Li Auto (NASDAQ:LI) stock fell slightly on Sept. 26 in premarket trading after cutting its production outlook for the rest of the year. But after the market opened, LI stock has been rebounding in early morning trading.
The company will now deliver 25,500 vehicles in the current quarter, down from a previous estimate of 27-29,000. Li’s latest sedans sell for about $70,000 each.
LI stock has been more resilient than its competitors this year, and today’s rebounding is more evidence of that trend. Nio (NYSE:NIO) and Xpeng (NASDAQ:XPEV) are both up only 2% and 3% respectively on an extension of a tax break worth $1,400 for electric car sales in 2023. Yet LI stock is up about 6%.
Li Stock Is on the Move
The separation between Li and its competitors is becoming a story.
Li stock moved higher a week ago after moving up the launch of its new L8 SUV by two months. Before that, Li fell harder than its competitors after reporting a fall in August deliveries.
Overall, however, Li has been the strongest stock among the three Chinese sedan makers in 2022, with Nio down 46% and Xpeng at 71%. LI stock is only down about 17% in 2022, which is about in line with the S&P 500 average.
Investors see the extension of tax breaks as more important than the shortfall in deliveries. The L8 model will replace an earlier L1 in the Li line-up and won’t have a big impact on total sales.
All three companies have big ambitions. Li talks about getting 20% of the total auto market and building assembly plants outside China. Li admits that supply chains are a problem as with other car makers.
China is becoming a significant competitor in global markets as the world adapts to electrics. China exported over 300,000 cars in August, 83,000 of them either electrics or plug-in hybrids. Plans are to quintuple that export production to 1.5 million vehicles in 2025, with 80% of European sales being electrics.
What Happens Now?
Li can be seen in one of two ways.
You can invest in an electric car company selling $5 billion a year on a market capitalization of $23.5 billion. Or you can speculate on the national ambition of $25 billion in Li sales three years from now.
All this assumes China remains stable and growing.
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.
