Jefferies has shifted its stance on Li Auto, adjusting its recommendation from Buy to Hold. The decision reflects growing competitive pressures within the family SUV market segment and a relatively weak product update cycle that is expected to extend Li Auto's period of transition into 2026.
The brokerage firm observes that starting from the second quarter of 2025, Li Auto has experienced a decline in market share within the extended-range electric SUV niche. This erosion is attributed to rival manufacturers introducing models equipped with larger battery capacities, which have attracted consumer demand.
Looking ahead, Jefferies anticipates that competition will intensify further throughout 2026, driven particularly by Huawei’s expansion of its SUV offering through partnerships with AITO, Zhijie, Xiangjie, and Huajing. Additional competitive pressures are expected from models launched by industry players such as XPeng, Great Wall Motor, and Zeekr.
Li Auto intends to bolster its standing by focusing on enhancements such as faster vehicle charging capabilities, streamlining its product lineup, and exercising tighter cost controls. Nonetheless, Jefferies warns that these measures may not be sufficient to counteract margin pressures in the increasingly crowded hybrid SUV market tier above RMB 200,000.
According to Jefferies, 2026 is likely to represent another transitional period for Li Auto, given the limited near-term catalysts and broader headwinds in the automotive industry. Consequently, the firm has revised down its price targets, setting them at $17.5 for shares listed in the U.S. and HKD 68.3 for those on the Hong Kong stock exchange.
The brokerage also notes Li Auto’s ongoing investment in artificial intelligence, characterizing it as an early-stage endeavor. Company management has outlined a long-term strategy centered on embodied AI technologies, which require extensive internal development of both software and hardware components. Recent milestones include the launch of Li Auto’s inaugural AI glasses and progress with the M100 chip, currently undergoing large-scale testing with commercialization planned for 2026. Jefferies cautions that meaningful revenue generation from AI-related initiatives may not materialize promptly.
Regarding international market expansion, Li Auto has transitioned to an authorized dealer model following a mid-2025 restructure of its overseas team. Initial expansion efforts are concentrated on the Middle East and Africa, with subsequent moves into Southeast Asia and Europe slated for the latter half of 2026. Future plans also include entry into right-hand-drive markets and South America.
In adjusting its earnings projections, Jefferies lowered estimates for 2025 and 2026 to RMB 1.0 billion and RMB 5.7 billion respectively. This downward revision incorporates expectations of margin compression stemming from increased competition and rising battery costs. Despite these challenges, Li Auto's robust cash reserves are seen as a mitigating factor, providing the financial flexibility to withstand current pressures, although the anticipated product cycle reset may extend beyond prior forecasts.