By Jiahui Huang

Li Auto shares fell sharply in Hong Kong after the Chinese hybrid-vehicle specialist unveiled weaker-than-expected earnings and guidance after a lackluster launch of its first fully-electric model.

Shares were 19% lower at 80.70 Hong Kong dollars (US$10.35) by midday Tuesday, on track for their biggest one-day selloff in more than two years. Li Auto's U.S.-listed ADRs slid 13% overnight.

Investors are reacting to Li Auto's first-quarter earnings report late Monday, which showed an operating loss and a big miss on profits after it increased spending on research and development, and other operating expenses. Revenue rose 36% compared with the same period a year earlier but was down 39% from the preceding quarter as Li Auto struggled with the rollout of its first all-electric model.

The market was also reacting to Li Auto's outlook as it guided for second-quarter deliveries of 105,000-110,000 vehicles, and revenue of up to 31.4 billion yuan ($4.34 billion). The guidance was stronger compared with the second quarter of 2023, but well below its fourth-quarter performance. Chief Financial Officer Tie Li said in an earnings call that the April-June period will be "the most difficult quarter for the company in this year."

Nomura analyst Joel Ying wrote in a note that the numbers mean Li Auto would need average monthly sales of about 60,000 vehicles in the second half of the year to achieve its annual sales target, which he thinks will be a challenge for the company.

CCB International analyst Qu Ke said the sales guidance was disappointing but the company's announcement that it would postpone the launch of new vehicles could be helpful.

"Delay of [the launch of] EVs is for the best for Li Auto... since no one is making money out of it except BYD and Tesla given their massive volume output," Qu said.

Bernstein analysts led by Eunice Lee said the delay was a positive strategy as it would buy Li Auto some time for product development and to reduce its margin dilution this year. Li Auto is "hitting a speed bump, not a roadblock," analysts wrote in a note.

Li Auto managed to maintain a 20%-plus gross margin in the first quarter, although its margin on vehicles slipped to 19.3% from 19.8% a year ago and 22.7% in the fourth quarter because of changes in its pricing strategy. The company said it doesn't currently have further plans for price cuts, though Goldman Sachs analysts forecast more price reductions in the second half of the year due to intense competition in China's EV market.

"We see the next few quarters being a transition period for Li Auto," Goldman Sachs analysts led by Tina Hou wrote in a note.

Write to Jiahui Huang at

(END) Dow Jones Newswires

05-21-24 0021ET