Lyon has issued a research report, reducing the price target for Li Auto-W (ASX: LI) by more than half to HK$68.

The firm reported that Li Auto swung to a net loss of RMB 2.3 billion, or an adjusted net loss of RMB 2.1 billion, in the first quarter due to a shift in its vehicle model mix, inventory destocking, and increased discounts.

Lyon anticipates that the challenges the company faces, including a slower pace of new model launches, inventory pressures, and rising expenses for new business ventures, may persist longer than previously expected.

The report noted that Li Auto's first-quarter deliveries reached 95,100 units, a year-on-year increase of 2.5%, but revenue fell by 11.4% year-on-year, primarily affected by product cycle transition and seasonal factors.

During the same period, the average selling price (ASP) of vehicles dropped to RMB 226,000, leading to a decline in vehicle gross margin to 6.1%. The overall gross margin was also impacted by subsidies and rising raw material costs, falling to 7.9%.

Despite these challenges, Lyon expressed optimism regarding Li Auto's recently launched flagship model, the L9 Livis, and the upcoming L8 Livis.

The firm expects these higher-margin models to improve the product mix and forecasts that total deliveries for 2026 could rise to 434,100 units.