The price war in China's auto industry has intensified the wait-and-see mood among car buyers, and Li Auto's move helps to allay potential consumers' concerns to some extent.
[eod_live target="LI.US" title="Li Auto US"] | [eod_live target="2015.HK" title="Li Auto HK"]
(Image credit: Li Auto)
As the price war in China's auto industry continues, Li Auto (NASDAQ: LI) is telling consumers that it won't be cutting prices, at least they don't need to worry about it in the short term.
An image circulating on the Chinese internet on March 13 shows Li Auto rolling out a consumer price protection policy covering all of the company's currently available models -- the Li L7, Li L8 and Li L9.
For consumers who purchase these models, if the prices drop within 90 days of their order, then Li Auto will refund the difference.
The policy is in effect from March 11 to March 31, and the price reduction Li Auto refers to includes both a drop in the vehicle's official prices and the cash-off benefits the company offers, according to the image.
In a report today, local media outlet The Paper quoted Li Auto salespeople as saying the image is true.
The policy, which is available to consumers when they purchase the Li L7, Li L8 and Li L9, is primarily intended to make clear to them that Li Auto will not be dropping prices, the salesperson said.
On March 2, Li Auto founder, chairman and CEO Li Xiang said on Weibo that the price of lithium carbonate would be drastically reduced no matter what because the demand is far less than expected.
He said at the time in the comments section of that Weibo that Li Auto's models would not be reduced in price.
Notably, a wave of price cuts then began in the Chinese auto industry, with some internal combustion engine automakers starting to offer huge discounts.
The increasing number of car companies joining the price war has also led to an increased wait-and-see sentiment among consumers to avoid seeing price cuts soon after purchasing a car.
Li Auto's move will partly contribute to allaying the company's potential consumers' concerns and thus help it achieve its sales targets.
Li Auto has an internal goal of 25,000-30,000 monthly deliveries and will aim to meet that goal in the second quarter, its management said in a February 27 analyst call after announcing fourth-quarter earnings.
The company delivered 16,620 vehicles in February, up 9.77 percent from 15,141 in January and up 97.53 percent from 8,414 in the same month last year.
Li Auto guided for deliveries of 52,000 to 55,000 vehicles in the first quarter when it reported fourth-quarter earnings. The company's delivery figures for February mean it is on track to deliver 20,239 to 23,239 vehicles in March.