in thousands)
| As of | ||||||||||||
| December 31, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | 27,854,224 | 33,888,442 | 5,059,411 | |||||||||
| Restricted cash | 2,638,840 | 3,206,578 | 478,729 | |||||||||
| Time deposits and short-term investments | 19,668,239 | 16,553,080 | 2,471,310 | |||||||||
| Trade receivable | 120,541 | 81,773 | 12,208 | |||||||||
| Inventories | 1,617,890 | 3,006,695 | 448,888 | |||||||||
| Prepayments and other current assets | 480,680 | 1,149,869 | 171,671 | |||||||||
| Total current assets | 52,380,414 | 57,886,437 | 8,642,217 | |||||||||
| Non-current assets: | ||||||||||||
| Long-term investments | 156,306 | 709,121 | 105,869 | |||||||||
| Property, plant and equipment, net | 4,498,269 | 7,367,707 | 1,099,970 | |||||||||
| Operating lease right-of-use assets, net | 2,061,492 | 3,117,056 | 465,364 | |||||||||
| Intangible assets, net | 751,460 | 801,940 | 119,726 | |||||||||
| Deferred tax assets | 19,896 | 11,652 | 1,740 | |||||||||
| Other non-current assets | 1,981,076 | 2,593,042 | 387,131 | |||||||||
| Total non-current assets | 9,468,499 | 14,600,518 | 2,179,800 | |||||||||
| Total assets | 61,848,913 | 72,486,955 | 10,822,017 | |||||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Short-term borrowings | 37,042 | 387,346 | 57,829 | |||||||||
| Trade and notes payable | 9,376,050 | 13,090,146 | 1,954,307 | |||||||||
| Amounts due to related parties | 37,455 | 6,176 | 922 | |||||||||
| Deferred revenue, current | 305,092 | 346,306 | 51,702 | |||||||||
| Operating lease liabilities, current | 473,245 | 567,559 | 84,734 | |||||||||
| Accruals and other current liabilities | 1,879,368 | 3,414,526 | 509,777 | |||||||||
| Total current liabilities | 12,108,252 | 17,812,059 | 2,659,271 | |||||||||
| Non-current liabilities: | ||||||||||||
| Long-term borrowings | 5,960,899 | 8,040,405 | 1,200,401 | |||||||||
| Deferred revenue, non-current | 389,653 | 548,272 | 81,855 | |||||||||
| Operating lease liabilities, non-current | 1,369,825 | 1,712,981 | 255,741 | |||||||||
| Deferred tax liabilities | 153,723 | 122,430 | 18,278 | |||||||||
| Other non-current liabilities | 802,259 | 1,599,082 | 238,736 | |||||||||
| Total non-current liabilities | 8,676,359 | 12,023,170 | 1,795,011 | |||||||||
| Total liabilities | 20,784,611 | 29,835,229 | 4,454,282 | |||||||||
| Total Li Auto Inc. shareholders’ equity | 41,064,302 | 42,356,138 | 6,323,605 | |||||||||
| Noncontrolling interests | – | 295,588 | 44,130 | |||||||||
| Total shareholders’ equity | 41,064,302 | 42,651,726 | 6,367,735 | |||||||||
| Total liabilities and shareholders’ equity | 61,848,913 | 72,486,955 | 10,822,017 | |||||||||
10
Li Auto Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(All amounts in thousands)
| For the Three Months Ended | ||||||||||||||||
June 30, 2021 | March 31, 2022 | June 30, 2022 | June 30, 2022 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Net cash provided by operating activities | 1,407,627 | 1,833,769 | 1,129,407 | 168,616 | ||||||||||||
| Net cash (used in)/provided by investing activities | (1,217,758 | ) | 1,564,251 | (740,518 | ) | (110,556 | ) | |||||||||
| Net cash provided by financing activities | 5,533,762 | 902,991 | 1,026,855 | 153,305 | ||||||||||||
| Effect of exchange rate changes | (78,935 | ) | (77,503 | ) | 962,704 | 143,727 | ||||||||||
| Net change in cash, cash equivalents and restricted cash | 5,644,696 | 4,223,508 | 2,378,448 | 355,092 | ||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 8,182,362 | 30,493,064 | 34,716,572 | 5,183,048 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of period | 13,827,058 | 34,716,572 | 37,095,020 | 5,538,140 | ||||||||||||
| Net cash provided by operating activities | 1,407,627 | 1,833,769 | 1,129,407 | 168,616 | ||||||||||||
| Capital expenditures | (425,488 | ) | (1,331,814 | ) | (677,755 | ) | (101,186 | ) | ||||||||
| Free cash flow | 982,139 | 501,955 | 451,652 | 67,430 | ||||||||||||
11
Li Auto Inc.
Unaudited Reconciliation of GAAP and Non-GAAP Results
(All amounts in thousands, except for ADS/ordinary share and per ADS/ordinary share data)
| For the Three Months Ended | ||||||||||||||||
June 30, 2021 | March 31, 2022 | June 30, 2022 | June 30, 2022 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Cost of sales | (4,086,172 | ) | (7,398,181 | ) | (6,854,321 | ) | (1,023,324 | ) | ||||||||
| Share-based compensation expenses | 6,204 | 10,665 | 9,301 | 1,389 | ||||||||||||
| Non-GAAP cost of sales | (4,079,968 | ) | (7,387,516 | ) | (6,845,020 | ) | (1,021,935 | ) | ||||||||
| Research and development expenses | (653,438 | ) | (1,373,962 | ) | (1,531,644 | ) | (228,668 | ) | ||||||||
| Share-based compensation expenses | 109,771 | 324,532 | 301,449 | 45,005 | ||||||||||||
| Non-GAAP research and development expenses | (543,667 | ) | (1,049,430 | ) | (1,230,195 | ) | (183,663 | ) | ||||||||
| Selling, general and administrative expenses | (835,277 | ) | (1,202,967 | ) | (1,325,113 | ) | (197,834 | ) | ||||||||
| Share-based compensation expenses | 54,416 | 152,754 | 146,858 | 21,925 | ||||||||||||
| Non-GAAP selling, general and administrative expenses | (780,861 | ) | (1,050,213 | ) | (1,178,255 | ) | (175,909 | ) | ||||||||
| Loss from operations | (535,935 | ) | (413,074 | ) | (978,457 | ) | (146,080 | ) | ||||||||
| Share-based compensation expenses | 170,391 | 487,951 | 457,608 | 68,319 | ||||||||||||
| Non-GAAP (loss)/income from operations | (365,544 | ) | 74,877 | (520,849 | ) | (77,761 | ) | |||||||||
| Net loss | (235,489 | ) | (10,866 | ) | (641,046 | ) | (95,705 | ) | ||||||||
| Share-based compensation expenses | 170,391 | 487,951 | 457,608 | 68,319 | ||||||||||||
| Non-GAAP net (loss)/income | (65,098 | ) | 477,085 | (183,438 | ) | (27,386 | ) | |||||||||
| Net loss attributable to ordinary shareholders of Li Auto Inc. | (235,489 | ) | (10,866 | ) | (617,966 | ) | (92,259 | ) | ||||||||
| Share-based compensation expenses | 170,391 | 487,951 | 457,608 | 68,319 | ||||||||||||
Non-GAAP net (loss)/income attributable to ordinary shareholders of Li Auto Inc. | (65,098 | ) | 477,085 | (160,358 | ) | (23,940 | ) | |||||||||
| Weighted average number of ADSs (Non-GAAP) | ||||||||||||||||
| Basic | 904,997,063 | 964,870,446 | 965,395,732 | 965,395,732 | ||||||||||||
| Diluted | 904,997,063 | 1,035,309,021 | 965,395,732 | 965,395,732 | ||||||||||||
| Non-GAAP net (loss)/earnings per ADS attributable to ordinary shareholders | ||||||||||||||||
| Basic | (0.07 | ) | 0.49 | (0.17 | ) | (0.02 | ) | |||||||||
| Diluted | (0.07 | ) | 0.47 | (0.17 | ) | (0.02 | ) | |||||||||
| Weighted average number of ordinary shares (Non-GAAP) | ||||||||||||||||
| Basic | 1,809,994,125 | 1,929,740,892 | 1,930,791,463 | 1,930,791,463 | ||||||||||||
| Diluted | 1,809,994,125 | 2,070,618,042 | 1,930,791,463 | 1,930,791,463 | ||||||||||||
| Non-GAAP net (loss)/earnings per share attributable to ordinary shareholders7 | ||||||||||||||||
| Basic | (0.04 | ) | 0.25 | (0.08 | ) | (0.01 | ) | |||||||||
| Diluted | (0.04 | ) | 0.23 | (0.08 | ) | (0.01 | ) | |||||||||
7 Non-GAAP basic net earnings/loss per share attributable to ordinary shareholders is calculated by dividing non-GAAP net income/loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the periods. Non-GAAP diluted net earnings/loss per share attributable to ordinary shareholders is calculated by dividing non-GAAP net income/loss attributable to ordinary shareholders by the weighted average number of ordinary shares, dilutive potential ordinary shares outstanding during the periods, including the dilutive effects of convertible senior notes as determined under the if-converted method and the dilutive effect of share-based awards as determined under the treasury stock method.
