Li Auto (NASDAQ:LI) stock jumped nearly 9% in early trading on news of a new economic plan from China’s government. The plan emphasizes manufacturing and central government loans at the expense of real estate and local government.
Premier Li Qiang addressed a Shanghai trade fair over the weekend, promising to relax market access, protect foreign investment, and build a market-oriented business environment.
China’s economy grew at a 4.9% rate during the third quarter, the government said, beating estimates of a 4.5% growth. Li stock opened this morning at $39.63 per share, a market capitalization of $39.6 billion.
China is Good for Li
A more market-oriented policy would be good for both China and the U.S. But it would be especially good for companies that are already successful, like Li Auto.
I have called Li China’s “hidden gem” and the only Chinese Electric Vehicle (EV) stock you should buy. Its plug-in hybrid SUVs can go 800 miles on a gasoline fill-up and 200 miles on a charge. This eliminates the range anxiety, keeping many buyers from looking at electric cars.
While there are fears that Li’s $80,000 price is leaving out China’s middle class, the government program could push executive incomes higher.
Li delivered 40,422 cars in China in October. It had more new car registrations in China than Tesla (NASDAQ:TSLA), which exports most of its Shanghai factory production.
Other Chinese stocks catering to the high life are also rising in price in the wake of the Li Qiang speech. Among the winners are Chinese automakers XPeng (NASDAQ:XPEV), which also reported strong sales for October, BYD (OTCMKTS:BYDDF), and Tesla itself.
LI Stock: What Happens Next?
The battle now turns to lower-priced vehicles affordable to the middle class.
Li hopes to make all-electric cars for under $30,000. Tesla is aiming at prices of $25,000 from its plant in Germany.
As of this writing, Dana Blankenhorn 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.
