Shares of Chinese electric vehicle (EV) maker Li Auto (NASDAQ:LI) are falling more than 8% today as China’s Golden Week holiday looks set to slow production. This morning, LI stock opened at $36.80 per share.
The long holiday is likely to boost some sectors, like airlines and resorts. Chinese tourists are also being warmly welcomed in places like Thailand, which just introduced a “new visa-free scheme” to boost tourism. However, Golden Week will also cut production in industrial sectors like the automotive space.
Hovering around the $36 per share mark as of this writing, Li Auto carries a market capitalization of around $36.2 billion.
LI Stock: Joining the EV Crowd
Li Auto delivered 34,914 vehicles during August and has cumulatively delivered 208,165 vehicles through August. Shares of LI stock are still up more than 70% year-to-date (YTD), even with the latest downturn. But investors are more interested in a company’s tomorrows than its yesterdays.
Li Auto’s tomorrows are focused on the transition from its plug-in hybrid new energy vehicles (NEVs) to fully electric vehicles (EVs), which it will start delivering in December. Li has chosen to first launch the Mega, a $69,000 car that looks like the old Toyota (NYSE:TM) Previa. Five more EVs are due to come out in the next year.
But the battery-powered car market is far more competitive than Li Auto’s hybrid niche, especially at the high end. The company also faces new competition from Huawei Technologies, which is seeking manufacturing partners for its new Aito electric vehicle.
China’s EV market is ferociously competitive. The government is offering incentives to encourage that competition. BYD (OTCMKTS:BYDDF) and Tesla (NASDAQ:TSLA) lead the race and the mid-market is quickly being soaked up. Competitors like Nio (NYSE:NIO) have also begun exporting vehicles, which Li Auto has yet to do.
What Happens Now?
The current move down is based on speculation and profit-taking, which seems like a legitimate strategy given LI stock’s performance this year. Whether this turns out to be something more serious, or a buying opportunity, will become more clear after the Chinese holiday ends.
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.
