Li Auto Sinks on Q1 Profit Slump

American depositary receipts (ADRs) of Li Auto (LI) are down 14% in intraday trading Monday after the Chinese electric vehicle (EV) manufacturer posted a 36% year-over-year drop in first-quarter net income as it lowered car prices.

The company said its profit attributable to shareholders was 592.6 million yuan ($82.0 million), versus CNY929.7 million in the same period last year, and well below analysts’ forecasts of CNY1.63 billion.

Revenue was up, however, by 36% at CNY25.63 billion, including a 32% jump in vehicle sales to CNY24.3 billion.

“The increase in revenue from vehicle sales over the first quarter of 2023 was mainly attributable to the increase in vehicle deliveries, partially offset by the lower average selling price due to different product mix and pricing strategy changes between two quarters,” Li Auto said.

Intense EV Market Competition

Competition is intense in the EV market. Zeekr Intelligent Technology Holding (ZK) recently debuted on the New York Stock Exchange (NYSE), in the largest U.S. IPO from a Chinese company since ridesharing platform Didi in 2021. Earlier this month, Tesla (TSLA) launched a financing initiative for its Model Y after 18 months of select price reductions across its vehicle lineup. And Japanese car makers, which had previously focused on hybrid vehicles, are joining the fray as well, with Honda Motor (HMC) last week announcing plans to invest nearly $65 billion in its EV strategy over a 10-year period through its 2031 fiscal year.

Li Auto ADRs were down almost 14% to $21.42 as of 10 a.m. ET Monday.