12
Exhibit 99.4
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
Li Auto Inc.
理想汽車
(A company controlled through weighted voting rights and incorporated in the Cayman Islands with limited liability)
(Stock Code: 2015)
INTERIM RESULTS ANNOUNCEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2022
The board (the “Board”) of directors (the “Directors”) of Li Auto Inc. (the “Company”) is pleased to announce the unaudited interim consolidated results of the Company for the six months ended June 30, 2022 (the “Reporting Period”), together with the comparative figures for the corresponding period in 2021. These interim results have been prepared in accordance with generally accepted accounting principles in the United States of America (the “U.S. GAAP”) and have been reviewed by the audit committee (the “Audit Committee”) of the Board. The unaudited condensed consolidated financial statements for the six months ended June 30, 2022 were reviewed by the Audit Committee and PricewaterhouseCoopers, the independent auditor of the Company, in accordance with International Standard on Review Engagements 2410, “Review of interim financial information performed by the independent auditor of the entity”.
In this announcement, “we,” “us,” and “our” refer to the Company and where the context otherwise requires, the Group (as defined under the “General Information” section).
| 1 |
FINANCIAL PERFORMANCE HIGHLIGHTS
For the Six Months Ended June 30, | |||||||||||
| 2021 | 2022 | Change (%) | |||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| (RMB in thousands, except percentages) | |||||||||||
| Revenues | 8,614,153 | 18,294,657 | 112.4 | % | |||||||
| Gross profit | 1,569,513 | 4,042,155 | 157.5 | % | |||||||
| Loss from operations | (943,626 | ) | (1,391,531 | ) | 47.5 | % | |||||
| Loss before income tax | (536,267 | ) | (625,907 | ) | 16.7 | % | |||||
| Net loss | (595,456 | ) | (651,912 | ) | 9.5 | % | |||||
| Comprehensive (loss)/income attributable to the ordinary shareholders of Li Auto Inc. | (794,041 | ) | 344,260 | N/A | |||||||
| Non-GAAP Financial Measures: | |||||||||||
| Non-GAAP loss from operations | (590,307 | ) | (445,972 | ) | (24.5 | )% | |||||
| Non-GAAP net (loss)/income | (242,137 | ) | 293,647 | N/A | |||||||
Non-GAAP Financial Measures
The Company uses Non-GAAP financial measures, such as Non-GAAP income/loss from operations and Non-GAAP net income/loss, in evaluating its operating results and for financial and operational decision-making purposes. By excluding the impact of share-based compensation expenses, the Company believes that the Non-GAAP financial measures help identify underlying trends in its business and enhance the overall understanding of the Company’s past performance and future prospects. The Company also believes that the Non-GAAP financial measures allow for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making.
The Non-GAAP financial measures are not presented in accordance with U.S. GAAP and may be different from Non-GAAP methods of accounting and reporting used by other companies. The Non-GAAP financial measures have limitations as analytical tools and when assessing the Company’s operating performance, investors should not consider them in isolation, or as a substitute for net loss or other consolidated statements of comprehensive loss data prepared in accordance with U.S. GAAP. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.
The Company mitigates these limitations by reconciling the Non-GAAP financial measures to the most comparable U.S. GAAP performance measures, all of which should be considered when evaluating the Company’s performance.
| 2 |
The following table sets forth unaudited reconciliation of GAAP and Non-GAAP results for the period indicated.
For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| (RMB in thousands) | ||||||||
| Loss from operations | (943,626 | ) | (1,391,531 | ) | ||||
| Share-based compensation expenses | 353,319 | 945,559 | ||||||
| Non-GAAP loss from operations | (590,307 | ) | (445,972 | ) | ||||
| Net loss | (595,456 | ) | (651,912 | ) | ||||
| Share-based compensation expenses | 353,319 | 945,559 | ||||||
| Non-GAAP net (loss)/income | (242,137 | ) | 293,647 | |||||
BUSINESS REVIEW AND OUTLOOK
Business Review for the Reporting Period
In the first half of 2022, we achieved solid financial and operational results despite the significant industry-wide parts supply chain challenges posed by the COVID-19 pandemic. Thanks to Li ONE’s enduring appeal to our customers, our total deliveries in the first half of 2022 increased by 100.3% year over year to 60,403 vehicles and our total revenues amounted to RMB18.29 billion, representing a 112.4% year-over-year increase. The cumulative deliveries of Li ONE since its market debut reached 184,491 vehicles as of June 30, 2022.
We remain dedicated to our mission: “Create a Mobile Home, Create Happiness” (創造移動的家，創造幸福的家) and have been leveraging technologies to create value for our users by offering compelling products and services, supported by our continually expanding direct sales and servicing network. We unveiled Li L9, our flagship smart SUV for families on June 21, 2022. Meanwhile, we continued to invest in intelligent cockpit and autonomous driving technologies as well as other in-car technologies to provide joyful and safe driving and riding experiences for families, while spending efforts to develop new EREV and BEV models.
Product
We are a leader in China’s NEV market. Our products are built to serve the mobility needs of families in China. After Li ONE emerged as one of China’s most competitive SUV choices for family users, we build on our strengths and forge ahead on our product roadmap.
| 3 |
The newly unveiled Li L9, our flagship smart SUV for families, is a six-seat, full-size flagship SUV, offering superior space and comfort for family users. Its self-developed flagship range extension and chassis systems provide excellent drivability with a CLTC range of 1,315 kilometers and a WLTC range of 1,100 kilometers. With a 44.5 kilowatt-hour new-generation NCM lithium battery, it can support a CLTC range of 215 kilometers and a WLTC range of 180 kilometers under the EV mode. Li L9 also features top-notch vehicle safety measures and our self-developed autonomous driving system, Li AD Max, powered by dual Orin-X chips with 508 TOPS of computing power to protect every family passenger. Li L9’s innovative five-screen, three-dimensional interactive intelligent cockpit brings a new level of driving and entertainment experience.
The success of Li ONE and users’ enthusiasm for Li L9 demonstrate our extraordinary product defining capabilities. We will continue to expand our product portfolio by developing new EREVs and BEVs to target a broader user base.
Direct Sales and Servicing Network
Our direct sales and servicing network serves as an important and efficient interface for us to gain insight into our users’ needs and desires. With expanding direct sales and servicing network and our integrated online and offline platform, we can achieve higher operating efficiency with a data-driven, closed-loop digital platform to manage all user interactions from sales leads to test drives to purchases and even to user reviews.
While the pace of our sales network expansion has been challenged by the COVID-19 resurgence, we further expanded our direct sales and servicing network in the first half of 2022. As of June 30, 2022, we had 247 retail stores in 113 cities, as well as 308 servicing centers and Li Auto-authorized body and paint shops operating in 226 cities.
Research and Development
Our product excellence is underpinned by our strong research and development capabilities, which helped reinforce our market leading position. We leverage the know-how accumulated from our Li ONEs to continuously optimize software and hardware. Our research and development efforts yielded tangible results, as evidenced by the several self-developed features applied to Li L9, including the next-generation EREV powertrain system, Li AD Max – our upgraded autonomous driving system, and our pioneering five-screen three-dimensional interactive intelligent cockpit. Our autonomous driving and intelligent cockpit technologies have been designed with expandability and transferability across models, which allow us to smoothly migrate our design language, interaction experience, and integrated systems into our future models to further improve the intelligence level of all future models. In addition, we continue to invest in our high-voltage platform to be adopted by our future HPC BEV models, which could further enhance their driving range by reducing energy consumption.
| 4 |
Environmental, Social and Governance (ESG)
We have been proactively contributing to sustainable development for the benefit of our society and environment, while constantly enhancing corporate governance capability in areas such as compliance operations and risk control.
On April 19, 2022, we published our inaugural ESG report, highlighting our ESG initiatives and achievements in 2021, underscoring our commitment to being a responsible public company. To learn more about our ESG efforts and download the full ESG report in simplified Chinese, traditional Chinese, and English, please visit the ESG section of our investor relations website at https://ir.lixiang.com/esg.
Inclusion in the Shenzhen- and Shanghai-Hong Kong Stock Connect Programs
Our Class A ordinary shares (the “Class A Ordinary Shares”), which are listed and traded on the Stock Exchange of Hong Kong Limited, have been included in the Shenzhen- and Shanghai-Hong Kong Stock Connect programs, effective on March 14 and April 25, 2022, respectively. This allows us to access a broader investor base and share our growth trajectory and further success with users, partners and investors in mainland China via the financial market.
