Li Auto plans to initially enter Middle Eastern countries including the UAE, Saudi Arabia and possibly some North African countries, with the first model to be the flagship Li L9, according to local media.

(A Li L9 on display at the 2023 Shanghai auto show. Image credit: CnEVPost)

Li Auto (NASDAQ: LI) plans to start entering overseas markets in 2024, initially into Middle Eastern countries including the UAE, Saudi Arabia and possibly some North African countries, local media outlet LatePost reported today, citing several people familiar with the matter.

The company's first model available in overseas markets will be the flagship Li L9, the report said, adding that it may also decide whether to offer the less expensive Li L8 and Li L7 as well, depending on their acceptance by overseas consumers.

Li Auto's three models currently on sale are all extended-range electric vehicles (EREVs), essentially plug-in hybrids. The Li L9, with a starting price of RMB 429,800 ($60,220), is Li Auto's highest-priced by far.

Pre-sales for its first battery electric vehicle (BEV) model, the Li Mega MPV (Multi-Purpose Vehicle), started earlier this month at the Guangzhou auto show, with the official launch set for December.

Prior to Li Auto's strategy session earlier this year, investors from the Middle East and Europe approached the company, and the EREV maker evaluated the Middle East's political and consumer environments as more suitable for its first foray into overseas markets than Europe's, according to LatePost.

In terms of the political environment, the European Union announced on October 4 that it was launching an anti-subsidy investigation into EVs from China, while Middle Eastern countries have generally welcomed Chinese EV makers to invest there, the report noted.

In terms of the consumer environment, most countries in the Middle East encourage childbirth, favoring Li Auto, which targets the family market, according to the report.

The high selling price of Li Auto's models matches the level of economic development in Middle Eastern countries, the report said. International Monetary Fund (IMF) data show GDP per capita reaching $50,600 in the UAE and $32,600 in Saudi Arabia in 2022, the report noted.

Li Auto's preparations to expand into overseas markets date back two years, the report said.

In the second half of 2021, Li Auto was preparing to enter the US market and had built a team of about 30 people in Beijing for that purpose, LatePost said, citing a person familiar with the matter.

That team was then responsible for overseas marketing, brand strategy, strategic analysis, and data analytics. In early 2022, as its efforts to expand overseas slowed down, some members of the team were reassigned to the domestic business and others left, according to the report.

Notably, Li Xiang, founder, chairman, and CEO of Li Auto, said in a July 18 Weibo post that the company will not enter overseas markets before 2025 and will focus all of its resources on achieving its 2025 goals.

In overseas markets, Li Auto will maintain a direct sales model, he added at the time.

Li Auto's goal is to reach annual sales of 1.6 million vehicles by 2025 and annual revenue of 500 billion yuan, Li wrote on June 21 on Weibo.

The company's latest timeline for expanding into overseas markets is earlier than previously planned, the LatePost report noted.

Li Auto's efforts to expand overseas will be divided into "small closed-loop" and "big closed-loop" levels, with the former being more conservative and the latter more aggressive, according to the report.

Under the "small closed-loop" model, Li Auto will export its China-built cars to overseas markets in the next 1-2 years. The company has already set up a team for this, headed by Li Auto's senior vice president of sales and service, Zou Liangjun, who worked in Saudi Arabia and the UAE during his time at Huawei, according to the report.

Li Auto has already been preparing for this, with developers already starting to do Arabic and English adaptations on top of the vehicle's Chinese-language system, the report said.

Taking into account tariffs, shipping costs, and customs clearance fees, Li Auto's vehicles are expected to sell for 1.5 to 2 times the price of what they sell for in China, according to the report, which cited a source close to the company.

If the "small closed-loop" model is successful, Li Auto will build on it to push forward with the "big closed-loop" model, which will allow it to set up its own network of directly-managed offline stores in some overseas markets, the report said.

In addition, Li Auto plans to build vehicle assembly plants overseas, and will guide domestic supply chain manufacturers to build factories overseas, according to the report.

The "big closed-loop" model, which will start in 2026 or later, is headed by Li Auto CFO Li Tie, according to the report.

($1 = RMB 7.1373)

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