China’s Li Auto provides substantial discounts to address falling electric vehicle sales.

      On February 25, 2025, Li Auto previewed its fully electric i8 sport utility vehicle. Credit: Li Auto

      To mitigate the risk of losing customers to competitors, China’s Li Auto is providing a discount of up to RMB 16,000 ($2,194) across its vehicle lineup, alongside an interest-free loan, following disappointing delivery results for February. Why this matters: This strategy exemplifies the intense competition among automakers in China, where prices are under pressure from decreasing demand. This comes as larger competitor BYD, along with Xpeng Motors and Leapmotor, have shown an increase in February sales, indicating a shift in the competitive landscape.

      Details: On February 28, Li Auto announced (in Chinese) that its L9 full-size SUV, which had a starting price of RMB 409,800 last year, is now priced RMB 16,000 lower by the end of March. Additionally, customers can save RMB 20,000 due to a three-year, 0% interest financing option. The smaller models, L8 and L7, are now priced at RMB 309,800 and RMB 289,800, respectively, reflecting a 4% discount. The entry-level L6 crossover now costs RMB 239,800, which is over RMB 20,000 less than Tesla’s Model Y, with the new financing arrangement allowing buyers to save RMB 10,000 in interest over three years.

      These substantial incentives were announced just prior to Li Auto reporting that it delivered 26,263 vehicles in February, marking a 30% year-on-year increase but a 12.2% decrease from the previous month. The company had reduced prices on four of its five models by between 4.3% and 5.7% last April.

      In contrast, Xpeng achieved over 30,000 deliveries for the fourth consecutive month, while Leapmotor, seen as a more budget-friendly option compared to Li Auto, experienced a 285% increase in February deliveries year-on-year, reaching 25,287 units with a slight rise since January.

      Listed on Nasdaq and the Hong Kong Stock Exchange, Li Auto is anticipated to benefit from a strong product cycle this year, with the launch of its first all-electric SUV, the i8, expected in July at around RMB 350,000. The company also has plans to introduce updated versions of its existing models in May, featuring an enhanced advanced driver assistance system.

      Context: According to estimates from the China Passenger Car Association, February's passenger vehicle sales in China are projected to have reached 1.25 million units, representing a 13.6% year-on-year increase and a 30.3% month-on-month decline. It is likely that at least half of these sales, or 600,000 units, are new energy vehicles (NEVs), comprising all-electrics and plug-in hybrids, as the market recovers swiftly following the Chinese New Year holiday, which concluded on February 4.

      BYD announced it sold 318,233 electric passenger vehicles in February, reflecting a 161.4% increase compared to the previous year and a 7.3% rise from January. Conversely, sales from Huawei’s Harmony Intelligent Mobility Alliance (HIMA) fell by 38.5% to 21,517 units last month compared to January.

      Jill Shen is a technology reporter based in Shanghai, focusing on Chinese mobility, autonomous vehicles, and electric cars. You can reach her through email at [email protected] or on Twitter at @jill_shen_sh.