On May 16th, according to a report by the 21st Century Economic Herald, Li Auto initiated a new round of personnel optimization following the May Day holiday, with an overall optimization ratio exceeding 18%, affecting more than 5,600 people.

Insiders say that at the end of April, the management approved the final layoff list, and this round of layoffs officially started in the first week of May, with most to be completed by the end of May. The company will compensate optimized employees with a package of N+1.

Li Auto hopes to complete most of the personnel optimization plan before the employee stock options vest on June 15th, which could save some costs associated with cashing out employee stock options.

The main reason for the layoffs at Li Auto is the underperformance in sales of the MEGA and the new L series. On March 21st, Li Auto revised down its delivery guidance for the first quarter from the original 103,000 vehicles to 76,000-78,000, and the annual sales target was also adjusted from the original 800,000 vehicles to 560,000-640,000. The latest data shows that Li Auto's sales in the most recent month were only 671 units. Even the L7, 8, 9 series, which were big hits at the end of last year with monthly sales of 50,000 units, saw sales of less than 30,000 in the first four months of this year.

In order to boost sales, Li Auto had to join the "price war." On April 22nd, Li Auto officially announced price cuts, except for the newly launched Li Auto L6, the 2024 models of Li Auto L7, L8, L9, and MEGA adopted a new pricing system, with a reduction of 18,000-30,000 yuan compared to before. At the same time, to protect the interests of existing car owners, Li Auto officially announced that it would provide cash rebates to users who purchased the 2024 model L7, L8, L9, and MEGA and have already taken delivery.

The market says that Li Auto's official price cut could result in a loss of hundreds of millions of yuan.

Facing the double blow of declining sales and gross margin, Li Auto's personnel optimization has to be put on the table. After the frantic recruitment last September, the issue of redundant personnel at Li Auto has become particularly glaring. In 2024, Li Auto set a sales target of 800,000 units for the whole company, and under this sales expectation, the company's personnel were configured according to the expectation of 800,000 units in sales. However, the continuous cold sales also indicate that both the original target of 800,000 vehicles set by Li Auto last year and the revised target of 640,000 vehicles are gradually becoming distant according to industry practices.

It is understood that the departments with the most adjustments this time are the recruitment department, sales service operation department, and intelligent driving department, etc. Specifically, the sales service operation department has optimized more than 400 people, the recruitment department will be reduced from the original more than 200 people to 40-50 people, and the intelligent driving team will be reduced to less than 1,000 people.

Referring to the data of 2023, last year, the total compensation for Li Auto's employees exceeded 12.1 billion yuan, with an average compensation of more than 380,000 yuan per person. This means that the layoff of more than 18% can save Li Auto more than 2.1 billion yuan in costs. Moreover, due to the frantic expansion last year, Li Auto also offered higher salary packages to newly recruited employees than in previous years. For example, for the position of autonomous driving algorithm, the starting salary offered to the 2024 graduates is nearly 40% higher than that of the 2023 graduates. This indicates that the money Li Auto can save through layoffs may be more than the estimated 2.1 billion yuan.

On March 21st, after the Li Auto MEGA encountered a "poor start," Li Auto CEO Li Xiang issued a letter to all employees, reviewing the essence of the company's problems in March and the solutions, stating "We have been too focused on sales and competition from top to bottom, allowing our desires to surpass our values, which has led to a significant decline in our original strengths in user value and operational efficiency. The pursuit of desire has turned us into the people we dislike."

On April 3rd, Li Auto issued another announcement to all employees, announcing the launch of the Matrix Organization 2.0 upgrade and organizational adjustments in multiple departments. In the same month, rumors of Li Auto layoffs began to circulate online: the company had already stopped approving new offers, and it was rumored that it would cut all budgets by more than 30%, with layoffs to follow. Although Li Auto quickly refuted the rumors of layoffs, the facts have proven that lies do not hurt people, the truth is the sharp knife.

It can be said that under the shadow of declining sales and gross margin, Li Auto's comfortable plank has been mercilessly broken by the market. Among them, although there is the macro influence of the poor automotive industry tone in 2024, there are also subjective reasons for Li Xiang's own arrogance and misjudgment of industry patterns. To survive under the siege of Wey and Xiaomi, Li Xiang's Li Auto must fully realize the crisis and learn to prepare in advance, which is just the first step in the fiercely competitive new energy track.