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Shares of Chinese electric vehicle (EV) maker Li Auto (NASDAQ:LI) are down nearly 10% today after an earnings miss and a key management change at the company.
Li Auto reported third-quarter sales of $1.31 billion, which was up 20% from a year ago but missed analyst forecasts for $1.4 billion in Q3 revenue.
At the same time, the company announced that President and Board Director Yanan Shen has resigned. Li Auto has promoted Donghui Ma, chief engineer, to the role of president and appointed him as a director on the company’s board effective Jan. 1, 2023.
LI stock has now fallen 32% this year to trade at $22 a share.
What Happened With LI Stock
Li Auto reported a Q3 loss per share of 18 cents, which was greater than the per-share loss of 15 cents expected on Wall Street. Also, deliveries quarter-over-quarter declined 7.5%, and its gross profits decreased 34.8% from a year ago to $166.2 million.
Li Auto announced that its operating loss for this year’s third quarter grew $299.4 million. The quarterly earnings were bad enough to force Shen to resign and for a new leader to be appointed at the automaker.
Why It Matters
With a population of 1.4 billion people, China is the world’s biggest automotive market and is strategically important when it comes to electric vehicles. Li Auto is viewed as a leader in the domestic Chinese market and among Chinese EV makers.
The company’s poor results and management change show the extent to which the automotive market in China is slowing amid Covid-19 lockdowns and declining economic growth. Production and sales of electric vehicles are cooling rapidly along with the global economy.
Investors are reacting very negatively to the poor Q3 earnings reported by Li Auto, and the management change has cast uncertainty over the company and its near-term direction. Until there is clear evidence that Li Auto has turned its finances around and management has the company on a better track, LI stock will likely sink further.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.