Li Auto has long generated optimism among investors in both China and the United States due to its strength in innovation across the electric vehicle (EV) industry, which has promised to spearhead the global neat energy transition.

However, in January 2026, news broke that the Chinese electric vehicle company had only managed to deliver 27,668 cars, marking the eighth consecutive month of decline.

The rate of slowdown is shocking. January delivery figures were down 7.55% year-on-year, while deliveries were down 37.47% compared to December.

Worse still for the stock, which is listed on the Hong Kong Stock Exchange under the ticker 2015 and on the Nasdaq under the letter “LI” and valued at $20 billion, JPMorgan analyst Nick Lai recently downgraded Li Auto to Sell from Hold, with his price target lowered to $14 from $18.

Lai suggested that the lack of significant fresh models this year was a key reason for the downgrade, while market conditions in China have made it much more challenging for electric vehicle companies to sell their vehicles.

The JPMorgan analyst also lowered price targets for rivals Li Auto, Nio and XPeng, underscoring the industry-wide problems facing China’s electric vehicle makers.

What’s going wrong?

Many factors contribute to China’s shrinking electric vehicle sector. One of the biggest challenges comes from the sheer level of competition between domestic automakers, which has led to intense price competition that has driven down the value of fresh vehicles.

However, electric vehicle sales in China are withering overall. Retail sales of electric vehicles, including battery electric and hybrid cars, fell 20% to 596,000 units in January, according to data from the China Passenger Car Association.

Li Auto’s decline reflects a broader slowdown, with January passenger car sales down 14% year-on-year and 32% compared to December.

Another catalyst for the downturn is the expiration at the end of 2025 of trade-related tax breaks that allocated some funds to the sale of electric vehicles as a cash incentive.

Amid weaker consumer confidence and continuing signs of an uncertain economic outlook for China, the end of tax breaks has become a major issue for securing electric vehicle sales.

“There is a growing existential threat to Chinese EV players as EVs are simply becoming too expensive for a high-price pressured consumer environment,” explained Iván Marchena, senior economist at global brokerage brand Just2Trade.

“The value of lithium needed to make batteries has tripled since the summer, while other basic components such as copper, aluminum, graphite and rare earths have also become more expensive at a time when manufacturers have increased their reliance on government subsidies to secure sales.”

Ahead of innovation

The reason Li Auto stock continues to excel despite mounting pressure is because investors can find plenty of evidence that the company isn’t standing still and struggling in the face of dwindling supplies.

Despite a downgrade by JPMorgan over suggestions that Li Auto has lost its lineup of flagship vehicles, the Chinese electric vehicle company recently announced the launch of the L9 Livis SUV, which has been manufactured using AI-equipped Li robots and will be equipped with the company’s M100 chips, providing 2,560 TOPS of processing power.

The SUV announcement helped sustain a 16% gain in the first 10 trading days of February, helping the company’s shares significantly outperform the Hang Seng Index over the same period.

The fresh model, which retails for 559,800 yuan ($81,000), is a high-end vehicle that could support change Li Auto’s trajectory in 2026.

The L9 Livis SUV is the latest installment in Li Auto’s conscious attempt to become an AI-centric electric vehicle manufacturer, which will see the company implement an end-to-end autonomous driving system and Vision Language Action architecture for its vehicles.

Li Auto also appears to be taking a more international approach, opening its first overseas shopping center in Uzbekistan, and for the future it plans to expand deeper into Central Asia with an upcoming launch in Kazakhstan.

This marks a key shift away from dependence on the domestic market and Li Auto is expected to seek expansion into the Middle East and Europe following its successful launch in Central Asia.

The return of trade subsidies

Most notably, China announced the return of trade subsidies for domestic EV purchases in 2026, a move expected to reignite consumer interest in purchasing EVs.

With RMB62.5 billion ($8.9 billion) allocated in ultra-long-term government bonds to support consumer goods replacement programs, we are likely to see an improvement in the domestic market for stocks like Li Auto, even as existing price pressures continue.

Is Li Auto still worth buying?

JPMorgan may have calmed shares a bit, but Li Auto remains one of China’s most novel electric vehicle companies, and its focus on overcoming challenges ahead by adopting artificial intelligence technology and expanding into European markets could serve shareholders well at a time when domestic demand and parts costs are challenging.

Investors should keep an eye on Li Auto’s deliveries for signs of economic recovery. The prospect of earnings deterioration in the coming year could pose a significant challenge to the company’s stock trajectory, but there is no doubt that the automaker continues to seek to gain an edge in the challenging electric vehicle market.