Li Auto reported second-quarter revenue of CNY30.2 billion (about USD4.2 billion), down nearly 5 percent year on year, while net profit held steady at CNY1.1 billion. The Chinese electric-vehicle maker delivered 111,074 cars, a 2 percent increase, and lifted its gross profit margin to 20.1 percent from 19.5 percent by reducing production costs. Free cash flow, however, deteriorated to a negative USD540 million. The company said it expects third-quarter vehicle deliveries of 90,000 to 95,000 units and revenue of CNY24.8 billion to CNY26.2 billion, implying year-on-year declines of roughly 38 percent to 42 percent. Management plans to launch the Li i6 sedan in September and accelerate model upgrades as competition in China’s intensifying price war weighs on sales volumes. The downbeat outlook initially pushed Li Auto’s U.S.-listed shares down about 4 percent in pre-market trading, but the stock later reversed to trade roughly 4 percent higher. In Hong Kong, the shares closed up around 4 percent as investors focused on the company’s improved margins despite softer top-line growth. Bank of America downgraded the stock to Neutral from Buy and cut its price objective to USD26 from USD31. Barclays and U.S. Tiger Securities also reduced targets, citing rising competitive pressures and the sharply lower guidance. Even so, Li Auto has now posted 11 consecutive profitable quarters and continues to generate vehicle margins higher than several global and domestic rivals.