Li Auto Shares Plummet After Disappointing Earnings


Li Auto’s shares took a nosedive in Hong Kong after underwhelming earnings and setbacks in their battery electric vehicle (BEV) plans. The company’s earnings report revealed a significant drop in net income compared to the previous year and the fourth quarter, contributing to a 44% year-to-date loss in share value.

Why does it matter?

The delay in launching more all-electric models to the first half of next year showcases the challenges Li Auto faces in transitioning from extended-range electric vehicles (EREVs) to BEVs. With a revised plan to release all-electric SUVs in 2022 instead of 2021, the company admits the necessity of enhancing infrastructure like self-operated superchargers and expanding store spaces.

The disappointing performance of their first BEV model, the Li Mega MPV, which fell short of sales expectations, has led to concerns about Li Auto’s future volume, declining margins, and the competitiveness of the premium BEV market. Analysts suggest that lowering BEV prices might be necessary to boost sales.

Deutsche Bank analysts highlight broader industry shifts, including increased competition in the EREV market and the challenging nature of premium BEV sales, drawing parallels with struggles faced by companies like Nio. Li Auto’s BEV endeavors are met with structural challenges, emphasizing the complexities of transitioning from EREVs to BEVs successfully.

How is it going to shape the future?

Looking ahead, Li Auto aims to deliver between 105,000 and 110,000 vehicles in the second quarter, below Wall Street predictions. The company’s struggles have not gone unnoticed, with other EV stocks like Nio, Xpeng, and BYD also seeing declines in Hong Kong trading.

With uncertainties looming over Li Auto’s volume projections and BEV roadmap, the company finds itself in a pivotal moment. The need to adapt to changing market dynamics, improve product acceptance, and address pricing strategies will be crucial for Li Auto to navigate the evolving landscape of electric vehicle manufacturing.