li auto lowers delivery guidance

Li Auto (NYSE: LI) stock is trading lower in US premarket price action today after it lowered its third-quarter delivery guidance today. The global automotive industry continues to grapple with inflationary pressures and supply chain woes.

Li Auto had previously guided for deliveries between 27,000-29,000 vehicles for the third quarter. Now, with just a week before the quarter ends, the company has said that it expects to deliver only about 25,500 cars in the quarter.

Li Auto delivered 10,422 vehicles in July and 4,571 cars in August. Its deliveries had plunged by more than 50% in August and trailed both NIO and Xpeng Motors by a big margin. Li Auto’s new delivery guidance implies deliveries of little above 10,500 cars in September. To put that in perspective, it delivered 7,094 cars in September 2021.

Commenting on the guidance cut, Li Auto said, “The revision is a direct consequence of the supply chain constraint, while the underlying demand for the Company’s vehicles remains robust.” It added, “The Company will continue to closely collaborate with its supply chain partners to resolve the bottleneck and accelerate production.”

Automotive Industry is Grappling with Supply Chain and Inflation Woes

While the supply chain situation has improved in almost all industries, the automotive industry continues to grapple with supply chain bottlenecks, especially the shortage of chips. The higher inflation is not making things any better. Ford recently said that higher inflation would hit its third-quarter earnings by $1 billion.

While some Wall Street analysts have turned bearish on Ford stock amid the recession concerns, billionaire hedge fund manager Ray Dalio bought more Ford shares in the second quarter.

As for the supply chain issues, Li Auto is not the only automaker that has lowered its guidance. Lucid Motors has slashed its 2022 guidance twice in 2022. Lucid Motors stock is getting near its post-merger lows. The steep fall has made some analysts turn bullish on the startup EV (electric vehicle) company. We have a guide on how to buy Lucid Motors stock.

Li Auto Stock Falls on Guidance Cut, Other Chinese EV Stocks Rise

While Li Auto stock is trading lower today after the guidance cut, NIO and Xpeng Motors are trading higher after China announced that it would extend the purchase tax exemption for EVs to the end of 2023.

The Chinese economy is slowing down and expanded at an annualized pace of 2.5% in the first half of 2022 which is less than half of what the country was targeting for the year. While most major central banks globally are raising rates to tame inflation, the Chinese central bank has instead cut interest rates to spur growth.

China has been supporting its EV industry and the country also bailed out NIO when it seemed that the company is headed for bankruptcy.

NIO has since raised billions of dollars through stock issuances and ended June with total cash and cash equivalents of $8.1 billion. Most analysts are bullish on NIO stock. Deutsche Bank analyst Edison Yu, who has a buy rating on NIO stock, is optimistic on the company’s international expansion plans. He also believes that eventually, NIO would enter the US market, which is the world’s most profitable automotive market.

Li Auto Has a Massive Cash Pile

Li Auto has also been on a cash-raising spree and raised money by selling shares in the second quarter of 2022. It ended June with total cash in excess of $8 billion. The stock however fell after releasing its Q2 2022 earnings.

Li Auto reported revenues of $1.3 billion in the second quarter of 2022, which were 73.3% higher YoY. The revenues however fell short of estimates. The company’s gross profit almost doubled over the period to $280.4 million at an impressive vehicle margin of 21.2%. However, its net losses also swelled to $95.5 million which was 172% higher than the second quarter of 2021.

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