Li Auto’s sales fell 39% sequentially last quarter. The company’s explanation for that raises more questions than it answers.
Investors in Chinese automaker Li Auto (LI -3.74%) are having a rough month of May. After reporting a decline in sales Monday, which sent its shares tumbling double digits, the company announced Tuesday that it will delay releasing new all-electric SUV models until 2025. Shares of Li Auto stock reacted poorly to the news, falling 3.6% through 10 a.m. ET.
That makes six straight days of declines for Li stock.
Li’s latest bad news
A lack of electric chargers appears to be (at least) one culprit for Li’s latest bad news. As Reuters reports, Li planned to unveil three new all-electric SUV models this year. (To date, Li has been primarily a hybrid electric carmaker.) But Li says it lacks “enough charging stations and enough incremental display spots (in our retail shops)” to support demand for the new models and will delay production until they’re built.
But here’s the thing: If we read between the lines, Li seemed to offer this explanation for postponing the new models as also explaining poor sales of its Mega electric minivan. Introduced in March, Li had hoped to sell 8,000 units of Mega per month — but it’s so far selling closer to 3,000.
Is Li Auto stock a sell?
Now, this argument isn’t wholly without merit. As Reuters observes, Li’s only built about 400 charging stations in China so far versus Tesla‘s (TSLA 3.97%) 2,000 and Nio‘s (NIO -0.26%) 2,200. But consider this:
In theory, all electric cars in China are supposed to be able to use GBT chargers interchangeably. In other words, they’re not supposed to have to worry about the NACS/CCS issue that (still) bifurcates the charging system in the U.S. In this case, Li’s 400 chargers shouldn’t be an issue if Li buyers can just charge at one of Tesla’s or Nio’s. But that doesn’t seem to be helping Li or preventing its sales from falling 39% sequentially last quarter — not a great look for a growth stock.
Conclusion: Li’s problems may be bigger than just not having enough chargers.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nio and Tesla. The Motley Fool has a disclosure policy.