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 Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our&nbsp;<a href="https://tokenist.com/terms-of-service/" style="text-decoration:underline;color:#3c7b7b" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">website policy</a>&nbsp;prior to making financial decisions.
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<p class="has-drop-cap">For the six-month period, Tesla (NASDAQ: TSLA) has been the only S&amp;P 500 (<a href="https://tokenist.com/investing/spx-vs-spy/" rel="noopener noreferrer nofollow" class="deco-link">SPX</a>) stock with a double-digit loss of 35.91%. This also translates to the three months following negative coverage of EVs during winter conditions.</p>
<p>The pure EV sector faces problems with entry-level affordability, charging infrastructure, and resale value as it is difficult to gauge the condition of the car’s most expensive component – batteries. On average, lithium-ion batteries degrade by <a aria-label=" (opens in a new tab)" href="https://www.geotab.com/blog/ev-battery-health/" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">2.3% annually</a>.&nbsp;</p>
<p>This means that the resale value of EVs far underperforms petrol-powered cars. According to an Auto Trader report last December, EVs lose up to half of their value in three years, leading to “unsustainable levels of depreciation.”</p>
<p>Expressed in the performance of Defiance Pure Electric Vehicle ETF (<a aria-label="EVXX (opens in a new tab)" href="https://www.defianceetfs.com/evxx/" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">EVXX</a>), consisting of Tesla, <a href="https://tokenist.com/rivian-vs-tesla-which-ev-stock-offers-more-opportunity-for-growth/" rel="noopener noreferrer nofollow" class="deco-link">Rivian</a> (NASDAQ: RIVN) and three top <a href="https://tokenist.com/three-asian-ev-stocks-that-can-compete-with-tesla/" rel="noopener noreferrer nofollow" class="deco-link">Chinese EV companies</a>, EV stocks had a 26% year-to-date loss. However, Li Auto (NASDAQ: LI) stands out from the crowd, as it even outperformed SPX at 11% YTD returns.</p>
<p>At this point, does it make sense to back TSLA or LI?</p>
<h3 id="outlining-ev-battleground">Outlining EV Battleground</h3>
<p>When Bitcoin was half its current price, many investors bought in for maximum exposure. Others were burdened with doubts and waited. In the world of earnings and EV equities, this translates to catching the discount period. But to catch it, one must be assured of fundamentals.</p>
<p>Like Japan’s <a href="https://tokenist.com/three-stocks-that-can-soar-with-japans-historic-policy-shift/" rel="noopener noreferrer nofollow" class="deco-link">Toyota</a>, China-based Li Auto adopted a plug-in hybrid, extended-range approach to EVs, cutting short some of the key adoption obstacles. Moreover, Li Auto focuses on SUVs, <a aria-label=" (opens in a new tab)" href="https://www.motor1.com/news/587230/suvs-still-rule-us-market/" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">widely popular</a> in the US due to their greater crash survivability. This is what propelled Tesla to supply the SUV demand with its own take – Cybertruck.</p>
<p>On the Chinese video-sharing platform Douyin, Tesla’s official account indirectly attacked Li Auto, arguing that one should buy EVs for their smart and safety tech instead of relying on superficial comfort features like refrigerators or color TVs.</p>
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 <figure class="aligncenter size-large"><img decoding="async" width="1024" height="606" src="https://tokenist.com/wp-content/uploads/2024/03/Teslasliautovideo-1024x606.jpg" alt="" class="wp-image-201437" srcset="https://tokenist.com/wp-content/uploads/2024/03/Teslasliautovideo-1024x606.jpg 1024w, https://tokenist.com/wp-content/uploads/2024/03/Teslasliautovideo-300x177.jpg 300w, https://tokenist.com/wp-content/uploads/2024/03/Teslasliautovideo-768x454.jpg 768w, https://tokenist.com/wp-content/uploads/2024/03/Teslasliautovideo-650x384.jpg 650w, https://tokenist.com/wp-content/uploads/2024/03/Teslasliautovideo.jpg 1099w" sizes="(max-width: 1024px) 100vw, 1024px">
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<p>Li Auto pushed back with the help of four Chinese car bloggers. On Weibo, they <a aria-label=" (opens in a new tab)" href="https://weibo.com/6001272153/NDsXkijgY" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">compared</a> Li Auto’s minivan Li Mega (~$78k) to Tesla’s Model X (~$80k), showcasing Li Auto’s superior battery performance with 14% battery charge remaining vs Tesla’s 4% for the same range.</p>
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 <figure class="aligncenter size-large"><img decoding="async" width="1024" height="568" src="https://tokenist.com/wp-content/uploads/2024/03/2024012507515122-1024x568.jpg" alt="" class="wp-image-201450" srcset="https://tokenist.com/wp-content/uploads/2024/03/2024012507515122-1024x568.jpg 1024w, https://tokenist.com/wp-content/uploads/2024/03/2024012507515122-300x167.jpg 300w, https://tokenist.com/wp-content/uploads/2024/03/2024012507515122-768x426.jpg 768w, https://tokenist.com/wp-content/uploads/2024/03/2024012507515122-650x361.jpg 650w, https://tokenist.com/wp-content/uploads/2024/03/2024012507515122.jpg 1200w" sizes="(max-width: 1024px) 100vw, 1024px">
