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Shares of Li Auto (NASDAQ:LI) are down more than 40% so far this year as Chinese electric vehicle (EV) stocks continue to face competitive pressure and macro headwinds. Now, a class-action lawsuit has been opened for shareholders who purchased LI stock between Feb. 26 and May 20.

The lawsuit alleges that Li and some of its executives violated the Securities Exchange Act of 1934 by making misleading statements and withholding material information.

In the firm’s fourth-quarter earnings report, CEO Xiang Li noted that Li Auto was “consistently improving operating efficiency throughout the year.” Chief Financial Officer Tie Li said the firm would have “healthy profitability and capital strength” in 2024.

However, the complaint notes that Li overstated its demand and the efficiency of its MEGA EV launch strategy, as well as the fact that it would likely not meet its delivery target for Q1. Li delivered 80,400 vehicles during the quarter, up by 52.9% year-over-year (YOY).

LI Stock: Li Auto Faces New Class-Action Lawsuit

On March 21, Li reduced its Q1 delivery guidance to between 76,000 and 78,000 vehicles, down from between 100,000 and 103,000 vehicles. The company also admitted that its MEGA operating strategy was “mis-paced.”

“We planned operations of Li MEGA as if the model had already entered the 1-to-10 scaling phase, while in fact, we were still in the nascent 0-to-1 business validation period,” said Chairman and CEO Xiang Li. “Similar to Li ONE and our EREV technologies, Li MEGA and our BEV technologies will also need to undergo this 0-to-1 validation process.”

LI stock fell by about 7.5% following the news.

On May 20, the day of Li Auto’s earnings, the company announced that Q1 profit had declined by 46% compared to the prior quarter, according to the complaint. That resulted in a 12.8% drop for LI stock. LI has lost another 7.5% since May 20.

For Q2, Li expects to deliver between 105,000 and 110,000 vehicles, resulting in total revenue between $4.1 billion and $4.3 billion. Deliveries are expected to grow between 21.3% and 27.1% on an annual basis while revenue is expected to grow between 4.2% and 9.4%.

Shareholders who wish to serve as the lead plaintiff in the case must provide notice to the court by July 9.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.