Chinese electric vehicle maker Li Auto now has what many of its competitors in China are in search of: profit.
The company relies in Beijing reported annual net income of 11.8 billion Chinese renminbi ($1.7 billion), making it the first of three Chinese electric vehicle startups to post an annual profit. The other two major startups are Xpeng and Nio, which have yet to reveal full-year results.
The automaker delivered 376,030 vehicles last yr, almost thrice the 133,246 delivered in 2022. It also increased its vehicle margin to 21.5%, up from 19.1% in 2022.
Investors welcomed the news in Hong Kong trading on Tuesday, sending the company’s shares soaring more than 25%, adding more than $9 billion to its market value. The stock is near the peak it hit last August.
Li Auto sees growing interest in electric vehicles in China, the world’s largest electric automobile market. Li Auto’s cars are closer to Tesla’s in terms of price and are geared toward premium consumers, somewhat than selling cheaper models offered by market leader BYD.
BYD, backed by Warren Buffett’s Berkshire Hathaway, also posted record sales last yr, shipping 3.02 million vehicles. The company has even overtaken Tesla as the world’s largest seller of battery electric vehicles. In a stock exchange report filed in late January, BYD said it expects 2023 profit of 29-31 billion yuan ($4-4.3 billion), which might represent a rise of as much as 86% year-on-year.
Li Auto, nevertheless, gave a bearish outlook for the current quarter, saying it expects to deliver around 100,000 to 103,000 electric vehicles, which can be the lowest since last yr’s second quarter.
There are signs that China’s electric vehicle market is struggling slows down, amid a patchy economic recovery that has weighed on consumer sentiment. Competition between players in China’s electric vehicle market can also be fierce, with firms reminiscent of BYD and US carmaker Tesla engaging in a price cutting war to gain market share.
“The iPhone Moment”
On Monday, Li Auto CEO Donghui Ma said the company had no plans to release a vehicle priced below 200,000 yuan ($27,800). For comparison, the base Tesla Model 3 in China currently costs 245,000 yuan ($34,000).
Ma rejected the idea of targeting products at a lower cost point and said the company would only concentrate on households willing to spend more than 200,000 yuan.
“If we were able to capture one-third of this market in China, our total sales would already be over RMB 1 trillion ($139 billion).”
Ma then set his sights even higher. “If we include overseas by 2030, this market will create a business close to the revenue of all iPhones sold worldwide combined,” he said.
In fact, the iPhone was widely discussed in Li Auto’s earnings calls. When an analyst asked when the “iPhone moment” might come for autonomous driving, Ma replied that he believed autonomous cars could possibly be ready for that level of mass acceptance in only a few years. Li Auto will make autonomous driving standard in its vehicles, he continued.
Credit : fortune.com
