Chinese luxury electric vehicle maker Li Auto stock had a stellar October, delivering a total of 40,422 vehicles, representing a 4x year-over-year increase. The number also rose from 36,060 units in September 2023. Li currently offers three SUVs, namely the Li L9, Li L7, and Li L8 which all combine gasoline generators with batteries to extend the range of EVs and reduce range anxiety. All three models appear to be seeing strong demand with Li indicating that it has led the sales chart of SUVs priced above RMB300,000 ($42,000) for six conservative months. Cumulative deliveries of Li Auto vehicles in 2023 reached 284,647 as of the end of last month, an increase of 194% versus last year. Li Auto’s smaller rival XPeng also fared well, delivering 20,002 vehicles, up almost 4x compared to last year and up 30% compared to the previous quarter. Nio continued to lag, with deliveries coming in at 16,074 vehicles for the month of October marking an increase of 60% year-over-year. Price cuts during the second quarter also likely stimulated demand to an extent.
Amid the current delivery strength, Li Auto stock has shown strong gains of 35% from levels of $30 in early January 2021 to around $40 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. However, the increase in LI stock has been far from consistent. Returns for the stock were 11% in 2021, -36% in 2022, and 93% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 14% in 2023 – indicating that LI underperformed the S&P in 2021 and 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could LI face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?
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