HONG KONG - Shares of Chinese electric-vehicle (EV) maker Li Auto have more than doubled from last year’s low and are tipped for further gains, even as a slowing economy and price war hamper its rivals.
The Beijing-based automaker unexpectedly reported profits for the past two quarters by churning out a regular line-up of new models and keeping costs contained. Analysts remain bullish: Citigroup predicts the firm’s shares will climb another 88 per cent by year-end, while Morgan Stanley raised its target price by more than 40 per cent in May.
A price war is heating up in China’s EV industry as the costs of batteries fall from last year’s highs. Tesla and BYD have both announced plans to cut vehicle prices, effectively squeezing industry margins, though analysts see Li Auto ideally positioned to weather the intensifying competition.
The price wars are mainly in the mass-market segment around a selling price of 100,000 yuan (S$19,000) to 150,000 yuan, “but Li Auto is selling cars far above that range”, said Mr Vincent Sun, an analyst at Morningstar Asia in Singapore. “Secondly, if you look across the board, there are actually not too many models to choose in mid-to-large-sized premium SUVs.”
Unlike its rivals, Li Auto has focused on designing and manufacturing extended-range electric cars, vehicles that use gasoline engines to add to the distance possible for their electric motors. The company is also expected to introduce its first purely electric-powered vehicle later in 2023 to complement its existing range of hybrid cars.
Li Auto has outpaced its peers by introducing a new model in each quarter since the middle of 2022 – a much faster pace than competitors such as XPeng and Nio. The revamped product line-up helped revenue surge by 96 per cent last quarter, while deliveries jump to a record 52,584.
Ms Joanna Chen, an analyst at Bloomberg Intelligence in Hong Kong, said: “The order intake has been much stronger than the market had expected, thanks partly to the intensive model launches. Li Auto’s sales volume will continue to beat XPeng and Nio this year, as the latter are still in a phase of product switch.”
Li Auto’s Hong Kong-listed shares closed at HK$110.80 on Monday, having climbed from last year’s low of HK$53.55 set on Oct 31. Their 107 per cent rally over the period compares with a 20 per cent gain in Xpeng, and 21 per cent loss for Nio.
Citigroup sees Li Auto’s shares climbing to HK$208.80 by Christmas due to its sustained sales momentum and improving economies of scale. The firm’s “business model and sales logic are totally different from other new energy vehicle players”, analysts at the bank wrote in a research note published in May.
Analysts have raised their 12-month target price for the automaker by about 10 per cent over the past month alone, the largest increase among the 30 members of the Hang Seng Tech Index, according to data compiled by Bloomberg.
Morgan Stanley analysts in Hong Kong wrote in a note in May, in which they raised their target price by 41 per cent: “Two profitable quarters in a row, quality execution in model launches, and cost control, underpin a more favorable volume and margin outlook. The company deserves more credit for its well-rounded strategy and quality execution.” BLOOMBERG
