Li Auto's Deep-Value Investment Opportunity: Uncovering Supply-Side Strengths and Backlog-Driven Growth

In the volatile world of electric vehicles (EVs), Li Auto (LI) has faced its share of turbulence in 2025. A 39% year-over-year drop in Q3 2025 deliveries according to the company's financial report and a net loss of RMB624.4 million as reported by Yahoo Finance have cast a shadow over its short-term performance. Yet, beneath these headlines lies a compelling deep-value opportunity. By dissecting Li Auto's underappreciated supply-side strengths and its backlog-driven growth potential, investors can uncover a company poised to rebound with strategic resilience and innovation.

Supply-Side Strengths: Strategic Partnerships and Vertical Integration

Li Auto's recent supply chain challenges-exacerbated by a vehicle recall and production bottlenecks as reported in The Globe and Mail-have obscured its long-term advantages. The company's strategic partnerships, particularly in battery technology, are a case in point. In October 2025, Li Auto partnered with Sunwoda Power Technology to establish Shandong Li Auto Battery Co., Ltd., a joint venture aimed at developing and producing lithium-ion power batteries. This move not only stabilizes battery supply but also reduces costs through localized production, a critical edge in an industry where battery expenses account for 30–40% of a vehicle's total cost.

Equally significant is Li Auto's five-year strategic alliance with Contemporary Amperex Technology Co., Limited (CATL), a leader in battery innovation. The partnership focuses on ultra-fast charging technologies, battery safety, and international market expansion as detailed in Auto News. Over one million Li Auto vehicles equipped with CATL batteries have been delivered without a single thermal runaway incident as reported by Auto News, underscoring the reliability of this collaboration. By securing access to CATL's cutting-edge M3P and sodium-ion battery technologies, Li Auto is future-proofing its product lineup against the rising demand for high-performance, cost-effective energy storage as detailed in Auto News.

Backlog-Driven Growth: Scaling Production and Infrastructure

Despite Q3 2025's delivery slump, Li Auto has laid the groundwork for a robust recovery. The company's Q4 2025 delivery target of 100,000–110,000 vehicles as outlined in Seeking Alpha suggests confidence in fulfilling pent-up demand, particularly for its flagship Li i6 and Li i8 models. The Li i6, launched in September 2025, has already demonstrated strong market appeal with its 720 km CLTC range and 5C ultrafast charging capabilities as reported in Li Auto's financial release. To meet this demand, Li Auto plans to increase the Li i6's monthly production capacity to 20,000 units by early 2026 through a dual supplier strategy for batteries as reported by Yahoo Finance. This diversification mitigates risks from single-source dependencies and accelerates production ramp-up.

Moreover, Li Auto's investment in charging infrastructure-RMB6 billion allocated to expand its supercharging network to over 5,000 stations by year-end as reported by QuiverQuant-creates a flywheel effect. Enhanced infrastructure not only supports domestic growth but also positions the company for international expansion, as evidenced by its first overseas retail store in Uzbekistan as reported in Li Auto's financial release. These efforts align with broader industry trends: China's NEV market is projected to grow at a 20% CAGR through 2030, and Li Auto's infrastructure investments will help it capture a larger share of this expanding pie.

Financial Resilience and Technological Innovation

Li Auto's RMB98.9 billion cash reserves as reported in The Globe and Mail provide a critical buffer against near-term headwinds, enabling continued R&D and strategic acquisitions. The company's in-house AI system, powered by its M100 chip, further differentiates its offerings. By transforming vehicles into "proactive machines" as reported in Yahoo Finance, Li Auto is addressing a key consumer pain point-software limitations in EVs-while reducing reliance on third-party suppliers. This vertical integration of hardware and software mirrors Apple's ecosystem strategy, offering long-term cost advantages and customer retention.

Conclusion: A Misunderstood Gem in the EV Sector

While Li Auto's Q3 2025 results were disappointing, the company's supply-side strengths and backlog-driven growth potential are often overlooked. Strategic partnerships with CATL and Sunwoda Power, combined with a dual supplier strategy for batteries, position Li Auto to overcome production constraints and reduce costs. Its aggressive infrastructure investments and AI-driven innovation further solidify its competitive edge. For investors with a medium-term horizon, Li Auto represents a deep-value opportunity-a company that is not just surviving the EV industry's turbulence but strategically positioning itself to thrive in the next phase of growth.