The US ATM Offering
On June 28, 2022, we announced an at-the-market offering program (the “ATM Offering”) to sell up to US$2,000,000,000 of American depositary shares (the “ADSs”), each representing two Class A Ordinary Shares.
As of June 30, 2022, we had sold 414,310 ADSs representing 828,620 Class A Ordinary Shares under the ATM Offering raising gross proceeds of US$15.8 million and net proceeds of approximately US$14.5 million, respectively, with the selling price ranging from US$38.00 per ADS to US$38.41 per ADS and average net selling price of US$38.14 per ADS. As disclosed in the announcement and the listing document of the Company dated June 29, 2022, we intend to use the net proceeds from the ATM 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. Considering that the ATM Offering was only launched two days before June 30, 2022, none of the net proceeds had been utilized as of June 30, 2022. To the extent that the net proceeds of the ATM Offering are not immediately required for the above described purposes, we may hold such funds in bank deposits at authorized financial institutions.
| 5 |
Recent Developments After the Reporting Period
Delivery Update
In July 2022, we delivered 10,422 Li ONEs, representing a 21.3% increase from July 2021. As of July 31, 2022, we had 259 retail stores covering 118 cities, in addition to 311 servicing centers and Li Auto-authorized body and paint shops operating in 226 cities.
ATM Offering
As of the date of this announcement, we have sold 9,431,282 ADSs representing 18,862,564 Class A Ordinary Shares under the ATM Offering raising gross proceeds of US$366.5 million before deducting fees and commissions payable to the distribution agents of up to US$4.8 million and certain other offering expenses.
Business Outlook
Looking ahead to the second half of 2022, we will continue to provide families with safe, convenient, and comfortable products and services, aiming to maintain a leading position in China’s NEV market. Along the journey to create a sustainable path for everyone to embrace vehicle electrification, we remain focused on R&D of next-generation electric vehicle technologies including technologies for smart cabin, autonomous driving, and future EREV and BEV models, while expanding sales network to pursue operational excellence.
Meanwhile, due to the evolving pandemic caused by new variants on top of limited parts production capacity with rising NEV demands, uncertainties associated with auto parts shortage and cost inflation remain as industry-wide challenges. Going forward, we will continue to reinforce our supply chain system and strengthen our partnership with parts suppliers to mitigate such risks.
| 6 |
MANAGEMENT DISCUSSION AND ANALYSIS
For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| (RMB in thousands) | ||||||||
| Revenues | ||||||||
| Vehicle sales | 8,366,968 | 17,792,221 | ||||||
| Other sales and services | 247,185 | 502,436 | ||||||
| Total revenues | 8,614,153 | 18,294,657 | ||||||
| Cost of sales | ||||||||
| Vehicle sales | (6,867,603 | ) | (13,907,185 | ) | ||||
| Other sales and services | (177,037 | ) | (345,317 | ) | ||||
| Total cost of sales | (7,044,640 | ) | (14,252,502 | ) | ||||
| Gross profit | 1,569,513 | 4,042,155 | ||||||
| Research and development expenses | (1,167,938 | ) | (2,905,606 | ) | ||||
| Selling, general and administrative expenses | (1,345,201 | ) | (2,528,080 | ) | ||||
| Total operating expenses | (2,513,139 | ) | (5,433,686 | ) | ||||
| Loss from operations | (943,626 | ) | (1,391,531 | ) | ||||
| Other (expense)/income: | ||||||||
| Interest expense | (34,323 | ) | (31,310 | ) | ||||
| Interest income and investment income, net | 410,994 | 412,536 | ||||||
| Others, net | 30,688 | 384,398 | ||||||
| Loss before income tax expense | (536,267 | ) | (625,907 | ) | ||||
| Income tax expense | (59,189 | ) | (26,005 | ) | ||||
| Net loss | (595,456 | ) | (651,912 | ) | ||||
| Less: Net loss attributable to non-controlling interests | – | (23,080 | ) | |||||
| Net loss attributable to ordinary shareholders of Li Auto Inc. | (595,456 | ) | (628,832 | ) | ||||
| Other comprehensive (loss)/income | ||||||||
| Foreign currency translation adjustment, net of tax | (198,585 | ) | 973,092 | |||||
| Total other comprehensive (loss)/income | (198,585 | ) | 973,092 | |||||
| Total comprehensive (loss)/income | (794,041 | ) | 321,180 | |||||
| Less: Net loss attributable to non-controlling interests | – | (23,080 | ) | |||||
Comprehensive (loss)/income attributable to ordinary shareholders of Li Auto Inc. | (794,041 | ) | 344,260 | |||||
| 7 |
Revenues
Total revenues were RMB18.29 billion for the six months ended June 30, 2022, representing an increase of 112.4% from RMB8.61 billion for the six months ended June 30, 2021.
Vehicle sales were RMB17.79 billion for the six months ended June 30, 2022, representing an increase of 112.6% from RMB8.37 billion for the six months ended June 30, 2021. This increase was primarily attributable to a 100.3% increase in vehicle deliveries from 30,154 vehicles in the first half year of 2021 to 60,403 vehicles in the same period of 2022.
Other sales and services were RMB502.4 million for the six months ended June 30, 2022, representing an increase of 103.3% from RMB247.2 million for the six months ended June 30, 2021. This increase was primarily attributable to increased sales of charging stalls, accessories and services in line with higher accumulated vehicle sales.
Cost of Sales
Cost of sales were RMB14.25 billion for the six months ended June 30, 2022, representing an increase of 102.3% from RMB7.04 billion for the six months ended June 30, 2021. This increase was mainly due to the increase of vehicle deliveries as described above.
Gross Profit and Gross Margin
Our gross profit was RMB4.04 billion for the six months ended June 30, 2022, representing an increase of 157.5% from RMB1.57 billion for the six months ended June 30, 2021. The increase in gross margin from 18.2% for the six months ended June 30, 2021 to 22.1% for the six months ended June 30, 2022 was mainly driven by the increase of vehicle margin over the first half year of 2021.
Our vehicle margin increased from 17.9% for the six months ended June 30, 2021 to 21.8% for the six months ended June 30, 2022 driven by a higher average selling price attributable to the increase of vehicle deliveries of 2021 Li ONE since its release in May 2021.
Research and Development Expenses
Research and development expenses were RMB2.91 billion for the six months ended June 30, 2022, representing an increase of 148.8% from RMB1.17 billion for the six months ended June 30, 2021. This increase was primarily attributable to increased employee compensation as a result of growing number of research and development staff as well as increased costs associated with new models to be introduced in the future.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were RMB2.53 billion for the six months ended June 30, 2022, representing an increase of 87.9% from RMB1.35 billion for the six months ended June 30, 2021. This increase was primarily attributable to increased employee compensation as a result of growing number of staff, as well as increased rental expenses associated with the expansion of the Company’s sales network.
| 8 |
Loss from Operations
As a result of the foregoing, loss from operations increased by 47.5% from RMB943.6 million for the six months ended June 30, 2021 to RMB1.39 billion for the six months ended June 30, 2022.
Others, Net
Others, net was RMB384.4 million for the six months ended June 30, 2022, representing an increase of 1,152.6% from RMB30.7 million for the six months ended June 30, 2021, primarily attributable to increased VAT refunds and reimbursement paid to us by the depositary of our ADS program.
Net Loss
As a result of the foregoing, net loss was RMB651.9 million for the six months ended June 30, 2022, representing an increase of 9.5% from RMB595.5 million for the six months ended June 30, 2021.
Liquidity and Source of Funding and Borrowing
During the six months ended June 30, 2022, we funded our cash requirements principally through cash generated from our operations and proceeds from borrowings. Our cash and cash equivalents, restricted cash, time deposits and short-term investment increased by 7.0% from RMB50.16 billion as of December 31, 2021 to RMB53.65 billion as of June 30, 2022.
The following table sets out our cash flows for the periods indicated:
For the Six Months Ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| (RMB in thousands) | ||||||||
| Net cash provided by operating activities | 2,333,970 | 2,963,176 | ||||||
| Net cash (used in)/ provided by investing activities | (4,110,154 | ) | 823,733 | |||||
| Net cash provided by financing activities | 5,533,762 | 1,929,846 | ||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (103,039 | ) | 885,201 | |||||
| Net increase in cash, cash equivalents and restricted cash | 3,654,539 | 6,601,956 | ||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 10,172,519 | 30,493,064 | ||||||
| Cash, cash equivalents and restricted cash at end of the period | 13,827,058 | 37,095,020 | ||||||
| 9 |
Significant Investments
We did not make or hold any significant investments during the six months ended June 30, 2022.
Material Acquisitions and Disposals
We did not have any material acquisitions or disposals of subsidiaries, consolidated affiliated entities, or associated companies during the six months ended June 30, 2022.
