Freedom Global Analysts Assess Li Auto’s Prospects after a Weak Quarter

Freedom Global has lowered the target price for shares of the Chinese electric vehicle (EV) maker Li Auto (LI) from $25 to $21 per share while maintaining a Buy recommendation. Li Auto produces new‑energy vehicles (NEVs), specialises in premium SUVs, and is among the leaders of China’s fast‑growing EV market.

Li Auto reported mixed results for Q1 2026. Revenue declined 11% YoY to CNY 23 billion ($3.3 billion), which was 4.2% above market expectations. However, the net loss reached CNY 2.3 billion ($330 million), exceeding analysts’ forecast of CNY 1.8 billion. Experts believe Li Auto is going through a challenging phase: demand is falling in China’s auto market, while competition has intensified in the SUV segment. 

One of the main pressures on results was a sharp decline in margins. Vehicle deliveries grew only 2% for the quarter to 95.1 thousand units, but automotive gross margin fell to 6.1% from 19.8% a year earlier. The company attributes this to model line-up updates, a higher share of more affordable models, and the phasing out of part of its hybrid line-up.

Operating margin remained negative at −13%. Nevertheless, management expects to improve metrics as sales of new models expand and economies of scale are restored. Li Auto plans to unveil an updated version of the Li L8 SUV in late June.

Additional pressure on stock quotes came from the Q2 forecast. The company expects deliveries in the range of 95–100 thousand vehicles, below the market forecast of around 107.5 thousand. Revenue forecast is set at CNY 24.1 -- 25.4 billion, also notably below analysts’ expectations.

Freedom Broker notes that Li Auto’s long‑term investment case remains attractive. The company maintains strong positions in China’s premium EV segment, continues to expand its model range, and views overseas expansion as a key growth driver. According to analysts, the launch of new models and entry into foreign markets could offset slowing domestic demand.

Key risks include the ongoing price war in China’s EV market, which is pressuring industry profitability, and a possible reduction in government subsidies for EV purchases.

Not an individual investment recommendation.