Li Auto Faces Critical Test Amid Safety Recall and Slumping Deliveries

Chinese electric vehicle manufacturer Li Auto confronts a perfect storm of operational challenges as safety concerns plague its flagship model while vehicle deliveries continue their downward trajectory. The company’s ambitious transition from extended-range electric vehicles to pure battery electric models faces its most serious test yet.

Delivery Numbers Paint Concerning Picture

October brought more troubling news for investors as Li Auto reported deliveries of just 31,767 vehicles. This figure represents a substantial 38.25% decline compared to the same period last year, marking the fifth consecutive month of shrinking sales. The persistent downturn highlights the intense competitive pressures within China’s EV sector, where numerous manufacturers are battling for market share amid slowing demand growth.

The sales slump coincides with production complications for Li Auto’s newer models, creating a challenging operational environment. However, one bright spot emerges from the company’s recent product launches that could potentially reverse the negative trend.

Safety Recall Compounds Operational Woes

Beginning November 7, Li Auto will recall 11,411 units of its Li Mega electric MPV due to a significant safety defect. The voluntary action addresses insufficient corrosion protection in the cooling system, which could lead to leaks and potentially cause thermal runaway in the battery pack. This dangerous scenario came to light following a vehicle fire in Shanghai during late October.

In response, the automaker is providing free replacement parts and implementing an early warning system for affected owners. The damage to the flagship model’s reputation may prove more lasting, however, given that the Li Mega constitutes nearly half of all Mega variant deliveries.

Should investors sell immediately? Or is it worth buying Li Auto?

New Model Offers Potential Lifeline

Despite the concerning trends, Li Auto’s recently launched Li i6 electric SUV has generated substantial market interest. Since its September debut, the model has accumulated over 70,000 orders, providing a potential counterbalance to the negative impact of the Mega recall. Company representatives emphasize they’re taking all necessary measures to ensure timely deliveries of the new SUV.

This robust order book could serve as a crucial stabilizing factor as Li Auto navigates its current difficulties. The strong initial reception suggests continued consumer confidence in the brand’s newer offerings, even as established models face challenges.

International Expansion Strategy Advances

With domestic markets showing weakness, Li Auto is accelerating its global presence. The company inaugurated its first overseas location in Uzbekistan during October, with two additional facilities scheduled to open in Kazakhstan this November. This strategic push focuses on Central Asia, the Middle East, Europe, and the Asia-Pacific region.

The expansion plan leverages models including the Li L9, L7, and L6 to attract new customer segments outside China’s increasingly competitive home market. This geographical diversification represents a long-term approach to sustainable growth beyond immediate domestic headwinds.

The current crisis emerges during a pivotal transformation phase for Li Auto as it shifts from EREV to BEV manufacturing. While the i6 order volume provides encouraging signals, the company’s upcoming quarterly results will reveal whether the automaker can successfully navigate this complex period or continue losing ground in the intensely competitive electric vehicle landscape.