Li Auto Shares Plunge Over 8% over Price Cuts Following Tesla

TMTPost -- Hong Kong-listed shares of Li Auto Inc. Plunged 8.3% to HK$97.45 and the American Depositary Receipts (ADRs) settled 5.6% lower on Monday, all of them closed at their lowest since May 9, 2023. The shares selloff came on heels of the Chinese electric vehicle (EV) maker’s price cuts following U.S. rival Tesla Inc.’s similar move.

Credit：Li Auto

Li Auto said Monday it started to adopt new pricing system from that day for all new versions of across its models this year. Following the adjustment, Li Auto cut prices of its flagship L series including L7, L8, L9 by a range of RMB14,000 to RMB20,000 (around US$2,500 to US$4,000), and the starting price of MEGA, Li Auto’s first full-electric model as well as its most expensive model to date, was trimmed by RMB30,000 to RMB529,800. The shoppers who have already placed their orders but to taken delivery will be entitled to the new price, and Li AUto will grant cash to existing owners of all 2024 models.

While Li Auto is relatively well positioned to the development of the EV industry compared with other emerging EV startups in China, and became the first one to achieve profitability, it has to respond to the increasingly competitive market timely, the state-run newspaper Shanghai Securities News cited an auto industry analyst. The price cuts were deemed as Li Auto’s efforts to find a balance between cash flow and sales.

Li Auto followed suit after Tesla intensified the price war across the globe, especially in China, the world’s biggest EV market. The U.S. EV giant cut prices of its models in the United States, China, Germany and other major markets from Friday to the weekend. In U.S., Tesla trimmed the Model Y, the Model X and the Model S by US$2,000 on Friday. The cheapest version of the Model Y now costs US$42,990, down to the lowest start price of the sport utility vehicle. The Model Y Long-Range and Performance variants are listed at US$47,990 and US$51,490, respectively. The price of the Model X was dropped to US$77,990, its lowest yet, and its Plaid variant is priced at US$92,900.

Tesla China website showed Sunday that all models on sale in the country were reduced by RMB14,000. The newly revamped Model 3, which is the first major upgrade since the midsize electric vehicle (EV) was first revealed in 2016, is now priced at RMB231,900 (US$32,000) , down from RMB245,900 previously--back to its launch price last September. The Model Y Rear-Wheel Drive (RWD), Long-Range and Performance variants now cost RMB249,900, RMB290,900 and RMB354,900, respectively, with the former down to the cheapest its been in at least five years. The Model S Dual Motor All-Wheel Drive (AWD) and Plaid variants were discounted to RMB684,900 and RMB814,900, respectively. The price of the Model Dual Motor AWD fell to RMB724,900, and the Plaid variant to RMB824,900.

This is Tesla’s second round of price cuts in China to the date this year. The company initiated the year 2024 with a new round of price cuts in China, cutting prices even on its recently updated version of Model 3 sedan. It lowered prices on all the variants of new model 3 and two versions of Model Y on January 12.

U.S.-traded shares of Tesla slumped as much as 5.6% and closed 3.4% lower Monday, with their seventh consecutive daily losses in wake of the new price cuts which raised demand concern. The latest cuts could cost Tesla all of its operating profit in China, Evercore ISI warned in a report released that day. The Austin-based automaker had the most margin to give in North America, while its business in China may now be breakeven or even negative on the basis of earnings before interest and taxes, the report noted.