In October, Li Auto (NASDAQ:LI) achieved a remarkable feat, surpassing its own record by delivering 40,422 electric vehicles, marking a staggering 302.1% increase from the previous year. This outstanding performance underscores Li Auto’s rapid growth, setting it apart from the competition. Despite the challenges in the industry, Li Auto exhibited resilience, demonstrating a marginal increase in vehicle margins, defying the prevailing trend in the electric vehicle market. Moreover, the company’s robust Q3’23 results, coupled with its optimistic forecast for Q4’23, projecting a 20% growth in monthly deliveries, reaffirms its position as a formidable force in the EV sector.
Li Auto’s Strong Momentum
Previously, I had rated Li Auto as a strong buy, given its impressive margins and exceptional performance in Q3’23. The company’s delivery growth continued to accelerate, reinforcing its value proposition. With a revenue of 34.7B Chinese Yuan ($4.8B) in Q3 and the highest delivery volume of 40,422 electric vehicles, Li Auto outperformed its competitors, including NIO and XPeng, by a significant margin.
What sets Li Auto apart is its ability to maintain strong vehicle margins amidst intense competition and pricing pressures. The company reported an impressive 21.2% vehicle margin in Q3, showcasing a commendable year-over-year improvement. This, along with its bullish outlook for Q4’23, highlights Li Auto’s stability and potential for sustained growth.
Unprecedented Forecast for Q4’23
Li Auto’s forecast for Q4’23 remains exceptionally optimistic, projecting a significant year-over-year increase in delivery volume. With a guidance range of 125,000 to 128,000 vehicles and an expected monthly delivery volume of 41,666 to 42,666, the company is poised to maintain its upward momentum, solidifying its position as a leader in the EV market.
Decoupling from the Competition
Li Auto’s staggering performance has led to a notable decoupling from its competitors. The company’s revenue estimates for FY 2023 have consistently risen, while its rivals, NIO and XPeng, have faced disappointment in their delivery achievements. This clear divergence in performance, encompassing margins, delivery numbers, and revenue growth, underscores Li Auto’s unmatched prowess in the industry.
Assessment of Risks
While Li Auto’s performance has been exceptional, achieving profitability on a full-year basis in FY 2023 remains a critical milestone. Any potential drop in vehicle margins could also impact the company’s trajectory. It is important to monitor these factors as they pose inherent risks to Li Auto’s growth and profitability.
Conclusion: Li Auto’s Resilience and Potential
Despite the challenges, Li Auto’s remarkable growth, robust margins, and unparalleled delivery numbers position it as a dominant player in the electric vehicle market. The company’s consistent outperformance, along with its favorable valuation, underscores its attractiveness in the EV industry. With a strong outlook for Q4’23 and a proven track record of defying industry trends, Li Auto continues to present an enticing opportunity for investors in the dynamic EV landscape.