Ideal Motors: Q1, owing to problems with model i6, experiences decline in profit margins, increase in losses; overseas expansion accelerates but outcome yet uncertain.

Asian AutosLi Auto IncRatingMarket-PerformPrice Target Li Auto: Q1 margin slump on i6, widened losses; Internationalexpansion accelerates but turnaround unclear Q1 gross margin slumped on i6, with losses widened.Revenue reached RMB 23.0bn(-11.4% yoy, -20.1% qoq). Sales volume was 95.1k units (+2.5% yoy, -12.9% qoq), whileASP fell to RMB 226k (-14.8% yoy, -9.3% qoq), reflecting an unfavorable mix shift (60% i6contribution vs. 26% in Q4 25). Gross margin saw a sharp contraction to 7.9% (vs. 20.5%in Q1 25 and 17.8% in Q4 25), with vehicle margin declined sharply to 6.1%, slightly highercompared to 5% guided perviously, but lower vs. 19.8% in Q1 25 and 16.8% in Q4 25,mainly due to higher i6 mix and purchase tax subsidies offered to orders undelivered atyear-end. Q1 26 Opex remained disciplined at RMB 4.8bn, or 20.8% of revenue (vs. RMB5.0bn/19.5% in Q1 25 and RMB 5.7bn/19.7% in Q4 25) despite continued investment inAI and product development. Nevertheless, weak revenue and gross margin resulted in an Near-term outlook remains challenging, while a solid balance sheet underpinsvaluation.The company guided to Q2 deliveries of 95-100k units (-14.5% to -10% YoY; flat to +5% QoQ), implying May-June volumes of 30.5–33k units (vs. 34.1k in April),an unseasonal slowdown. Management highlighted strong demand for the L9 Livis(RMB 509.8k), with c.10k orders within two weeks of its May 15 launch, although supplyconstraints limit Q2 deliveries to c.9k units. Looking ahead, the L8 facelift (late June) and thenew i9 BEV (2H) support the pipeline, though premium positioning may constrain volumes.On margins, management guides for c.10% gross margin in Q2 and reiterates c.15% for Accelerating international expansion is positive for medium to longer term.Thecompany plans to officially introduce the L-series EREVs in Middle East and Central Asia in Q3 26, and launch the i6 BEV in Europe in 2H. The company also …(continue on page 2) its first entry into right-hand-drive markets. We view the accelerated global expansion positively, with product-market fit welltailored to local markets, and could provide a boost to the company in the medium to long-term. EXHIBIT 5:L9, L8, L7, L6, and MEGA took up 4%, 4%, 7%,19% and 1% of Q1 2026 sales volume, respectively; Therecently launched i8 and i6 represented 5% and 60% of EXHIBIT 4:ASP resumed its downward trajectory,declining to RMB 226k in Q1 2026, -14.8% yoy and -9.3%qoq EXHIBIT 6:Gross margin came in at 7.9% in Q1 2026 (withvehicle margin falling to 6.1%), vs. 20.5% in Q1 2025 and17.8% in Q4 2025EXHIBIT 7:Operating margin came in at -13.0% in Q12026, vs. 1.0% in Q1 2025 and -1.5% in Q4 2025 EXHIBIT 9:SG&A expenses booked RMB 2.0bn in Q1 2026,representing 8.9% of revenue, vs. 9.8% in Q1 2025 and9.2% in Q4 2025 EXHIBIT 8:R&D expenses came in at RMB 2.7bn for Q12026, implying 11.8% of revenue, vs. 9.7% in Q1 2025and 10.5% in Q4 2025 EXHIBIT 10:Li Auto saw its overall EV market share reached 4.0% in Apr 2026 and 5.2% in Q1 2026, vs. 4.0% in Q12025 and 2.8% in Q4 2025 INVESTMENT IMPLICATIONS We rate Li AutoMarket-Performwith price targets forLI.US at US$19.00(unchanged)and for2015.HK at HK$74.00. Wevalue Li Auto on blended 1-yr forward 0.5x EV/sales and 15x P/E. DISCLOSURE APPENDIX I. REQUIRED DISCLOSURES References to "Bernstein" or the “Firm” in these disclosures relate to the following entities: Bernstein Institutional Services LLC(April 1, 2024 onwards), Sanford C. Bernstein & Co., LLC (pre April 1, 2024), Bernstein Autonomous LLP, BSG France S.A. (April 1,2024 onwards), Sanford C. Bernstein (Hong Kong) Limited盛博香港有限公司,Sanford C. Bernstein (Canada) Limited, SanfordC. Bernstein (India) Private Limited (SEBI registration no. INH000006378), Sanford C. Bernstein (Singapore) Private Limited,Sanford C. Bernstein Japan KK(サンフォード・C・バーンスタイン株式会社)and analysts employed by Société GénéraleAfrica Technologies & Services to produce Bernstein research under a Global Services Agreement in place between Bernstein Bernstein is part of a joint venture between Société Générale (SG) and AllianceBernstein, L.P. (AB). Unless specifically notedotherwise, for purposes of these disclosures, references to Bernstein’s “affiliates” relate to both SG and AB and their respectiveaffiliates. VALUATION METHODOLOGY Li Auto Inc We value Li Auto primarily using forward EV/sales and P/E multiples. We value Li Auto on blended 1-yr forward 0.5x EV/sales and 15x P/E, and arrive at price targets for LI.US at US$19.00 and for2015.HK at HK$74.00. RISKS Li Auto Inc The main upside risks related to better than expected sales performance of the recently launched i8 and upcoming i6 models,and faster than expected progress on international expansion. We see downside risks around Li Auto relate to sales of current and RATINGS DEFINITIONS, BENCHMARKS AND DISTRIBUTION EQUITY RATINGS DEFINITIONS Bernstein brand The Bernstein brand rates stocks based on forecasts of relative performance for the next 12 months versus