(Yicai) Aug. 29 -- Li Auto’s shares fell amid a broader slump in Chinese automotive stocks after the new energy vehicle startup’s profit halved in the second quarter amid the price war in China’s auto market.

Li Auto [HKG: 2015] closed 9.8 percent lower at HKD73.15 (USD9.38) a share in Hong Kong today, after its New York-listed stock [NASDAQ: LI] tumbled 16.1 percent yesterday to USD17.80. Other Chinese NEV makers such as Nio [HKG: 9866 / NYSE: NIO] and Xpeng [HKD: 9868 / NYSE: XPEV] also sank.

Net profit shrank 52 percent to CNY1.1 billion (USD151.5 million) in the three months ended June 30 from a year earlier, Beijing-based Li Auto’s earnings report showed yesterday. Total revenue climbed 11 percent to CNY31.7 billion (USD4.4 billion), while vehicle sales revenue rose 8.4 percent to CNY30.3 billion.

Chinese automakers, particularly new energy vehicle producers, have been offering major price cuts, financing incentives, and extended warranties since early last year to stay ahead of rivals. That has often boosted short-term sales, but has also eaten into profits. Li Auto has been rolled out price cuts and discounts to buoy sales across its product lineup.

Gross profit margin narrowed to 19.5 percent from 21.8 percent, as operating expenses jumped 24 percent to CNY5.7 billion because of higher research, development, and sale costs. Chief Financial Officer Li Tie expects GPM to return to above 20 percent this quarter.

Li Auto delivered 108,581 vehicles in the quarter, up 26 percent on a year earlier and 35 percent on the previous quarter. The firm had forecast sales of between 105,000 and 110,000 vehicles.

"Huawei's Harmony OS-powered vehicles are our strongest competitors," founder and Chairman Li Xiang said during the company’s earnings conference call. “The two companies will coexist healthily in the long term, and Li Auto will continue to learn from Huawei's technological research and development system and operational management structure.”

Li Auto sold nearly 240,000 vehicles in the first seven months of the year, ranking first among Chinese NEV startups. Shenzhen-based Huawei followed with 222,700 Aito-branded cars.

For the third quarter, Li Auto expects to deliver between 145,000 and 155,000 vehicles, up 38 percent to 48 percent from a year ago. Revenue will likely increase 14 percent to 22 percent to between CNY39.4 billion and CNY42.2 billion.

The company also plans to launch a new battery electric vehicle in the first half of next year, following the release of its first pure EV model, the Li Mega, in March.

Li Auto needs to be sure that its pure electric sports utility vehicles have an appealing design and a network of over 2,000 supercharging stations, Li pointed out. "We hope to launch products that will be among the highest-end pure EVs on the market in about two years,” he said.

The Li Mega sparked much debate over its design, which many netizens likened to a coffin. Li Auto sold only 654 of the minivans last month, bringing the total to 6,231 since it was launched.

As of July 31, Li Auto had 487 retail stores in 146 Chinese cities, as well as 411 servicing centers and 701 supercharging stations with 3,260 charging piles.

Editor: Futura Costaglione