Pledge of Assets
As of June 30, 2022, we pledged a restricted deposit of RMB3.21 billion, compared with RMB2.64 billion as of December 31, 2021. We also secured certain production equipment for borrowings as of June 30, 2022.
Future Plans for Material Investments or Capital Assets
We did not have detailed future plans for significant investments or capital assets as at June 30, 2022.
Gearing Ratio
As of June 30, 2022, our gearing ratio (i.e., total liabilities divided by total assets, in percentage) was 41.2% (as of December 31, 2021: 33.6%).
Foreign Exchange Exposure
Our expenditures are mainly denominated in Renminbi and, therefore, we are exposed to risks related to movements between Renminbi and U.S. dollars. Our exposure to U.S. dollars exchange rate fluctuation arises from the Renminbi-denominated cash and cash equivalents, restricted cash, time deposits, and short-term investments held by us and our subsidiaries whose functional currency is U.S. dollars, and the U.S. dollar-denominated cash and cash equivalents, restricted cash, time deposits, and short-term investments held by our subsidiaries whose functional currency is Renminbi. We enter into hedging transactions in an effort to reduce our exposure to foreign currency exchange risk when we deem appropriate.
To the extent that we need to convert U.S. dollars or other currencies into Renminbi for our operations, appreciation of Renminbi against U.S. dollars would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars or other currency for the purpose of making payments to suppliers or for dividends on our Class A Ordinary Shares or ADSs or for other business purposes, appreciation of U.S. dollars against Renminbi would have a negative effect on the U.S. dollar amounts available to us.
| 10 |
Contingent Liabilities
We had no material contingent liabilities as of June 30, 2022.
Capital Commitment
As of June 30, 2022, our capital commitment was RMB5.78 billion (as of December 31, 2021: RMB2.92 billion), mainly on construction and purchase of production facilities, equipment and tooling.
Employees and Remuneration
As of June 30, 2022, we had a total of 15,157 employees. The following table sets forth the total number of employees by function as of June 30, 2022:
| Function | As of June 30, 2022 | |||
| Research and Development | 4,078 | |||
| Production | 2,912 | |||
| Sales and Marketing | 7,489 | |||
| General and Administrative | 678 | |||
| Total | 15,157 | |||
We have also adopted a post-IPO share option scheme and a share-based award scheme.
| 11 |
CORPORATE GOVERNANCE
The Board is committed to achieving high corporate governance standards. The Board believes that high corporate governance standards are essential in providing a framework for the Company to safeguard the interests of shareholders and to enhance corporate value and accountability.
Compliance with the Code on Corporate Governance Practices
During the Reporting Period, we have complied with all of the applicable code provisions of the Corporate Governance Code (the “Corporate Governance Code”) set forth in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), save for the following.
Code provision C.2.1 of the Corporate Governance Code, recommends, but does not require, that the roles of chairperson and chief executive should be separate and should not be performed by the same person. The Company deviates from this provision because Mr. Xiang Li (“Mr. Li”) performs both the roles of the chairperson of the Board and the chief executive officer of the Company. Mr. Li is our founder and has extensive experience in our business operations and management. Our Board believes that vesting the roles of both chairperson and chief executive officer to Mr. Li has the benefit of ensuring consistent leadership within our Company and enables more effective and efficient overall strategic planning. This structure will enable our Company to make and implement decisions promptly and effectively.
Our Board considers that the balance of power and authority will not be impaired due to this arrangement. In addition, all major decisions are made in consultation with members of the Board, including the relevant Board committees, and three independent non-executive Directors. Our Board will reassess the division of the roles of chairperson and the chief executive officer from time to time, and may recommend dividing the two roles between different people in the future, taking into account our circumstances as a whole. In light of the amendments to the Corporate Governance Code which came into effect on 1 January 2022 (the “New CG Code”) and impose requirements applicable to corporate governance reports for the financial year commencing on or after 1 January 2022, our Board will also continue to regularly review and monitor other corporate governance practices to ensure compliance with the latest version of the Corporate Governance Code.
Compliance with the Model Code for Securities Transactions by Directors
The Company has adopted the Management Trading of Securities Policy (the “Code”), with terms no less exacting that the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, as its own securities dealing code to regulate all dealings by Directors and relevant employees of securities in the Company and other matters covered by the Code.
Specific enquiry has been made of all the Directors and the relevant employees and they have confirmed that they have complied with the Code during the Reporting Period and up to the date of this announcement.
| 12 |
Audit Committee
The Company has established an Audit Committee in compliance with Rule 3.21 of the Listing Rules and the Corporate Governance Code.
The primary duties of the Audit Committee are to review and supervise the financial reporting process and the risk management and internal control systems of the Company, review and approve connected transactions and provide advice and comments to the Board.
The Audit Committee comprises three independent non-executive Directors, being Mr. Jiang Zhenyu, Prof. Xiao Xing, Mr. Zhao Hongqiang (being the Company’s independent non-executive Director with the appropriate professional qualifications) as the chairman of the Audit Committee.
The Audit Committee has reviewed our unaudited condensed consolidated financial statements for the six months ended June 30, 2022 and has met with the independent auditor, PricewaterhouseCoopers. The Audit Committee has also discussed matters with respect to the accounting policies and practices adopted by the Company and internal control and financial reporting matters with senior management members of the Company.
In addition, the independent auditor of the Company, PricewaterhouseCoopers, has reviewed our unaudited condensed consolidated financial statements for the six months ended June 30, 2022 in accordance with International Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”.
OTHER INFORMATION
Purchase, Sale or Redemption of the Company’s Listed Securities
Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company’s securities listed on the Stock Exchange during the Reporting Period.
Material Litigation
The Company was not involved in any material litigation or arbitration during the six months ended June 30, 2022. The Directors are also not aware of any material litigation or claims that are pending or threatened against the Company during the Reporting Period and up to the date of this announcement.
| 13 |
Use of Proceeds
(a) Use of proceeds from the Global Offering
On August 12, 2021, the Class A Ordinary Shares were listed on the Main Board of the Stock Exchange. The net proceeds from the global offering were HK$13.3 billion. As of the date of this announcement, there has been no change in the intended use of net proceeds as previously disclosed in the section headed “Future Plans and Use of Proceeds” in the prospectus dated August 3, 2021. The Company expects to fully utilize the residual amount of the net proceeds in accordance with such intended purposes within 3 years.
As at June 30, 2022, the Group had utilized the net proceeds as set out in the table below:
| Purpose | % of use of proceeds | Net proceeds | Utilized amount for the year ended December 31, 2021 | Unutilized amount as at December 31, 2021 | Utilized amount for the six months ended June 30, 2022 | Unutilized amount as at June 30, 2022 | ||||||||||||||||||
| (HK$ million) | (HK$ million) | (HK$ million) | (HK$ million) | (HK$ million) | ||||||||||||||||||||
| Fund the research and development of HPC BEV technologies, platforms, and future models, including to fund (a) the development of high C-rate battery, high-voltage platform, and ultra-fast charging technologies, (b) the development of our HPC BEV platforms, including Whale and Shark platforms, and (c) the development and launch of HPC BEV models planned for 2023 | 20 | % | 2,653.5 | – | 2,653.5 | – | 2,653.5 | |||||||||||||||||
| Fund the research and development of intelligent vehicle and autonomous driving technologies, including to fund (a) the enhancement of intelligent vehicle systems, (b) the enhancement of the current Level 2 autonomous driving technology and the development of the Level 4 autonomous driving technology | 15 | % | 1,990.1 | – | 1,990.1 | – | 1,990.1 | |||||||||||||||||
| Fund the research and development of future EREV models, including to fund (a) the development of a next-generation EREV platform, and (b) the development and launch of a new EREV model planned for 2022 and two more planned for 2023 | 10 | % | 1,326.8 | – | 1,326.8 | – | 1,326.8 | |||||||||||||||||
| Fund the expansion of production capacity | 25 | % | 3,316.9 | – | 3,316.9 | 1,945.7 | 1,371.2 | |||||||||||||||||
| Fund the expansion of retail stores and delivery and servicing centers | 10 | % | 1,326.8 | 160.7 | 1,166.1 | 266.3 | 899.8 | |||||||||||||||||
| Fund the roll-out of HPC network | 5 | % | 663.4 | – | 663.4 | 2.3 | 661.1 | |||||||||||||||||
| Fund marketing and promotion | 5 | % | 663.4 | – | 663.4 | 376.7 | 286.7 | |||||||||||||||||
| Working capital and other general corporate purposes to support our business operation and growth in the next 12 months | 10 | % | 1,326.7 | – | 1,326.7 | 1,326.7 | – | |||||||||||||||||
| Total | 100 | % | 13,267.6 | 160.7 | 13,106.9 | 3,917.7 | 9,189.2 | |||||||||||||||||
| 14 |
(b) Use of proceeds from the US ATM Offering
As disclosed in the section headed “Business Review for the Reporting Period” in this announcement, on June 28, 2022 (U.S. Eastern Time), the Company announced the ATM Offering to sell up to US$2,000,000,000 of ADSs, each representing two Class A Ordinary Shares. As disclosed in the announcement and the listing document of the Company dated June 29, 2022, the Company intends to use the net proceeds from the US ATM 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.
