Li Auto delivered 26,263 vehicles in February, representing an increase of nearly 30% compared to the previous year, even though sales dropped by 12% from the prior month. For the second consecutive month, the longtime leader’s sales were outpaced by its competitor Xpeng, which delivered 30,453 vehicles in February—an increase of over 6.5x from 4,545 in the same month last year. Nio stock reported 13,863 vehicle deliveries in February, marking a 62% rise from the year-ago period. Although Li Auto did not detail the primary factors behind its growth, it is likely that the Li L6, the most affordable model in its lineup, contributed to the year-over-year increase in volumes. As an aside, amid increased economic uncertainty, and investors possibly becoming more defensive, see Kimberly-Clark Stock: Navigating Margin Growth And Market Challenges.
The initial months of the year are generally slow for the Chinese automotive market due to the Chinese New Year celebrations, which take place between late January and mid-February. Therefore, a more accurate year-over-year comparison is to combine January and February deliveries and compare them to the same period last year. In this instance, Li Auto sold a total of 56,190 vehicles for January and February combined, which is an increase of approximately 9% from 51,416 units in the previous year.
Li’s overall sales growth has been sluggish. Why might this be? One reason is that the company conducted significant year-end promotional sales at the close of last year, which likely advanced demand and resulted in weaker sales in January and February. Moreover, fierce competition in the Chinese EV market is putting pressure on both volume growth and average selling prices, with over 100 brands competing for market share. The company has long relied on its gasoline-powered range extenders to boost vehicle sales; however, as charging infrastructure continues to improve, that advantage may be waning, making the successful delivery of popular pure EVs more critical. Additionally, Li’s first fully electric model, the MEGA van—which does not include the gasoline range extender found in its other vehicles—has not met expectations. Priced at over $70,000, this vehicle targets the high-end EV market. Furthermore, Li Auto trails behind competitors such as Tesla and domestic players like Xpeng in autonomous driving technology, which may be affecting its competitive edge.
Although Li Auto stock has experienced modest growth in recent years, the Trefis High Quality Portfolio, which comprises 30 stocks, has delivered superior returns with reduced risk compared to the benchmark S&P 500 index over the past four years—it has been less volatile, as demonstrated in HQ Portfolio performance metrics. In light of the current uncertain macroeconomic environment—characterized by potential rate cuts and multiple conflicts—could Li Auto encounter a similar situation as in previous years and underperform the S&P over the next 12 months, or is a recovery on the horizon?
Despite the risks, Li Auto’s valuation remains appealing. The stock is trading at approximately $27 per share, or around 17x consensus 2025 earnings. The company’s revenues are forecast to increase by a robust 30% in 2025, according to estimates. By contrast, U.S. rival Tesla is trading at about 100x consensus earnings, even though its revenues are expected to grow by only around 15% this year.
How might Li Auto’s stock trend upward? Although the underwhelming performance of Li’s Fire pure EV model has dampened investor sentiment, the company plans to introduce additional pure EV models, including the Li i8 SUV, anticipated around July. If this new model gains traction, it could enhance investor confidence in Li’s prospects within the battery electric vehicle market. Moreover, Li Auto stock could benefit from increased foreign capital inflows into China, spurred by the government’s generous stimulus measures and growing optimism regarding the nation’s technology and R&D capabilities following the launch of the DeepSeek AI model. Should investors adopt a more favorable valuation—approximately 35x forward earnings—reflecting Li Auto’s stronger growth prospects, the stock might experience significant upside, potentially reaching about $54 per share. For a detailed comparison of Li Auto stock with its rivals, Nio and Xpeng, see our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?.
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