Shares of Chinese electric vehicle (EV) manufacturer Li Auto (NASDAQ:LI) stumbled badly on Tuesday after disclosing an unfavorable announcement. While industry observers anticipated the launch of its latest multi-purpose vehicle (MPV) in December, management stated that it must reschedule for March. That didn’t resonate well with Wall Street as Li’s competitors continue to run on time. Unfortunately, the issue forced LI stock to drop about 8% in the afternoon session.
According to a Seeking Alpha report, the EV maker initially planned to launch its Mega MPV — a utilitarian platform shaped like a minivan — in December. As well, deliveries were set to start in late February. However, management recently backtracked on that schedule, delaying the launch to March 1, with deliveries set to begin that month.
That was a tough pill for investors to swallow because the Mega represents Li’s flagship family MPV. Notably, the robust-sized EV features a 500-kilometer (roughly 311 miles) range with a sticker price under $84,500. While that is an elevated price tag, the Mega features seven seats.
Further, the public first got a glimpse of the Mega in November at the Guangzhou International Automobile Exhibition in China. Significantly, Li secured 10,000 pre-orders within two hours of the release. Thus, the delay cut into the positive momentum.
LI Stock Suffers from a Painful Error
Aside from the disappointing delay of the Mega, LI stock slipped based on competitive pressures. As Investor’s Business Daily mentioned, the EV maker rivals compatriot vehicle producer XPeng (NYSE:XPEV). The latter enterprise officially launched its X9 MPV, a similar utilitarian platform that focuses on family transportation.
Indeed, both the X9 and the Mega feature the classic minivan-style chassis. Just like the Mega, the X9 is a seven-seater. In addition, Xpeng’s iteration of the MPV will feature different range options, from 610 kilometers to 702 kilometers. It’s also built on an 800 V high-voltage platform and comes standard with a 3C fast-charging battery cell. This technology should facilitate the addition of 300 kilometers of range on a 10-minute charge.
Finally, XPeng will offer the X9 at different price points, from RMB 359,800 ($50,680) to RMB 419,800 (roughly $59,200). Following its Nov. 17 unveiling, XPeng received more than 30,000 pre-orders. Therefore, it’s likely imperative that MPV producers reach the market first, heaping more pressure on LI stock.
If that wasn’t enough, Li must also contend with other competitors in the segment. Specifically, BYD (OTCMKTS:BYDDF) manufactures the Denza D9, another minivan offered in both plug-in hybrid and electric powertrains. Priced modestly lower than the XPeng X9, Li could potentially lose market share to BYD, thus clouding its narrative.
Why It Matters
At the moment, analysts don’t seem too flustered with LI stock, rating shares a unanimous strong buy. To emphasize the point, Morgan Stanley’s Tim Hsiao reiterated a “buy” rating with a $53 price target. Overall, the average expectation calls for shares to hit $53.75, implying about 56% upside potential.
On the date of publication, Josh Enomoto did not have (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.
