Li Xiang, founder and CEO of Chinese electric vehicle maker Li Auto, is struggling to convince investors that his company can keep growing amid intense competition and a price war, as disappointing results for the first quarter led to a brutal dumping of company shares.
Shares of the dual-listed firm plunged 19% in Hong Kong on Tuesday after falling 12.8% on the Nasdaq overnight. The 42-year-old Li, whose wealth is tied to a company stake, lost almost $1 billion in a single day.
The mogul still has a net worth of $5 billion, according to Forbes estimates. But during an analyst call yesterday, Li didn’t offer concrete details on how to meet targets for this year, including expanding deliveries by almost 50% to reach 560,000 or possibly 640,000 cars.
An operating loss for the first three months of this year and delays in launching a SUV model have shaken investors.
“Investor confidence has been affected after Li Auto was quite ambiguous on how to achieve the 2024 sales target,” says Wang Hanyang, a Shanghai-based analyst at research firm 86Research. “They also worry whether the company can maintain its gross profit margin with stepped up market competition.”
In the first quarter of this year, the gross profit margin was 20.6%, up from 20.4% in the first three months of 2023 but down from 23.5% in the previous quarter. The company reported revenues of 25.6 billion yuan ($3.6 billion) for the first quarter, up 36.4%, and an operating loss of 584.9 million yuan compared to an operating profit of 405.2 million yuan during the first quarter of 2023.
Li Auto still managed to eke out a net profit of 591.1 million in the first quarter, as the operating loss was offset by other income such as from investments, according to its quarterly results announcement.
An intense price war has forced industry leaders from BYD to Tesla to offer discounts on models across the board. Weak sales of Li Auto’s new Li Mega multi-purpose vehicle (MPV), which the company is now also selling at a discount, has added to its woes, according to Ming Lu, an analyst with Aequitas Research who publishes via research platform Smartkarma.
Meantime, the company has trouble on other fronts. Last week, it was hit with a class-action lawsuit, by investors who allege that the firm misguided them by exaggerating demand for the Li Mega MPV. It is also reportedly in the midst of large-scale layoff affecting almost 20% of its workforce, or 5,600 employees. Li Auto didn’t respond to an e-mailed request for comment.
