Hong Kong-listed shares of Li Auto Inc. (NASDAQ: LI) (HK: 2015) tumbled on Monday after the Chinese electric vehicle (EV) maker posted weaker-than-expected earnings for the fourth quarter and issued a lackluster revenue forecast for the current quarter. The stock fell as much as 7% to HK$105.0, underperforming the broader Hang Seng Index, which rose 1%. This decline followed a 4.3% drop in Li Auto’s U.S.-listed shares on Friday.
Earnings Miss and Weak Guidance Weigh on Investor Sentiment
Li Auto, a key competitor to Tesla Inc. (NASDAQ: TSLA) in China’s rapidly expanding EV market, reported record revenue of 44.3 billion yuan ($6.1 billion) for Q4 2024. However, its earnings per share (EPS) came in at 10.04 yuan, reflecting a decline from the previous year.
Adding to investor concerns, Li Auto issued revenue guidance of 23.4 billion to 24.7 billion yuan ($3.2 billion to $3.4 billion) for Q1 2025—well below analysts’ expectations of 33.5 billion yuan. This softer-than-expected outlook suggests challenges ahead for the company amid increasing competition and pricing pressures in China’s EV market.
Analysts Downgrade Li Auto Amid Rising Competition
The disappointing results prompted multiple analyst downgrades. Macquarie downgraded Li Auto to “Neutral” from “Outperform,” citing uncertainty over its ability to sustain earnings growth in a highly competitive market. Similarly, Nomura cut its rating from “Buy” to “Neutral,” expressing concerns about Li Auto’s near-term prospects as several Chinese automakers gear up to launch new EV models in 2025.
Li Auto has announced plans to introduce two all-electric SUVs, the Li i8 and the Li i6, later in 2025. While these new models could strengthen its market position, analysts remain cautious about how they will perform against a wave of new offerings from domestic rivals.
Price Wars and Market Challenges
Despite its strong sales growth in recent years, Li Auto’s margins have been squeezed by aggressive pricing strategies among Chinese EV manufacturers. The ongoing price war has made profitability more challenging for all players in the sector.
However, industry watchers believe the outlook for Chinese EV makers could improve as Beijing considers rolling out additional subsidies to boost consumer demand. These potential incentives could help stabilize the market and offer some relief to companies like Li Auto.
As investors digest the latest earnings miss and weak guidance, Li Auto’s stock remains under pressure. The coming months will be crucial in determining whether the company can regain momentum amid intensifying competition and evolving market dynamics.
