Is there any possibility of a price cut for Li Auto's L series? - Thoughts on Li Auto and the recent developments in the EV industry.

This article mainly organizes some fragmented personal discussions from recent group chats, covering two aspects:

1. Evaluating the pricing and perspectives of Li Auto L7 and L6 from an owner's viewpoint.

2. Reflecting on the current electric vehicle (EV) industry from an investor's perspective.

About Li Auto L7 and L6:

The pricing for the L7 launch event on March 1st (MAX 350,000, PRO 320,000, AIR 300,000) was initially reasonable, as it was 20,000-30,000 cheaper than the 2023 L7 model.

Under normal circumstances, if the L6 had been launched alongside the L7/8/9 on March 1st, the L6 MAX would likely have been priced at 300,000.

However, several factors disrupted Li Auto's plans this year:

1. Year-end sales push in 2023 led to a 40,000 price cut for the L7, making the new model less attractive despite being cheaper.

2. Poor macroeconomic conditions weakened consumer spending on big-ticket items.

3. Intense competition forced rivals to slash prices aggressively.

4. The underwhelming launch of the Mega model impacted momentum and public perception.

These negative factors made the 2024 L7 pricing unappealing, even with subsequent 5,000 discounts and subsidies.

With the L6 launch timing critical, Li Auto couldn't afford another failure. Thus, the L6 had to be priced competitively at 280,000 for the MAX variant—a clear bargain given its specs.

This created a new problem: the L7 MAX, now only 12cm longer with air suspension but priced 70,000 higher than the L6 MAX, became virtually unsellable except to the price-insensitive.

The solution? The L6's pricing reset the anchor point downward by at least 20,000. For the L7 to regain traction, a price cut is inevitable. Current 5,000 discounts are insufficient—a 20,000 reduction would align with option-based calculations:

1. Air suspension: +20,000

2. Extra 12cm length: +20,000

3. Power doors/rear massage: +10,000

Thus, adding 50,000 to the L6 MAX creates an L7 MAX equivalent, justifying a 330,000 price point. My proposed adjustments:

L7 MAX 330,000

L7 PRO 300,000

L7 AIR 280,000

A 20,000 cut from current prices would restore competitiveness; 30,000 would make it a blockbuster.

As an L7 owner, I maintain that Li Auto's product strength remains solid—the issue lies solely in the shifted pricing anchor. Recalibrating upward from the L6's baseline could revive sales, potentially surpassing last year's 50,000 monthly peak.

About the EV Industry:

My stance stands: This is a brutal sector with shallow moats. Investing here demands constant monitoring—no "set-and-forget" like Tencent or Moutai.

Yet its massive potential as a leading AI commercialization frontier guarantees future giants. Hence, despite the risks, I maintain 30%+ exposure—though I caution newcomers: volatility is extreme. Unless deeply researched, why wade in when Tencent at 300 HKD offers smoother sailing?

Currently, cutthroat competition has escalated into a bloodbath price war. Product differentiation matters less now—surviving players all meet baseline quality. Price reigns supreme, humbling even Huawei and pressuring premium brands like Nio.

Short-term pain is inevitable: unpriced cars won't sell, but discounts don't guarantee success. Profit-stable growth is unrealistic—even leaders like BYD, Tesla, Aito, and Li Auto face immense strain. For second-tier players, it's existential.

Capital patience wears thin—even long-term backer BG exited Nio after six years. The silver lining? Accelerated consolidation will strengthen cash-rich leaders, while depressed valuations create opportunities amid the gloom.

Disclaimer:

These are personal views—often wrong (my Mega analysis became a running joke). Always conduct independent research before investing or purchasing. $Li Auto(LI.US) $LI AUTO-W(02015.HK)