China is already the biggest electric vehicle market in the world. However, it does not imply that the growth is over.
To put things into perspective, China wants new energy vehicle sales in 2025 to be 20% of all car sales. Currently, new energy vehicle sales are around 5% of all car sales.
This gives an idea of the potential that China’s electric vehicle industry holds.
I had discussed Nio as a good investment option in China’s electric car industry.
Another emerging player that holds immense promise is Li Auto.
This article will discuss some of the factors that makes the company’s stock interesting.
Li Auto, which got listed in the NASDAQ exchange in July 2020 at $16, has already doubled and currently trades at $31.
Investors with a medium to long-term investment horizon can consider accumulating the stock on corrections.
I would not be surprised if Li Auto doubles from current levels in the next 24 months.
Li Auto launched its first model in November 2019.
The progress, in terms of vehicle deliveries, has been strong.
For the first quarter of 2020, the company sold 2,896 electric vehicles
For the second quarter of 2020, the company sold 6.604 vehicles
For the third quarter of 2020, the company sold 8,660 vehicles
For October 2020, the company sold 3,692 vehicles.
This would roughly imply 10,000 plus vehicle sales for the fourth quarter of 2020.
The company has guided for 11,000 to 12,000 vehicle sales for the last quarter.
It’s clear that the company’s vehicle sale is gaining traction. Not surprising that the stock is moving higher.
From a financial perspective, Li Auto has delivered positive operating and free cash flow for the most recent quarter.
This gives the company ample flexibility to invest in innovation and new product launches in the coming years.
As an example, the company’s R&D expense was RMB334.5 million for the third quarter of 2020. R&D expense was higher by 66.1% as compared to Q2 2020.
Investment in innovation will ensure that growth remains robust.
Overall, I am bullish on Li Auto. The stock has the potential to deliver robust returns. Gradual exposure to the stock can be considered.
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Tesla is getting new competition with every year and my take is that the quality of their products and driving ranges is what makes it a champ. Don't know if it has already managed it, but once it will have a 1000 km range vehicle it will be a game changer. We even have a Model X in my area and we're talking eastern Europe so the future really looks electric.
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Yet another good analysis and in trend with the electric movement in the auto manufacturing industry. I am well involved in NIO and some good diversification of my portfolio is welcomed.
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Yeah, noticed Li Auto two months ago when I spotted unusual options activity on the stock. Stayed away because I didn't know the fundamental, so you talking about their free cash flow is good. Will have to keep Li on my radar, but I'm more familiar with Nio.
https://leofinance.io/hive-167922/@rollandthomas/unusual-options-activity-in-li-auto
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