Stock Analysis & Valuation Li Auto Inc. (LI)

• Previous Close: $16.64
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	2.50	-85
Intrinsic value (DCF)	443.45	2565
Graham-Dodd Method	15.70	-6
Graham Formula	27.20	63

Strategic Investment Analysis

Company Overview

Li Auto Inc. (NASDAQ: LI) is a leading Chinese premium smart electric vehicle (EV) manufacturer specializing in hybrid and battery-powered SUVs and multi-purpose vehicles (MPVs). Headquartered in Beijing, the company focuses on the design, development, and sale of energy-efficient vehicles tailored to China's growing EV market. Li Auto differentiates itself with extended-range electric vehicle (EREV) technology, combining battery power with fuel-based range extenders to address charging infrastructure limitations. The company operates through a direct sales model with a strong online and offline presence, offering comprehensive after-sales services. With a market cap exceeding $14.8 billion, Li Auto is a key player in China's competitive EV sector, benefiting from government incentives and rising consumer demand for sustainable mobility solutions. Its flagship models, such as the Li L series, compete in the premium segment, targeting tech-savvy urban consumers.

Investment Summary

Li Auto presents an attractive investment opportunity due to its strong revenue growth (CNY 144.5 billion in FY 2023), profitability (net income of CNY 8 billion), and robust cash position (CNY 65.9 billion). The company's EREV technology addresses China's charging infrastructure challenges, giving it a competitive edge in the hybrid segment. However, risks include intense competition from domestic and global EV makers, potential regulatory changes in China's EV subsidies, and reliance on a limited product lineup. The stock's beta of 0.94 suggests moderate volatility relative to the market. Investors should monitor execution risks as Li Auto expands its pure EV offerings and scales production.

Competitive Analysis

Li Auto's competitive advantage lies in its focus on extended-range EVs, which bridge the gap between traditional hybrids and pure battery EVs. This technology appeals to Chinese consumers concerned about charging infrastructure limitations. The company's premium positioning and direct sales model allow for higher margins compared to mass-market competitors. Li Auto's strong R&D focus (evidenced by its technology development services) supports continuous innovation in smart features and energy efficiency. However, its reliance on the SUV/MPV segments and slower transition to pure EVs compared to rivals like NIO or BYD could limit long-term growth as China's charging infrastructure improves. The company's capital-light approach (zero reported capital expenditures in the latest period) suggests efficient asset utilization but may raise questions about production scalability. Li Auto's CNY 65.9 billion cash reserve provides ample runway for expansion and R&D investments to maintain its technological edge.

Major Competitors

• NIO Inc. (NIO): NIO is a pure-play premium EV maker with strong brand recognition in China and expanding global presence. Its battery-swapping technology and extensive charging network address range anxiety more effectively than Li Auto's EREV approach. However, NIO's higher cash burn rate and later path to profitability compared to Li Auto raise concerns about sustainability.
• BYD Company Limited (BYDDF): BYD dominates China's EV market with vertical integration from batteries to vehicles. Its broader product portfolio and stronger economies of scale give it pricing power Li Auto lacks. However, BYD primarily competes in mass-market segments, while Li Auto's premium focus allows for higher margins and differentiated branding.
• XPeng Inc. (XPEV): XPeng competes directly with Li Auto in smart EV technology but focuses more on autonomous driving features. Its lower price points attract different demographics but result in thinner margins. XPeng's stronger software capabilities contrast with Li Auto's hardware-focused EREV advantage.
• Tesla, Inc. (TSLA): Tesla's global brand strength and Gigafactory Shanghai presence make it a formidable competitor in China's premium EV space. Its pure EV technology and Supercharger network are more advanced but lack the fuel flexibility of Li Auto's EREVs. Tesla's higher production scale gives cost advantages Li Auto cannot yet match.
• BYD Company Limited (H-shares) (1211.HK): BYD's Hong Kong-listed shares represent the same competitive dynamics as its OTC-listed shares - market leadership in volume but less premium positioning compared to Li Auto. Its broader international footprint provides diversification Li Auto lacks.