How will Li Auto do going forward?

I had a X Space with Glenn recently where we discussed about the various automakers in China and who we think will be around and healthy in a few years.

Out of all my thoughts for the next couple of years, the one that probably ran most contrarian was Li Auto. From what I’ve heard, Li Auto has top notch sales and product design team. It seemed to really know what its customer base is and how to serve that base. But is that really enough?

In October, Li Auto’s ASP dropped all the way to 309k RMB due to changing profile of its vehicle deliveries. Based on the current research, delivery time for Li Auto vehicles is 2 to 4 weeks, which indicates it doesn’t have much order on hand. It basically deliver whatever orders it got. In fact, its sales dropped from September to October. So once Q1 comes around, their sales will be down to 30k per month. Consider that it reached 50k sales in December of last year, this is not really great growth YoY, despite most of the vehicle sales profile changed to 250-280k L6s.

If we look at what Li Auto has done well so far, none of that is ground breaking tech that no other automakers have. It has invested a lot in AI for both cockpit and ADAS. Based on all the customer feedback and various recorded videos, their AI is top notch. However, I wouldn’t say it’s better than Huawei or Xiaomi. It has developed great air suspension systems that is top notch based on product review videos of comparing them to BMW SUVs of the same class. However, that is also not better than what’s being deployed in other premium NEVs. It’s great product innovation of putting “TV, sofa & fridge” in large SUV is also being copied by other product development team. In fact, BYD will deploy that even on seagull at much lower cost.

Aside from the pressure they face from Huawei, the competition will also be intense from BYD next year. Recently, I saw a listing of all the new Denza product releases.

From this list, N9 will add pressure to L9 (like Bao-8 already has). N8max will add pressure to L8. 2025 N7 PHEV version will pressure L6. D9L will pressure Mega. On top of that, Tang L will put pressure on L7. Huawei’s long awaited AITO M8 will also come out in 2025 to pressure L8. Everywhere I look, things get more crowded for Li Auto.

If we look at L9, it is slightly smaller than both M9 and N9. L9 has 0 to 100km/h acceleration time of 5.3s and top speed of 180 km/h. It’s fuel efficiency is as low as 5.9L/100km.

M9 on the other hand has both BEV and PHEV version. the PHEV version has 0 to 100km/h acceleration time of 4.9s (BEV in 4.3s). It has top speed of 190 km/h. It’s fuel efficiency is 6.9L/100km.

Compared to these two, N9 will likely have both faster acceleration time and top speed. The reason for this is quite simple. BYD has high discharge PHEV batteries that releases more power for longer and powering the 3 motors for probably 640kW of total power. That is more powerful than the dual motors available for M9 and L9. It can also sustain this top performance for longer since its batteries have good discharge performance even at low SOC. This is demonstrated in BYD’s Z9 PHEV, which has faster acceleration and top speed than Stelato S9. Despite the latter being BEV, it cannot generate as much power as a Z9 PHEV.

Having 3 motors means that N9 would also be turn tighter and decelerate more quickly than L9 and M9. As such, N9 will be a compelling third NEV option that will draw orders from L9.

The same situation will likely play out with L8, M8 and N8 Max. N8 Max will have the best maneuverability with E3f and BYD’s special PHEV batteries. M8 will have better AI and better brand from Huawei. L8 will have to price lower to sell.

But the most devastating factor will probably come in the 200-300k segment that will get progressively more crowded. BYD alone will have Tang L and N7 PHEV/BEV. With both models, there will be PHEV and BEV options. They will use high voltage platform that will be more energy efficient and faster (+ charge faster). And BYD can undercut Li Auto. It’s likely that Geely will have its own alternatives in the same class and challenge L6 and L7 sales. Leapmotor will also continue to have compelling SUV options. Same with Xiaomi when its SUV options come out.

Can Li Auto use the same high charge and discharge battery that BYD uses? Probably not, since only BYD has it with LFP chemistry. Since so few battery makers can make such batteries, they cost a lot. MEGA’s battery pack cost about half of the entire sales price, because the 5C charging battery on it is just so expensive. If you cannot do your own BMS and packing, then you have to rely on battery maker to do it and that’s where they earn the premium. Lack of access to affordable high charge/discharge battery will be a huge problem for Li Auto as it seeks to enter the BEV SUV market. It’s hard for them to price SUV competitively if they are forced to pay top money for the battery.