Li Auto (NASDAQ:LI) shares have demonstrated considerable volatility in 2022. The firm, among China’s most promising EV manufacturers, recently released its second, long-awaited car — the L9.
The L9 truly highlights why we need to be taking note of developments in the Chinese EV market. Li claims that the L9 is the best SUV on the market, better than the Bentley Bentayga, any Range Rover, or the Rolls Royce Cullinan.
That’s a big claim considering the car only costs $70,000 — a fraction of its peers. But some reviewers think Li might have a point.
So, let’s take a closer look at Li Auto.
Past performance
Li Auto was founded in 2015 and was listed on the NASDAQ in July 2020. So how has the stock faired since its launch?
Well, the company priced 95m million American Depositary Shares at $11.5 per share, which was higher than the expected range of $8 to $10 per share. But the stock quickly rose, and eventually reached nearly $40 a share in late November.
So, if I had bought Li Auto shares two years ago, how much would I have now?
Well, two years ago today, Li Auto was trading around $38, near its peak, and just more than double the current share price. If I’d invested $200 in the stock, today I’d have $96.
However, I need to take into account exchange rate changes. Two years ago, £200 would have got me $260. So today, that $260 of Li Auto stock would be worth $124. In turn, $124 is worth £104 at today’s exchange rate. So, the weak pound would have saved me on my losses.
Why I’m buying now
Li Auto, like its Chinese peers, have struggled in 2022. China’s ongoing battle with Covid has impacted production and the supply chain. Deliveries have suffered as a result and the growth experienced in previous years has not been sustained.
The Chinese government is largely responsible for the turmoil. Li delivered just 4,571 EVs in August. The 56% month-on-month decline in deliveries was attributed to Covid-19 and supply chain restraints.
Despite this, Li could be the first EV-maker — with the exception of Tesla — to turn a profit and it could do it this year.
I also see the L9 as being central to this profitability. The SUV comes with two electric engines and one petrol, delivering the driver an astonishing 1,100-km range. The $70,000 EV comes with a wealth of tech, including sizeable infotainment displays controlled by 3DToF hand/finger tracking cameras.
Another reason I’m buying Li Auto is because of its valuation relative to its peers. Li roughly has a price-to-sales (P/S) ratio comparable with NIO and XPeng — three. However, its P/S is a fraction of this of Tesla (eight) or Rivian (30).
