Li Auto has taken the Chinese electric vehicle (EV) market by storm, surpassing all competitors in recent months. With its unique strategy, Li has managed to capture a significant share of the market.
According to Citi analyst Jeff Chung, who utilized data from the Chinese Passenger Car Association to update his EV database, there is both good news and some food for thought for Tesla, the leading player in the electric vehicle industry.
In October, sales of new energy vehicles (NEVs) witnessed a remarkable growth of 31% compared to the previous year. This growth rate exceeded the 23% increase seen in September and marked the highest year-over-year growth since May. It’s noteworthy to mention that these results account for the Covid-19-related decline in production that occurred in 2022.
NEV is the metric China uses to track EV sales, encompassing battery-electric vehicles, like Tesla’s offerings, as well as plug-in hybrid vehicles.
This accelerating growth is positive news for the entire industry, which has recently experienced a downturn in stock prices due to concerns about slowing growth. Over the past three months, Tesla stock suffered a decline of approximately 14%, while the S&P 500 remained flat and the Nasdaq Composite dropped around 2%.
Despite posting exceptional year-over-year growth of about 38%, BYD stock (1211.Hong Kong) dipped about 7%. Why? BYD managed to challenge Tesla’s dominance by offering lower-priced EVs in China. Their range includes several models priced below $30,000, significantly below the cost of a Tesla Model 3.
Similarly, Li Auto (ticker: LI) saw its shares fall by 14% over the past three months, despite announcing better-than-expected earnings and gaining market share. Among all automakers operating in China, Li stands out by capturing the largest NEV market share in the last 12 months.
Li Auto’s impressive performance underscores the effectiveness of its electric-vehicle strategy. As the Chinese EV market continues to thrive, Li’s success is a testament to its ability to meet the demands of Chinese consumers with innovative and affordable options.
This bodes well for Li Auto and the entire EV industry, signaling that there is still significant potential for growth and market expansion in the coming months and years.
Li Auto’s Market Share Increases
Li Auto, a prominent player in the electric vehicle (EV) industry, has witnessed a significant surge in its market share. In October, Li captured 4.5% of the market share, an impressive increase from its previous market share of 1.5% a year ago. In contrast, Tesla’s market share slipped to 8.2% from 10.6% during the same period.
However, evaluating Tesla’s market share in China alone might not accurately reflect the overall health of its business. This is because Tesla serves both the European and Chinese markets from its manufacturing plant in Shanghai. Over the past three months, Tesla has exported roughly 40% of its production from China.
Li Auto achieved an outstanding milestone with a remarkable 300% year-over-year sales growth in October. What makes Li distinct is its unique approach to EVs. Unlike traditional battery-electric vehicles or plug-in hybrids, Li Auto’s platform offers range-extended electric vehicles. These vehicles include a gasoline-powered generator that replenishes the battery when it reaches a low charge level. Consequently, Li Auto’s solution overcomes range anxiety, which refers to the fear of depleting the battery without access to charging stations. Despite this innovative approach, Li Auto has managed to keep the additional cost of its vehicles relatively low.
The success of Li’s strategy has not gone unnoticed by other industry giants. Stellantis (STLA), for instance, plans to emulate Li Auto’s approach in its forthcoming 2025 Dodge Ram 1500 EV truck. Stellantis intends to equip this electric truck with a generator, providing a remarkable range of 690 miles on a single charge with a full gas tank in the generator.
While Li Auto is primarily known for its range-extended electric vehicles, it also has plans to introduce battery-only EVs in the future. Unlike other companies that may need to redesign their plug-in hybrid models to make this transition, Li Auto is well-positioned to offer battery-only EVs without significant alterations.
Looking ahead, as advancements in battery technology continue and charging infrastructure further improves, the need for generators may diminish. However, for now, the inclusion of a generator has proven to be a winning strategy for Li Auto.
