Shorts made record bets against Li Auto stock. What made them wary?

Bets on the fall in shares of Chinese electric car maker Li Auto hit a record high ahead of the company's third-quarter report. Analysts had expected the company to post its biggest revenue decline since its listing in the US. In the end, the company reported a 36% drop in sales. Since the beginning of the year, Li Auto's securities have lost about 23% of their value and more than half of their value from their 2023 peaks, and the market is increasingly discussing the need to revise its product strategy.

According to S&P Global, the share of short positions among freely traded shares of Chinese electric car maker Li Auto, traded in Hong Kong, rose to a record 8.1% on Nov. 21. Analysts whose estimates were compiled by Bloomberg believed the company's revenue in the quarter ended September fell 38% compared with the same period in 2024. That would be the strongest drop in the figure since the company listed in the U.S. in 2020, the agency noted.

As a result, the company said in a report that total revenue fell 36.2% (to 27.4 billion yuan or $3.8 billion), and specifically car sales fell 37.4%. The revenue was better than Wall Street's expectations: Barron's cited an estimate of $3.7 billion. In addition, Li Auto reported a loss and gave a weak revenue forecast for the fourth quarter: from $3.7 billion to $4.1 billion, while analysts predicted $5.1 billion, Barron's wrote.

Li Auto receipts were cheaper by about 2.6% in the U.S. premarket.

The company is losing ground amid stiff competition in the extended range electric vehicle (EREV) market in China, the world's largest auto market, Bloomberg explains .

"The main bearish concerns center around their key EREV business," notes Eugene Xiao, Macquarie Capital's head of China equities strategy. - Next year is likely to remain extremely competitive, with Xpeng launching four EREV models at once and Xiaomi preparing to launch its much-anticipated EREV crossover."

Li Auto's U.S. depository receipts have fallen about 23.6 percent since the start of 2025, making it the second worst performing component of one of Hong Kong's key Hang Seng China Enterprises indexes, which has gained nearly 26 percent over the same time frame. The company has lost more than half of its market value since its August 2023 high.

The options market plotted stock movements of about 6% following the report's release - less than the 11% average swing seen after the eight previous quarterly releases, Bloomberg notes . In five of those eight cases, the actual change in the value of the securities was lower than the option prices suggested.

"Li Auto needs to revamp its product strategy to better meet the expectations of choice-ridden local buyers," Xiao says. - This includes expanding the model lineup and possibly updating the BEV lineup - all-electric vehicles - to appeal to a wider audience."

This article was AI-translated and verified by a human editor