Macquarie's Bold Underperform Call on Li Auto: What It Means for Investors

Electric vehicle (EV) disruptor Li Auto Inc. is back in the headlines as Macquarie, a globally respected investment bank with particular strength in Asia-Pacific markets and a robust track record in automotive sector research, has downgraded the Chinese EV maker from "Neutral" to "Underperform," slashing its price target to $21—well below the current trading price of $23.72. This move comes at a crucial juncture for Li Auto, as it prepares to report its Q2 2025 results amid growing sector headwinds and mixed investor sentiment.

Analyst upgrades and downgrades are critical for sophisticated investors; they signal shifting institutional perspectives that often precede or confirm inflection points in a stock’s trajectory. Macquarie's latest call—given its influence and deep sector expertise—demands careful scrutiny, especially as it implies a potential downside for existing shareholders and raises questions about the sustainability of Li Auto’s business momentum in an increasingly competitive and regulatory-sensitive Chinese EV landscape.

Key Takeaways

• Potential Downside: Macquarie’s $21 price target signals a potential downside of nearly 11.5% from current levels.

• Recent Price Volatility: LI has experienced a 1.1% uptick today, but remains far below its 52-week high of $33.12, and has seen more down days (129) than up days (119) over the past year.

• News Flow: Recent headlines include an upcoming Q2 earnings announcement (Aug 28), a notable stock slide despite broader market gains, and a high-profile downgrade from J.P. Morgan citing demand concerns in China.

• Technical Weakness: The stock is trading below both its 20-day EMA and SMA, and its RSI (~34) signals it’s hovering near oversold territory—suggesting persistent bearishness.

• Analyst Credibility: Macquarie is a heavyweight in Asia-Pacific research, known for rigorous, data-driven analysis and sectoral depth—lending extra gravitas to this downgrade.

Inside the Downgrade: What’s Driving Macquarie’s Call?

Macquarie’s Influence and the Weight of an "Underperform"

Macquarie’s research arm is among the most respected in the Asia-Pacific region, with particular strength in automotive and new energy sectors. Its analysts are known for their cautious, data-driven approach and their calls often move markets for China-based companies. The shift from "Neutral" to "Underperform" is notable not just for the negative outlook, but for the conviction implied by setting a price target more than 11% below current market value. This isn’t a tepid warning—it’s a clear signal of expected underperformance relative to sector peers.

Analyst Confidence Snapshot:

"Macquarie’s downgrade signals heightened caution, given their deep track record analyzing Chinese EVs and market dynamics."

For sophisticated investors, such a call should not be taken lightly, especially when considering Macquarie’s history of prescient sector warnings and their broad institutional client base.

Li Auto: Business Model Under Strain?

Li Auto is a key player in China’s new energy vehicle space, with a unique focus on extended-range electric vehicles (EREVs) that blend battery and internal combustion for longer driving range. This hybridized approach has differentiated Li Auto from pure-play EV competitors, garnering significant market share and investor attention through 2022-2024.

However, the competitive landscape is evolving rapidly. Legacy automakers and pure EV giants like BYD and Tesla are intensifying their push into the Chinese market, squeezing margins and making customer acquisition costlier. Moreover, regulatory scrutiny and shifting government incentives add further uncertainty.

Financials and Recent Performance

• Current Price: $23.72 (as of market open, August 22, 2025)

• 52-Week Range: $17.44 (low) to $33.12 (high)

• 20-Day EMA: $24.99 | 20-Day SMA: $24.94

• RSI: 34.4 (approaching oversold)

• Average Daily Volume: 6.17M shares

• 1-Year Trend: More down days than up, with a generally bearish sentiment (sentiment ratio below 0.5)

The technical picture is fragile. Li Auto’s stock is trading below both its short-term moving averages and the lower Bollinger Band, and the RSI suggests it’s near oversold—yet not quite at a reversal point. This, combined with high volatility and declining volume, underscores fragile investor confidence.

Upcoming Catalysts and Risks

• Q2 Earnings (Aug 28): This report will be pivotal. Investors will scrutinize delivery numbers, margin trends, and management’s outlook for H2 2025, especially amid sector slowdowns.

• Sector Headwinds: Recent news from Barron’s and Zacks highlights lingering demand fears and broader macro pressure on China’s consumer and auto markets.

• Peer Moves: The downgrade comes on the heels of J.P. Morgan’s Hold call, citing similar concerns—suggesting a growing consensus among top analysts.

Sector and Macro Context: Why the Bears Are Circling

China’s EV market is at a crossroads. While long-term growth remains a consensus view, the near-term is clouded by:

• Slowing demand growth, particularly in Tier 1 and Tier 2 cities.

• Intensifying competition from both domestic and international manufacturers.

• Policy uncertainty, with potential changes to subsidies and emissions standards.

• Ongoing concerns about consumer confidence and macroeconomic headwinds in China.

For Li Auto, which built its initial moat on innovative range-extending tech, these pressures are challenging its ability to defend margins and maintain growth.

Potential Downside: Crunching the Numbers

With Macquarie’s $21 target, the implied downside from the current price of $23.72 is approximately 11.5%. This is a material risk for investors holding the stock—particularly as the stock has failed to regain momentum since its early 2025 highs. Notably, the target sits near the lower end of Li Auto’s 12-month trading range, indicating that Macquarie expects little near-term support if fundamentals deteriorate further.

News Flow and Market Psychology

• Upcoming Earnings: GlobeNewsWire confirms Li Auto will report Q2 2025 results on August 28, a possible binary event for the stock.

• Recent Slides: Zacks notes the stock recently fell 4.6% in a single session, diverging from broader market strength—a sign of stock-specific pressure.

• Peer Downgrades: Barron's highlights a recent JPMorgan downgrade, with the analyst expressing concerns about slowing demand in China. This stacking of negative analyst sentiment is a red flag.

“JPMorgan analyst Nick Lai cut his rating on Li Auto stock to Hold from Buy. He is worried about slowing demand.”
— Barron’s, August 2025

Technicals: Is the Slide Overdone or Just Beginning?

Bollinger Bands show LI is hugging the lower band, and the RSI near 34 suggests oversold conditions—but with no clear reversal signal yet. The stock is below both its 20-day EMA and SMA, and its volume trends are declining, supporting a bearish technical thesis.

Strategic Takeaways for Investors

• Risk-Reward Skews Negative: With a prominent Asia-Pacific analyst now projecting double-digit downside, risk-averse investors should carefully reassess their exposure.

• Wait for Clarity: The upcoming Q2 earnings are likely to set the tone for H2 2025. A rebound in deliveries, margins, or guidance could spark a reversal—while further weakness will validate the bearish case.

• Monitor Sector Peers: Negative sentiment appears to be broadening across Chinese EVs. Watch for further analyst downgrades, peer earnings, and regulatory shifts.

• Technical Caution Warranted: Persistent price weakness and bearish technicals argue against aggressive bottom-fishing, despite the near-oversold RSI.

Conclusion: A Defining Moment for Li Auto

Macquarie’s downgrade carries significant weight, especially in light of Li Auto’s technical fragility, sector headwinds, and mounting analyst skepticism. With a price target that implies over 11% downside, the risk calculus for investors has changed materially. The upcoming Q2 earnings will be a critical inflection point.

Sophisticated investors should watch closely for fundamental or technical confirmation of this bearish thesis before making any allocation decisions. In the meantime, Macquarie’s call stands as a rare and forceful warning from a leading institution, underscoring the importance of vigilance in a rapidly shifting EV landscape.