Li Auto hits the pause button on going global

Author | Chai Xuchen

Editor | Wang Xiaojuan

While domestic car companies are vigorously expanding overseas, Li Auto has unexpectedly slowed down its pace of international expansion.

Recently, a source close to Li Auto told Wall Street News that starting from the second quarter, the company's overseas sales have shifted towards parallel exports as the main focus, with "some large traders purchasing new cars from Li Auto and shipping them to the Central Asian market."

However, for Li Auto, such "passive exports" are not its original vision. Vice President Fan Haoyu pointed out that Li Auto discusses the topic of going global multiple times every year. It wasn't until September last year that the overseas project was officially established internally, with the initial plans only targeting the United Arab Emirates in the Middle East.

During a communication session after the release of MEGA in March this year, Li Auto's product line president Liu Jie revealed to Wall Street News that the company has started building a sales service team in Dubai, adopting a direct sales model. Liu Jie emphasized that Dubai has a strong demand for medium to large SUVs, "Dubai is not just about second children, but about large families. Despite uncertainties such as tariffs, the local consumption capacity remains sufficient."

At that time, Li Auto was in a smooth "leap forward" phase, naturally wanting to expand its influence in the high-end market and "export" to other countries. "Looking towards 2030, an excellent Chinese technology company will definitely not only serve Chinese consumers. We also need to see if we have the capability to serve overseas markets. This is an ability upgrade that we will inevitably face," said Liu Jie.

However, this "ability upgrade" was soon put on hold after the MEGA incident. This decision was both a "strategic retreat" in response to overseas uncertainties and a refocusing on the domestic market after returning to rationality.

Sources close to Li Auto's senior management pointed out that the complexity of the Middle Eastern market exceeded expectations, with current monthly sales contributing only a three-digit figure, which is no longer cost-effective for Li Auto, which has always valued ROI. As for Southeast Asian countries where Chinese brands are increasing their presence, they are still considered emerging markets with insufficient consumption capacity to support Li Auto's positioning (USD 50,000-70,000). As for mature luxury car markets in Europe and the United States, factors such as tariffs have become new barriers, and new forces do not have a significant advantage in the short term.

Li Auto's senior management believes that in order to better prepare for going global, products and policies need to be further adjusted for the international market to enhance product competitiveness. Liu Jie also emphasized that entering overseas markets is not easy, "It is another 0-1 process."

Therefore, the current almost "zero-cost" and substantial parallel exports are like a helping hand for Li Auto.

According to insiders, Li Auto is not involved in the localization work of parallel export models. Traders match the language for the vehicle system and install local apps on their own, with local grassroots technical organizations even developing a foreign language version of the "Li Auto Assistant." These import demands from Central Asian countries contribute 3,000-5,000 units in sales to Li Auto per month, with internal estimates expecting it to account for 10% of the overall sales this year.

The strategic "keeping a low profile and biding time" in going global holds greater significance for Li Auto, as it is determined to consolidate its position in the domestic high-end car market and go ALL IN In the first and second quarters of this year, Li Auto's market share in the 200,000+ new energy vehicle market was 13.6% and 14.4%, lower than the 16% at the end of last year. Meng Qingpeng, Vice President of Li Auto's supply chain, admitted that the growth in the 200,000-300,000 yuan price range is below expectations, and the market share in the 300,000+ yuan segment is declining; competitors are also rapidly attacking, "the speed of homogenization of competing products is very fast, our refrigerators, color TVs, and large sofas were replicated by others within half a year."

Consumers have become more rational, and market competition is intensifying simultaneously, forcing Li Auto to focus on the domestic market.

Zhang Xiao, the head of Li Auto's product line, once mentioned, "Our concept is, if we can't win a battle, don't go fight the second one, fighting on multiple fronts consumes a lot of resources." Fan Haoyu, Senior Vice President of Li Auto, also stated, "We always prioritize business efficiency management, making cars burns too much money, ensuring self-sufficiency is the only way to survive."

In Zhang Xiao's view, the Matthew Effect will lead to increasing market concentration and fiercer competition. Earlier this year, Li Xiang himself stated, "The changes in the 200,000+ new energy vehicle market will be beyond imagination, with three brands taking up 70% market share in Q4 this year." The industry has already reached a consensus - in the future, only a few leading players will remain in the automotive market, and Li Auto must ensure it stays until the end.

Zhang Xiao believes that by 2030, Li Auto needs to secure a 30% market share in the domestic market for vehicles priced above 200,000 yuan to be considered secure. For Li Auto, which has just crossed the million-unit mark, this is still a major challenge. After all, competitors like Huawei, Xiaomi, Nio, are already eyeing them closely, while premium brands like Avita and IM Motors are also preparing to chase Li Auto in the extended-range market.

Li Auto must consolidate its position in the extended-range market and cross the pure electric vehicle hurdle next year. At this moment, convergence and focus are the best strategies for Li Auto. Once they have solidified their position in the domestic luxury car market, expanding overseas may become more feasible