Company: LI
Filing Date: 2025-04-10
Form Type: 20-F
Source: 0001410578-25-000678
Chunk: 55

Company: Li Auto Inc.
Filing Date: 2025-04-10
Form: 20-F
Item: Item 3
Chunk 55
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 the world are increasingly introducing laws, regulations, and policies aimed at reducing greenhouse gas emissions and mitigating the impacts of climate change, such as China’s national carbon market and the European Union’s Carbon Border Adjustment Mechanism (CBAM), with an expanding scope of coverage. If we were to be directly included in a carbon tax or carbon market system, we would incur additional compliance costs, such as paying carbon taxes or purchasing carbon allowances. Furthermore, if our upstream suppliers become subject to such regulations, our procurement costs may also rise indirectly. Such transition costs associated with compliance and carbon pricing could impact our financial condition and results of operations.
Our warranty reserves may be insufficient to cover future warranty claims, which could adversely affect our financial condition and results of operations.
We provide warranties for new vehicles, battery packs, electric motors, and electric motor controllers, as well as air springs. Our warranty program is similar to other automakers’ warranty programs and is intended to cover all parts and labor to repair defects in material or workmanship in the body, chassis, suspension, interior, electric systems, battery, powertrain, and brake system. We record and adjust warranty reserves based on changes in estimated costs and actual warranty costs. We cannot assure you that our warranty reserves will be sufficient to cover future warranty claims. We could, in the future, become subject to significant and unexpected warranty claims, resulting in significant expenses, which would in turn materially and adversely affect our financial condition, results of operations, and prospects.

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If our vehicle owners modify our vehicles regardless of whether third-party aftermarket products are used, the vehicle may not operate properly, which may create negative publicity and could harm our business.
Automobile enthusiasts may seek to modify our vehicles, including using third-party aftermarket products, to alter their appearance or enhance their performance, which could jeopardize vehicle safety systems. We do not test, nor do we endorse, such modifications or third-party products. In addition, the use of improper external cabling or unsafe charging outlets can expose our users to injury from high voltage electricity. Such unauthorized modifications could reduce the safety of our vehicles and any injuries resulting from such modifications could result in adverse publicity which would adversely affect our brand and harm our business, financial condition, results of operations, and prospects.
We have granted, and may continue to grant options and other types of awards under our share incentive plan, which may result in increased share-based compensation expenses.
We adopted a share incentive plan in July 2019, or the 2019 Plan, for the purpose of granting share-based