As of June 30, 2022, the Company had sold 414,310 ADSs representing 828,620 Class A ordinary Shares under the ATM Offering raising gross proceeds of US$15.8 million and net proceeds of US$14.5 million, respectively, with the selling price ranging from US$38.00 per ADS to US$38.41 per ADS and average net selling price of US$38.14 per ADS. Considering the US ATM Offering was only launched two days before June 30, 2022, none of the net proceeds have been utilized as of June 30, 2022. To the extent that the net proceeds of the US ATM Offering are not immediately required for the above described purposes, the Company may hold such funds in bank deposits at authorized financial institutions.
Events after the Reporting Period
There was no significant events that might affect the Company since June 30, 2022.
Interim Dividend
The Board did not recommend the distribution of an interim dividend for the six months ended June 30, 2022.
| 15 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
(All amounts in thousands, except for share and per share data)
| For the six months ended June 30, | ||||||||||||||||
| Note | 2021 | 2022 | ||||||||||||||
| RMB | RMB | US$ | ||||||||||||||
| Note 2(c) | ||||||||||||||||
| Revenues: | ||||||||||||||||
| Vehicle sales | 8,366,968 | 17,792,221 | 2,656,309 | |||||||||||||
| Other sales and services | 247,185 | 502,436 | 75,012 | |||||||||||||
| Total revenues | 9 | 8,614,153 | 18,294,657 | 2,731,321 | ||||||||||||
| Cost of sales: | ||||||||||||||||
| Vehicle sales | (6,867,603 | ) | (13,907,185 | ) | (2,076,288 | ) | ||||||||||
| Other sales and services | (177,037 | ) | (345,317 | ) | (51,554 | ) | ||||||||||
| Total cost of sales | (7,044,640 | ) | (14,252,502 | ) | (2,127,842 | ) | ||||||||||
| Gross profit | 1,569,513 | 4,042,155 | 603,479 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 10 | (1,167,938 | ) | (2,905,606 | ) | (433,796 | ) | |||||||||
| Selling, general and administrative | 11 | (1,345,201 | ) | (2,528,080 | ) | (377,432 | ) | |||||||||
| Total operating expenses | (2,513,139 | ) | (5,433,686 | ) | (811,228 | ) | ||||||||||
| Loss from operations | (943,626 | ) | (1,391,531 | ) | (207,749 | ) | ||||||||||
| Other (expense)/income: | ||||||||||||||||
| Interest expense | (34,323 | ) | (31,310 | ) | (4,674 | ) | ||||||||||
| Interest income and investment income, net | 410,994 | 412,536 | 61,590 | |||||||||||||
| Others, net | 30,688 | 384,398 | 57,389 | |||||||||||||
| Loss before income tax expense | (536,267 | ) | (625,907 | ) | (93,444 | ) | ||||||||||
| Income tax expense | 13 | (59,189 | ) | (26,005 | ) | (3,882 | ) | |||||||||
| Net loss | (595,456 | ) | (651,912 | ) | (97,326 | ) | ||||||||||
| Less: Net loss attributable to non-controlling interests | – | (23,080 | ) | (3,446 | ) | |||||||||||
| 16 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME (Continued)
(All amounts in thousands, except for share and per share data)
| For the six months ended June 30, | ||||||||||||||||
| Note | 2021 | 2022 | ||||||||||||||
| RMB | RMB | US$ | ||||||||||||||
| Note 2(c) | ||||||||||||||||
| Net loss attributable to ordinary shareholders of Li Auto Inc. | (595,456 | ) | (628,832 | ) | (93,880 | ) | ||||||||||
| Weighted average number of ordinary shares used in computing net loss per share | ||||||||||||||||
| Basic and diluted | 12 | 1,809,695,350 | 1,930,269,050 | 1,930,269,050 | ||||||||||||
| Net loss per share attributable to ordinary shareholders | ||||||||||||||||
| Basic and diluted | 12 | (0.33 | ) | (0.33 | ) | (0.05 | ) | |||||||||
| Net loss | (595,456 | ) | (651,912 | ) | (97,326 | ) | ||||||||||
| Other comprehensive (loss)/income | ||||||||||||||||
| Foreign currency translation adjustment, net of tax | (198,585 | ) | 973,092 | 145,279 | ||||||||||||
| Total other comprehensive (loss)/income | (198,585 | ) | 973,092 | 145,279 | ||||||||||||
| Total comprehensive (loss)/income | (794,041 | ) | 321,180 | 47,953 | ||||||||||||
| Less: Net loss attributable to non-controlling interests | – | (23,080 | ) | (3,446 | ) | |||||||||||
| Comprehensive (loss)/income attributable to ordinary shareholders of Li Auto Inc. | (794,041 | ) | 344,260 | 51,399 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 17 |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except for share and per share data)
| As of December 31, | As of June 30, | |||||||||||||
| Note | 2021 | 2022 | ||||||||||||
| RMB | RMB | US$ | ||||||||||||
| Note 2(c) | ||||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | 27,854,224 | 33,888,442 | 5,059,411 | |||||||||||
| Restricted cash | 2,638,840 | 3,206,578 | 478,729 | |||||||||||
| Time deposits and short-term investments | 19,668,239 | 16,553,080 | 2,471,310 | |||||||||||
| Trade receivable | 3 | 120,541 | 81,773 | 12,208 | ||||||||||
| Inventories | 4 | 1,617,890 | 3,006,695 | 448,888 | ||||||||||
| Prepayments and other current assets | 5 | 480,680 | 1,149,869 | 171,671 | ||||||||||
| Total current assets | 52,380,414 | 57,886,437 | 8,642,217 | |||||||||||
| Non-current assets: | ||||||||||||||
| Long-term investments | 156,306 | 709,121 | 105,869 | |||||||||||
| Property, plant and equipment, net | 4,498,269 | 7,367,707 | 1,099,970 | |||||||||||
| Operating lease right-of-use assets, net | 2,061,492 | 3,117,056 | 465,364 | |||||||||||
| Intangible assets, net | 751,460 | 801,940 | 119,726 | |||||||||||
| Deferred tax assets | 19,896 | 11,652 | 1,740 | |||||||||||
| Other non-current assets | 1,981,076 | 2,593,042 | 387,131 | |||||||||||
| Total non-current assets | 9,468,499 | 14,600,518 | 2,179,800 | |||||||||||
| Total assets | 61,848,913 | 72,486,955 | 10,822,017 | |||||||||||
| Liabilities | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Short-term borrowings | 37,042 | 387,346 | 57,829 | |||||||||||
| Trade and notes payable | 7 | 9,376,050 | 13,090,146 | 1,954,307 | ||||||||||
| Amounts due to related parties | 37,455 | 6,176 | 922 | |||||||||||
| Deferred revenue, current | 305,092 | 346,306 | 51,702 | |||||||||||
| Operating lease liabilities, current | 473,245 | 567,559 | 84,734 | |||||||||||
| Accruals and other current liabilities | 6 | 1,879,368 | 3,414,526 | 509,777 | ||||||||||
| Total current liabilities | 12,108,252 | 17,812,059 | 2,659,271 | |||||||||||
| 18 |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(All amounts in thousands, except for share and per share data)
| As of December 31, |
As of June 30, | |||||||||||||
| Note | 2021 | 2022 | ||||||||||||
| RMB | RMB | US$ | ||||||||||||
| Note 2(c) | ||||||||||||||
| Non-current liabilities: | ||||||||||||||
| Long-term borrowings | 8 | 5,960,899 | 8,040,405 | 1,200,401 | ||||||||||
| Deferred revenue, non-current | 389,653 | 548,272 | 81,855 | |||||||||||
| Operating and finance lease liabilities, non-current | 1,369,825 | 1,712,981 | 255,741 | |||||||||||
| Deferred tax liabilities | 153,723 | 122,430 | 18,278 | |||||||||||
| Other non-current liabilities | 802,259 | 1,599,082 | 238,736 | |||||||||||
| Total non-current liabilities | 8,676,359 | 12,023,170 | 1,795,011 | |||||||||||
| Total liabilities | 20,784,611 | 29,835,229 | 4,454,282 | |||||||||||
| Total shareholders’ equity | 41,064,302 | 42,651,726 | 6,367,735 | |||||||||||
| Total liabilities and shareholders’ equity | 61,848,913 | 72,486,955 | 10,822,017 | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 19 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands, except for share and per share data)
| For the Six Months Ended June 30, | ||||||||||||
| 2021 | 2022 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Note 2(c) | ||||||||||||
| Net cash provided by operating activities | 2,333,970 | 2,963,176 | 442,390 | |||||||||
| Net cash (used in)/provided by investing activities | (4,110,154 | ) | 823,733 | 122,980 | ||||||||
| Net cash provided by financing activities | 5,533,762 | 1,929,846 | 288,118 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (103,039 | ) | 885,201 | 132,157 | ||||||||
| Net increase in cash, cash equivalents and restricted cash | 3,654,539 | 6,601,956 | 985,645 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 10,172,519 | 30,493,064 | 4,552,495 | |||||||||
| Cash, cash equivalents and restricted cash at end of the period | 13,827,058 | 37,095,020 | 5,538,140 | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 20 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
| 1 | GENERAL INFORMATION |
Li Auto Inc. (“Li Auto”, or the “Company”) was incorporated under the laws of the Cayman Islands in April 2017 as an exempted company with limited liability. The Company, through its consolidated subsidiaries and consolidated variable interest entities (the “VIEs”) and VIEs’ subsidiaries (collectively, the “Group”), is primarily engaged in the design, development, manufacturing, and sales of new energy vehicles in the People’s Republic of China (the “PRC”).
