LI Unveils Li i8 SUV but Challenges Keep the Stock Under Pressure

Core Viewpoint - Li Auto is transitioning from hybrid vehicles to fully electric models, unveiling the Li i8 SUV, which is expected to enhance investor confidence in 2025 [1][2]. Company Overview - Li Auto has emerged as a leading luxury car brand in China, delivering 500,508 vehicles in 2024, significantly outperforming competitors XPEV and NIO, which delivered 221,970 and 190,068 units respectively [2]. Stock Performance - Over the past 12 months, Li Auto's shares have decreased by 37.5%, underperforming the Zacks Auto, Tires and Trucks sector's decline of 0.7% and the S&P 500's gain of 18.5% [3]. - In the same period, XPEV shares increased by 80.7%, while NIO shares fell by 21.4% [3]. Financial Metrics - Li Auto's shares are currently considered overvalued, with a Value Score of C, and a forward 12-month price/sales ratio of 1.12x, exceeding its median of 0.94x and the Zacks Automotive – Foreign industry's 0.59x [6]. - The average selling price (ASP) of Li Auto's vehicles is declining due to product mix changes, impacting revenue growth despite higher delivery numbers [9]. Expense Analysis - Selling, general and administrative (SG&A) expenses rose by 32.1% year-over-year, driven by increased employee compensation, while R&D expenses decreased by 8.2% year-over-year in Q3 2024 [9]. Strategic Initiatives - Li Auto is expanding its supercharging network, planning to build over 1,200 stations by the end of 2025, which will cover 90% of national highways, although this requires significant capital investment [10]. Market Challenges - The company faces macroeconomic uncertainties, potential tariff increases, and changing government policies regarding EV subsidies and market regulations, which could hinder long-term growth [11]. - The Zacks Consensus Estimate for Li Auto's 2025 EPS is currently $1.70, reflecting a decrease of 2 cents over the past month [11]. Conclusion - Despite strong delivery growth and a shift to fully electric vehicles, Li Auto is encountering substantial challenges that may impact its growth trajectory and stock performance [12].