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Li Auto (LI) Slashes Q3 Delivery Forecast Amid Chip Dearth

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Li Auto LI recently trimmed its third-quarter 2021 delivery guidance. The China-based electric vehicle (EV) maker now expects to deliver about 24,500 vehicles in the third quarter, down from the previous outlook of vehicle deliveries between 25,000 to 26,000 units.

Backed by China's food delivery giant Meituan, Li Auto, which debuted on Nasdaq on Jul 30, is the second China-based EV maker to be listed on the U.S. stock market after NIO Inc NIO. The company designs, develops, manufactures, and sells premium smart EVs. It currently sells a family-sized SUV named the Li One. The company started volume production of Li One in November 2019 and released the 2021 Li One in May 2021.

Amid the heightened pandemic-induced concerns in Malaysia, the production of chips dedicated for Li Auto’s millimeter-wave radar supplier has been severely disrupted. This has resulted in the company slashing its delivery guidance for the third quarter.

Per Li Auto, the company will continue to monitor the ongoing market conditions and work in collaboration with its supply-chain partners to reduce the adverse impact of the chip shortage on its production.

Following the news of the delivery cut, shares of Li Auto, which currently carries a Zacks Rank of 4 (Sell), dropped 7.5% yesterday to close the trading session at $26.91.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from Li Auto, shares of other China-based EV makers and of Tesla Inc. TSLA also took a major hit in yesterday’s trading session. Shares of NIO tumbled 6.24%, XPeng Inc. XPEV slid 6.2%, while Tesla's stock slumped 3.8%.

The big dip in these companies was sparked amid fears that the highly indebted China-based real-estate developer Evergrande Group could possibly collapse, leading to a wave of defaults in China's bloated property market.

Evergrande, a real estate developer, is a massive conglomerate based in the city of Shenzhen, with a debt burden of $300 billion. Amid declining sales, Evergrande has been trying to cut costs and offload buildings. However, nothing seems to have worked in favor of the company, which has been struggling to raise funds. This has forced the company to declare to its investors that it might not be able to clear its debts. It has triggered a decline in share prices for major Chinese companies. In fact, investors are worried that the possible collapse of the property behemoth poses major threat to China's financial stability and economic growth. It is still unclear how the Chinese government will step in to keep Evergrande from sinking.

In fact, worries over a potential Evergrande collapse have sent the equity markets reeling, with the negative sentiment spilling over into the U.S. and European markets as well.


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