The market value of Li Auto is close to halving, and the price reduction of the whole system and the development of the sinking market have achieved great results?

In the first quarter, the sales volume was overtaken, and the MEGA series market performed poorly, and Li Auto may hope for this price reduction for all models

"China Science and Technology Investment", Long Min, Li Wanting

On April 18, Li Auto (02015. HK) officially unveiled the all-new Li L6, a five-seater luxury SUV for families. The Ideal L6 is available in two versions, Pro and Max, with the Ideal L6 Pro having a unified retail price of 249,800 yuan and the Ideal L6 Max having a unified retail price of 279,800 yuan. This is the first time that the national unified retail price of Li Auto has dropped below 300,000 yuan.

In addition, on April 22, Li Auto announced that the 2024 Li L7, Li L8, Li L9 and Li MEGA will adopt a new price system. Among them, the price of the Ideal MEGA will be reduced by 30,000 yuan, and the current price will be 529,800 yuan, and the price of some models of the 2024 Ideal L9 and L8/L7 will be reduced by 18,000 yuan to 20,000 yuan. Previously, Li Xiang, chairman of Li Auto, has publicly stated many times that Li Auto will not reduce prices.

However, on the day of the official announcement of the price cut, the share price of Li Auto's Hong Kong stock fell sharply, closing at HK$97.45 per share, a decrease of 8.33%. In the past two months, the market value of Li Auto has nearly halved, falling by more than HK$150 billion.

The MEGA series did not perform as expected

In 2023, Li Auto's market will perform well, and its annual sales will firmly rank first among new EV manufacturers. According to Li Auto's financial report, in 2023, Li Auto will deliver a total of 376,000 vehicles, a year-on-year increase of 182.2%, ranking first among new car manufacturers, with annual revenue of 123.85 billion yuan, a year-on-year increase of 173.5%, becoming China's first new car company with an annual revenue of 100 billion yuan, and a net profit of 11.81 billion yuan, achieving a comprehensive profit since delivery. Among the new domestic car-making forces, Li Auto has partnered with NIO (09866. HK), Xpeng (09868. HK) and other car companies have completely opened their positions.

Thanks to the strong market performance in 2023, on January 1, 2024, Li Xiang announced the goal for 2024 on Weibo, that is, the annual sales target is 800,000 units, with the highest monthly sales exceeding 100,000 units and monthly sales exceeding 30,000 units.

In order to achieve this sales target, Li Auto has accelerated the speed and frequency of launching new vehicles. Li Xiang said at the 2023 annual results meeting, "We will release and deliver a total of 4 products next year, which is the most abundant product year since the company's establishment." In the first half of 2024, we will release the Li L6, a mid-to-large SUV for younger families, and three more pure electric products will be delivered in the second half of the year. ”

At present, Li Auto's first pure electric MPV, Ideal MEGA and Ideal L6, have been released, but in terms of market performance, Ideal MEGA does not seem to have met Li Auto's expectations.

On March 1, Ideal MEGA was officially put on sale, with a unified retail price of 559,800 yuan. As the first 5C high-voltage pure electric model of Li Auto, Li MEGA is expected to be high. Li Xiang has publicly stated that the Ideal MEGA will be the next hot product of Li Auto, and will become a luxury model with more than 500,000 "No. 1 sales regardless of category and energy form".

However, since the launch of the Ideal MEGA, its unique body design has caused a lot of controversy. A car owner in Qingdao, Shandong Province told the reporter of "China Science and Technology Investment": "The early expectations were too high, and then I hesitated with the fermentation of public opinion, and finally chose to unsubscribe." ”

In response to the online controversy, Li Auto issued a complaint letter, claiming that the malicious P map insinuated that Li Auto's new product was a funeral product (funeral car) loaded with the deceased, deliberately distorted the use of Li Auto, and seriously infringed on Li Auto's product image and brand reputation. The infringing picture and its content have constituted insult and infringed on the reputation right of Li Auto.

However, the official statement did not save the market performance of Ideal MEGA. According to the data of the car emperor, the ideal MEGA delivered a total of 1,058 new cars in the first week, and then fell all the way, with sales of 3,229 units in March, which is still a significant gap from Li Xiang's goal of "monthly sales of 8,000 units". Sales of the Ideal MEGA fell further in April, with only 856 units sold in the first three weeks.

