(Yicai) Aug. 29 -- Shares of Li Auto advanced after the Chinese electric vehicle maker increased its gross profit margin in the second quarter, maintaining profitability despite a drop in revenue due to intensifying price wars.

Li Auto [HKG:2015] closed up 4 percent at HKD91.70 (USD11.80) in Hong Kong today. Its US-listed shares [NASDAQ: LI] rose 2.9 percent to USD23.26 yesterday.

In the quarter ended June 30, the premium automaker earned CNY1.1 billion (USD153.1 million) in net profit, largely unchanged from a year earlier, extending its profit streak to 11 consecutive quarters, according to the Beijing-based firm's earnings report released yesterday.

Revenue fell nearly 5 percent year-over-year to CNY30.2 billion (USD4.2 billion) as a result of China’s ongoing EV price wars. However, Li Auto raised its vehicle gross profit margin to 19.4 percent from 18.7 percent by lowering production costs.

Founded by Chairman and Chief Executive Li Xiang in 2015, Li Auto was the first Chinese EV startup to turn a profit and has consistently maintained strong margins. For comparison, Tesla posted a gross profit margin of 17.2 percent last quarter, while Xpeng reported 17.3 percent. Emerging rival Xiaomi outperformed all three with a margin of 26.4 percent, based on second-quarter earnings disclosures.

Looking ahead, Li Auto provided a cautious outlook. It expects third-quarter deliveries to fall between 90,000 and 95,000 units, down 38 to 41 percent from a year earlier. That would translate to a revenue drop of 39 to 42 percent to between CNY24.8 billion and CNY26.2 billion.

During an earnings call, Li Xiang said the company plans to accelerate product upgrades, enhance its sales and service systems, and further integrate smart technologies into its vehicles.

Li Auto delivered 111,070 vehicles in the second quarter, a 2 percent increase from a year ago. However, sales fell nearly 5 percent to CNY28.9 billion, primarily due to a lower average selling price driven by changes in its product mix and customer incentives.

The company also tightened spending. Research and development expenses fell 7 percent year-over-year to CNY2.8 billion in the second quarter, mainly due to reduced salaries. It plans to spend CNY12 billion on R&D this year, with half allocated to artificial intelligence development.

Editor: Emmi Laine