Li Auto (NASDAQ:LI) kicked off 2021 with style. The shares of the EV manufacturer stood at $36.75 in January, although LI stock slipped to close to $20 today for a loss of nearly 30%.
As the company looks to enjoy strong growth and achieve profitability this year, I am bullish on this EV stock. The dip in LI stock is an opportunity to buy.
The Chinese EV market is highly competitive but there is room for all. I believe LI stock could benefit from the massive Chinese auto market and achieve a larger market share in the industry.
Let’s take a look at the catalysts driving growth for the EV company.
The EV market in China is massive and despite several EV players, there is room for everyone to grow. Despite the pandemic, the sales of EVs in China stood at 1.3 million in 2020. It is expected that the market will rise to 1.9 million EVs this year. The market is expected to grow at a rate of 40%, which gives enough room for EV manufacturers to grow.
The delivery numbers are reassuring that the company is moving towards strong numbers and revenue. In March, LI Auto delivered 4,900 vehicles, which is a 210% rise over February. Rival Nio (NYSE:NIO) delivered 7,257 vehicles and Xpeng (NYSE:XPEV) delivered 5,102.
The companies saw outstanding deliveries for the first quarter with Nio sales at 20,000 and LI Auto at 12,579 and Xpeng at 13,340 units. The country is strongly moving towards reducing carbon emission and is promoting EV manufacturers to take charge.
This offers Li a strong chance to increase its market share and double the deliveries.
Tesla’s Loss Is Li’s Gain
Li Auto’s rival, Tesla (NASDAQ: TSLA) is facing trouble in China. It began with the Shanghai Auto Show where protestors raised their voices about vehicle malfunctions. Chinese regulators are not happy with Tesla’s failure to keep up with auto repairs while the sales grow. There have been several complaints in China and the company has not been able to handle them efficiently.
China had also banned Tesla’s car from military complexes over the fears that the cars would spy on the government. If Tesla is not able to handle the situation well, it could lose the large market share and the position it holds in China.
Li has a great opportunity to expand in the ever-growing EV industry in China and offer an alternative to Tesla. If it pans out well, LI stock could hit a new high.
Impressive Product Line
Li Auto has an impressive product lineup and it will be expanding its fleet with one model a year, starting 2022. Li is currently focusing on BEV (battery electric vehicle) models to meet the regulations of the government and plans to launch the first model in 2023.
The company believes that its self-driving capabilities will compete with Tesla. Recently, the CEO stated that the current and future models of Li will be equipped with assisted driving features and they will have 508 trillion operations in a second of LiDAR and computing power.
This gives the company a competitive edge in the industry and places it in a strong position against the rivals Nio and Xpeng.
The Bottom Line on LI Stock
Despite chip shortage and stiff competition in the market, Li has reported strong delivery numbers. It is differentiated from the rivals on technology and holds a competitive edge in the industry.
Li stock has shown volatility lately due to sell off, but it will pick up pace soon. With a market cap of $18 billion, the stock is priced to perfection. Now is a good opportunity to add LI stock to your portfolio. Once the company turns profitable, there is no looking back.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.