Last Update 10 Dec 25

Fair value Decreased 13%

LI: Shares Will Recover As Global Expansion Progress Supports Long Term Upside

Analysts have trimmed their price target on Li Auto by roughly $4 per share to about $19. They cite a slightly higher discount rate and lower future valuation multiples, despite stronger long term revenue growth and margin expectations, amid concerns over the company’s uncertain global expansion strategy and intense competition in China’s auto market.

Analyst Commentary

Analyst views on Li Auto are mixed, reflecting both the company’s strategic potential and the risks embedded in its current trajectory and market backdrop.

Bullish Takeaways

Bullish analysts note that Li Auto’s long term revenue and margin outlook remains attractive. This supports the view that the company can justify a mid-teens to high-teens valuation multiple if execution on its product roadmap continues.
They highlight that Chinese electric vehicle specialists benefit from strong electronics self reliance, which can support cost advantages and faster innovation cycles compared to many global peers.
Some see the Neutral rating and $19 price target as leaving room for upside if Li Auto demonstrates credible progress on overseas expansion and converts its technology strengths into sustainable global market share.
There is recognition that, relative to certain domestic peers, Li Auto’s brand and technology platform could allow it to participate meaningfully in premium segments, potentially enhancing long term profitability.

Bearish Takeaways

Bearish analysts emphasize that China’s auto market is characterized by cutthroat competition and high policy risk. This pressures pricing power and margins and justifies a lower valuation multiple despite solid growth prospects.
They view Li Auto’s global strategy as uncertain, arguing that limited clarity on timing, scale, and differentiation in overseas markets creates execution risk and caps near term multiple expansion.
Concerns persist that stronger, better positioned peers in the Chinese EV ecosystem may capture a disproportionate share of industry profits, potentially limiting Li Auto’s long term earnings power.
Given these competitive and policy headwinds, cautious analysts believe the current valuation appropriately discounts execution risk, with only modest room for multiple re rating absent clear catalysts on global growth and profitability.

What's in the News

Issued fourth quarter 2025 guidance calling for vehicle deliveries of 100,000 to 110,000 units, implying a year over year decline of 37.0% to 30.7%, and total revenue of RMB 26.5 billion to RMB 29.2 billion, down 40.1% to 34.2%, with management cautioning that the outlook may change with market conditions (Company guidance).
Scheduled a board meeting on November 26, 2025 to review and approve unaudited financial results for the quarter ended September 30, 2025 and their public release (Company board notice).
Officially launched the Li i6, a five seat battery electric SUV priced at RMB 249,800 for the standard configuration, with deliveries set to begin on September 27, 2025 (Product launch announcement).

Valuation Changes

Fair Value Estimate has fallen from $28.09 to $24.43 per share, reflecting a moderate downward revision in long term intrinsic valuation.
Discount Rate has risen slightly from 11.58% to 11.66%, indicating a marginally higher required return and perceived risk profile.
Revenue Growth has increased from 15.16% to 18.23%, signaling a more optimistic view of Li Auto’s top line expansion over the forecast period.
Net Profit Margin has edged up from 6.45% to 6.56%, suggesting a modest improvement in expected long term profitability.
Future P/E Multiple has declined from 20.1x to 17.8x, implying a lower valuation multiple being applied to earnings despite stronger growth and margin assumptions.

Transition to battery electric vehicles and investment in smart driving tech are set to boost market share, revenue streams, and premium positioning.
Network expansion, innovative charging solutions, and initial global efforts drive higher sales, deeper market reach, and reduced reliance on domestic demand.
High spending, intense competition, and regulatory shifts threaten profitability, market share, and future growth, especially as the company navigates international expansion and evolving EV preferences.

Catalysts

About Li Auto

Operates in the energy vehicle market in the People’s Republic of China.What are the underlying business or industry changes driving this perspective?

The company's ongoing transition from extended-range vehicles (EREVs) to pure battery electric vehicles (BEVs)-including successful launches of the Li MEGA and Li i8, and the upcoming Li i6-positions Li Auto to capture expanding market share as Chinese middle-class consumers upgrade and EV adoption accelerates, directly supporting long-term revenue growth and total addressable market expansion.
Aggressive investment in proprietary intelligent driving systems (e.g., the VLA driver model and in-house AI chips), and the rapid rollout of these features across the lineup are expected to unlock high-margin, recurring software and services revenue, enhancing net margins and supporting premium product positioning.
The rapid buildout of Li Auto's ultra-fast charging network (now the largest among Chinese automakers, with plans to reach 4,000 stations by year-end) and development of charging technology (e.g., 5C batteries and autonomous charging robots) enhances user experience and alleviates range anxiety, thus accelerating BEV adoption and boosting sales volumes.
Expansion of the company's sales/service and retail network-especially into lower-tier Chinese cities-combined with an optimized, localized channel strategy and digital marketing initiatives, should drive higher conversion rates and unlock previously untapped markets, positively impacting both topline revenue and operating leverage.
Early-stage global expansion plans, with R&D centers in Germany and the US, and a roadmap for compliance and international product launches, could open significant new revenue streams and diversify growth, reducing overreliance on the domestic Chinese market and supporting long-term earnings potential.

Li Auto Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Li Auto's revenue will grow by 17.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.6% today to 6.5% in 3 years time.
Analysts expect earnings to reach CN¥15.2 billion (and earnings per share of CN¥15.01) by about September 2028, up from CN¥8.1 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting CN¥24.6 billion in earnings, and the most bearish expecting CN¥8.0 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.2x on those 2028 earnings, down from 21.6x today. This future PE is greater than the current PE for the US Auto industry at 18.6x.
Analysts expect the number of shares outstanding to grow by 1.14% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 11.87%, as per the Simply Wall St company report.

Li Auto Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heightened R&D and capital expenditure requirements, including anticipated RMB 6 billion AI investments and large negative free cash flow (negative RMB 3.8 billion in Q2), place sustained pressure on liquidity and profitability, especially if vehicle sales or margins fail to scale as projected.
Increasingly intense domestic and global competition in China's NEV market and rapidly accelerating product iteration by peers threaten Li Auto's market share and pricing power, as evidenced by sales fluctuations in the L series and the need for higher sales incentives, directly pressuring revenue and margins.
International expansion efforts, while part of the medium
and long-term strategy, face significant risks due to brand unfamiliarity, trade barriers, regulatory adjustment, and the need to tailor products and supply chains for new markets, which may delay or reduce projected overseas revenue growth.
Business dependency on EREV models exposes Li Auto to secular risk from shifting global regulations and consumer preferences that favor pure BEVs, potentially undermining future revenue streams if the company cannot transition its lineup rapidly enough as subsidies and support wane for hybrids.
Regulatory tightening in China for autonomous driving and potential industry-wide changes to payment terms and other compliance factors may increase operational costs, slow technology deployment, and create cash flow volatility, directly impacting net margins and earnings sustainability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $29.298 for Li Auto based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $39.04, and the most bearish reporting a price target of just $18.13.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥232.1 billion, earnings will come to CN¥15.2 billion, and it would be trading on a PE ratio of 20.2x, assuming you use a discount rate of 11.9%.
Given the current share price of $24.22, the analyst price target of $29.3 is 17.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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