LI: What's Going on Next?
So here's my take. $Li Auto(LI)$
Their market share today is still growing thought at a slower rate. So what has changed? The fact that Li as a new entrant made it into the top 10 so fast was in itself an incredible feat. But something changed as 2024 dawned.
Not that Li faltered or made any mistakes. Inspite of all the hoopla about falling sales their market share is actually growing - this is very important to note. But there is now a new kid on the block with really sexy EV's aiming at the premium luxury segment (Li's niche).
They seem to have come out of nowhere and are making all the right moves. The brand is Aito (co-owned by Seres and Huawei). Aito is eating into everyone's market share so except $BYD Co., Ltd.(BYDDY)$ (which is still showing increasing sales) all other EV producers are showing a decline in numbers. The Q1 sales numbers tell the story. Tesla showed false growth in March as it resorted crazy incentives valid only for March to clear inventory. In Jan-Feb Tesla has lost ground and by the end of Q1 both Aito and Li would be closing the gap in numbers with Tesla.
Li definitely needs to play its best game to take on Aito but there is room for both these players to grow because the NEV market in China continues to grow at a blistering pace. NEV sales are now more than 40% of all new cars sold and it is very likely to take a 50%+ majority by year end. So the real losers here are the ICE makers who are losing sales and market share at an unprecedented rate. Overall in the EV segment there is obviously a bloodbath looming in the years to come. There are too many players most of whom are losing money.
Consolidation is evident. But players like Li, Aito, BYD's Denza that are aiming only at the premium segment have a better chance as compared to those competing for market share at the lower end of the food chain where competition is cut throat and gross margins ridiculously low.
Curiously though $Tesla Motors(TSLA)$ is prepping itself to go down the value chain which in my opinion will cost it dearly. Li is profitable and has a tremendous cash reserve to lean on to double up efforts so it should still come out a winner.
Aito though is also a serious contender to deal with because with Huawei backing it they have deep pockets to reach into and have tremendous marketing muscle riding on Huawei's sales outlets all over the country.
The games have begun. Let the best players win. It's going to be fun. I for one have still got my money on Li to emerge as one of the successful players when the dust has settled.[Smart][Smart][Smart]
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