Chinese luxury electric vehicle maker Li Auto saw a slowdown in growth in April, with deliveries increasing by just 0.41% compared to the previous year. This is down by 11% from March, indicating a cooling demand for the company’s extended-range electric vehicle models. The launch of Li’s first battery electric vehicle model, the Li Mega, in March also did not seem to drive significant sales. To stay competitive, Li Auto reduced prices on most models by about RMB 20,000 following Tesla’s latest round of price cuts.
The stock of Li Auto has declined by 15% since early January 2021, currently trading at around $25 compared to $30 at the beginning of the year. Returns for the stock have been inconsistent over the years, with highs and lows compared to the S&P 500. The company has underperformed the benchmark index in 2021 and 2022, facing challenges in consistently beating the market. In a volatile macroeconomic environment with high oil prices and elevated interest rates, it remains to be seen if Li Auto will be able to recover and outperform the S&P over the next 12 months.
Although there are concerns about global EV demand, the Chinese market presents opportunities for growth. China recently announced incentives for consumers to trade their older gasoline cars for electric vehicles, benefiting companies like Li Auto. The company is also expanding its retail presence, aiming to almost double the number of retail stores by the end of the year. With a stock price trading at around $31 per share, Li Auto is valued at about 15x consensus 2024 earnings and 12x 2025 earnings, considering the projected revenue growth of over 45% this year and over 40% next year.
As competition in the EV market intensifies and demand becomes more uncertain, it will be crucial for Li Auto to differentiate itself and capitalize on the incentives and opportunities in the Chinese market. The company’s performance in the coming months will determine its ability to bounce back and outperform the S&P 500. Investors will be watching closely to see if Li Auto can navigate the challenges ahead and maintain its position in the rapidly evolving electric vehicle industry.
With Li Auto facing challenges in a competitive market, investors are looking for signals of a potential turnaround and growth for the company. The fluctuating stock prices and performance trends indicate the challenges that Li Auto is facing in beating the market consistently. However, with strategic initiatives such as price reductions, new product launches, and expansion plans, Li Auto is positioning itself to leverage the growth opportunities in the Chinese EV market and deliver strong financial performance in the coming years.
Overall, the future outlook for Li Auto remains uncertain, but the company’s resilience and ability to adapt to market dynamics will be key in determining its success. With a focus on innovation, customer demand, and expanding its presence in the Chinese market, Li Auto is poised to capitalize on the opportunities in the EV sector and drive growth in the coming years. Investors will be closely monitoring the company’s performance and strategic moves to gauge its potential for long-term success in the competitive electric vehicle industry.
