Chinese EV maker Li Auto falls after it cuts delivery outlook; Beijing extends tax breaks for electric cars

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

Li Auto's US shares fell in pre-market trade on Monday after the Chinese electric carmaker cut its delivery guidance.

Beijing announced an extension of tax breaks for the purchase of electric cars.

Li Auto now expects to deliver 25,500 vehicles in the third quarter, down from a previous expectation of between 27,000 and 29,000. The shares of Li Auto were lower before the market opened.

Li Auto said in a statement that the revision was a result of the supply chain constraint. The company will continue to work with its supply chain partners to solve the problem.

China's electric carmakers have faced a number of challenges stemming from a resurgence of Covid-19 and Beijing's continued policy of lock downs to contain the virus. Supply disruptions at factories across China have been caused by the zero- Covid policy.

China's Ministry of Industry and Information Technology and Ministry of Finance extended the period that new energy vehicles will be exempt from purchase taxes. Plug-in hybrid cars are one of the new energy vehicles.

In order to spur demand, Beijing has extended the purchase tax exemption multiple times. China has become the biggest electric vehicle market in the world.

Xpeng's shares were 4% higher in pre-market trade while Nio was up 1.6%.

China's electric car startups are continuing to launch new products this year despite the market facing challenges.

The most expensive car to date, the G9 sports utility vehicle, was launched by Xpeng last week. The Li L8 will be unveiled on Friday and will be delivered in November.