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Shares of Chinese electric vehicle (EV) maker Li-Auto (NASDAQ:LI) are down almost 10% today after a loss of profits and a key management change at the company.
Li Auto posted third-quarter sales of $1.31 billion, up 20% from a year ago, but missed analysts’ forecasts for $1.4 billion in third-quarter revenue .
At the same time, the company announced that the chairman and director of the board, Yanan Shen, had resigned. Li Auto promoted Donghui Ma, chief engineer, to president and appointed him as a director to the company’s board of directors 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 third-quarter loss of 18 cents per share, which was higher than the 15 cents per share loss expected on Wall Street. Additionally, quarter-over-quarter shipments were down 7.5% and its gross profit was down 34.8% from a year ago to $166.2 million. .
Li Auto said its operating loss for the third quarter of this year increased to $299.4 million. Quarterly earnings were bad enough to force Shen to resign and for a new executive to be appointed at the automaker.
why is it important
With a population of 1.4 billion, China is the largest automotive market in the world and is of strategic importance when it comes to electric vehicles. Li Auto is considered a leader in the Chinese domestic market and among Chinese electric vehicle manufacturers.
The company’s poor results and management change show how China’s auto market is slowing amid Covid-19 shutdowns and declining economic growth. Electric vehicle production and sales are cooling rapidly along with the global economy.
Investors are reacting very negatively to the weak third-quarter results released by Li Auto, and the change in management has sown uncertainty about the company and its near-term direction. Until there is clear evidence that Li Auto has straightened out its finances and management has put the company on a better path, LI shares will likely continue to slide.
At the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.