In the current new energy vehicle market, Li Auto has become "unstoppable".

On October 31, Li Auto released its financial report for the third quarter of 2024, which showed that it achieved revenue of 42.9 billion yuan in the third quarter, an increase of 23.6% year-on-year; net profit was 2.8 billion yuan, a 0.3% increase year-on-year. Although the net profit growth rate in the third quarter was not high, it marked the eighth consecutive quarter of profitability for Li Auto. In other words, while other automakers are still struggling in the "quagmire" of losses, Li Auto has already taken the lead in "reaching shore".

This is good news for Li Auto. However, the response in the capital market has not been positive.

After the financial report was released, Li Auto's share price fell instead of rising the next day. Li Auto's Hong Kong-listed shares fell as much as 11.55% at one point and closed down 9.59%. As of the close on November 6, Li Auto's share price was 95.7 Hong Kong dollars per share, with a total market value of 203.1 billion Hong Kong dollars.

Although Li Auto's sales have recovered significantly recently, and its performance has been impressive, its share price has not risen substantially. Compared to its peak of 185.5 Hong Kong dollars per share, Li Auto's share price is still nearly halved, and its market value has shrunk by more than 180 billion Hong Kong dollars from its peak.

Concerns Behind the Financial Report

Judging solely from revenue and net profit figures, Li Auto's financial report is relatively impressive.

However, a closer look at the various data reveals certain underlying concerns. Li Auto's financial report reveals two major issues – financial management losses and weakness in the high-end market.

Starting with financial management, it is crucial for large automakers. After all, in the first half of this year, Li Auto relied on financial management income to "hold the stage." The financial report shows that in the first half of the year, Li Auto's financial management income was 1.439 billion yuan, accounting for 80% of the net profit of 1.695 billion yuan.

However, in the third quarter, Li Auto suffered a "significant setback" in financial management.

According to the financial report, Li Auto's net interest income and investment income in the third quarter was -21.979 million yuan, a far cry from the investment income in the first half of the year. It is reported that the A-share market experienced a significant rebound in the third quarter, with the Shanghai Composite Index rising 12.44% and the ChiNext Index surging by a staggering 29.21%. Therefore, it was unexpected for Li Auto to incur investment losses in the third quarter.

In the third quarter, Li Auto's net operating cash flow reached 11 billion yuan, with cash on hand totaling 106.5 billion yuan. Even after deducting short-term and long-term borrowings, net cash was still 97.7 billion yuan. If invested properly, this huge amount of cash could generate considerable profits for Li Auto. Therefore, enhancing investment capabilities is particularly important for Li Auto.

The issue of weakness in the high-end market is even clearer. In terms of sales, Li Auto has emerged from the shadow of the failure of the Li MEGA early this year. In the third quarter, Li Auto's total sales reached 152,800 units, with an average monthly sales volume exceeding 50,000 units, representing a year-on-year growth rate of over 40%.

However, it should be noted that most of these sales were generated by the low-end model Li L6.

According to Li Auto executives, since its launch, the monthly delivery volume of Li L6 has exceeded 25,000 units, making it the best-selling model among the new cars launched this year. In the six months since its launch, Li L6 has delivered a cumulative total of 139,000 new vehicles. However, as Li L6 sales soared, the proportion of Li Auto's high-priced, high-margin models has also declined significantly, and the product sales structure gradually tilt towards lower-priced models, affecting the overall profit level. According to the financial report, in the third quarter of this year, the average price of a single Li Auto vehicle was 270,000 yuan, compared to 319,800 yuan in the same period last year, a year-on-year decrease of 15%.

Admittedly, with the help of economies of scale, although the average price per vehicle has decreased, Li Auto's overall gross margin remains at a high level. In the third quarter, Li Auto's overall gross margin reached 21.5%, with an automotive business gross margin of 20.94%. However, compared to the past, Li Auto has clearly faced challenges from brands like AITO in the high-end market.

Li Auto Under "Siege"

As a top performer in the automotive industry, Li Auto currently faces a major hidden danger: too many imitators.

Taking the extended-range technology as an example, Li Auto was one of the earliest automakers to adopt this technology. At that time, most automakers either chose a pure electric route or a PHEV route, and extended-range technology was once considered outdated. Previously, an executive from Great Wall Motors even mentioned on a platform that "it is a consensus in the industry that extended-range hybrid technology is outdated."

However, as Li Auto's sales gradually increased, more and more automakers began to imitate Li Auto and switch to the extended-range route.

According to media statistics, among existing brands, Zeekr, Voyah, Lanvin, NIO, Changan, AITO, and others have already launched extended-range models. Media reports also suggest that Xiaomi, which is currently the hottest topic in the automotive industry, may also launch an extended-range model. Coupled with BYD's million-yuan brand BYD Atto 3 also using extended-range technology, it is foreseeable that extended-range models will soon cover all models and price segments.

The reason why various automakers are flocking to the extended-range route is that launching extended-range models can indeed boost sales. NIO is a prime example, with its sales continuously rising after the launch of its extended-range models, exceeding 30,000 units in sales in the past three months.

The entry threshold for extended-range technology is not high. It has a simple structure and low cost, and does not require significant R&D investment to complete development. For Li Auto, being imitated is a sign of recognition from other automakers. However, on the other hand, Li Auto is facing increasing pressure. After all, when more and more technically equivalent but lower-priced models appear on the market, Li Auto's sales will inevitably be divided, similar to how joint-venture automakers are gradually struggling to sell their vehicles nowadays.

Li Auto itself has also felt the pressure, with increased expenses in various areas in the third quarter. Specifically, Li Auto's sales cost in the third quarter was 33.6 billion yuan, an increase of 24.5% year-on-year and 32% quarter-on-quarter; operating expenses were 5.8 billion yuan, an increase of 9.2% year-on-year and 1.5% quarter-on-quarter; and in terms of R&D expenses, due to the reduction in design and R&D costs for new products and technologies, as well as a decrease in employee compensation, Li Auto's R&D expenses in the third quarter were 2.6 billion yuan, a year-on-year decrease of 8.2%. Although R&D expenses decreased, the absolute value remains high.

Currently, Li Auto is a leading player among the new forces in the automotive industry. However, to maintain this advantage, Li Auto faces considerable pressure.