Is Li Auto Stock a Buy?

When tallying up electric automobile (EV) gross sales globally, China tops the listing. In the first half of 2021, nearly 1.1 million EVs were sold in China — extra than 40% of the EV devices sold worldwide in the end of that length. Clearly, that has many leading automakers surroundings their sights on this snappy-rising market. Li Auto ( LI -4.84% ) isn’t basically a streak-setter, nevertheless it completely has managed to function a foothold on this competitive market.

In November, Li Auto sold 13,485 electric autos in China. That locations it amongst the cease 10 sellers of EVs in China. Other top gamers encompass BYD, Tesla, Overall Motors (joint enterprise with SAIC and Wuling), Xpeng ( XPEV -2.13% ), and Nio ( NIO -1.34% ). Li Auto’s deliveries in November exceeded rival Nio’s 10,705 devices. By comparison, Xpeng sold 15,613 EVs in the end of the month. 

The Li ONE electric vehicle is shown against an empty background.

Image supply: Li Auto.

Seriously, BYD sold extra than 90,000 EVs (including plug-ins) in November, while the SAIC-GM-Wuling JV sold a bit over 50,000 EVs. Finishing the comparison, Tesla sold 31,732 EVs in China while exporting 21,127 EVs of the total 52,859 autos it delivered in China in November. 

Let’s clutch a smarter stare at Li Auto to salvage if the firm can compete and if its stock makes a curious dangle stop unswerving now.

Li Auto’s impressive utter

Li Auto (also typically typically known as Li Xiang or Perfect Autos) turned into once based in 2015 and started producing its first SUV, the Li ONE, in November 2019. To this point, the firm has delivered around 110,000 autos entire. Of these, roughly 76,400 devices were delivered in 2021.

LI Revenue (Quarterly) Chart

LI Earnings (Quarterly) info by YCharts

In the third quarter, Li’s revenue rose to $1.2 billion, up nearly 230% over the year-ago quarter. As the above graph displays, Li Auto’s revenue utter in the third quarter turned into once bigger than that of its peers Xpeng and Nio. Li’s utter momentum sustained itself in October and November, as evident by the firm’s most contemporary transport numbers. In November, Li Auto’s automobile deliveries rose 190% year over year. The firm is clearly rising in a market with aggressive competitors. Moreover, Li Auto’s inappropriate profit margin of 23.3% turned into once bigger than its peers in the most contemporary quarter.

What differentiates Li Auto from opponents

Li ONE might perhaps perhaps more than doubtless extra precisely be typically known as a hybrid EV which skill of it makes utilize of an inner combustion engine-based utterly “differ-extender,” which (love plug-ins) permits refueling in the absence of an electrical charger. Moreover, not like most plug-ins, Li ONE will be charged the usage of snappy chargers. This optionality is doubtless a key explanation for Li’s mighty utter. In inequity to in the U.S., EV owners rely extra on public chargers in China which skill of the little availability of residential parking areas beautiful for placing in home chargers. Utilizing unhurried public chargers isn’t always imaginable (or optimal), leading to differ fright. Li’s differ-extender affords a solution to that fright. 

To be beautiful, even supposing Li ONE’s differ-extension expertise is getting a valid response from patrons unswerving now, that will change as battery electric autos with longer ranges change into extra long-established.

Enhance plans

In the fourth quarter, Li Auto expects to sell 30,000 to 32,000 autos, representing extra than 100% year-over-year utter. The firm’s manufacturing facility in Changzhou has an annual manufacturing capability of 100,000 devices, expandable to 200,000 devices. 

In October, Li Auto commenced construction of a recent manufacturing facility in Beijing. It’s anticipated to alter into operational in 2023. 

Li Auto plans to originate a fat-size extended-differ SUV in 2022. At some point soon, it plans to originate extra fashions of extended differ besides utterly electric autos. 

A promising electric automobile stock

Li Auto stock is Trading at a lower ahead mark-to-gross sales ratio than that of Xpeng and Nio.

LI PS Ratio (Forward) Chart

LI PS Ratio (Forward) info by YCharts

The firm grew its gross sales at a bigger charge than peers currently. On the identical time, it reported bigger inappropriate margins. Even though Li Auto’s operational historical previous is quick, its utter prior to now looks promising.

In the prolonged hobble, Li Auto might perhaps perhaps furthermore merely unexcited possess the profit of a sturdy domestic ask utter for EVs. Overall, Li Auto stock looks promising. Alternatively, investors might perhaps perhaps furthermore merely unexcited exhibit the dangers which skill of its somewhat short historical previous of operations besides intense competitors from extra established electric automobile corporations.

This text represents the idea of the author, who might perhaps perhaps furthermore merely disagree with the “unswerving” recommendation field of a Motley Fool top charge advisory carrier. We’re motley! Questioning an investing thesis – even one in every of our bear – helps us all think significantly about investing and create selections that abet us change into smarter, happier, and richer.

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