Shares of Li Auto sank -5.3% to $17.01 Wednesday after Goldman Sachs cut the stock to Neutral from Buy and slashed its price target 21% to $19, warning of widening losses and shrinking margins at the Chinese electric-vehicle maker. The downgrade lands at a painful moment: Goldman now expects Li Auto to post "two quarters of widening net profit loss" in Q1 and Q2 2026, with vehicle gross margins as low as 5% — the worst since early 2020.
• Fewer Cars, Fewer Model Launches, Less Revenue
Goldman cut its 2026–2028 volume forecasts by 5% to 22%, citing weaker management guidance and fewer model launches — now expecting just one refreshed model versus three previously.
Li Auto's own Q1 2026 guidance calls for just 85,000–90,000 deliveries, a year-over-year decrease of up to 8.5%, and revenue down as much as 21.3%. For a growth company, shrinking sales are an existential problem for the stock's valuation.
• China's Price War Is Crushing Profits
The biggest question facing Li Auto is whether it can stabilize profitability as rising costs for batteries, chips, and metals squeeze margins while fierce price competition limits its ability to raise prices.
Adding to the pressure, China reintroduced a 5% purchase tax on new energy vehicles in 2026, raising ownership costs and potentially dampening demand.
• R&D Spending Is Rising Even as Cash Flow Deteriorates
Goldman flagged that Li Auto's research and development costs are expected to climb to roughly RMB 12 billion in 2026 from RMB 11 billion in 2025. That's a company spending more while earning less. Free cash flow already turned deeply negative — negative RMB 8.9 billion in Q3 2025 versus positive RMB 9.1 billion a year earlier.
Li Auto still holds RMB 92 billion in net cash , a cushion — but one that's draining fast.
• Wall Street Is Running Out of Bulls
Jefferies cut its target to $17.50 in January.
JPMorgan carries an "underweight" rating with a $15.50 target.
Macquarie sits at $15. Goldman's move from buyer to bystander removes one of the last prominent bull voices. The stock now trades below Goldman's new $19 target, implying modest upside but zero conviction. With margins collapsing, deliveries shrinking, and China's EV price war showing no signs of easing, investors are left asking whether Li Auto's RMB 92 billion war chest can buy enough time for a turnaround — or merely cushion a longer decline.