Li Auto has long been a cause for optimism among investors in both China and the United States for its strength in innovation throughout an electric vehicle (EV) industry that promised to spearhead the global clean energy transition.
However, January 2026 brought the news that the Chinese EV firm had managed to deliver just 27,668 cars, marking the eighth consecutive month of decline.
The rate of the slowdown has been jarring. January delivery figures are down 7.55% year-on-year, whereas deliveries tumbled 37.47% compared to December.
To make matters worse for the stock, which is listed on the Hong Kong stock exchange with the ticker 2015 and on the Nasdaq under ‘LI’ at a $20 billion valuation, JPMorgan analyst Nick Lai recently downgraded Li Auto to Sell from Hold, with his price target lowered to $14 from $18.
Lai suggested that a lack of major new models this year was a key contributor to the downgrade, while market conditions in China have made it considerably more challenging for EV firms to sell their vehicles.
The JPMorgan analyst also lowered price targets for Li Auto’s rivals, Nio and XPeng, in a move that highlights the industry-wide issues that Chinese EV manufacturers face.
What’s going wrong?
There are many contributing factors to China’s dwindling EV sector. One of the biggest challenges stems from the sheer level of competition between the nation’s car manufacturers, which has brought intense price competition that has driven the value of new vehicles lower.
But sales of EVs in China are falling across the board. Retail sales of electric vehicles, including battery electric and hybrid cars, fell 20% to 596,000 units in January, according to data from the China Passenger Car Association.
Li Auto’s decline reflects a broader slowdown, where passenger car sales in January tumbled 14% year-over-year and 32% from December.
Another catalyst for the downturn is the expiration of trade-in tax exemptions late in 2025, which allocated a pool of money towards EV sales as a cash incentive.
With weaker consumer confidence and lingering signs of a vulnerable economic outlook for China, the end of these tax benefits has been a major issue for securing EV sales.
“There’s a growing existential threat for China’s EV players in that electric vehicles are simply becoming too expensive for a consumer environment with high pricing pressures,” explained Iván Marchena, Senior Economist at global brokerage brand Just2Trade.
“The lithium needed to build batteries has tripled in value since the summer, while other core components like copper, aluminum, graphite, and rare earth elements have also become more costly at a time when manufacturers have increased their dependency on government subsidies to secure sales.”
Out-innovating challenges
The reason why Li Auto’s stock continues to stand out despite its growing pressures is that investors can find plenty of evidence that the company isn’t sitting still or battening down the hatches as deliveries dwindle.
Despite JPMorgan’s downgrade on the suggestion that Li Auto has lost its pipeline of flagship vehicles, the Chinese EV firm recently announced its L9 Livis SUV, which was produced with the assistance of Li’s embodied AI robots and will be packed with in-house developed M100 chips to deliver 2,560 TOPS of computing power.
The SUV’s announcement helped to support what’s become a 16% rally over the first 10 trading days of February, helping the stock to far outperform the Hang Seng Index over the same period.
Retailing for 559,800 yuan ($81,000), the new model is a high-end vehicle that may help to reshape Li Auto’s trajectory in 2026.
The L9 Livis SUV represents the latest iteration of Li Auto’s conscious attempt to become an AI-focused EV manufacturer, which will see the firm roll out an end-to-end autonomous driving system and a Vision Language Action architecture for its vehicles.
Li Auto also appears to be shifting to a more international mindset, having opened its first overseas retail center in Uzbekistan, with future plans to delve deeper into Central Asia with an upcoming launch in Kazakhstan.
This represents a key shift away from domestic market dependence, and it’s expected that Li Auto will seek to grow into the Middle East and Europe off the back of a successful Central Asian launch.
The return of trade-in subsidies
Critically, China has announced the return of trade-in subsidies for domestic EV purchases in 2026, in what’s set to be a move that reignites consumer interest in purchasing electric vehicles.
With RMB 62.5 billion ($8.9 billion) allocated through ultra-long-term government bonds to support consumer goods replacement programs, we’re likely to see an upturn in fortunes for domestic selling for stocks like Li Auto, even as pre-existing pricing pressures remain.
Is Li auto still a buy?
JPMorgan may have cooled on the stock, but Li Auto remains one of China’s most innovative EV firms, and its focus on out-innovating its challenges by incorporating AI technology and expanding into European markets can serve the stock well at a time when domestic demand and the costs of component parts pose a challenge.
It’s worth investors looking to Li Auto’s deliveries for signs of an upturn in fortunes. The prospect of earnings downgrades for the year ahead could be a major challenge for the stock’s trajectory, but there’s no doubting that the manufacturer is still looking to make waves in a challenging EV market.