In preparation for the initial public offering and listing of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited (the “HKEx”), the Group underwent a reorganization (the “Reorganization”) to establish the Company as the ultimate holding company of the companies now comprising the Group which conduct the Group’s Business. Details of the Group’s Reorganization have been disclosed in the section headed “HISTORY, REORGANIZATION AND CORPORATE STRUCTURE” of the Prospectus.
The Company’s shares have been listed on the HKEx since August 12, 2021.
This unaudited condensed consolidated financial statements and related notes for the six months ended June 30, 2022 is presented in Renminbi and all values are rounded to the nearest thousand (RMB’000) unless otherwise indicated. This unaudited condensed consolidated financial statements for the six months ended June 30, 2022 was approved on August 15, 2022.
| 2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Basis of presentation |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the disclosure requirements of the Rules Governing the Listing of Securities on The HKEx, as amended, supplemented or otherwise modified from time to time (the “HK Listing Rules”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The unaudited condensed consolidated financial statements have been prepared on the same basis under the same accounting policies as set out in Accountant’s Report included in the Appendix I of the Prospectus and include all adjustments as necessary for the fair statement of the Company’s financial position as of June 30, 2022, results of operations and cash flows for the six months ended June 30, 2021 and 2022. The consolidated balance sheet at December 31, 2021 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by U.S. GAAP. Interim results of operations are not necessarily indicative of the results, expected for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the Accountant’s Report and related footnotes for the years ended December 31, 2021.
| 21 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| (b) | Use of estimates |
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue and expenses during the reported period in the unaudited condensed consolidated financial statements and accompanying notes.
Significant accounting estimates reflected in the Group’s unaudited condensed consolidated financial statements mainly include, but are not limited to, standalone selling price of each distinct performance obligation in revenue recognition and determination of the amortization period of these obligations, the valuation of share-based compensation arrangements, fair value of investments and derivative instruments, fair value of warrant liabilities and derivative liabilities, useful lives of property, plant and equipment, useful lives of intangible assets, assessment for impairment of long-lived assets and intangible assets, the provision for financial assets, lower of cost and net realizable value of inventories, product warranties, determination of vendor rebate, assessment of variable lease payment, and valuation allowance for deferred tax assets. Actual results could differ from those estimates.
| (c) | Convenience translation |
Translations of balances in the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of comprehensive (loss)/income and unaudited condensed consolidated statements of cash flows from RMB into US$ as of and for the six months ended June 30, 2022 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.6981, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on June 30, 2022. No representation is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2022, or at any other rate.
| (d) | Segment reporting |
ASC 280, Segment Reporting, establishes standards for companies to report in their financial statements information about operating segments, products, services, geographic areas, and major customers.
Based on the criteria established by ASC 280, the Group’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews unaudited condensed consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole, and hence, the Group has only one reportable segment. The Group does not distinguish between markets or segments for the purpose of internal reporting. As the Group’s long-lived assets are substantially located in the PRC, no geographical segments are presented.
| 22 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| 3 | TRADE RECEIVABLE |
An aging analysis of the trade receivable as of December 31, 2021 and June 30, 2022, based on the recognition date and net of provisions, is as follows:
| As of December 31, | As of June 30, | |||||||
| 2021 | 2022 | |||||||
| Within 3 months | 16,462 | 28,215 | ||||||
| Between 3 months and 6 months | 890 | 67 | ||||||
| Between 6 months and 1 year | – | 575 | ||||||
| More than 1 year | 103,189 | 52,916 | ||||||
| Total | 120,541 | 81,773 | ||||||
| 4 | INVENTORIES |
Inventories consist of the following:
| As of December 31, | As of June 30, | |||||||
| 2021 | 2022 | |||||||
| Raw materials, work in process and supplies | 1,468,801 | 2,535,484 | ||||||
| Finished products | 149,089 | 471,211 | ||||||
| Total | 1,617,890 | 3,006,695 | ||||||
Raw materials, work in process and supplies as of December 31, 2021 and June 30, 2022 primarily consist of materials for volume production which will be transferred into production cost when incurred as well as spare parts used for after sales services.
Finished products include vehicles ready for transit at production plants, vehicles in transit to fulfill customers’ orders, new vehicles available for immediate sales at the Group’s sales and servicing center locations.
| 23 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| 5 | PREPAYMENTS AND OTHER CURRENT ASSETS |
Prepayments and other current assets consist of the following:
| As of December 31, | As of June 30, | |||||||
| 2021 | 2022 | |||||||
| Prepayments to vendors | 218,660 | 370,750 | ||||||
| Note receivable | – | 299,106 | ||||||
| Prepaid rental and deposits | 48,929 | 245,440 | ||||||
| Deductible VAT input | 118,177 | 119,272 | ||||||
| Receivables related to rebate | 28,491 | – | ||||||
| Others | 68,615 | 120,455 | ||||||
| Less: Allowance for credit losses | (2,192 | ) | (5,154 | ) | ||||
| Total | 480,680 | 1,149,869 | ||||||
| 6 | ACCRUALS AND OTHER CURRENT LIABILITIES |
Accruals and other current liabilities consist of the following:
| As of December 31, | As of June 30, | |||||||
| 2021 | 2022 | |||||||
| Payables for purchase of property, plant and equipment | 456,395 | 1,387,107 | ||||||
| Salaries and benefits payable | 417,449 | 538,244 | ||||||
| Tax payable | 277,233 | 326,963 | ||||||
| Payables for research and development expenses | 94,517 | 194,631 | ||||||
| Advance from customers | 10,262 | 183,033 | ||||||
| Payables for logistics expense | 143,632 | 169,183 | ||||||
| Accrued warranty | 154,276 | 147,518 | ||||||
| Payables for marketing and promotional expenses | 96,945 | 143,658 | ||||||
| Deposits from vendors | 27,716 | 26,305 | ||||||
| Other payables | 200,943 | 297,884 | ||||||
| Total | 1,879,368 | 3,414,526 | ||||||
| 24 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| 7 | TRADE AND NOTES PAYABLE |
Trade and notes payable consist of the following:
| As of December 31, | As of June 30, | |||||||
| 2021 | 2022 | |||||||
| Trade payable for raw materials | 7,089,370 | 7,839,630 | ||||||
| Notes payable | 2,286,680 | 5,250,516 | ||||||
| Total | 9,376,050 | 13,090,146 | ||||||
An aging analysis of the trade payable as at December 31, 2021 and June 30, 2022, based on the recognition date, is as follows:
| As of December 31, | As of June 30, | |||||||
| 2021 | 2022 | |||||||
| Within 3 months | 7,539,833 | 11,658,250 | ||||||
| Between 3 months and 6 months | 1,639,286 | 1,341,226 | ||||||
| Between 6 months and 1 year | 161,913 | 45,665 | ||||||
| More than 1 year | 35,018 | 45,005 | ||||||
| Total | 9,376,050 | 13,090,146 | ||||||
The trade payable is non-interest-bearing and are normally settled on 30-90 day terms.
