Li Auto Faces Class Action Lawsuits Over Misleading Outlook for Li Mega MPV

Investors of **Li Auto Inc.**'s Nasdaq-listed shares have initiated a class action lawsuit against the Chinese electric vehicle (EV) manufacturer in the United States. The investors allege that the company inflated market demand for their new multi-purpose vehicle (MPV), the Li Mega, which was launched in March, leading to investors experiencing financial losses following lower-than-expected sales.[para. 1]

Li Auto was highly optimistic about the Li Mega, a seven-seat MPV introduced on March 1, promoting it as a standout local offering poised to revolutionize the luxury MPV market. This segment has traditionally been dominated by models such as the Toyota Alphard and Mercedes V-class.[para. 2]

The company set an ambitious sales target, aiming to sell approximately 8,000 units per month. The Li Mega's starting price was positioned at 559,800 yuan ($77,500). For context, the best-selling model in this category, the Toyota Alphard, sells fewer than 20,000 units annually.[para. 3]

Despite these high hopes, the Li Mega received a tepid market response upon its debut, coinciding with a period of decelerating market activity. During this period, competing Chinese EV manufacturers were also reducing their prices. Consequently, Li Auto revised its sales expectations for the first quarter and the entirety of 2024 downward on March 21. The company now anticipates total vehicle deliveries for the first quarter to be between 76,000 and 78,000 units, a significant drop from the initial projection of 100,000 to 103,000 units.[para. 4]

In a candid internal letter dated March 21, the company's founder, chairman, and CEO, Li Xiang, acknowledged that they had overestimated the market growth potential for the Li Mega. Following this admission, Li Auto's shares have plummeted by 46% since February 27.[para. 5]

Hao Junbo, a Beijing-based lawyer whose firm is representing the Li Auto stock investors, noted that such class action lawsuits are not uncommon when investors face financial losses due to declining stock prices in listed companies.[para. 6]

The legal troubles Li Auto is facing echo similar actions against another Chinese EV maker, Nio Inc. In 2019, Nio and its executives were embroiled in multiple class action lawsuits in the U.S., filed by shareholders who claimed that the company had misled investors regarding a planned new manufacturing facility during its 2018 IPO. Additionally, it was alleged that Nio failed to disclose the potential impact of reductions in government subsidies for electric vehicles in China.[para. 7]

For additional information or media inquiries, Denise Jia can be contacted at huijuanjia@caixin.com.[para. 8]