Many U.S.-based stock traders have probably never considered China-based electric vehicle (EV) manufacturer Li Auto (NASDAQ:LI). Yet, LI stock could actually be a winner based on Li Auto’s EV delivery data.

At the same time, prospective investors should monitor Li Auto’s expenditures as they could hinder the company’s growth.

There are several publicly listed Chinese clean energy vehicle businesses for financial traders to choose from. Why should anyone choose Li Auto? The answer lies within the automaker’s sales results, which are indisputably positive.

What’s less clear, though, is whether Li Auto can keep its expenditures in check. This factor could determine the future success of Li Auto and its long-term stakeholders.

LI Stock Pops on Positive Quarterly Results

Even before Li Auto released its first-quarter 2023 results, the company had already provided a notable April 2023 update. Li Auto set a monthly company record in April with 25,681 vehicle deliveries, up 516.3% year over year (no, that’s not a misprint).

This was only an appetizer, however, as Li Auto was about to serve a full course of eye-catching Q3 2023 data points. First and foremost, Li Auto delivered 52,584 EVs during the first quarter of 2023, up 65.8% year over year.

Li Auto’s revenue nearly doubled (up 96.5%, to be precise) to 18.79 billion RMB, which translates to $2.74 billion.

It’s understandable, then, that LI stock ran higher after Li Auto released these results. Still, the stock doesn’t currently get an “A” rating, but only a perfectly respectable “B.” So, let’s now consider a major concern that pertains to Li Auto.

Li Auto Should Control Its Costs

There’s no denying that Li Auto knocked it out of the park with terrific vehicle sales figures in April and throughout Q1 2023. There’s another factor to keep in mind, though. Remember, strong sales are less meaningful if an automaker is spending a lot of the money it’s taking in.

Let’s take a closer look at Li Auto’s gross margin. It was 22.6% during the first quarter of 2022. Then, in 2023’s third quarter, it contracted to 20.4%. That’s not a good sign.

Now, let’s examine Li Auto’s cost of sales. Alarmingly, it doubled (up 102.2%) year over year to 14.96 billion RMB ($2.18 billion) in 2023’s first quarter. This is problematic, as it surely affects Li Auto’s margins and on the company’s financial health in general.

The company cited an “increase in vehicle deliveries,” and certainly this contributed to Li Auto’s higher cost of sales. The company can undoubtedly identify ways to reduce its financial outlays. Otherwise, Li Auto’s bottom-line results in the coming quarters might disappoint shareholders.

LI Stock Might Rally in the Coming Months

Li Auto is a promising EV startup and overall, the company is on the right track. After all, it’s hard to argue with Li Auto’s tremendous growth in vehicle deliveries and revenue.

If Li Auto can demonstrate improvement in cost containment over the coming quarters, LI stock could easily move higher. Therefore, investors are invited to consider a small position in Li Auto shares, or at least to monitor the company for further financial developments.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.