Li Auto (NASDSAQ:LI) remains a strong player in the family-use SUV segment, but the landscape has quickly become more crowded, and competition has intensified.
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The Chinese EV maker has remained highly profitable in this market, though there has been a wave of new launches in recent months, including Xiaomi’s YU7, AITO’s M8/M7, and Onvo L90.
BofA analyst Ming Hsun Lee thinks that is the reason why the company guided for lower sales volume/GPM (gross profit margin) in 3Q25. Management has called for vehicle deliveries of 90–95,000 units in Q3, representing a year-over-year decline of 41% to 38%, with gross margins expected at 19%. “We believe the latest guidance echoes the intensified market competition, which will weigh on Li’s sales growth outlook,” the analyst went on to say.
The soft outlook was preceded by Q2 results that featured misses on both the top-and bottom-line; revenue fell by 4.5% year-over-year to $4.2 billion, missing the Street’s forecast by $250 million. Adj. EPADS of $0.19 fell short of the consensus estimate by $0.05.
Lee believes the company might need to explore new segments such as sedans or accelerate its push into overseas markets to restore its “fast growth path,” particularly as China’s EV market faces a potential slowdown from its high base. The company appears to addressing the latter, viewing 2025 as a “pivotal year” for its overseas expansion. The company has already set up R&D centers in the US and Germany and is in the process of building out its international sales network and IT infrastructure.
Meanwhile, the roll out of the i6 will kick off in September, a five-seater electric SUV designed with a distinctive look, extended driving range, enhanced interior space, all aimed at appealing to younger consumers. Moving forward, management intends to streamline the product lineup by reducing SKUs and concentrating on models with the greatest competitiveness and cost efficiency. Li also plans to speed up model refreshes and technology upgrades to maintain its edge against rivals.
Lee thinks the i6 is likely to be a “popular product,” though some “cannibalization” with the L6 appears unavoidable. Looking ahead, Lee expects the L6/L7/L8/L9 lineup to regain sales momentum, with gross margin improvement likely in 2Q26 as the next-generation L series comes to market.
However, given the lower sales volume/GPM in 3Q25, Lee has now downgraded Li’s rating from Buy to Neutral, while his price objective goes from $31 to $26. Nevertheless, there’s still upside of 12% from current levels. (To watch Lee’s track record, click here)
6 other analysts join Lee on the sidelines while an additional 4 Buys and 2 Sells still keep the consensus rating a Hold. That said, the $28.13 average target factors in a one-year gain of 21%. (See LI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.