Li Auto to shift focus away from sales and competition, toward its customers

By Tomi Kilgore

EV maker's stock sinks after delivery outlook lowered, weighing on shares of rivals including Nio and Tesla

Shares of Li Auto Inc. took a hard hit Thursday, after the China-based EV maker cut its first-quarter delivery outlook, citing "lower-than-expected order intake."

The company now expects to deliver between 76,000 and 78,000 EVs during the current quarter, down from previous guidance of between 100,000 and 103,000.

The stock (LI) dropped 7.7% in midday trading. It has tumbled 31.4% so far in March, which would be its worst monthly performance since it plunged 40.8% in October 2022.

The company acknowledged that its sales strategy for the new Li MEGA model was "mis-paced." Chief Executive Xiang Li said the operations were planned as if the model had already entered the "scaling phase" of sales, while it was still in the early "validation" period.

So Li said the company will revert to the validation phase of sales, by shifting its focus toward its core user group, and target sales to cities with stronger purchasing power. Then, it will look to expand to a broader user base.

"[W]e put excessive emphasis on sales volume and competition, distracting us from what we excel at - creating value for our users and driving operating efficiency," Li said. "We will lower our delivery expectations and restore sustainable growth by refocusing on enhancing user value instead of competition, while maintaining operating efficiency."

The selloff in Li Auto's stock also appeared to weigh on the shares of its China-based peers, as they bucked the broader stock market's rally.

Shares of Nio Inc. (NIO) fell 1%, XPeng Inc.'s stock (XPEV) shed 1.8% and BYD Co. Ltd.'s U.S.-listed shares gave up 0.7%.

Read: XPeng's stock jumps as margin improvement helps fuel earnings beat.

Shares of U.S.-based EV giant Tesla Inc. (TSLA), which generated $21.75 billion in revenue from China in 2023, or 22.5% of the total, were down 0.7%.

Meanwhile, the Dow Jones Industrial Average DJIA jumped 326 points, or 0.8%, and the S&P 500 index SPX surged 0.7%.

-Tomi Kilgore

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03-21-24 1235ET

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