Why Li Auto Stock Could Outperform Tesla

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Li Auto (NASDAQ:LI) stock is worth watching. The company has been very successful building Plug-in Hybrid Electric Vehicles. That’s thanks to the chemistry and physics of energy density.

Its new Li 9 flagship SUV is a full-sized family car that can handle local chores and commutes with its battery.

The Li 9 can also eliminate range anxiety with its gas engine, which serves to charge the battery. Its drive train is electric.

A Closer Look at Li Stock

Li 9 drivers get fast acceleration, 0-60 in 5.3 seconds. They get the quiet ride of electrics as well. It takes a half-hour for a 480-volt charger to get the battery from 20% power to 80%.

It can achieve a full charge in 6 hours at 200 volts, the power of common dryer plugs. Curb weight is 5,556 pounds, a little short of 3 tons.

Li is building its own 800-volt charging network for the Li 9, promising a charge of 240 miles in just 10 minutes. It claims its Max 3.0 software will offer human-like driving capabilities. The starting price will be $72,000. 

Compare that to the Tesla (NASDAQ:TSLA) Model Y, which has been made in China since 2020. The Tesla is smaller than the Li 9, and its range is just over 300 miles between charge.

That’s three full charges to drive across Texas on I-10. The Tesla also weighs 2.3 tons. (Going east to west, you will gas up the Li 9 in El Paso.) Current base model price of the Model Y is about $48,000. 

Energy Density

The Li 9 is a bigger car, with three times the range of the Tesla, thanks to the magic of energy density.

Tesla, like most electric car makers, uses Lithium-Ion batteries that deliver about .3 megajoules of energy per kilogram of weight.

The liquid lithium mix can catch fire when exposed to air. Hope is that solid state batteries will deliver 2.5 times that energy density with greater safety. But those are still a few years away.

Gasoline delivers 47.5 megajoules of energy per kilogram. That’s 10 times more. A fully electric car thus needs a much bigger, heavier battery to achieve the range, and pull the weight, of a gas powered vehicle.

Many American electric makers have chosen to accept the weight and drive big loads. A Ford Motor (NYSE:F) F-150 Lightning goes just 230 miles on a charge and weighs well over three tons because of its battery.

Electric First

Over time, batteries will improve, and Li Auto will go fully electric. Charging stations will proliferate. Over time, gasoline will fade away.

But if you’re buying a car now, a gas engine is still the best compromise between range and weight.

The difference between what Li is doing and what, say, Toyota (NYSE:TM) does, is that my Corolla and other Toyota hybrids are gas-first vehicles. They don’t carry plugs. They deliver a range of 550 miles on a 10-gallon fuel tank, but that’s what’s powering the drivetrain.

The Bottom Line

Li delivered 32,575 vehicles in June, up 150% from a year ago. It delivered 86,533 cars in the second quarter.

Tesla delivered 466,915 vehicles in the second quarter, mostly Model Ys and Model 3s. That’s  5 times more than Li, but Tesla’s growth is slowing, margins are declining, and you’re paying nearly 10 times revenue to own it.

Li is on track to deliver over $12 billion in sales this year, and its market cap is just $33 billion.

If Li were an American company, I’d buy it in a heartbeat over Tesla. The problem is it’s not. You’re constrained by the falling value of the Chinese Yuan, and by Chinese government policy.

But Li stock remains a better bargain today.


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