Li Auto is reportedly undergoing massive layoffs that could involve more than 5,600 people, as sales fall short of expectations, according to local media.

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Li Auto (NASDAQ: LI) is reportedly undergoing massive layoffs, with sales falling short of expectations.

Li Auto is in the midst of a new round of layoffs that could involve more than 18 percent of its workforce overall, according to a report from local media outlet 21jingji today.

The carmaker's 2023 financial report shows it has nearly 31,600 employees, up 63 percent year-on-year.

Based on the percentage of layoffs, Li Auto may reduce its workforce by more than 5,600 in the latest round, the report noted.

Specifically, Li Auto's sales and service operations division is laying off more than 400 employees, the team in charge of hiring will shrink from more than 200 to 40-50, and the smart driving team will shrink to less than 1,000, according to the report.

The company lowered its sales forecast for this year to between 560,000 and 640,000 units in late March, down from 800,000 units previously, and staffing will need to be scaled back accordingly, the report noted.

Li Auto's staffing adjustments this year were initially modest, and it has been purging low-performing employees from the beginning of this year through March, according to the report.

In some teams, low-performing employees made up only about 10 percent, the report said, citing a person familiar with the matter, adding that human resources was one of the most hit departments at the time, with nearly 100 employees leaving earlier this year.

At the end of April, Li Auto's management approved the final list of layoffs, and the latest cuts then officially kicked off in the first week of May, with the bulk of the realignment to be wrapped up by the end of May, according to the report.

The smart driving team, which was the focus of Li Auto's previous expansion, expanded to nearly 1,000 people by the end of September 2023, up from about 600 at the beginning of 2023, the report said.

Li Auto's smart driving team doubled in size last September from the beginning of 2023, if factoring in about 200 pending college freshmen, the report noted.

Li Auto originally aimed to sell 800,000 vehicles in 2024, but with its first battery electric vehicle (BEV) model, the Li Mega MPV (multi-purpose vehicle), falling short of expectations in its early days on the market, that goal will be difficult to meet.

On March 22, Li Auto held an investor meeting and officially lowered its sales forecast to 560,000-640,000 from the original 650,000-800,000 sales forecast, 21jingji's report noted.

The company didn't lay off employees immediately after Li Mega saw less-than-expected order numbers because it was worried it would affect Li L6 sales, according to the report.

Li Auto launched the Li L6, its lowest-priced model, on April 18, with deliveries starting on April 24.

The consensus within Li Auto right now is 560,000 units for this year's sales expectations. Even that number remains extremely challenging for the company, the story noted.

In the first four months, Li Auto sold a total of 106,200 units, less than 20 percent of its lowered annual target.

This means that over the next eight months, Li Auto will need to sell an average of more than 54,000 units per month to meet its annual target, the report said.

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