While the beginning of the month is usually slow for the auto industry, Li Auto's apparent lagging performance behind its peers may have raised some concerns.
Li Auto's US-traded shares plunged Tuesday, significantly lagging local peers Nio and Xpeng Motors, as rumors of a weak sales performance in the first week of August may have sparked investor concerns.
Li Auto fell 7.02 percent to $30.87 as of Tuesday's US stock market close. For comparison, Nio was down 4.96 percent, Xpeng was down 1.6 percent and the Nasdaq Golden Dragon China Index was down 1.66 percent.
There was no significant negative news about Li Auto on Tuesday, and the sell-off by investors may have been due to insurance registration data showing the company's unusually weak performance in the first week of August.
Li Auto vehicles had just 800 insurance registrations from August 1-7, down 74 percent from the previous week and down 55 percent from the first week of August last year (July 26-August 1, 2021), data shared by Weibo car blogger @痛快舒畅 showed.
As a comparison, Nio vehicles had 2,200 insurance registrations in the same period, down 24 percent from the previous week and 14 percent year-on-year. Xpeng was 2,100, down 39 percent from the previous week and up 4 percent year-on-year.
BYD vehicles registered 30,300 units during the same period, down 25 percent from the previous week and up 177 percent year-on-year. Tesla was 6,700 vehicles, up 31 percent from the previous week and up 292 percent year-on-year. Huawei-backed AITO was 1,600 units, down 6 percent from the previous week, according to the data.
This data is based on Statutory Automobile Liability Insurance, which is required in China before a vehicle can be allowed to be driven on open roads.
It is worth noting that it is common for the auto industry to see lower sales at the beginning of the month, but it is not common to see such a significant decrease as Li Auto.
It could be that the initial launch of the Li L9 has created a disruption in Li Auto sales, although company executives previously downplayed the impact of its new SUV on the existing model, the Li ONE.
Li Auto launched the Li L9, the company's second model after the Li ONE SUV, on June 21, following its predecessor's extended-range technology. Its deliveries are expected to begin this month.
On June 4, Li Auto founder, chairman and CEO Li Xiang said on Weibo that the model will be officially delivered in August and deliveries could exceed 10,000 in September.
On June 24, Li Auto said the Li L9 had received more than 30,000 orders within 72 hours of the vehicle being available for reservation.
On July 1, Li Auto co-founder and president Shen Yannan said while the company announced that 13,024 vehicles were delivered in June that user enthusiasm for Li L9 did not hold back order intake for the 2021 Li ONE, which remains high on the back of continued user recognition.
On August 1, Li Auto announced that the company had reached the production milestone of 200,000 Li ONEs when it announced that it had sold 10,422 vehicles delivered in July, but did not continue to downplay the impact of the Li L9 on the model.
The Li L9 has received positive feedback from customers since its June 21 launch, and it has amassed more than 50,000 orders, with more than 30,000 confirmed non-refundable orders, Shen said on August 1.
Still, the current concerns may also be short-lived. But until the Li L9 proves its success and the Li ONE proves that its demand was not cannibalized, investor concerns are also likely to persist.
It's also worth noting that CnEVPost reported yesterday that Scottish investment firm Baillie Gifford & Co increased its holdings in Nio and cut its holdings in Tesla and Li Auto during the second quarter.
Moreover, in a research note on Tuesday, Deutsche Bank analyst Edison Yu's team said Li Auto could face some incremental headwinds in 2023.
"New BEVs next year will be a drag for gross margins in our view especially if raw material prices stay elevated and it must accelerate opex+capex to build out its new production lines, charging infrastructure network, and higher level ADAS capabilities," the team wrote.
"This fundamentally keeps us on the sidelines," according to the note.
The team raised their price target on Li Auto by $2 to $30, but that implies a 9.64 percent downside from Monday's close.
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