| 8 | BORROWINGS |
Borrowings consist of the following:
| As of December 31, | As of June 30, | |||||||||||||||
| Maturity date | Classification | Principal amount | Interest rate per annum | 2021 | 2022 | |||||||||||
| Convertible debt(1) | May 1, 2028 | Non-current | US$862,500 | 0.25% | 5,397,941 | 5,690,428 | ||||||||||
| Secured bank loan(2) | February 15, 2027 | Non-current | RMB900,000 | 5-year LPR -0.40% | – | 900,000 | ||||||||||
| Credit guaranteed borrowing(3) | June 29, 2024 | Current and Non-current | US$100,000 | SOFR | – | 671,140 | ||||||||||
| Secured bank loan(4) | September 28, 2029 | Current and Non-current | RMB600,000 | 4.80% | 600,000 | 600,000 | ||||||||||
| Secured borrowing(5) | March 25, 2025 | Current and Non-current | RMB274,180 | 4.00% | – | 274,180 | ||||||||||
| Unsecured borrowing(6) | April 19, 2023 | Current | RMB237,180 | 1-year LPR -0.20% | – | 237,180 | ||||||||||
| Secured borrowing(7) | June 21, 2034 | Non-current | RMB54,823 | 5-year LPR -0.60% | – | 54,823 | ||||||||||
| Total | 5,997,941 | 8,427,751 | ||||||||||||||
| 25 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
The total borrowings are classified as short-term borrowings and long-term borrowings:
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Short-term borrowings: | ||||||||
| Unsecured borrowing(6) | – | 237,180 | ||||||
| Current portion of Secured borrowing(5) | – | 99,702 | ||||||
| Current portion of Secured bank loan(4) | 37,042 | 37,042 | ||||||
| Current portion of Credit guaranteed borrowing(3) | – | 13,422 | ||||||
| Total short-term borrowings | 37,042 | 387,346 | ||||||
| As of | ||||||||
| December 31, 2021 | June 30, 2022 | |||||||
| Long-term borrowings: | ||||||||
| Convertible debt(1) | 5,397,941 | 5,690,428 | ||||||
| Secured bank loan(2) | – | 900,000 | ||||||
| Non-current portion of Credit guaranteed borrowing(3) | – | 657,718 | ||||||
| Non-current portion of Secured bank loan(4) | 562,958 | 562,958 | ||||||
| Non-current portion of Secured borrowing(5) | – | 174,478 | ||||||
| Secured borrowing(7) | – | 54,823 | ||||||
| Total long-term borrowings | 5,960,899 | 8,040,405 | ||||||
| Total borrowings | 5,997,941 | 8,427,751 | ||||||
| 26 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| (1) | In April 2021, the Company issued and sold convertible debt in an aggregate principal of US$862,500 through a private placement. The convertible debt will mature in 2028, bearing the interest at a rate of 0.25% per annum. The related interest is payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2021. The net proceeds from this offering were approximately US$844,876, equivalent to RMB5,533,238. |
The convertible debt may be converted, at an initial conversion rate of 35.2818 American depositary shares (the “ADSs”) per US$1,000 principal amount (which represents an initial conversion price of approximately US$28.34 per ADSs) at each holder’s option at any time on or after November 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date of May 1, 2028. Upon conversion, the Company will pay or deliver to such converting holders, as the case may be, either cash, ADSs, or a combination of cash and ADSs, at its election.
The initial conversion price of US$28.34 per ADSs, or US$14.17 per Class A Ordinary Share (the latter represents the effective cost per Class A Ordinary Share), represents a discount of approximately 26.56% to the maximum Public Offer Price of HK$150.00 per Class A Ordinary Share. The initial conversion rate may be adjusted in certain circumstances, including but not limited to when the Company effects a share split or share combination. As of June 30, 2022, no adjustment had been made to the initial conversion rate.
Holders of the convertible debt have the rights to require the Company to repurchase all or a portion for their convertible debt on May 1, 2024 and May 1, 2026 or in the event of certain fundamental changes, at a repurchase price equal to 100% of the principal amount of the convertible debt to be repurchased, plus accrued and unpaid interest.
The Company accounted for the convertible debt as a single instrument measured at its amortized cost as long-term borrowings on the unaudited condensed consolidated balance sheets. The issuance costs were recorded as an adjustment to the long-term borrowings and are amortized as interest expense using the effective interest method over the contractual life to the maturity date (i.e., May 1, 2028). For the six months ended June 30, 2021 and 2022, the convertible debt related interest expense was US$1,011 (RMB6,531) and US$2,235 (RMB14,973), respectively. As of December 31, 2021 and June 30, 2022, the principal amount of the convertible debt was RMB5,499,041 and RMB5,788,583, and the unamortized debt issuance cost was RMB101,100 and RMB98,155, respectively.
| (2) | In February, 2022, the Group entered into a 5-year pledged loan agreement with a commercial bank in the PRC, with total principal of RMB900,000. This loan was pledged by certain manufacturing facilities of the Group. As of June 30, 2022, the interest rate was between 4.05% to 4.20% per annum and all principal amount was presented as a long-term borrowing. |
The borrowing contain covenants which includes limitations on certain asset sales and a requirement to to maintain current assets above RMB5,000. The Group is in compliance with all of the loan covenants as of June 30, 2022.
| (3) | In June 2022, the Group entered into loan agreements with a commercial bank pursuant to which the Group is entitled to borrow the group of banks from time to time until June 2024 up to an aggregate of US$200,000. In June 2022, the Group made the drawdown in the amount of US$100,000 (RMB671,140). Interest accrues on the principal amounts of the loans outstanding at an annual rate equal to the SOFR. As of June 30, 2022, the outstanding loan principal of RMB13,422 is due within 12 months, which is classified as current portion of long-term borrowing and the remaining portion of principal of RMB657,718 is presented as a long-term borrowing. |
| 27 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| (4) | In September 2021, the Group entered into a loan facility agreement with a commercial bank in the PRC, which allows the Group to draw borrowings up to RMB1,009,900 as of periods ended September 28, 2029. The borrowings bear annual interest rate of 4.8% and were guaranteed by certain production facilities and toolings of the Group. As of June 30, 2022, the outstanding loan principal was RMB600,000, of which RMB37,042 will be due within 12 months, which is classified as current portion of long-term borrowing and the remaining balance of RMB562,958 will be due in July 1, 2023 and thereafter, which is classified as long-term borrowing. The unused credit limits under these facilities was RMB409,900 as of June 30, 2022. |
| (5) | In February 2022, the Group entered into an asset transfer agreement with a finance lease company to sell certain production facilities and equipment in Changzhou Production Base with a total consideration of RMB299,106. Immediately after the transfer, the Group entered into a lease agreement to lease back the production facilities and equipment for the period starting from March 25, 2022 to March 25, 2025, and further obtained an option to repurchase the production facilities and equipment with the notional amount of RMB0.001 on March 25, 2025. |
As the repurchase option is not at the fair value of the assets when the option is exercised, and the assets repurchased are designed for the use of the Group, and no alternative assets that are substantially the same as the transferred assets are readily available in the market, as a result, the transaction did not qualify for the sales accounting, and was accounted for as a financing transaction and the Group recorded the sales proceeds as a borrowing in the unaudited condensed consolidated balance sheets. The Group repaid a portion of the principal in the amount of RMB24,926 for the six months ended June 30, 2022. As of June 30, 2022, outstanding loan principal of RMB99,702 is due within 12 months, which is classified as current portion of long-term borrowing and the remaining portion of principal of RMB174,478 is presented as a long-term borrowing.
Considering the above arrangement, The Group received RMB299,106 in acceptance bills issued by the finance lease Company through its contracted financial institution that entitles the Group to receive the full face amount at maturity, which generally ranges within one year from the date of issuance. Accordingly, the Group recognized the notes receivable in Prepayments and Other Current Assets as of June 30, 2022 (Note 5).
| (6) | In December 2021 and April 2022, the Group entered into 1-year loan agreement and supplemental agreement with a commercial bank in the PRC, with total principal of RMB500,000. As of June 30, 2022, the annual interest rate was 1-year Loan Prime Rate (“LPR”) published by the National Interbank Funding Center, minus 0.2% per annum and all outstanding loan principal of RMB237,180 was presented as a short-term borrowing. |
| (7) | In June 2022, the Group entered into a credit agreement with a group of banks pursuant to which the Group is entitled to borrow from the group of banks from time to time up to an aggregate of RMB3,000,000 until April 2024. The related principle and interest is payable semiannually in arrears on June and December of each year, beginning from June 2025, until June 2034. In June 2022, the Group made an initial drawdown in the amount of RMB54,823 which is due and matures on June 20, 2025. The loan is secured by the pledge of certain Groups land use rights and property relating to the production of electric vehicles, when the certificates of land use rights and property are approved and provided by the local authorities. Interest accrues on the principal amounts of the loans outstanding at an annual rate equal to the 5-year Loan Prime Rate (“LPR”) published by the National Interbank Funding Center, minus 0.6%. Borrowings under this credit agreement are classified as long-term. |
| 28 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| 9 | REVENUE DISAGGREGATION |
Revenues by source consist of the following:
For the six months ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Vehicle sales | 8,366,968 | 17,792,221 | ||||||
| Other sales and services | 247,185 | 502,436 | ||||||
| Total | 8,614,153 | 18,294,657 | ||||||
Revenue by timing of recognition is analyzed as follows:
For the six months ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Revenue recognized at a point in time | 8,578,671 | 18,223,658 | ||||||
| Revenue recognized over time | 35,482 | 70,999 | ||||||
| Total | 8,614,153 | 18,294,657 | ||||||
Revenues arising from vehicle sales are recognized at a point in time when the control of the products are transferred to the users. Included in revenues from other sales and services are (i) revenue arising from sales of charging stalls and certain services under the Li Plus Membership which are recognized at a point in time when the control of the products and services are transferred to the users; and (ii) revenue arising from vehicle internet connection services, FOTA upgrades and certain services under the Li Plus Membership are recognized over time throughout the service period.
