HSBC has cut its target price for Li Auto to $15.60 from $17.20 while retaining a Hold recommendation on the Chinese electric vehicle maker, citing intensifying competition and a weaker short-term profitability picture as the company moves through its product refresh cycle. The bank also reduced its target for the Hong Kong-listed shares to 61 Hong Kong dollars from 67 Hong Kong dollars.
In U.S. premarket trading, Li Auto's American depositary receipts eased about 1.4% by 06:17 GMT.
Revised earnings outlook
HSBC adjusted its 2026 earnings projection for Li Auto from a prior profit estimate to a loss. The bank attributed the change to three drivers identified in its model - softer volume assumptions, pressure on gross margins from cost inflation, and a higher operating expense ratio as Li Auto scales up research and development spending.
On a multi-year basis, HSBC now forecasts Li Auto's earnings for 2026, 2027 and 2028 to be approximately 6%, 13% and 9% below Bloomberg consensus, respectively.
Product refresh and demand signals
Early demand for Li Auto's refreshed L9 SUV has been encouraging, with the model recording roughly 10,000 orders in its first two weeks and a sales mix skewed toward higher-end trims. HSBC noted that a new L8 model, slated to launch later this month, should offer additional support to volume.
Despite these product-level positives, the bank warned that a recovery in deliveries and profitability is likely to be gradual and concentrated in the second half of 2026. HSBC cautioned that the upside this cycle is likely to be more modest than in previous product refreshes.
Structural concern - product mix and competition
HSBC highlighted a deeper structural issue for Li Auto. Analyst Yuqian Ding wrote, "The key challenge is that industry demand is increasingly shifting towards premium BEVs, while Li Auto remains largely reliant on its EREV franchise." The bank pointed out that with limited BEV refresh catalysts in 2026 and rising competitive intensity across both extended-range electric vehicle (EREV) and battery electric vehicle (BEV) segments, the company may see operational improvements but only limited scope for a meaningful earnings reacceleration.
Margin trajectory
Li Auto reported vehicle gross margin of 16.8% in the first quarter of 2026. HSBC said that level reflected a higher share of lower-priced i6 BEV models in the mix, the effect of purchase-tax subsidies, and raw material cost inflation. While the bank expects some margin recovery over time, it does not anticipate margins returning to prior peak levels near 19-20% in the near term.
Valuation and rating rationale
HSBC's new $15.60 target implies roughly 10% upside from current price levels - a gap the bank deemed insufficient to adopt a more positive stance. The firm maintained a Hold rating on Li Auto, noting that momentum for the L series volumes may be constrained this year amid intensifying competition in the large EV SUV segment.
Outlook
In summary, HSBC expects a gradual recovery in both deliveries and profitability through the latter half of 2026, but sees the potential upside as more measured than in prior product cycles. The bank's adjustments reflect a combination of lower volume expectations, margin headwinds tied to cost inflation and subsidies, plus higher operating expenses related to expanded R&D effort. Against that backdrop, HSBC retains a Hold recommendation and trimmed price targets in both U.S. dollar and Hong Kong dollar terms.