Li Auto: A Profitable Player in the Electric Vehicle Market

Li Auto has positioned itself as one of the few consistently profitable pure-play electric vehicle (EV) makers globally, joining the ranks of Tesla and BYD. Operating in China, the largest market for battery EVs, Li Auto's upcoming earnings report holds significant weight in the industry.

On Thursday morning, Li Auto (ticker: LI) will be releasing its third-quarter results. Analysts on Wall Street expect earnings per share of about 20 cents from sales of $4.6 billion, according to FactSet. In the third quarter of 2022, Li reported a loss per share of 5 cents from sales of $1.3 billion.

Driven by its expansion of production capabilities and product lineup, Li Auto has witnessed remarkable sales growth. The company's ability to generate profits from car sales is evidenced by its shipment of more than 105,000 units in the third quarter compared to approximately 27,000 units a year ago.

For Tesla (TSLA), consistent profitability was only achieved when it was shipping around 100,000 cars each quarter.

Li Auto typically provides a quarterly sales outlook alongside its financial results. Shareholders would be content with projected sales falling within the range of 110,000 to 120,000 units. Anything below this figure may raise concern among investors regarding the state of the Chinese EV market.

In its second-quarter earnings release, Li guided for deliveries in the range of 100,000 to 103,000 units for the third quarter. The company managed to exceed these expectations.

Third-quarter Chinese BEV sales, including exports, witnessed a year-over-year growth rate of approximately 10%. While this growth is slower than previous quarters (which saw a 40% increase in BEV sales in Q2), it still demonstrates promising market dynamics.

Investors are eagerly anticipating Li Auto's financial report amidst concerns over slowing growth and weaker stock prices. Despite increasing deliveries, Li's stock has declined by about 8% over the past three months, whereas the S&P 500 and Nasdaq Composite only experienced modest drops of less than 2% over the same period.

During this timeframe, shares of Tesla and BYD (1211.Hong Kong), fellow profitable EV manufacturers, also saw declines of around 11% and 5%, respectively.