Li Auto Plunges 6.1%, Unveiling New EV Amidst Intense Competition – Is the Market Overreacting?

Summary
• Li Auto's stock nosedives 6.1% to $27.41, marking its worst intraday performance since 2023.
• The company launches the Li i8, a six-seat BEV priced at $44,830, facing direct competition from Onvo L90 and Tesla Model Y L.
• Turnover surges to 20.5 million shares, with 52-week range of $17.44–$33.12.

Today's sharp decline in Li Auto's stock reflects a confluence of aggressive pricing in a saturated BEV market and investor skepticism about its competitive positioning. The Li i8's entry into a crowded segment, coupled with Tesla's own 0.77% dip, signals a high-stakes battle for market share in China's EV sector.

New EV Launch Sparks Price War Jitters
Li Auto's stock collapse follows the launch of its Li i8, a $44,830 six-seat BEV priced 8.06% below initial estimates but 14.97% above Onvo L90's expected price. While the vehicle boasts 720km CLTC range and 5C charging, the aggressive pricing strategy has raised concerns about margin sustainability. Competitors like Onvo and Tesla are poised to launch similarly priced models this fall, creating a pricing war scenario that investors are swiftly discounting. The stock's 6.1% drop reflects fears of margin compression in a market already saturated with premium EVs.

EV Sector Turbulence as Tesla Trails 0.77%
The broader EV sector is under pressure as Tesla's stock declines 0.77% alongside Li Auto's collapse. While Li Auto's 6.1% drop is steeper, it mirrors Tesla's recent struggles with slowing sales and regulatory uncertainties. Both companies face a crowded BEV market, with Onvo's L90 and Tesla's Model Y L set to intensify competition. Li Auto's 323x dynamic PE ratio highlights its valuation vulnerability compared to Tesla's more established position in the sector.

Options and ETF Strategy for BEV Sector Volatility
• 200-day MA: $25.83 (below current price) • RSI: 63.63 (neutral) • MACD: 0.63 (bullish divergence) • Bollinger Bands: $24.98–$32.22 • 30D support: $26.88–$26.99

Technical indicators suggest Li Auto is testing critical support levels near $27. The stock is trading below its 30D MA but above the 200D MA, indicating potential for a bounce if it holds above $27. The high turnover (2.47%) suggests active trading, but leveraged ETFs are absent in the data. For options, two contracts stand out:

• LI20250808P26.5 (Put):
- Strike: $26.50 • Expiry: 2025-08-08 • IV: 57.32% • Leverage: 42.22% • Delta: -0.339 • Theta: -0.0054 • Gamma: 0.134 • Turnover: 2,003
- High gamma indicates sensitivity to price swings; moderate leverage aligns with bearish bias. Projected 5% downside (to $26.04) yields $0.46 profit.

• LI20250808P27.5 (Put):
- Strike: $27.50 • Expiry: 2025-08-08 • IV: 59.69% • Leverage: 30.49% • Delta: -0.412 • Theta: -0.0013 • Gamma: 0.137 • Turnover: 2,386
- Strong IV and moderate delta make it ideal for a mid-term bearish play. Projected 5% downside (to $26.04) yields $1.46 profit.

Aggressive bearish players may consider the LI20250808P27.5 if the stock breaks below $27.50, while LI20250808P26.5 offers safer entry near $26.50 support. The 5C charging network rollout in August could trigger volatility, making these options time-sensitive plays.

Backtest Li Auto Stock Performance
The backtest of LI's performance after a -6% intraday plunge shows favorable results, with the 3-Day win rate at 52.55%, the 10-Day win rate at 52.55%, and the 30-Day win rate at 56.41%. This indicates that LI tends to recover and even surpass its previous levels in the short term following a significant drop. The maximum return during the backtest period was 9.52%, which occurred on day 59, suggesting that there is potential for substantial gains in the weeks following a steep intraday decline.

Act Now: Key Levels and Strategic Entry Points
Li Auto's 6.1% drop has created a critical inflection point, with $27.50 acting as near-term resistance and $26.50 as immediate support. Investors should monitor the 30D MA ($28.60) and 200D MA ($25.83) for directional clues. With Tesla (-0.77%) also under pressure, sector-wide volatility remains elevated. Aggressive traders may target the LI20250808P27.5 put for a 5% downside scenario, while conservative players should watch the $26.50 level before committing capital.