The updated delivery guidance means that Li Auto now expects it to deliver between 24,584 and 26,584 vehicles in March.
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Li Auto (NASDAQ: LI) lowered its guidance for first-quarter deliveries by about 24 percent, after being overly optimistic ahead of the launch of new models and weak actual order performance.
As a result of the lower-than-expected order intake, the company now expects first-quarter vehicle deliveries to be in the range of 76,000 to 78,000 units, a revision from its previous estimate of 100,000 to 103,000 units, Li Auto said in a statement today.
Li Auto's previous delivery guidance was provided in its fourth-quarter 2023 earnings announcement on February 26, when it also guided first-quarter revenue to be in the range of RMB 31.25 billion ($4.3 billion) to RMB 32.19 billion, an increase of 66.3 percent to 71.3 percent from the first quarter of 2023.
Li Auto didn't provide updated revenue guidance in today's statement, but it's clear that expectations also need be lowered.
The updated delivery guidance means that Li Auto now expects it to deliver between 24,584 vehicles and 26,584 vehicles in March, considering it delivered 31,165 in January and 20,251 in February.
Li Auto said on March 1 that it was targeting a rebound in monthly deliveries to 50,000 units in March. The latest guidance means that it will only reach about half of its goal for this month.
Following Li Auto's statement, the company's US-traded shares were down 6 percent in premarket trading as of press time.
The dramatic reversal comes shortly after deliveries of Li Auto's first battery electric vehicle (BEV), the Li Mega MPV (Multi-Purpose Vehicle), as well as updated versions of existing models began.
The company officially entered the BEV segment with the launch of the Li Mega on the evening of March 1, Beijing time. It also launched the 2024 updates for the three extended-range electric vehicle (EREV) models, the Li L7, Li L8, and Li L9, at that time.
Li Auto's management has mentioned several times before that the Li Mega would be the best-selling model priced at more than RMB 500,000 in China. One executive said in a local media interview that the Li Mega would challenge monthly sales of 8,000 units after launch.
However, the Li Mega has been met with a lot of negative comments since its launch. Local media outlet LatePost reportedon March 17 that the Li Mega's initial sales fell short of expectations and that the company's management was considering lowering its sales target for the model.
The Li Mega received orders for nearly 4,000 units within half a month of its launch, and the Li Auto plant has a capacity of 5,000 units of the Li Mega this month, according to the report.
"I want to reflect on a couple of the key issues that we faced in March and provide some insights and solutions. First, we want to acknowledge that the operating strategy of Li Mega was mis-paced," Li Xiang, founder, chairman and CEO of Li Auto, said in the statement today.
"We planned operations of Li Mega as if the model had already entered the 1-to-10 scaling phase, while in fact, we were still in the nascent 0-to-1 business validation period," Li said.
Similar to Li One and the company's EREV technology, Li Mega and the company's BEV technologies will need to go through this 0 to 1 validation process, according to Li.
"Next, we will first focus on our core user group and target cities with stronger purchasing power, recalibrating the Li Mega strategy back to the 0-to-1 phase. After that, we will expand our reach to a broader user base and more cities," Li said.
"Second, we put excessive emphasis on sales volume and competition, distracting us from what we excel at -- creating value for our users and driving operating efficiency," Li added.
Li Auto will lower delivery expectations and restore sustainable growth by refocusing on increasing user value rather than competition, while maintaining operational efficiency, he said.
($1 = RMB 7.1995)
Li Auto CEO addresses what went wrong with Li Mega and how to fix it in internal letter
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