Li Auto (LI) Plunges 5.4% Amid Pricing Pressures and Sector Turbulence – What’s Next for the EV Giant?

Summary
• Li Auto’s stock tumbles 5.4% intraday to $24.20, its lowest since May 2025.
• The company slashes prices on its flagship Li i8 SUV by RMB 20,000 amid weak demand.
• NIO (NIO) outperforms with a 2% gain, signaling sector divergence.

Li Auto’s sharp decline reflects mounting pressure from aggressive pricing cuts and tepid consumer response to its new electric SUV. With the stock trading near its 52-week low of $17.44, investors are scrutinizing whether the company’s cost-cutting strategy can reverse its fortunes. The move comes as NIO and other EV peers gain traction, intensifying competition in China’s crowded EV market.

Price Cuts and Weak Demand Spur Investor Flight
Li Auto’s 5.4% intraday drop stems from its decision to slash the Li i8 SUV’s price by RMB 20,000—a desperate bid to boost sales after a lackluster launch. The company also eliminated its entry-level i8 Pro variant, which accounted for less than 2% of reservations, and now offers only the Max and Ultra trims. This aggressive discounting, coupled with reports of low test drive bookings and sluggish conversion rates, has rattled investor confidence. Meanwhile, NIO’s Onvo L90 has surged in popularity, with sales jumping 143% week-over-week, further highlighting Li Auto’s struggles to compete in the premium EV segment.

EV Sector Splits as NIO Gains Momentum
While Li Auto’s shares crumbled, NIO (NIO) rose 2.0% intraday, outperforming the broader EV sector. NIO’s Onvo L90, a family-oriented crossover, has captured market share with its affordability and features, selling 3,697 units in its first week. Li Auto’s sales, by contrast, fell 26% week-over-week to 5,471 units. The divergence underscores the sector’s fragmentation: investors are rewarding companies with clear product differentiation and strong demand, while penalizing those relying on price cuts to sustain growth.

Bearish Setup and High-Leverage Put Options for Short-Term Bets
• 200-day MA: $25.80 (below current price)
• RSI: 31.41 (oversold)
• MACD: -0.58 (bearish divergence)
• Bollinger Bands: $24.38 (lower band) vs. $24.20 (current price)

Technical indicators suggest a short-term bearish bias for LI. The stock is trading near its 200-day moving average and within the lower Bollinger Band, signaling potential for further downside. The VanEck Low Carbon Energy ETF (SMOG) is down 0.04%, reflecting broader sector jitters. For options, two contracts stand out:

• LI20250815P23 (Put, $23 strike, 8/15 expiry):
- IV: 45.21% (moderate)
- Leverage Ratio: 92.98% (high)
- Delta: -0.236 (moderate sensitivity)
- Theta: -0.00268 (slow decay)
- Gamma: 0.170 (responsive to price swings)
- Turnover: 1,888 (liquid)
This put option offers high leverage and gamma, making it ideal for a 5% downside scenario. If LI drops to $23, the payoff would be $1.20 per contract, a 133% gain.

• LI20250822P23 (Put, $23 strike, 8/22 expiry):
- IV: 53.39% (elevated)
- Leverage Ratio: 41.68% (moderate)
- Delta: -0.306 (strong sensitivity)
- Theta: -0.00893 (moderate decay)
- Gamma: 0.1259 (modest responsiveness)
- Turnover: 3,168 (high liquidity)
This contract’s higher IV and delta make it a safer bet for a short-term bearish play. A 5% drop to $23 would yield a $1.20 payoff, a 286% return.

Action: Aggressive bears should prioritize LI20250815P23 for immediate exposure, while LI20250822P23 offers a balanced approach for a week-long trade.

Backtest Li Auto Stock Performance
The backtest of LI's performance after a -5% intraday plunge shows favorable results, with win rates and returns indicating a positive trend. Here's a detailed analysis:1. Frequency and Win Rates: The event occurred 649 times over the backtested period. The 3-day win rate was 52.39%, the 10-day win rate was 52.54%, and the 30-day win rate was 54.85%. This suggests that following a -5% intraday plunge, LI tends to experience a positive rebound in the short term.2. Returns: The average 3-day return was 0.66%, the 10-day return was 1.98%, and the 30-day return was 4.45%. This indicates that while the immediate post-plunge period may not yield significant gains, LI tends to recover and even exceed its pre-plunge levels in the following weeks.3. Maximum Return: The maximum return observed was 8.93% over 30 days, with the maximum return day occurring on day 59. This highlights the potential for substantial gains if one holds LI long enough after the intraday plunge.In conclusion, while a -5% intraday plunge in LI may present a short-term challenge, the backtest results suggest that it is a buying opportunity with a high probability of positive returns over the following days and weeks. Investors may consider this strategy for potential gains, keeping in mind the potential for varying returns based on the timing of their entry and exit.

Key Levels and Sector Shifts: What to Watch Now
Li Auto’s 5.4% drop reflects deteriorating demand and pricing pressures, but technicals suggest the decline could extend to the $23 support level. Investors should monitor the 200-day MA at $25.80 and the 52-week low of $17.44 as critical thresholds. Meanwhile, NIO’s 2% gain highlights sector leadership, with its Onvo L90 outpacing Li Auto’s offerings. For short-term traders, the LI20250815P23 and LI20250822P23 options offer high-reward potential if the stock breaks below $23. Act now: Position for a breakdown below $24.38 or watch NIO’s momentum for sector-wide clues.