Li Auto Hits New Delivery Milestones but Faces Intense Competition

Subheading: Growth in Vehicle Deliveries but Lagging Behind Rivals

Li Auto (NASDAQ:LI), recognized as the largest emerging electric vehicle (EV) company in China, achieved significant milestones with 58,513 vehicles delivered in December 2024. This marked a 16.2% increase from the same month last year and represented an approximate 20% rise compared to November. Over the entire year, the company delivered just over half a million vehicles, setting a new record. However, this growth rate fell behind those of its main competitors. Nio stock (NYSE:NIO) saw deliveries reach 31,138 vehicles, reflecting a substantial 73% year-on-year improvement, while Xpeng (NYSE:XPEV) reported 36,695 vehicles, a remarkable 82% increase year-over-year.

While Li Auto has not detailed the specific factors contributing to its growth, it is likely that the Li L6, which is the company’s most affordable model, has played a critical role. Launched in April, the L6 is priced at about RMB 250,000 (approximately $34,500). In addition, Li Auto has been advancing its autonomous driving technology, which is further supporting sales. In January, the company plans to roll out an over-the-air update to enhance its self-driving features, adding both city and highway autopilot capabilities. Compounding these efforts, the pricing strategies prompted by competition among major EV brands like Tesla and BYD have led Li Auto to implement enticing promotions. For instance, at the end of November, the company announced a promotion offering three years of zero percent interest financing for any Li Auto vehicle purchase through the end of 2024.

Despite its growing sales figures, Li Auto stock has experienced slow growth over recent years. In contrast, the Trefis High Quality (HQ) Portfolio, which consists of 30 carefully selected stocks, has yielded better returns with lower risk compared to the benchmark S&P 500 index over the last four years. Given this context, investors may wonder about the future of Li Auto stock.

Currently, Li stock trades at around $24 per share, equating to approximately 1.2 times the consensus 2024 revenues. This valuation appears favorable considering forecasts suggest revenues could grow by 18% in 2024 and by 33% in 2025, according to consensus estimates. In contrast, industry leader Tesla trades at a multiple of 13 times estimated 2024 revenues, despite expectations of almost stable revenues. However, challenges loom on the horizon for Li Auto. The fierce competition within the Chinese EV market is putting pressure on average selling prices and profit margins, with over 100 brands competing for market share. Furthermore, a shift towards fewer premium models (Li L7, Li L8, and Li L9) in favor of the more affordable L6 has contributed to a decline in average selling prices. Li’s first fully electric vehicle, the MEGA van, has also underperformed, leading the company to postpone plans for additional purely electric models from 2024 to 2025. For a comprehensive comparison, see our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?.

[1] Returns as of 1/1/2025
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.