A Li employee works at a retail outlet at a Beijing shopping mall this month.
Jade Gao/AFP/Getty Images
Stock in Li Auto is gaining even though the Chinese electric-vehicle maker’s second-quarter earnings fell short of expectations. It is evidence that sales—and sales growth—are more important than the bottom line for EV startups.
And Li’s growth and financial forecasts look just fine. Li Auto (ticker: LI) stock was up about 2.9% Monday morning, while futures on the S&P 500 and Dow Jones Industrial Average were flat.
Li reported a 1 cent adjusted per-share loss from about $780 million in sales. Analysts were looking for it to break even with $774 million in sales.
Losing more money than anticipated when sales are better than expected can amount to a red flag. This loss, however, has more to do with rising administrative and research and development spending than a problem with profits coming from the cars.
Li delivered 17,575 vehicles in the second quarter, up from 12,579 in the first quarter of 2021. Gross profit margins on the company’s cars hit 18.7% in the second quarter, up from 16.9% in the prior three months.
“Our remarkable second quarter results reflect the undeniable strength and appeal of our Li ONE,” said CEO Xiang Li in the company’s news release. “We are also excited to share that Li ONE topped sales charts in the large SUV and new energy SUV categories in July, making us a leading domestic NEV manufacturer in China.” The Li ONE is Li’s only model for sale currently.
Li plans to deliver 25,000 to 26,000 cars in the third quarter and generate about $1.1 billion in sales. Those are big numbers, especially because analysts were looking for about $990 million in sales. Li’s best month for deliveries to date was July, when it shipped 8,589 vehicles. The company sees deliveries in August and September keeping up at that pace.
The strong forecast is good news for Li shareholders. It is also positive for EV investors looking at the strength of the Chinese market. China is the largest market globally for new cars, as well as new EVs.
Coming into Monday trading, Li stock was up about 2% year to date. It has been a volatile ride for investors. Shares are down almost 40% from their 52-week high, but up 26% over the past three months.
Early in the year, rising interest rates and constraints on auto production from the global semiconductor shortage which is constraining auto production weighed on investor minds. Lately, strong EV demand in China has helped to improve sentiment.
Li management scheduled a conference call at 8 a.m. Eastern time to discuss the results.
