Chinese luxury electric vehicle maker Li Auto’s stock has declined by about 45% year-to-date, in comparison to rival Xpeng’s 29% decrease. Li Auto’s delivery numbers for May showed promising growth, with 35,020 vehicles delivered, up 23.8% from last year. However, the growth was below that of Nio, which shipped 20,544 vehicles for the month, a 234% increase from the previous year. Xpeng delivered 10,146 vehicles, up 35% year-over-year.
LI stock has seen a sharp decline of 35% from early January’s levels of $30 to around $20 currently. Returns for the stock have been inconsistent over the past few years, underperforming the S&P 500 in 2021 and 2022. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year during the same period, offering better returns with less risk.
There are concerns about global EV demand, with most mainstream automakers experiencing tepid demand and scaling back electrification goals. Li’s growth has been slowing, leading to cost-cutting measures like laying off about 18% of its workforce. Despite this, there are positives in the Chinese EV market, with new incentives announced by China to trade older gasoline cars for electric vehicles. Li is also benefiting from the production of its new low-priced model, the Li L6.
Li Auto stock currently trades at around $21 per share, with a relatively low valuation compared to its projected revenue growth. With the company’s revenues expected to grow by almost 20% this year and over 35% next year, Li Auto may see a recovery. Additionally, the Chinese EV market continues to show promise, with incentives for electric vehicles and the ramping up of production for Li’s new model.
Overall, while Li Auto’s stock has faced challenges in 2021 and 2022, there is potential for recovery and growth in the coming years. The company’s focus on cost-cutting measures and the introduction of new models, along with positive developments in the Chinese EV market, could help drive future success for Li Auto. Investors may want to keep an eye on how Li Auto navigates the current macroeconomic environment and market conditions.
