What’s Happening With Li Auto Stock?

Li Auto (NASDAQ:LI) delivered 26,263 vehicles for February, an increase of almost 30% year-over-year, although sales declined by 12% month-over-month. This is the second straight month that the long-time leader’s sales have been beaten by rival Xpeng (NYSE:XPEV), which delivered 30,453 vehicles in February, up over 6.5x from 4,545 in the same month last year. Nio stock (NYSE:NIO) reported deliveries of 13,863 vehicles in February, a 62% increase from the year-ago period. Although Li Auto doesn’t break down the key drivers of its growth, it’s quite likely that the Li L6, the most affordable model in the company’s lineup, helped its volumes rise year over year.

The first couple of months of the year are typically quite sluggish for the Chinese automotive market on account of the Chinese New Year festival, which occurs sometime between late January and mid-February. Considering this, a better way to do year-over-year comps is to add January and February deliveries and compare them with the year-ago period. In this case, Li Auto sold a total of 56,190 vehicles for January and February combined, up just about 9% from 51,416 units in the year-ago period.

Image by Lee Rosario from Pixabay

Now Li’s sales growth has been sluggish overall. Why is this? One factor is that the company ran considerable year-end promotional sales toward the end of last year, which likely pulled forward demand, leading to softer sales in January and February. Intense competition in the Chinese EV market is pressuring volume growth and average selling prices, with over 100 brands vying for market share. The company has relied heavily on the advantage of its gasoline-powered range extenders to sell its vehicles in recent years. That advantage could be diminishing as charging infrastructure continues to improve, making the successful delivery of popular pure EVs crucial. However, Li’s first purely electric model, the MEGA van, which comes without the gasoline range extender found in Li’s other vehicles, hasn’t quite lived up to expectations. Priced upwards of $70,000, the vehicle is aimed at the high-end EV market. Besides this, Li Auto also lags behind rivals such as Tesla and domestic players like Xpeng in autonomous driving technology, which could be impacting its competitiveness.

While Li Auto stock has seen lackluster growth over recent years, the Trefis High Quality Portfolio, with a collection of 30 stocks, has provided better returns with less risk versus the benchmark S&P 500 index over the last four-year period; it’s been less of a roller-coaster ride, as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could NIO face a similar situation as it did the last few years and underperform the S&P over the next 12 months – or will it see a recovery?

Although there are risks, Li Auto’s valuation is attractive. The stock trades at about $27 per share, or roughly 17x consensus 2025 earnings. The company’s revenues are projected to grow by a strong 30% in 2025 per estimates. In comparison, U.S. rival Tesla trades at about 100x consensus earnings, even though revenues are likely to grow by just about 15% this year.

So how could Li Auto’s stock trend higher? While the weak performance of Li’s Fire pure EV model dampened investor sentiment, the company is set to launch more pure EV models, including the Li i8 SUV, expected around July. If this model gains traction, it could boost investor confidence in Li’s prospects in the battery electric vehicle market. Li Auto stock could also benefit from increased foreign capital inflows into China, driven by the government’s generous stimulus programs and growing optimism surrounding the country’s technology and R&D capabilities following the launch of the DeepSeek AI model. If investors assign a more generous valuation, say around 35x forward earnings, reflecting Li Auto’s stronger growth prospects, the stock could see a considerable upside, potentially rising to about $54 per share. See our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for a detailed look at how Li Auto stock compares with its rivals, Nio and Xpeng.

[1] Returns as of 3/4/2025
[2] Cumulative total returns since the end of 2016

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