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Li Auto (NasdaqGS:LI) has rolled out an updated version of its Mega minivan, keeping the bullet-train-inspired silhouette while adding fully active suspension, a larger 108 kWh battery pack, and enhanced LiDAR coverage. The move comes as the company accelerates its shift from extended-range electric vehicles (EREVs) to pure battery electric vehicles (BEVs), a transition that analysts say could unlock significant shareholder value.
Written on August 6, 2025.
The updated Mega arrives at a time when Li Auto’s stock has been volatile. Shares have risen 7.67% over the past month but are down 24.35% year-to-date, and the one-year total shareholder return has slumped 45.62%. Despite the price turbulence, the company continues to push new products, including the recently launched Li i8 and the upcoming Li i6, reinforcing its BEV narrative.
Valuation Gap Underscores Potential
The most widely followed valuation narrative for Li Auto places fair value at $18.14 per share, compared with the current trading price of around $13.05. That gap implies a roughly 28% discount, drawing attention from value-focused investors. The bullish case rests on the assumption that Li Auto will capture a larger slice of China’s EV market as middle-class consumers upgrade and the country’s EV penetration rate climbs. Faster revenue growth, improving margins, and a richer earnings profile over several years are the key drivers behind the $18.14 target.
However, the market is also pricing the stock at a price-to-sales (P/S) ratio of 0.8x, slightly above the US auto industry average of 0.7x but below the P/S of 1.6x for some peers. The fair P/S ratio is estimated at 0.9x, suggesting the shares are only modestly cheap on a sales basis. This mix of “undervalued on fair value” and “close to fair on sales” points to a balanced risk-reward profile, where execution on the BEV transition will be the deciding factor.
Fresh Perspective: Delivery Data and Competitive Landscape
Just last week, Li Auto reported July 2025 delivery numbers showing a 15% month-over-month increase, with total deliveries exceeding 50,000 vehicles for the first time. The company also announced that its cumulative EV deliveries have now surpassed 800,000 units. These figures lend credibility to the BEV narrative, as the product lineup—including the refreshed Mega and the high-volume Li i8—gains traction. Meanwhile, competition is intensifying: Nio, XPeng, and BYD are all launching new BEV models in the same price segment. Li Auto’s ability to maintain pricing power while funding heavy R&D and capital expenditure remains a key risk.
Risks That Could Derail the Narrative
The bullish fair value estimate is not without its challenges. High R&D and capex spending could continue to strain cash flow, especially if the company’s BEV ramp-up takes longer than expected. Rising competition from domestic and foreign automakers may also limit Li Auto’s ability to raise prices or sustain margins. If the company fails to meet its ambitious delivery targets, the stock could face additional downside.
Another Lens: Sales Multiple vs. Fair Value
Looking beyond the standard discounted cash flow model, the P/S ratio offers a simpler check. At 0.8x, the stock is trading at a slight discount to the estimated fair P/S of 0.9x, implying only a modest 11% upside on a sales multiple basis. This contrasts with the 28% upside from the fair value calculation, highlighting the uncertainty around future profitability. Investors should weigh both metrics to form a complete picture.
Next Steps for Investors
With mixed signals—product momentum on one side, competitive pressure on the other—now is a good time to dig into the underlying data. For those seeking a quick overview, key rewards include the potential upside if the BEV plan stays on track and the company’s strong brand recognition in China’s premium EV market. But caution is warranted given the execution risks.
If you are looking beyond Li Auto, consider screening for high-quality undervalued stocks or resilient companies with low risk scores. Tools like the undervalued stock screener (48 results) and the solid balance sheet screener (50 results) can help identify opportunities with stronger fundamentals.
This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making investment decisions.
