Li Auto Stock Is Falling. Earnings Missed, but This Was the Real Problem.
Shares of Chinese electric vehicle maker
are falling after weaker-than-expected earnings. Demand for its all-electric vehicles isn’t the main problem. Car pricing is.
Monday morning, Li reported first-quarter earnings per share of 8 cents on sales of $3.6 billion. Wall Street was looking for earnings per share of12 cents on sales of $3.7 billion, according to FactSet. A year ago, Li reported earnings per share of 10 cents on sales of $2.7 billion.
Operating-profit margins were negative 2%—investment income pushed earnings per share into positive territory—down about 4 percentage points year over year.
Pricing was a big reason for the decline. Average revenue per car sold in the first quarter was roughly $42,000, down about $8,000 from a year ago.
U.S.-listed American depositary receipts were down 4.2% in premarket trading at $23.85, while
and
futures were up 0.1% and 0.2%, respectively.
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Pricing pressure may not be going away soon. Li expects to sell between 105,000 and 110,000 cars in the second quarter. That implies deliveries of about 40,000 a month in May and June, compared with 25,787 cars in April.
That would be up about 30% to 38% year over year, compared with May and June 2023. For the full quarter, guidance implies growth of about 21% to 27%.
Second-quarter sales, however, are expected to come in around $4.2 billion, up about 6% year over year. Wall Street was projecting about $5.2 billion, up some 30%.
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Part of the weaker pricing in the second quarter is product mix. “In April, we launched and commenced delivery of Li L6, a five-seat premium family SUV, to satisfy the mobility needs of more young families, making all-wheel-drive range extension system and intelligent features available on vehicles priced below RMB300,000 [or $42,000],” said CEO Xiang Li in a news release. “As our company continues to grow amidst an ever-changing market landscape, we will embrace the twists and turns that the journey presents and consistently focus on enhancing operating efficiency while persistently creating incremental user value.”
New products always help sales, but competition in the Chinese EV market looks fierce.
Management will hold a conference call at 8 a.m. U.S. Eastern to discuss results. Analysts and investors will want to hear more about demand and pricing on the call.
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Coming into Monday trading, Li stock was down about 34% year to date. Slowing demand growth for battery-EVs and lower pricing have weighed on investor sentiment.
Write to Al Root at allen.root@dowjones.com