| 10 | RESEARCH AND DEVELOPMENT EXPENSE |
Research and development expense consist of the following:
For the six months ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Employee compensation | 713,611 | 1,837,448 | ||||||
| Design and development expense | 380,491 | 897,108 | ||||||
| Rental and related expense | 23,734 | 49,668 | ||||||
| Depreciation and amortization expense | 24,959 | 38,092 | ||||||
| Travel expense | 14,972 | 29,191 | ||||||
| Others | 10,171 | 54,099 | ||||||
| Total | 1,167,938 | 2,905,606 | ||||||
| 29 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| 11 | SELLING, GENERAL AND ADMINISTRATIVE EXPENSE |
Selling, general and administrative expense consist of the following:
For the six months ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Employee compensation | 485,626 | 1,320,923 | ||||||
| Marketing and promotional expense | 540,511 | 394,880 | ||||||
| Rental and related expense | 119,772 | 279,783 | ||||||
| Depreciation and amortization expense | 28,613 | 87,795 | ||||||
| Travel expense | 21,827 | 40,246 | ||||||
| Expected credit losses | 884 | 3,906 | ||||||
| Others | 147,968 | 400,547 | ||||||
| Total | 1,345,201 | 2,528,080 | ||||||
| 12 | LOSS PER SHARE |
Basic loss per share and diluted loss per share have been calculated in accordance with ASC 260 for the six months ended June 30, 2021 and 2022 as follows:
For the six months ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Numerator: | ||||||||
| Net loss | (595,456 | ) | (651,912 | ) | ||||
| Less: Net loss attributable to non-controlling interests | – | (23,080 | ) | |||||
| Net loss attributable to ordinary shareholders of Li Auto Inc. | (595,456 | ) | (628,832 | ) | ||||
| Denominator: | ||||||||
| Weighted average ordinary shares outstanding – basic and diluted | 1,809,695,350 | 1,930,269,050 | ||||||
| Basic and diluted net loss per share attributable to ordinary shareholders of Li Auto Inc. | (0.33 | ) | (0.33 | ) | ||||
For the six months ended June 30, 2021 and 2022, the Company had ordinary equivalent shares, including options and RSUs granted and convertible debt issued (shares subject to conversion) in April 2021. As the Group incurred a loss for each of the periods ended June 30, 2021 and 2022, these ordinary equivalent shares were determined to be anti-dilutive and excluded from the calculation of diluted loss per share of the Company. The weighted average numbers of options and RSUs granted and convertible debt (shares subject to conversion) excluded from the calculation of diluted loss per share of the Company were 61,478,317 and 28,581,182 for the six months ended June 30, 2021 and 86,223,898 and 60,861,105 for the six months ended June 30, 2022, respectively.
| 30 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
| 13 | TAXATION |
| (a) | Value added tax |
The Group is subject to statutory VAT rate of 13% for revenue from sales of vehicles and spare parts in the PRC.
Wheels Technology is subject to 13% VAT for software research and development and relevant services. Wheels Technology is entitled to a VAT refund in excess of 3% output VAT on the total VAT payable from April 2021, after completing the registration with relevant authorities and obtaining a refund approval from local tax bureau. For the six months ended June 30, 2021 and 2022, nil and RMB170,958 of VAT refunds were received and were recorded as Others, net.
| (b) | Income taxes |
Cayman Islands
The Company was incorporated in the Cayman Islands and conducts most of its business through its subsidiaries located in Mainland China and Hong Kong. Under the current laws of the Cayman Islands, the Company is not subject to tax on either income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
PRC
Beijing CHJ and Wheels Technology are qualified as a “high and new technology enterprise” under the EIT Law and are eligible for a preferential enterprise income tax rate of 15%, respectively. The high and new technology enterprise certificate is effective for a period of three years. Other Chinese companies are subject to enterprise income tax (“EIT”) at a uniform rate of 25% as of June 30, 2022.
Wheels Technology, which is our wholly-owned entity primarily engaged in the operations of technology, software research and development and relevant services, was awarded as a Software Enterprise and was thereby entitled to an income tax exemption for two years beginning from its first profitable calendar year since 2021, and a 50% reduction in the standard statutory rate for the subsequent three consecutive years.
Under the EIT Law enacted by the National People’s Congress of PRC on March 16, 2007 and its implementation rules which became effective on January 1, 2008, dividends generated after January 1, 2008 and payable by a foreign investment enterprise in the PRC to its foreign investors who are non-resident enterprises are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement. Under the taxation arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the “beneficial owner” and directly holds 25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. The Cayman Islands, where the Company was incorporated, does not have a tax treaty with PRC.
The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” Based on a review of surrounding facts and circumstances, the Group does not believe that it is likely that its operations outside of the PRC will be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, there is uncertainty as to the application of the EIT Law. Should the Company be treated as a resident enterprise for PRC tax purposes, the Company will be subject to PRC income tax on worldwide income at a uniform tax rate of 25%.
| 31 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data)
According to relevant laws and regulations promulgated by the State Administration of Tax of the PRC, enterprises engaging in research and development activities were entitled to claim 150% of their research and development expenses incurred as tax deductible expenses when determining their assessable profits for that year (the “R&D Deduction”). The State Taxation Administration of the PRC announced in September 2018 that enterprises engaging in research and development activities would be entitled to claim 175% of their research and development expenses as R&D Deduction from January 1, 2018 to December 31, 2023.
Withholding tax on undistributed dividends
According to the current EIT Law and its implementation rules, foreign enterprises, which have no establishment or place in China but derive dividends, interest, rents, royalties and other income (including capital gains) from sources in China or which have an establishment or place in China but the aforementioned incomes are not connected with the establishment or place shall be subject to the PRC withholding tax (“WHT”) at 10% (a further reduced WHT rate may be available according to the applicable double tax treaty or arrangement provided that the foreign enterprise is the tax resident of the jurisdiction where it is located and it is the beneficial owner of the dividends, interest and royalties income).
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, the subsidiaries of the Group incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.
Composition of income tax expense for the periods presented is as follows:
For the six months ended June 30, | ||||||||
| 2021 | 2022 | |||||||
| Current income tax expense | – | 49,054 | ||||||
| Deferred income tax expense/(benefit) | 59,189 | (23,049 | ) | |||||
| Total | 59,189 | 26,005 | ||||||
| (c) | Consumption tax |
Chongqing Lixiang Automobile Co Ltd (“Chongqing Lixiang Automobile”), as a subsidiary of the Company, is eligible for consumption tax rate of 3% and related surcharge. The consumption tax is calculated based on the sales price of its self-manufactured vehicles at 3% consumption tax rate from August 2021.
| 14 | DIVIDEND |
The Board did not recommend the distribution of any interim dividend for the six-month period ended June 30, 2021 and 2022.
| 32 |
PUBLICATION OF THE INTERIM RESULTS ANNOUNCEMENT AND INTERIM REPORT
This interim results announcement is published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (https://ir.lixiang.com/). The interim report for the six months ended June 30, 2022 will be dispatched to the Company’s shareholders and made available for review on the same websites in due course.
| By order of the Board | |
| Li Auto Inc. | |
| Xiang Li | |
| Chairman |
Hong Kong, August 15, 2022
As of the date of this announcement, the board of directors of the Company comprises Mr. Xiang Li, Mr. Yanan Shen, and Mr. Tie Li as executive directors, Mr. Xing Wang and Mr. Zheng Fan as non-executive directors, and Mr. Hongqiang Zhao, Mr. Zhenyu Jiang, and Prof. Xing Xiao as independent non-executive directors.
| 33 |
Exhibit 99.5
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
Li Auto Inc.
理想汽車
(A company controlled through weighted voting rights and incorporated in the Cayman Islands with limited liability)
(Stock Code: 2015)
Change of Address of Principal Place of Business in Hong Kong
The board of directors (the “Board”) of Li Auto Inc. (the “Company”) hereby announces that with effect from August 15, 2022, the address of the principal place of business in Hong Kong of the Company will be relocated from Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong to 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong.
| By Order of the Board | |
| Li Auto Inc. | |
| Xiang Li | |
| Chairman |
Hong Kong, August 15, 2022
As of the date of this announcement, the board of directors of the Company comprises Mr. Xiang Li, Mr. Yanan Shen and Mr. Tie Li as executive directors, Mr. Xing Wang and Mr. Zheng Fan as non-executive directors, and Mr. Hongqiang Zhao, Mr. Zhenyu Jiang, and Prof. Xing Xiao as independent non-executive directors.