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Why Is Li Auto (LI) Stock Rebounding Today?

  • Li Auto (LI) stock rose ahead of other Chinese EV makers on Sept. 22.
  • Li will now launch its L8 SUV on Sept. 30.
  • All the Chinese EV makers are facing economic headwinds in their home market.
LI stock - Why Is Li Auto (LI) Stock Rebounding Today?

Source: Robert Way / Shutterstock.com

All the Chinese electric vehicle (EV) companies traded in the U.S. struggled on Sept. 21. But Li Auto (NASDAQ:LI) stock was the first to rise again, on reports that it will speed up the launch of its latest model.

Li said it will hold a launch event for the Li L8, a six-seat premium SUV, on Sept. 30. The car carries a sticker price of $56,600 at the Chinese yuan’s current exchange rate of 7.06 to the dollar.

Rival Xpeng (NASDAQ:XPEV), meanwhile, continued to fall overnight. Nio (NYSE:NIO) was up 2% in premarket trading.

LI Stock: What’s Going On?

Most Chinese stocks are down for the year. They have been battered by the country’s continuing Covid-19 lockdowns, by U.S.-China tensions, and by the falling yuan, which traded below 6.4 to the dollar at the start of 2022. Analysts are now starting to price those headwinds into their analyses, taking all the Chinese auto stocks down.

But, until recently, business for Li was pretty good. Li’s sales could be up nearly 25% this year after tripling in 2021. The company continues to narrow its losses even while it grows. In the 2021 investing environment, this would be fine. In 2022, it means the stock is down 24%, in line with the general stock market.

LI stock was hit hard after August deliveries fell 56% from July. At the time, it planned a November release for the L8. At the end of August, it had 265 outlets in China.

While Li’s SUVs look well-adapted to western roads, it has yet to launch here, hoping instead to get 20% of its home market, then assemble overseas. Co-founder Shen Yanan said, “We want to be a winner, not just a mere participant, in the global market,” when launching the stock’s issue in Hong Kong a year ago.

What Happens Next?

All the Chinese luxury EV makers represent a fraction of the sales of Tesla (NASDAQ:TSLA) in their home market. While their cars look like you might see them on American roads, you won’t for some years. They’re also still Chinese companies, subject to the policies and economic problems of their home market.

Speculators are making a quick buck on LI, but investors will have to wait for a profit.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2022/09/why-is-li-auto-li-stock-rebounding-today/.

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