Bernstein downgrades Li Auto stock rating to Market Perform on rising competition

Investing.com - Bernstein SocGen Group downgraded Li Auto (NASDAQ:LI), the $24.5 billion market cap EV maker with a GREAT financial health score according to InvestingPro, from Outperform to Market Perform on Tuesday, while reducing its price target to $26.00 from $33.00.

The downgrade reflects intensifying competition in the premium PHEV SUV segment where Li Auto has historically dominated. Despite maintaining a 20.5% gross margin and generating nearly $20 billion in revenue over the last twelve months, the company’s market share in this category has declined significantly from 72% in Q2 2023 to 34% in Q2 2025, according to Bernstein’s analysis.

Li Auto faces mounting pressure from rivals including Huawei-backed AITO, Great Wall, BYD (SZ:002594), and upcoming entrants such as XPeng (NYSE:XPEV), Zeekr, and Xiaomi (OTC:XIACF). This competitive landscape has prompted a more cautious 12-month outlook from Bernstein despite acknowledging Li Auto’s pioneering extended-range electric vehicle (EREV) technology and strong advanced driver assistance systems (ADAS) progress.

The research firm also noted that high-end PHEV market penetration has reached approximately 30% after two consecutive years of over 100% annual growth, suggesting future growth moderation in the segment.

Bernstein further highlighted challenges in Li Auto’s battery electric vehicle (BEV) efforts, describing them as "margin dilutive" amid an already crowded BEV market, though the company maintains technological strengths and overseas potential. According to InvestingPro’s Fair Value analysis, Li Auto currently appears undervalued, with 7 additional ProTips and a comprehensive Pro Research Report available for subscribers seeking deeper insights into the company’s fundamentals and growth prospects.

In other recent news, Li Auto has announced the launch of its new Li i8 electric SUV, which features a rapid charging capability that adds 500 kilometers of range in just 10 minutes. The vehicle will be available in three trims priced between RMB321,800 and RMB369,800, with deliveries set to begin on August 20, 2025. The pre-sale price range for the i8 model aligns with market expectations, and more details on pricing are expected to be revealed soon. Meanwhile, UBS has maintained its Buy rating on Li Auto, viewing the upcoming debut of the i8 model as a potential positive catalyst for the company’s stock. However, Li Auto has revised its vehicle delivery forecast for the second quarter of 2025, now expecting to deliver approximately 108,000 vehicles, down from its previous guidance of 123,000 to 128,000 vehicles. This adjustment is attributed to a temporary sales system upgrade, which the company believes is necessary for long-term growth. The revised delivery forecast is below analyst expectations, with the average estimate being 124,739 units.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.