How Can We Focus R&D Capabilities on What Matters Most? A Review of Li Auto’s Materials Technology Day

Recently, Li Auto held the Li Auto Materials Technology Day at its headquarters, during which the company shared numerous technological breakthroughs in the field of materials, covering multiple dimensions such as health and safety. In addition, at this Materials Technology Day, Li Auto’s head of materials R&D used the retail company Pangdonglai as an example to introduce Li Auto’s “Select, Cultivate, and Research” materials methodology.

From the editor’s perspective, this methodology is essentially an internal decision-making framework for strategically allocating and managing R&D resources. The three components—“selection, development, and research”—are not merely three parallel options; rather, they form a decision funnel that progresses from easier to more challenging tasks and from external considerations inward. The primary function of this process is to help teams swiftly determine, when confronted with specific technical or material needs, which approach to adopt and how much resource to allocate.

The first step—“selection”—is a common practice among most manufacturing enterprises: identifying the best solution that meets standards within the existing supply chain. For complex industrial products like automobiles, fully developing everything in-house is neither economical nor realistic; blindly pursuing in-house R&D is clearly not advisable. The key to ideal “selection” lies in the precision and rigor with which standards are defined upfront. For instance, in the area of healthy materials for automotive interiors, the standards go beyond industry-wide norms and introduce even stricter limits on specific volatile organic compounds. The very process of setting these standards itself constitutes an R&D effort driven by the needs of a specific user group—for example, families with infants and young children. It demands that the team possess the ability to translate vague user expectations into precise technical specifications.

When no off-the-shelf solution on the market can meet custom specifications, the process moves into the second stage—“Cultivation.” At the heart of this stage is “collaborative development driven by demand.” The relationship between companies and their suppliers shifts from a simple buyer-seller dynamic to one of partners jointly tackling technological challenges. An example is the development of an ultra-high-strength aluminum alloy for battery-pack underguards: Li Auto set a performance target for its supplier that exceeded the highest strength material then in mass production by nearly 20%. Under such circumstances, it’s highly unlikely that a supplier would have sufficient motivation to undertake dedicated R&D solely to meet the requirements of a single automaker.

Li Auto’s approach involves engaging in equal-footing dialogue with top-tier material suppliers, armed with preliminary technical concepts and clearly defined performance boundaries. By committing to share the majority of any additional costs, Li Auto effectively reduces suppliers’ innovation risks and alleviates their concerns. This approach seeks to address a common industry dilemma: While the upstream segments of the supply chain often possess significant technological potential, they frequently lack clear, firm demand signals from the end market as well as commitments to share risks. The success of “cultivation” hinges on whether companies can clearly and firmly communicate the technical necessity and establish a reasonable mechanism for cost and risk sharing.

When a problem lacks an off-the-shelf solution and supply-chain partners are reluctant to collaborate due to excessively high technical or commercial risks, companies are faced with a choice: either lower their standards and compromise, or invest their own resources to tackle the challenge head-on. Li Auto naturally chose the latter. For instance, to enhance the puncture resistance of its high-pressure fuel tanks under extreme road conditions, its team spent considerable time independently developing a super-high-strength stainless steel fuel-tank material called UFHS-X. Li Auto reported that the development cost alone exceeded 10 million yuan—six times higher than the cost of using conventional 304 stainless steel for fuel tanks. Compared to traditional 304L, the new material boasts a yield strength that’s 100% higher, and the resulting fuel tanks exhibit a 52% improvement in puncture resistance. Choosing the “in-house R&D” path signifies that the company has judged this issue to carry sufficiently high strategic importance—typically tied to core safety commitments or fundamental brand values—to the extent that it must maintain complete control and master the underlying technology. Moreover, the company is willing to bear the long development cycle, substantial investment, and uncertain outcomes that come with such an approach. This represents a quintessential strategic trade-off.

The operation of the “selection, cultivation, and research” system embodies a clear logic of resource allocation: routine quality-improvement needs are addressed through the “strict selection” process, which offers the highest efficiency; significant performance breakthroughs are achieved collaboratively via a “co-creation” model, working in tandem with the supply chain to strike a balance between innovation and risk; and only those fundamental, critical challenges—ones for which no external assistance is available—are assigned to full in-house R&D, where we concentrate our superior resources on tackling them head-on.

Dynamic Assessment and Decision-Making: The three levels are not fixed. As technology advances and supply-chain capabilities evolve, yesterday’s “cultivation” may become today’s “selection,” and what was once “research” could in the future become a project that is both “cultivable” and even “selectable.” The system requires teams to continuously assess technological developments—both internal and external.

The path to capability accumulation: R&D activities at different levels cultivate distinct organizational capabilities. “Selection” hones capabilities in standard definition and supply-chain management; “development” fosters cross-organizational technological collaboration and project-driving skills; and “research” directly refines the most fundamental, original innovation capabilities. Together, these capabilities form the enterprise’s comprehensive system for technological judgment and execution.
From an external perspective, the effectiveness of this system will ultimately need to be tested by the market and time. The inherent challenges it faces are also evident: How can we ensure that our judgments about “strategic importance” remain consistently accurate, thereby avoiding the misallocation of resources into secondary “no-man’s-lands”? In the “co-creation” model, how can we sustain deep, mutually beneficial relationships with top-tier suppliers without merely descending into premium-priced procurement? These are all questions that the system must address if it is to operate healthily over the long term.
In the current automotive industry, as competition increasingly intensifies to the level of foundational materials and manufacturing processes, Li Auto’s “Select, Cultivate, and Research” system offers a compelling model for focusing R&D resources. This system reflects a growing trend: the competitiveness of automakers is no longer solely embodied in their final products but is increasingly rooted in their systematic organizational capabilities—capabilities that involve defining problems, integrating resources, and achieving breakthroughs through layered approaches. The development and continuous refinement of these capabilities may be just as critical, if not more so, than breakthroughs in any single technology.

Reposted from Sina Auto

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