A class action lawsuit was filed against Li Auto Inc. (NASDAQ:LI) on May 10, 2024. The plaintiffs (shareholders) alleged that they bought Li Auto American Depositary Shares (ADS) at artificially inflated prices between February 26, 2024 and March 20, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought LI ADS during that period can click here to learn about joining the lawsuit.
Li Auto is an electric vehicle (EV) manufacturer and a dominant player in China’s new energy vehicle (NEV) market. The company designs and manufactures premium smart electric SUVs with extended-range technology.
The plaintiffs maintain that Li Auto and three senior officers and/or directors (Individual Defendants) deceived investors by lying and withholding vital information about the demand for its vehicles and ancillary issues from SEC filings and related material. By doing so, the Defendants repeatedly made false and misleading public statements throughout the Class Period.
The truth became clear on March 21, 2024, when Li Auto released its updated Q1 auto delivery outlook. For the first quarter, Li Auto slashed its delivery outlook to the range of 76,000 to 78,000 units, significantly down from the prior outlook of 100,000 to 103,000 vehicles. The company cited lower-than-expected order intake. Particularly, Li Auto noted that the company’s operating strategy for its Li Mega (a family multi-purpose vehicle or MPV) was “mis-paced.”
The company had incorrectly planned operations as if the Li Mega was in the scaling phase (1-to-10), while in reality, it was only in the nascent business validation period (0-to-1). Accordingly, the company acknowledged that it would have to “first focus on our core user group and target cities with stronger purchasing power, recalibrating the Li MEGA strategy back to the 0-to-1 phase.”
In stark contrast, during the Class Period, the Defendants claimed in press releases that the company would be able to deliver between 100,000 and 103,000 units in Q1, with March delivery exceeding 50,000 units. This was owing to the volume production delivery of the Li MEGA and other autos during 2024. Moreover, the company said that it was leveraging its new integrated planning system to connect end-to-end supply and demand and all necessary requirements, thus maintaining “the consistency and timeliness of our supply.”
As per the class action lawsuit, Li Auto caused its ADS to trade at artificially inflated prices by knowingly and recklessly misleading investors about the company’s business practices during the Class Period.
Notably, Li Auto stock has declined roughly 51% so far in 2024, massively impacting shareholders’ returns.
