Bank of America Downgrades Li Auto Stock Amidst Q3 Weakness

Bank of America downgraded Li Auto stock to Hold from Buy, citing a weak Q3 outlook and intense competition in the Chinese EV market. Barclays and U.S. Tiger Securities also lowered their price targets, with Barclays expecting a steeper decline in deliveries of Li Auto's EREV portfolio. Li Auto reported a year-over-year decline in Q2 EPS and missed expectations, with Q3 vehicle deliveries expected to be 90,000 to 95,000 units, a 38% to 41% YoY decline.

Bank of America has downgraded Li Auto's stock to Hold from Buy, reflecting a reassessment of the company's market position and future outlook. This decision comes amidst a challenging third-quarter outlook and intense competition in the Chinese electric vehicle (EV) market. Additionally, Barclays and U.S. Tiger Securities have also lowered their price targets for Li Auto.

Li Auto, a prominent player in the Chinese new energy vehicle market, saw its stock fall to a new four-month low after reporting its second-quarter earnings results. The company missed expectations on both revenue and earnings per share (EPS). The second-quarter revenue was RMB30.2 billion, down 4.5% year-over-year (YoY) and up 16.7% quarter-over-quarter (QoQ) [1].

The company's management emphasized cost optimization and operational efficiency enhancement in the second quarter. However, Li Auto expects vehicle deliveries to plunge between 37.8% and 41.1% in the third quarter. The company expects to deliver between 90,000 and 95,000 vehicles, a significant decline compared to the 152,831 vehicles delivered in the third quarter of 2024 [2].

The company's Q3 guidance shows revenue expected between RMB24.8 billion and RMB26.2 billion, below Q2's RMB30.2 billion, with a 19% gross margin. Li Auto's overseas strategy involves building R&D centers in Germany and the U.S., expanding its product portfolio globally, and considering markets such as the Middle East, Central Asia, and Europe. The company aims to achieve 30% of overall sales overseas in the long term [3].

Despite being up nearly 15% over the last twelve months, Li Auto's US-listed shares have lost 21% in the last 90 days. The company began deliveries in China of its second fully electric model, the three-row SUV i8, last week. It starts at 339,800 yuan and is equipped with a 97.8 kWh battery that provides 720km of range based on China’s CLTC cycle [2].

References:
[1] https://www.ainvest.com/news/li-auto-q2-2025-contradictions-emerge-product-marketing-ai-strategy-assisted-driving-overseas-expansion-house-chip-development-2508/
[2] https://eletric-vehicles.com/li/li-auto-shares-sink-to-4-month-low-as-carmaker-sees-q3-sales-plunging-40/
[3] https://www.ainvest.com/news/li-auto-q2-2025-contradictions-emerge-product-marketing-ai-strategy-assisted-driving-overseas-expansion-house-chip-development-2508/