Li Auto is intensifying its efforts in the international arena. As Chinese automakers venture into overseas markets, encountering numerous uncertainties, can Li Auto capitalize on the global market's potential?

| Heyan Yueche Studio

| Zhang Dachuan

| He Zi

<2313 words in total>

<4 minutes to read>

In recent years, the overseas expansion of domestic automakers has garnered significant attention. From emerging players like NIO, XPeng, and Zero Run to traditional giants such as Chery, BYD, Changan, and Geely, all have bolstered their overseas presence. Compared to these counterparts, Li Auto's pace in globalizing has been relatively modest. However, Li Xiang, Li Auto's CEO, recently announced on WeChat Moments that the company is set to go global. The opening of Li Auto's R&D center in Munich, Germany, and the reaffirmation of the company's overseas strategy during a recent earnings call, underscore Li Auto's commitment to accelerating its international expansion.

△ Li Auto will intensify its overseas efforts in 2025

Why is Li Auto going global?

The primary objective behind allocating more resources to the overseas market is to meet this year's ambitious sales growth target.

In 2024, Li Auto sold 500,500 vehicles, marking a 33.1% year-on-year increase. For 2025, Li Auto has set an even more aggressive target of selling 700,000 vehicles. However, in terms of new models, Li Auto will only introduce two pure electric vehicles, the i8 and i6, in the second half of this year. The domestic auto market is currently characterized by rapid momentum from competitors like AITO and Zero Run, both of which also deploy extended-range technology. As Zeekr and XPeng plan to launch their own extended-range models, Li Auto faces increasing challenges. Additionally, the growth momentum in the pure electric vehicle market has already slowed down, raising questions about whether Li Auto's two new pure electric models will follow in the footsteps of its previous MEGA models or carve out a new niche. Therefore, in this context, further strengthening the overseas market has become crucial for Li Auto to achieve its sales targets for this year and beyond.

△ Li Auto plans to introduce only two pure electric models this year

Currently, it is an opportune moment for Li Auto, which has extensive experience in extended-range technology, to expand internationally. The unwavering prices of electric vehicles and the decline in government subsidies for electric vehicles in Europe and the United States have deterred many users in these regions, while hybrid vehicles are gaining popularity. Li Auto's extended-range models offer a pure electric range that can adequately cover users' daily needs without range anxiety and at a lower cost compared to electric vehicles in the same class. Therefore, for ordinary household users, Li Auto still holds considerable appeal.

△ Li Auto has certain advantages in the overseas market with its extended-range models as its mainstay

Parallel export alone is insufficient

Although Li Auto has not previously publicized its overseas strategy prominently, it has already ventured into the global market. In 2023, Li Auto sold over 30,000 vehicles overseas through parallel export, primarily in the Middle East, Central Asia, and Russia.

The main advantage of parallel export is that it does not require vehicle validation or local investment in channel construction, making it a swift and efficient approach. However, parallel import struggles to support large-scale sales, especially if Li Auto does not have a substantial engineering team on the ground. Various technical issues that may arise later may exceed the capabilities of parallel importers. To address this, Li Auto has established after-sales service centers in markets such as Kazakhstan, Uzbekistan, and the United Arab Emirates over the past year. Nonetheless, to further expand sales in these regions, relying solely on parallel export is insufficient.

△ Li Auto has entered many countries and regions through parallel export

Therefore, the next step after parallel export is to focus on operating the overseas market. There are two main modes for operating overseas markets: direct sales and utilizing agents. In choosing between these two models, Li Auto is likely to opt for the dealer model. The direct sales model has clear advantages and disadvantages: while it allows direct access to users and diverts subsidies that would go to dealers to the development of its own network channels, it also comes with higher costs and requires significant upfront investment, particularly when faced with numerous unknown local laws and regulations. Thus, partnering with automotive dealer groups that are more familiar with the local market for sales is the least risky and fastest way to see results. Once Li Auto has established a certain brand reputation in the local market and has a thorough understanding of a particular market, it can consider introducing direct sales.

△ In the initial stage of overseas auto market expansion, finding local dealers is a better approach

Risks in overseas markets cannot be underestimated

Operating in overseas markets entails various unforeseen risks.

△ MG's sales in the European pure electric market have declined rapidly due to countervailing tariffs

Tariff barriers. In 2024, the European Union imposed countervailing tariffs on electric vehicles produced in China, dealing a severe blow to Chinese electric vehicles that had been gaining ground in Europe by setting up factories there based on their cost-effectiveness. In terms of tariffs alone, both BYD and MG still maintain a certain degree of competitiveness in the European market even after being subject to high tariffs, as mass-market brands like Volkswagen and Stellantis have been slow to transition to electrification and their electric vehicle prices are generally high. However, the EU's countervailing tariffs send a negative signal. If the number of exports from Chinese automakers to Europe continues to climb, Europe may further adopt other trade remedy measures.

New force automakers like NIO, XPeng, and Li Auto, which lack overseas operating experience, may struggle to weather the storms of globalization. Recently, the European Union initiated an investigation into BYD's factory in Hungary, undoubtedly adding a layer of concern for automakers that originally hoped to completely resolve tariff obstacles by setting up factories in the EU. Additionally, domestic automakers in the EU market also lack adequate responses to hot topics such as GDPR and antitrust.

△ BYD's factory in Hungary is under investigation by the EU

Before and after the EU announced the imposition of tariffs on Chinese electric vehicle exports, Great Wall Motor directly closed its headquarters office in Germany and entrusted the sales of its WEY and Ora brands in Europe entirely to local dealers. Li Bin, the CEO of NIO, which was once full of confidence in the European market, also stated that the company would prioritize consolidating the Chinese market and postpone large-scale global expansion until after 2028. Furthermore, the LYNK&CO brand, which has been cultivating the European market for many years, has begun seeking cooperation with Volvo to accelerate its sales in Europe through Volvo's dealer network. Therefore, Li Auto should thoroughly assess risks and consider as many potential adverse factors as possible in the early stages of entering the overseas market.

△ Great Wall Motor has closed its headquarters in Europe

Going global is a pivotal driver for domestic automakers seeking sustained growth after reaching a certain scale. For Li Auto, its signature features in the domestic market, such as refrigerators, TVs, and large sofas, may not necessarily resonate well in overseas markets. Additionally, convincing European consumers to accept extended-range technology may take some time. Nonetheless, regardless of the challenges faced, the overseas market is a necessary step for Li Auto. Only by successfully driving growth in both domestic and overseas markets can Li Auto ensure a more solid future.

(This article is originally created by Heyan Yueche and may not be reproduced without authorization)