Li Auto Inc. reported its second-quarter 2025 financial results, which were largely consistent with revised expectations. The announcement has led to mixed reactions among analysts, with Tiger Securities reaffirming a "Buy" rating with a reduced price target, while JPMorgan downgraded the stock to "Hold" due to intensifying competition and concerns over slowing demand in China's electric vehicle market.

U.S.-listed shares of Li Auto Inc. (NASDAQ:LI) experienced varied analyst sentiment after the Chinese electric vehicle (EV) manufacturer released its second-quarter 2025 financial results. While the company's performance largely met its revised delivery guidance, analysts presented divergent outlooks, reflecting both the company's resilience and broader market challenges.

Second Quarter 2025 Performance Overview

Li Auto reported total deliveries of 111,074 vehicles in the second quarter of 2025, marking a modest 2.3% year-over-year increase and a 20% sequential rebound from the first quarter of 2025. Total revenues for the quarter reached RMB 30.2 billion (US$4.2 billion), a 4.5% decrease from the second quarter of 2024 but a 16.7% increase quarter-over-quarter. Vehicle sales contributed RMB 28.9 billion (US$4.0 billion) to this total. The average selling price saw a decline compared to the same period last year, attributed to changes in product mix and increased sales incentives.

Despite the year-over-year revenue decrease, Li Auto maintained a healthy gross margin of 20.1% for the quarter, with a vehicle margin of 19.4%. The company reported a net income of RMB 1.1 billion (US$152.0 million), reflecting a slight 0.4% decrease year-over-year but a substantial 69.6% increase from the first quarter of 2025. Basic and diluted net income per ADS stood at US$0.44 and US$0.43, respectively. The company concluded the quarter with a robust cash position, holding RMB 109.0 billion (US$15.0 billion) in cash and cash equivalents.

Analyst Reactions and Market Implications

Post-earnings, Tiger Securities reaffirmed its "Buy" rating on Li Auto but adjusted its price target downwards from $33 to $28. The firm noted that the second-quarter results were "largely in line with expectations" following earlier lowered delivery guidance, suggesting a stabilization of performance.

Conversely, JPMorgan analyst Nick Lai downgraded Li Auto's stock to "Hold" from "Buy" (or "Overweight" to "Neutral") on August 14, 2025, also reducing the price target from $33 to $28. This downgrade was primarily driven by increasing concerns regarding the competitive landscape within China's EV market and more conservative volume assumptions for the latter half of 2025 and beyond. Lai specifically highlighted the potential for a slowdown or even contraction in China's passenger vehicle market in 2026, anticipating the expiration of government subsidies by the end of 2025. This led JPMorgan to reduce its fiscal year 2025 and 2026 volume and earnings estimates by 10% to 20%.

This mixed analyst sentiment underscores the complex environment facing Chinese EV manufacturers. While Li Auto demonstrated resilience in its ability to meet revised guidance and maintain strong margins, the broader market outlook, particularly concerning future demand and competition, remains a significant factor influencing investor perception.

Broader Market Context and Competitive Landscape

The Chinese EV market is characterized by intense competition. A comparison with a peer like NIO highlights some of these dynamics: NIO reported a 25.6% year-over-year surge in deliveries in Q2, significantly outpacing Li Auto's 2.3% growth. While Li Auto maintains a stronger vehicle margin at 19.4% in Q2 (compared to NIO's 10.2% in Q1), NIO is expanding its product offerings and market reach with brands like Onvo and Firefly.

Despite the competitive pressures and the JPMorgan downgrade, Li Auto's current valuation stands at $23.87 billion, trading at a P/E ratio of 20.77x. According to InvestingPro's Fair Value analysis, the company is considered undervalued. The broader analyst consensus for Li Auto remains a "Buy," with an average 12-month price target of $29.35 among 26 analysts, suggesting a potential upside of 21.67% from its current market price. Notably, Li Auto's U.S.-listed stock has advanced approximately 4% year-to-date in 2025, indicating some investor confidence despite recent headwinds.

Looking Ahead

The expiration of government subsidies by the end of 2025 is a critical factor for the Chinese EV market, potentially impacting demand in 2026. JPMorgan projects Li Auto's sales volume to be around 480,000 units in 2025, with an anticipated rebound of 35% to 640,000 units in 2026, contingent on market conditions.

Li Auto continues to focus on product innovation and expansion. The company is actively introducing new models, including the Li Mega van and the Li i8 electric SUV, with ambitious delivery targets of over 8,000 units by the end of September and 10,000 before the October 1-8 National Day holiday. Furthermore, plans are underway to launch a volume BEV SUV, the i6 (5-seater), with an estimated starting price of RMB 240,000 to 250,000, to compete in the mid-range EV segment. Continued significant investment in research and development, totaling RMB 2.8 billion in Q2 2025, underscores the company's commitment to future growth. Investors will closely monitor these strategic initiatives and the company's capital allocation discipline in the coming quarters.