Li Auto (NAS100:LI) stock is pushing against a key resistance level after the government announced an end to price gouging.
LI is pushing the $31,27 level on the ADR, and if the stock breaks that level then there is little resistance ahead to $46.43.
The EV sector was in the news this week after Chinese authorities said they would intervene to halt “irregular competition” in the electric vehicle space. They were talking about the recent price cut war by BYD, and a State Council meeting chaired by Premier Li Qiang, who said the government would step up price monitoring, regulate the market, and urge companies to innovate with high-quality.
Global EV sales hit 9.1 million in the first half of 2025, and government subsidies should support continued growth in the second half. The government is also saying that low-cost manufacturers will no longer be allowed to control the market.
It was a disappointing month for Li Auto, with deliveries of 36,279 vehicles in June, which marked a -24% year-over-year decline and a -11.2% drop for May. However, this was driven by the price war, and Li also guided for lower H2 deliveries due to a system upgrade.
The company has focused on family vehicles and that has been a tough strategy when consumers are stretched, the new i6 SUV in September, is expected to challenge the Mercedes-Benz GLC, BMW X3, and Audi Q5.
Margins on vehicles were 19.8% in the first quarter of 2025, compared to 19.3% in the first quarter of 2024 and resilient margins are the reason that Bank of America and Morgan Stanley analysts remain bullish on the stock.
Li Auto has been well managed during a tough period for the sector and the government’s desire to end the price war strategies is a plus for the higher-end car manufacturers.
