Li Auto Shares Plunge Despite Q4 Beat

Li Auto's shares took a nosedive on Wednesday, March 14, 2025, despite the company's impressive Q4 earnings beat. The American depositary receipts (ADRs) of Li Auto Inc. plunged as much as 17.8% before settling 16.1% lower, underperforming the U.S. stock benchmark S&P 500, which edged down 0.6% that day. The Nasdaq Golden Dragon China Index, which tracks 65 China-exposed U.S.-listed companies, closed 3.6% lower. This selloff occurred despite Li Auto's stellar revenue performance, which exceeded Wall Street estimates.



Li Auto reported total revenue of RMB31.7 billion (US$4.2 billion) for the quarter ended June 30, with a year-over-year (YoY) rise of 10.6%, stronger than Wall Street estimates of RMB31.42 billion. Diluted net earnings per American depositary share (ADS), or EPS, slumped 51.8% YoY to RMB1.05 (US$0.10), slightly ahead of analysts’ projection of US$0.09. Net income was RMB1.1 billion, representing a YoY decrease of 52.3% and an increase of 86.2% from the previous quarter. On a non-GAAP basis, diluted EPS was RMB1.42 and net income was RMB1.5 billion, down 45% and 44.9% YoY, respectively.

The stellar revenue was driven by vehicle sales. Li Auto delivered a total of 108,581 EVs in the second quarter, just shy of analysts' expected 108,611 units. The delivery represented a YoY increase of 25.5%. Delivery in July gained 49.4% YoY to 51,000 units. Vehicle business brought RMB30.3 billion that quarter with an 8.4% YoY increase, topping analysts’ forecast of RMB29.99 billion.

Despite these impressive numbers, investors were not convinced. The selloff reflected investors' reaction to the headwinds that still exist. Vehicle margin recorded both YoY and quarter-over-quarter (QoQ) declines, which led to lower vehicle prices. And lower pricing is a result of fierce competition that has been an issue for EV stocks all year. Third Bridge analyst Rosalie Chen noted that Li Auto has now dropped its average product price to below RMB300,000 (US$42,109) with the launch of its EV model L6. Commenting on the results for the second quarter beat and operating expenses controlled well, Citi analyst Jeff Chung maintained a "Buy" rating on shares but cut his price target for ADRs by 11.5% to US$26.20, citing lower valuation targets.

Looking forward, Li Auto expected delivery for the third quarter to be between 145,000 and 155,000 vehicles, an increase of 38% to 47.5% from a year earlier. Total revenue for the current quarter is expected to be between RMB39.4 billion and RMB42.2 billion, up 13.7% to 21.6% YoY. The solid guidance still failed to help reverse the shares selloff.

In conclusion, Li Auto's Q4 earnings beat was impressive, but the intense competition in the EV market and the decline in vehicle margins have left investors cautious. The company's future financial performance will depend on how it navigates these challenges. Despite the selloff, Li Auto's strong sales performance and robust results have been highlighted by analysts, and the company's plans for releasing five new models in 2024 and selling up to 800,000 units in total show a solid pipeline and business plan. Investors will be closely watching how Li Auto performs in the coming quarters.