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Li Auto, Inc.

Chinese automobile company

04.11.2020 shares were sold at the price of $24. The investment idea brought 30.22% return in 12 days.

About the company

Li Auto Inc. (Nasdaq: LI) is a Chinese automobile company that designs, develops, manufactures and markets premium smart electric SUVs. The company offers its customers an unparalleled value for money with performance, functionality and space in the cabin of a large premium SUV.

The company’s car shipments in the third quarter of 2020 reached 8,660 units, higher by 31.1% from the previous quarter.

As of September 30, 2020, the Company had 35 retail stores in 30 cities. The company plans to expand its direct sales and service network throughout the country.

Prior to the IPO, the company received over $1.5B from investors including Amp Lee Ltd. (controlled by founder Xiang Li), Zijin Global, Rainbow Six and Inspired Elite Investments.

The company produces Li ONE hybrid SUV, which is powered by a 1.2-liter turbocharged engine and a 100-kilowatt electric generator. Thanks to the integrated transmission system, Li ONE provides a distance of 800 kilometers, acceleration from zero to 100 kilometers per hour in 6.5 seconds and a fuel consumption of 6.8 liters per 100 kilometers or 20.2 kilowatt-hours per 100 kilometers. The company uses proprietary technologies with a focus on smart technology and autonomous driving solutions. 

Positive sides

  • The electric vehicle market is in a global trend. China is the largest market for passenger cars and the largest market for electric vehicles in the world in terms of sales.
  • According to a 2019 TechSci Research report, the Chinese market for electric vehicles of all types was valued at approximately $74B in 2018 and is expected to reach $330B by 2024.
  • In China, domestically produced cars have a significant price advantage over imported models;
  • Li Auto is the first company to successfully sell extended range electric vehicles in China.
  • Li ONE’s energy can be replenished by quickly charging the battery and refueling. Li ONE can work even when customers do not have access to the charging station infrastructure, completely eliminating range concerns;
  • A smaller battery is not only cheaper but also contributes to a more cost-effective body structure, resulting in less use of expensive aluminum parts for the vehicle body and suspension system. As a result, the cost of the Li ONE specification is close to that of a vehicle with an internal combustion engine and is much lower than that of a battery electric vehicle of the same class.
  • Stable financial condition of the company. Liquid assets exceed both current and long-term liabilities combined.

Risks

Increased competition from the auto industry giants. In the hybrid niche, BMW is actively developing with the i3 and i8 models. Besides Tesla, electric cars are already actively sold by Porsche, Mercedes-Benz, Jaguar, Nissan.