Analyst Upgrade Highlights Major Opportunity in China’s EV Battleground as Li Auto’s Fundamental Momentum Confronts Industry Turbulence

Li Auto Inc. (LI) operates at the epicenter of China’s electric vehicle (EV) revolution, blending extended-range hybrid technology with a focus on premium family SUVs. As a new energy vehicle leader, Li Auto’s business model is built around innovation, scale, and rapid market expansion in China’s fiercely competitive automotive sector. Investors have watched the company’s rapid growth with both anticipation and caution amid price wars, regulatory shifts, and evolving consumer preferences.

Today’s analyst upgrade from Daiwa Securities – one of Asia’s largest and most respected investment houses – moves Li Auto’s rating from Outperform to Buy with a price target of $30.50, signaling renewed confidence in the company’s prospects. With the stock trading at $23.70, this upgrade implies a compelling 29% potential upside for investors, positioning Li Auto as a high-conviction pick in an industry beset by uncertainty.

Why do analyst upgrades matter? In markets driven by sentiment, access to capital, and shifting competitive dynamics, a decisive rating change from a heavyweight like Daiwa can serve as a catalyst, drawing institutional attention and re-shaping the risk/reward calculus for self-directed investors. Let’s break down the critical data and strategic context behind this upgrade and what it means for your portfolio.

Key Takeaways

  • Potential 29% Upside: Daiwa’s new $30.50 price target suggests nearly 29% upside from current levels.

  • Stock Under Pressure: Li Auto shares have declined 2.9% today and are down from February’s $33.12 high, now trading below both recent VWAP and 20-day moving averages.

  • Strong Delivery Momentum: August deliveries reached 28,529 vehicles, pushing cumulative deliveries to 1.4 million – a testament to sustained operational execution.

  • Sector Headwinds Persist: News highlights continued price wars and competitive threats across China’s EV market, raising questions about margin durability.

  • Daiwa’s Weight Carries Significance: The upgrade reflects meaningful conviction from a top-tier Asian investment firm known for its deep sector expertise.

Daiwa’s Upgrade: A Vote of Confidence from a Regional Powerhouse

Daiwa Securities, with a legacy spanning over a century, is one of Asia’s largest brokerages and a recognized authority in China’s tech and auto sectors. Their research carries particular weight among institutional investors and global funds seeking on-the-ground insight into Asian growth stories.

  • New Rating: From "Outperform" to "Buy"

  • Current Price Target: $30.50 (from an undisclosed prior target)

  • Implied Upside: 29% from the current $23.70 stock price

  • Analyst Confidence: Daiwa’s deep sector knowledge and Asia-centric coverage lend this upgrade unusual credibility, especially given the ongoing volatility across Chinese equities.

This shift to "Buy" – rather than a simple reiteration of an Outperform – is material. It indicates Daiwa’s analysts see a near-term inflection in Li Auto’s business, whether from product launches, cost structure improvements, or an anticipated stabilization in the competitive environment.

"Daiwa’s conviction here aligns with Li Auto’s operational momentum, despite sector headwinds. Their deep Asia expertise gives this call added gravitas."

Li Auto’s Business Model: Navigating China’s EV Crosswinds

Li Auto’s core strength lies in its extended-range electric vehicles (EREVs), which bridge the gap for Chinese households wary of pure-battery range limitations. The company focuses on family-sized SUVs with high-tech features and premium finishes, targeting affluent urban consumers across China’s first- and second-tier cities.

  • Scale and Reach: Over 1.4 million cumulative vehicles delivered as of August 2025

  • Product Pipeline: Ongoing launches in both EV and EREV categories

  • Technology Focus: Heavy investment in intelligent cockpit, autonomous driving, and proprietary battery solutions

This hybrid approach has helped Li Auto achieve rapid market share expansion, but it also exposes the company to the intensifying price wars and shifting subsidy policies roiling China’s EV sector.

Recent Stock and Financial Performance: Caution Beneath the Upgrade

Stock Price Dynamics

  • Current Price: $23.70 (down 2.9% today)

  • 52-Week Range: $18.11 (low, September 2024) to $33.12 (high, February 2025)

  • Recent Trend: Shares are trading below both the 20-day SMA ($23.97) and VWAP ($25.82), with RSI at 42.7, indicating subdued momentum but not yet oversold conditions.

  • Volume: Today’s volume (1.83M) is well below the 20-day average (6.1M), suggesting limited forced selling or panic despite the negative price action.

Financial and Delivery Highlights

Technical Snapshot

Indicator

Value

Comment

VWAP (1Y)

$25.82

Price below VWAP, cautious tone

SMA 20

$23.97

Price slightly below SMA

RSI

42.7

Momentum subdued

Bollinger Bands

$22.83 - $25.11

Trading near lower band

Potential Upside: What 29% Means for Investors

With Daiwa’s $30.50 target, Li Auto’s risk/reward profile looks compelling on paper – especially given the 29% implied upside. However, this must be weighed against:

  • Macro and Sector Risks: Ongoing price wars, uncertain regulatory environment, and the potential for slowing demand in China’s EV market.

  • Execution Risk: While delivery growth is impressive, margin compression and capital intensity remain key challenges.

  • Sentiment and Liquidity: With shares below key technical levels, a catalyst (such as an earnings beat, new model launch, or positive industry data) may be needed to unlock upside.

For risk-tolerant investors, Daiwa’s upgrade suggests that much of the near-term bad news may already be priced in – and that the stock could be poised for a re-rating if sector sentiment stabilizes.

Recent News: Contextualizing the Upgrade

August Delivery Beat:

“Li Auto delivered 28,529 vehicles in August 2025, raising its cumulative deliveries to 1,397,070.”
— GlobeNewswire, Sept. 1, 2025

Price War Pressures:

“Chinese electric vehicle companies could be at risk of a big reversal as competition and the ongoing price wars start to dent their profits.”
— Invezz, Aug. 31, 2025

Industry Focus:

“Tesla rivals XPeng, Xiaomi, Nio and Li Auto will report China EV sales for August on Monday, with giant BYD due Sept. 1-2.”
— Investors Business Daily, Aug. 31, 2025

Strategic Implications: Is This a Turning Point?

Daiwa’s upgrade is not a guarantee of near-term outperformance, but it does signal that a respected regional heavyweight sees a disconnect between Li Auto’s execution and its current valuation. The company’s ability to deliver consistent volume growth in an unforgiving market stands out, especially as other competitors stumble or retrench.

Yet, the sector’s price wars and margin pressures make it clear this is a high-risk, high-reward scenario. For sophisticated investors, the upgrade is a call to re-examine assumptions: Are current fears overdone, or is the market rightly discounting future risks?

What to Watch Next:

  • Earnings Results: Any evidence of margin stabilization or upside surprise would reinforce Daiwa’s bullish thesis.

  • Sector News Flow: Watch for signs of price discipline or regulatory support in China’s EV market.

  • Technical Breakout: A move back above the $25.82 VWAP or $23.97 SMA could signal renewed momentum.

Bottom Line: Opportunity with Eyes Wide Open

Daiwa’s upgrade gives Li Auto a spotlight at a moment when the market is wrestling with both optimism and fear. The 29% potential upside is meaningful, but so are the risks. Investors should weigh Daiwa’s conviction against the sector’s structural headwinds, using this upgrade as a catalyst for deeper due diligence and timely portfolio action.

Stay tuned to DeepStreet.io for real-time analyst moves, sector shifts, and tactical insights that keep you ahead of the market’s next turn.

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