Li Auto is first major China EV startup to turn profit, shares up over 25%

The Beijing-based company reported an annual net income of 11.8 billion Chinese renminbi ($1.7 billion), making it the first of China’s three EV startups to record an annual profit. (The other two major startups are Xpeng and Nio, both of which have yet to reveal full-year results).

The carmaker also delivered 376,030 vehicles last year, almost three times more than the 133,246 delivered in 2022. It also expanded its vehicle margin to 21.5%, up from 19.1% in 2022.

Investors welcomed the news in Tuesday trading in Hong Kong, sending shares up by over 25%, adding over $9 billion to the company’s market value. Shares are close to the peak recorded last August.

Li Auto is riding a surge of interest in EVs in China, the world’s largest electric car market. Li Auto’s cars are closer to Tesla’s in terms of pricing, targeting a premium consumer instead of selling the more affordable models provided by market leader BYD.

BYD, which is backed by Warren Buffett’s Berkshire Hathaway, also had record sales last year, delivering 3.02 million vehicles. The company even overtook Tesla as the world’s largest seller of battery electric vehicles. In a late January stock filing, BYD said it expected a 2023 profit of 29 billion to 31 billion yuan ($4 billion to $4.3 billion), which would be as much as an 86% year-on-year increase.

But Li Auto gave a bearish outlook for the current quarter, saying it expected to deliver around 100,000 to 103,000 EVs, which would be the lowest delivery figure since the second quarter of last year.

There are signs that China’s EV market is slowing, amid a patchy economic recovery which has weighed on consumer sentiment. Competition between EV players in China is also fierce, with companies like BYD and U.S. carmaker Tesla engaging in a price war to capture market share.

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