Recently, Li Auto’s chart has taken on an almost perverse quality. In the fourth quarter, revenue dropped 35% from the previous year. Since the middle of 2025, margins have been getting thinner. The P/E ratio is higher than 120, a figure typically associated with businesses that are still unknown. The stock continues to appear green. It has increased by more than 18% since mid-January, subtly regaining ground as BYD and XPeng struggle with declining Chinese demand. Analysts are left perplexed by such a move, and retail traders naturally double down.
Deliveries in March provided the most recent justification for the bounce. In a quarter when Chinese auto sales generally declined, Li Auto turned over 41,053 cars, a respectable figure. Barron’s observed that BYD and XPeng suffered while Li Auto and NIO held their ground. In late March, the company announced a $1 billion share buyback, which is a significant sum of money for a company whose U.S.-listed market capitalization is only about $19 billion. Although buybacks don’t address fundamentals, this type of capital discipline is noticeable in a Chinese EV market where companies are squandering cash on price reductions.
Li Auto’s tendency to behave differently from its competitors can be traced back to a strategic choice that many Western investors misinterpreted for years. Li Auto built its initial volume around range-extended EVs, which are essentially electric cars with tiny gasoline generators on board to reduce range anxiety, while Tesla, NIO, and XPeng doubled down on pure battery electric vehicles. Purists in Silicon Valley scoffed. Tens of thousands were purchased by Chinese families in lower-class cities. Suburban showrooms in Chengdu and Nanjing began to stock the L7, L8, and L9 SUVs as well as the MEGA minivan. Perhaps the company’s ability to avoid pure-EV price wars is what keeps it afloat.
Even so, the earnings line’s flat view is unappealing. In Q4 2025, there was a revenue crater, a narrow profit, poor guidance, and negative feedback from analysts. Following the March 12 report, shares declined. Cost reductions, a thinner product pipeline, and the challenge of maintaining average selling prices as BYD and Xiaomi become more aggressive at the top end were highlighted in CFO commentary. The ADR’s one-year return is still negative, which serves as a reminder that the current upswing is a recovery from a painful decline, from $32 in July of last year to a low of $15.71 in January.
Li Auto’s proprietary autonomous-driving stack, MindVLA, which was introduced in early April, complicates the situation. It was taken seriously by the market. Retail boards in China circulated footage of the new system navigating Shanghai ring roads, and Simply Wall St. published an article questioning whether valuation already reflected the update. It’s possible that Li Auto is actually catching up to Huawei and XPeng in terms of software, but it’s also possible that investors are just in need of a positive narrative regarding Chinese electric vehicles. It is possible for both to be true simultaneously. As I watch this develop, it’s clear that narrative is holding up the stock just as much as numbers.
Not much clarification is provided by the macro image. Exports helped to offset the sharp decline in Chinese auto sales in the first quarter. Beijing has reduced its growth goal. Alibaba, Meituan, and JD have been in and out of the news this year, making the Chinese tech market as a whole unstable. In the meantime, Tesla will release its earnings on Wednesday, and Chinese EV sentiment will be immediately read through. Delivery data from April and May will reveal whether customers in Wuhan and Shenzhen are switching brands or delaying purchases.
Despite all of that, it seems like Li Auto has accomplished the hardest thing a Chinese EV company can do at the moment: maintain profitability, ship volume, and steer clear of the kind of price-war bleeding that has made NIO a perennial dilution candidate. By any serious measure, the stock trading at 120 times earnings is not inexpensive. However, Li Auto’s presence on the buy side of analyst screens is at least intriguing in an industry where peers trade on losses. The next earnings report, which is due in late May, will address whether that justifies the current price or simply explains why it hasn’t fallen any further.