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Li Auto (LI) may not dominate headlines like Tesla, but perhaps it should. In 2024 alone, the company delivered over 500,000 vehicles, expanded its global R&D presence, and continued scaling China’s largest highway fast-charging network. Notably, Li Auto stands out in the sector for its profitability, strong balance sheet, and plans to launch two new models in 2025.
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In an industry often defined by lofty valuations and high expectations, Li Auto’s disciplined execution and relatively modest valuation make it an attractive opportunity. While geopolitical and macroeconomic risks remain, I’m initiating a Buy rating based on its solid fundamentals and growth trajectory.
New Kid on the EV Block
I’m impressed by Li Auto’s operations and strategic direction. Primarily active in China, the company specializes in extended-range electric vehicles (EREVs), which combine battery-electric drivetrains with onboard generators. This hybrid approach helps alleviate range anxiety, one of the biggest concerns among EV buyers. Most of Li Auto’s lineup consists of family-oriented SUVs, with increasing emphasis on autonomous driving capabilities, advanced software integration, and driver assistance systems.
Building on its strong delivery performance, the company reported revenues of RMB 144.5 billion (approximately $20 billion). It now operates over 500 retail locations and employs more than 32,000 people, all part of an ambitious growth plan that will soon place it in direct competition with EV titans like Tesla (TSLA) and BYD (BYDDF). With the upcoming launch of its i6 and i8 models and the introduction of the AD Max v13 autonomous driving system, Li Auto is positioning itself for a potentially transformative year.
Beyond vehicle production, Li Auto is aggressively expanding its infrastructure. The company currently operates 1,420 highway fast-charging stations and aims to grow that number to 4,000 by year-end. Meanwhile, opening a new R&D center in Munich marks its first significant move into Europe, complemented by new sales hubs in Dubai and other international markets. While still in the early phases of global expansion, these steps reflect a promising and deliberate push toward building a truly international brand.
Financial Performance Revs Up Li Auto
Despite the company’s solid balance sheet and strong top-line performance, there are a few near-term challenges worth noting. In Q4 2024, net income declined 39% year-over-year, and gross margins slipped from 23.5% to 20.3%. Management attributed this margin pressure to the ongoing ramp-up in battery electric vehicle (BEV) production, a shifting product mix, and broader macroeconomic uncertainty. While these factors are part of the company’s long-term growth strategy, they may continue to weigh on profitability in the short term.