China extends EV tax relief; Li Auto shares fall after reducing delivery outlook

Li Auto warned that “supply chain constraints” mean the company will deliver fewer vehicles than expected in the third quarter. Meanwhile, China has extended tax exemptions for new energy vehicles until the end of 2023 as this looks set to spur growth in electric cars.

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Shares of Li Auto Pre-market trading in the US fell on Monday after the Chinese electric car maker cut delivery guidance for the third quarter.

Meanwhile, rival electric car companies Nio and Xpeng spiked when Beijing announced an extension of tax breaks on electric car purchases.

Li Auto said it now expects to deliver 25,500 vehicles in the third quarter, down from a previous estimate of 27,000 to 29,000. Shares of Li Auto were about 2% lower in pre-market trading.

“The modification is a direct consequence of supply chain constraints, while underlying demand for the Company’s vehicles remains strong,” Li Auto said in a statement. “The company will continue to work closely with its supply chain partners to resolve bottlenecks and accelerate production.”

China’s electric carmakers have faced a number of difficulties stemming from the Covid-19 resurgence and Beijing’s continued strict lockdown policy to contain the virus. Here “The zero-Covid policy “has caused supply disruptions at factories across China and put pressure on the economy and consumer spending.

To help sustain growth for electric cars, China’s Ministry of Industry and Information Technology and the Ministry of Finance have extended the period during which new energy vehicles will be exempt from sales tax until December 31, 2020. 2023. New energy vehicles include all-electric as well as plug-in hybrid vehicles.

Beijing has extended the purchase tax exemption several times since the policy was first introduced in 2014 to boost demand. Along with other incentives, this policy has helped make China the largest electric vehicle market in the world.

Read more about electric vehicles from CNBC Pro

Shares of Xpeng were 4% higher in pre-market trading while Nio was up about 1.6%.

Even as the market faces challenges, Chinese electric vehicle startups have continued to launch new products this year to fuel growth.

Last week, Xpeng launches G9 . sport utility vehicle, its most expensive car to date, to push into the higher end of the market. Li Auto will wrap up a new SUV called the Li L8 on Friday with deliveries expected to begin in November.

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