Li AutoStocks

Tesla Rival Admits A Mega Fail

Li Auto announced on this Thursday that it has reduced its delivery forecast for the first quarter due to weak demand for its initial fully electric MPV, MEGA.

On Friday, Li Auto’s shares dropped by 3.27% to 30.53 on the stock market. Furthermore, the stock continued to decline below both the 50-day and 200-day moving averages.

Earlier, LI stock had surged on Feb. 26 following strong fourth-quarter earnings, reaching a six-month high of 46.44 the following day. However, the stock faced challenges as orders for the Mega minivan appeared to be weaker than expected.

Li Auto’s CEO, Xiang Li, has issued a detailed apology for its reduced guidance, attributing it to the performance of its first fully electric vehicle, the Mega. The company recently priced its all-electric minivan, the Mega, at 559,800 RMB ($77,764), which is almost double the price of General Motors’ gas-powered competitor, the GL8. This pricing also exceeds that of the XPeng X9 and the BYD-owned Denza D9.

Li Auto is often considered a close competitor to Tesla in China’s premium electric vehicle market, primarily known for its extended range electric vehicles (EREVs) that function as plug-in hybrids. The significant shortfall in March sales indicates potential weaknesses in Li’s existing EREV SUV lineup, including the L7, L8, and L9 models.

In a news release on Thursday, Xiang Li, CEO of Li Auto, admitted that the operating strategy of Li Mega was not properly paced. He acknowledged that they had mistakenly planned operations as if the model was already in the scaling phase, when in reality they were still in the early stages of business validation.

Moving forward, Li stated that they will refocus on their core user group and target cities with stronger purchasing power, adjusting the Li Mega strategy to align with the initial phase of business development. Once this is established, they will gradually expand to a wider user base and more cities.

Additionally, Li recognized that they had placed too much emphasis on sales volume and competition, which had diverted their attention from creating value for users and improving operational efficiency. To address this, they will lower delivery expectations and prioritize enhancing user value over competition, while still maintaining operational efficiency to ensure sustainable growth.

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