In contrast, the Ideal L6, which focuses on the sinking market, exceeded 10,000 units within 72 hours of its launch.

Range extender tracks are getting more and more crowded

The predecessor of Li Auto, "Car and Home", was founded in 2015, and in March 2019, the brand changed its name to Li Auto, and chose the extended-range track as its own development path.

Extended-range electric vehicles are the simplest series plug-in hybrid systems in new energy vehicle technology, and at the same time, the battery capacity of the vehicle is not high, so it is easier to achieve mass production.

In fact, it was not Li Auto that was the first to test the water in the extended range market. In 2012, General Motors' (GM) Chevrolet Volt Range Extender was launched in North America, the world's first mass-produced range extender car, followed by BMW Motor Corporation (ADR) in 2013 with the launch of the i3 Range Extender, but due to poor market performance, it was eventually discontinued.

In 2018, Li Auto launched its first model, the Ideal ONE. Unlike other new car companies, Li Auto did not choose the pure electric mode, but chose the range extender. Thanks to the differentiated development strategy of "extended-range medium and large family SUV" chosen by Li Auto, it quickly occupied this blank market and became the leader of new car manufacturers.

Li Auto's annual report shows that in the four quarters of 2023, Li Auto's gross profit margin will be 20.4%, 21.8%, 22.0%, and 23.5% respectively, showing a steady upward trend. For the whole year of 2023, Li Auto's gross profit margin will be 22.2%, which also exceeds Tesla's 18.2%, second only to BYD, and ranks second among new energy vehicle companies.

However, despite Li Auto's high gross profit margin and cash reserves of 103.67 billion yuan by the end of 2023, its overall R&D investment is not high. From 2020 to 2023, Li Auto's R&D expenses will be 1.099 billion, 3.29 billion, 6.78 billion, and 10.6 billion respectively, although R&D expenses have been rising, the proportion of revenue will drop from 11.62% in 2020 to 8.56% in 2023. At present, NIO and Xpeng Motors, which are still losing money, will have R&D expenses accounting for 24% and 17.2% of revenue in 2023, respectively.

Zhang Xiaorong, President of Deepin Science and Technology Research Institute, said: "Extended-range electric vehicles are mature technologies, and compared with smart electric vehicles, the research and development cost is lower, and it is easier to achieve mass production of technology. The recent decline in the market performance of Li Auto shows that this technical barrier is relatively easy to break through. ”

In this context, Wenjie, Deep Blue Automobile, Leapmotor (09863. HK), VOYAH Auto and other new power brands have entered the "family SUV + extended range" market that Ideal has deeply cultivated, and the market share of Li Auto has been continuously eroded.

In the first quarter of 2024, Li Auto delivered a total of 80,400 new cars, and Wenjie delivered a total of 85,800 new cars, a year-on-year increase of 636.27%, surpassing Ideal to become the sales champion in the first quarter. Deep Blue Automobile delivered a total of 40,000 units in the first quarter, a year-on-year increase of 113.1%, and its performance was also outstanding.

In addition to this, Li Auto is also facing BYD (002594. SZ). Entering 2024, BYD's brands will officially begin to set foot in the core market that Li Auto focuses on, and it is expected to launch the mid-to-large SUV Tang L, Denza N9 and Formula Leopard 8 this year, all of which will affect the market share of Li Auto's L series models.

It is worth mentioning that recently, many car companies have announced price cuts. Tesla's (TSLA) Model 3/Y/S/X models have been reduced by 14,000 yuan in Chinese mainland, of which the starting price of the mid-size SUV Model Y has dropped to 249,900 yuan. NIO launched a 1 billion yuan subsidy for the replacement of oil vehicles, giving a subsidy of 10,000 yuan to users who replace oil vehicles, and Wenjie also launched the new M7 model, with the price reduced by 20,000 yuan to 229,800 yuan. The results of Li Auto's new car launch and price reduction of all models also need to be further verified by the market.

The reporter sent a letter to Li Auto about the decline in stock price, R&D investment, market performance, etc., but has not received a reply so far.