:max_bytes(150000):strip_icc()/GettyImages-2166963217-1a2e63b721224736a39fe7f346b890b2.jpg "Production costs and price cuts cause Li Auto’s profits to collapse")
Production costs and price cuts cause Li Auto’s profits to collapse
Key findings
- Li Auto’s earnings fell as the Chinese electric vehicle maker faced higher costs and tougher competition due to falling demand for electric vehicles.
- The company said it faced intense competition in the second quarter.
- Li Auto’s expenses rose as it increased production of its new Li L6 SUV.
Li Auto (LI) American Depositary Receipts (ADRs) slumped on Wednesday after the Chinese electric vehicle (EV) maker’s profit fell due to higher costs and price cuts as falling demand for electric vehicles intensified competition.
The company reported a 52.3% year-on-year decline in second-quarter net profit to 1.1 billion yuan ($151.5 million) and a 45% drop in adjusted earnings per ADS to 1.42 yuan ($0.20), although both figures beat consensus estimates of analysts surveyed by Visible Alpha. Revenue rose 10.6% to 31.7 billion yuan, below estimates.
According to CFO, Li Auto faced “intense market competition”
Chief Financial Officer Tie Li said the company had faced “intense market competition” during the period and that results had also been negatively impacted by the costs of ramping up production of the new five-seat family SUV Li L6.
“As Li L6 production stabilizes and our cost-cutting and efficiency improvement measures take full effect, we expect both our margins and cash flow to increase in the second half of the year,” the CFO added.
Li Auto ADRs fell 17% to $17.58 an hour before the close on Wednesday, losing more than half their value this year.