  <figcaption class="wp-element-caption"><em>Image courtesy of CnEVPost</em>
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<p>The exchange between Tesla and Li Auto showcased where the competitive fault lines lie. But moving forward, what is the make-or-break demand both companies must cross?&nbsp;</p>
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<h3 id="affordability-threshold-and-self-driving-network-effect">Affordability Threshold and Self-Driving Network Effect</h3>
<p>Compounding on the depreciating EV resale value, the entry price remains the biggest EV adoption hurdle. Autolist.com’s <a aria-label="Electric Vehicle Survey for 2023 (opens in a new tab)" href="https://www.autolist.com/news-and-analysis/2023-survey-electric-vehicles" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">Electric Vehicle Survey for 2023</a> noted that 42% of respondents view EVs as too expensive to lease or buy. This aligns with the <a aria-label="S&amp;P Mobility Survey (opens in a new tab)" href="https://www.prnewswire.com/news-releases/sp-global-mobility-survey-finds-ev-affordability-tops-charging-and-range-concerns-in-slowing-ev-demand-301981126.html" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">S&amp;P Mobility Survey</a>, which found that 48% of respondents view EV pricing as excessively high.</p>
<p>Compared to the cheapest Li L7 SUV, which costs $44.5k, Tesla offers the Model 3 for ~$39k. Tesla has long aimed to break this barrier. Codenamed “Redwood,” this new model should come online in mid-2025 at an entry-level price of $25k.</p>
<p>In the meantime, Tesla has gained a significant advantage in data collection for self-driving capabilities and other improvements. The difference in cars delivered demonstrates this. For FY 2023, Li Auto delivered <a aria-label=" (opens in a new tab)" href="https://ir.lixiang.com/system/files-encrypted/nasdaq_kms/assets/2024/02/26/0-34-34/Li%20Auto%20Inc.%20Announces%20Unaudited%20Fourth%20Quarter%202023%20Financial%20Results.pdf" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">376,030 units</a> while Tesla delivered five times as much at <a aria-label=" (opens in a new tab)" href="https://ir.tesla.com/press-release/tesla-vehicle-production-deliveries-and-date-financial-results-webcast-fourth-quarter-2023" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">1,808,581 units</a>.</p>
<p>With Gigafactories and efforts to secure the <a href="https://tokenist.com/these-discounted-lithium-stocks-can-be-a-great-bet-on-evs/" rel="noopener noreferrer nofollow" class="deco-link">lithium supply chain</a> outside of China, Tesla is in a superior position to scale and ramp up production for the Western market. Interestingly, both companies reported free cash flow at ~$2 billion in Q4 2023 earnings. For Li Auto, this is a 349.4% increase from the year-ago quarter, while for Tesla this is a 45% increase.</p>
<p>During 2023’s aggressive price cuts against Chinese automakers, Tesla went through an equally aggressive price correction, making it the <a href="https://tokenist.com/boeing-now-the-second-worst-performer-in-the-sp-500-ytd-only-behind-tesla/" rel="noopener noreferrer nofollow" class="deco-link">worst YTD SPX performer behind Boeing</a>. But does that mean TSLA stock is now discounted?</p> <iframe src="https://tokenist.substack.com/embed" width="100%" height="320" style="border:1px solid #EEE; background:white;" frameborder="0" scrolling="no"></iframe>
<h3 id="analyst-pricing-of-tesla-and-li-auto">Analyst Pricing of Tesla and Li Auto</h3>
<p>Aggregated by Nasdaq, 32 analysts view the average TSLA price target at $207.22 vs the current $171 per share, making it a 21% potential gain twelve months ahead. For the same period, ten analysts view the average LI price target at $56.71 vs the current $38 per share, making it a potential 49% return.</p>
<p>This makes sense, given the 1,305% difference in their market capitalizations, which favors Tesla. However, Tesla’s forecasted price-to-earnings (P/E) ratio of 19.28 for 2024 suggests a cheaper exposure than Li Auto’s forecasted 72.47 for the same year. For the latter, investors would pay $72.47 for every dollar of the company’s earnings.</p>
<p>Li Auto’s initial growth spurt will likely be limited compared to other Chinese automakers. Tesla, owing to its large production capacity and strong branding, is preparing for the next phase of EV adoption in the Western market.&nbsp;</p>
<p><em><strong>Do you think Tesla should focus more on EV basics instead of luxury features? Let us know in the comments below.</strong></em></p>
<p><em>Disclaimer: The author does not hold or have a position in any securities discussed in the article.</em></p>
<p>The post <a rel="noopener noreferrer nofollow" href="https://tokenist.com/tesla-vs-li-auto-which-ev-stock-to-back-in-2024/">Tesla vs Li Auto: Which EV Stock to Back in 2024?</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://tokenist.com">Tokenist</a>.</p>

Tesla vs Li Auto: Which EV Stock to Back in 2024?

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