The Li L6 will be the biggest driver of Li Auto's sales growth this year, but the segment is highly competitive due to the natural effect of falling price ranges, says Deutsche Bank.

(Image credit: Li Auto)

Li Auto (NASDAQ: LI) yesterday launched the Li L6, an extended-range electric vehicle (EREV) model that is the least expensive in its lineup. In Deutsche Bank's view, the model will be a driver of Li Auto's sales growth this year, but will inevitably face stiff competition.

"Li Auto officially launched its L6 EREV SUV, representing the most affordable offering in its line-up and biggest driver of volume growth this year," analyst Edison Yu's team said in a research note yesterday.

The Li L6 should help regain some momentum after the underwhelming performance of the Li Mega, which should generate a solid order backlog, given the lower starting price, the team said.

However, the segment is very competitive due to the natural effect of falling price band, Yu's team noted.

The team expects the Li L6 to take share from Huawei-backed Aito's M7 SUV, though the latter's order book has fallen.

However, without incremental promotional activity, the Li L6 may struggle to stay at, or even reach, the target of delivering 20,000 units per month, the team said.

"Therefore, assuming a ~130,000 unit contribution, overall 2024 deliveries are likely trending toward the low-end of the 560k-640k guidance range," the team wrote.

The Li L6 hit the market last night and is available in two trims, Pro and Max, with starting prices of RMB 249,800 ($34,500) and RMB 279,800, respectively.

This model is the least expensive of in Li Auto's lineup, below the Li L7's starting price of RMB 319,800.

Notably, Li Auto leaves open the possibility of a lower-priced Li L6 Air in the future, as the company's current product naming is Air, Pro, Max, and Ultra in ascending order of price.

Li Auto began accepting orders for the Li L6 at the end of the launch event, with a deposit of RMB 5,000 refundable within seven days, and customers who ordered the Li L6 on May 5 and before will receive limited-time benefits totaling RMB 20,000.

Li Auto will begin small-volume deliveries of the Li L6 next week and expects to be able to deliver about 2,000 units this month. High-volume deliveries will begin in May.

The company's management has mentioned that the Li L6 was aiming to challenge the target of 30,000 deliveries per month, although acknowledging that there will be stiff competition in the market.

The market space for models in the price range of RMB 200,000 to RMB 300,000 is twice as large as that for models priced above RMB 300,000, Li Auto senior vice president Zou Liangjun said in a January 12 interview with local media.

The market is also more competitive, with Tesla's (NASDAQ: TSLA) Model Y, for example, selling 40,000-50,000 units a month in China, he said.

The Li L6 aims to challenge monthly sales of 30,000 units, Zou said. At the time, Li Auto's sales target for the whole of 2024 was 800,000 units.

However, with Li Auto's first battery electric vehicle (BEV) model, the Li Mega, falling short of expectations after its launch last month, the company lowered its overall delivery target.

Li Auto now expects to sell between 560,000 and 640,000 units in 2024, down from 650,000 to 800,000, local media outlet Xchuxing said in a March 21 report, citing minutes of a meeting with the company.

($1 = RMB 7.2382)

Li Auto launches its cheapest model Li L6 with starting price of $34,500