Li Auto: Mounting Competition, Weak 2026 Product Cycle, and Early-Stage AI/Overseas Growth Justify Hold Rating

In a report released today, Xiaoyi Lei from Jefferies downgraded Li Auto, Inc. Class A to a Hold, with a price target of HK$68.30.

Xiaoyi Lei has given his Hold rating due to a combination of factors tied to Li Auto’s competitive and product-cycle outlook. He expects the company to face mounting pressure in its core family EREV SUV segment as rivals such as Huawei, XPeng, GWM and Zeekr roll out strong, large‑battery models in the >RMB200k hybrid SUV market, likely squeezing margins. At the same time, Li Auto is entering what he views as a relatively weak product cycle in 2026, making that year more of a transition period than a growth inflection, despite management’s efforts to standardize 5C supercharging, streamline SKUs and improve cost efficiency. The firm’s earnings forecasts for 2025–26 have been revised down to reflect softer profitability expectations and rising battery costs, leading to a lower price target.

Xiaoyi Lei’s rating is based on the view that Li Auto’s longer‑term AI and international expansion initiatives are promising but still early in their commercialization. The company’s push into embodied AI—with in‑house chips, operating systems, and AD platforms—could eventually enhance competitiveness by cutting development time and costs, but meaningful financial benefits are not expected in the near term. Similarly, the shift to an authorized dealer model and staged overseas rollout across the Middle East, Africa, Southeast Asia, Europe and select right‑hand‑drive markets will take time to scale. Given this mix of intensified competition, a slower earnings trajectory, and yet‑to‑be‑proven growth drivers, he sees risk and opportunity as broadly balanced at current valuation, justifying a Hold stance.

Lei covers the Consumer Cyclical sector, focusing on stocks such as Weichai Power Co, Li Auto, and Li Auto, Inc. Class A. According to TipRanks, Lei has an average return of 25.6% and a 76.32% success rate on recommended stocks.