One of the biggest fears of owning an electric vehicle (EV) is range anxiety, the fear of running out of power during a trip with no charging source nearby. Charging anxiety is the top reason for not owning an EV, the fear of not being able to find a charging station or waiting around for the battery to recharge.
The combination of these 2 fears is what deters most people from purchasing an EV. However, Chinese EV maker Li Auto Inc. NASDAQ: LI has found the closest solution to assuage those fears, and it's paying off.
Li Auto operates in the auto/tires/trucks sector, competing with Chinese EV makers NIO Inc. NYSE: NIO, Xpeng Inc. NYSE: XPEV and U.S. EV Leader Tesla Inc. NASDAQ: TSLA.
Li Auto’s Solution to Range and Charge Anxiety is EREVs
Li Auto’s extended-range electric vehicles (EREVs), also referred to as range-extended electric vehicles (REEVs), address both range and charging anxiety with its onboard gasoline-powered generator that will automatically recharge the battery when it gets low.
The combination of a gas generator and electric motors results in a range of 690 miles on a single charge and a full tank of gas. Keep in mind that there isn't a gasoline-powered car engine that is connected to the wheel; the internal combustion engine (ICE) is a gas-fueled generator used solely to recharge the battery to extend the range of the electric motors. Li Auto extended range electric vehicles (EREVs) can typically hold 14.5 gallons of gasoline.
EREVs Are Not Hybrid EVs, But Some Hybrids May Be EREVs
While many mistake Li's EREVs as hybrid EVs, they aren't because the gas-powered motor doesn't power the wheels but only fires up to charge the lithium-ion battery. However, hybrids fall into many categories. A plug-in hybrid will operate on electric power until it gets low and then switch to the gas engine. A parallel hybrid can be powered either by the electric motor or the gas engine or even together simultaneously. A series hybrid is the closest to an EREV since the gas motor is just used to power the electric motor. The BMW i3 REx is a series hybrid EV; the RE stands for the range extender. It is an EV that also houses a 2-cylinder gas engine that flips on to charge the battery when it runs low.
NIO’s Power Swap Stations May Soothe Charging Anxiety
Chinese EV maker NIO found a solution to ease charging anxiety with its Power Swap Stations. Like a mini car wash you see at some gas stations, these automated garage-sized facilities let you drive into the station and will swap out your drained EV battery with a fully charged battery in less than 3 minutes. NIO's battery-as-a-service (BaaS) also enables drivers to purchase an NIO EV cheaper without the battery and pay a monthly fee to be able to swap out batteries rather than have to charge them. Unfortunately, with only 3,000 stations in China, it doesn't help with range anxiety.
Li Auto’s Largest EREV: L9 Has an 877 Mile Range
Li Auto’s L9 is its largest SUV and is considered a luxury long-distance EREV. The EV-only range is only 174 miles. However, when combined with the gas generator, it has a combined range of 877 miles. Its gas ICE generator is a 1.5 turbo operating 152 HP. It has a 17-gallon gas tank. Its front electric motor operates at 174 horsepower (HP), and its rear electric motor at 268 HP.
Li Auto Launches Its First Fully Electric SUV to a Weak Reception
Li Auto has launched its first fully electric SUV called the Mega. Li Auto claims it can drive 441 miles on a single charge. A 12-minute charge will enable the car to drive up to 310 miles. Li Auto figured its EREV was a bridge to get people comfortable with EVs and transition them into fully electric versions. That assumption didn't pan out.
The launch of the MEGA was actually lackluster, selling only 3,000 units in its debut, which was significantly lighter than the 8,000 it expected to sell. This caused the company to pause the launch of its second all-electric car until the second half of 2025. The company said it needs to build up its charging network since it only has just over 400 stations, which leaves drivers susceptible to range and charging anxiety (again), which may explain why MEGA EV sales were weak.
Li Auto had a tough second quarter of 2024, but August deliveries ticked up 37.8% YoY to 48,122, which brings total deliveries in 2024 to 288,103 vehicles
LI Stock Attempts to a Rectangle Channel Breakout
A rectangle trading channel is comprised of a flat-top upper trendline resistance that runs parallel to the flat-bottom lower trendline support. The stock fluctuates between the two trendlines, but one of them breaks.
LI has been in a rectangle trading channel since its swing low at $17.78 on June 20, 2024, which is also the flat-bottom trendline support. The flat-top trendline resistance is at $21.66, which is the breakout trigger. The daily anchored VWAP support is at $19.79. The daily relative strength index (RSI) is rising to the 60-band. Fibonacci (Fib) pullback support levels are at $20.66, $19.38, $17.77 and $15.68.
Li Auto’s average consensus price target is $36.36, and its highest analyst price target is $53.00.
Actionable Options Strategies: Bullish investors can buy on pullbacks using cash-secured puts at the fib pullback support levels to buy the dip.
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