Some financial traders are missing out on the potential growth of China-based electric vehicle manufacturer Li Auto (NASDAQ:LI) in 2023.
However, it’s still not too late to wager $1,000 on LI stock as China’s government just gave EV makers like Li Auto the green light to sell green vehicles.
By “green,” of course I’m referring to clean energy and that’s a priority in China now. It’s a nation with a vast population and a growing middle class with substantial buying power.
So, I encourage you to open up your horizons to international investing, even if it’s new to you. Who knows – with a $1,000 share position in Li Auto, you just might have a multi-bagger in the making.
Look to LI Stock for Explosive Upside
Not long ago, Ian Cooper identified three EV stocks to buy with explosive upside potential. LI stock was on that list, and I agree with its inclusion.
As Cooper reported, Li Auto delivered 52,584 vehicles in the first quarter of 2023, up 65.8% year over year. For the current quarter, Li Auto expects to deliver 76,000 and 81,000 vehicles.
That’s quite ambitious, as it would represent an increase of 164.9% to 182.4% compared to the year-earlier quarter’s result.
Indeed, with the explosive upside of Li Auto’s EV deliveries, there could be a repricing of LI stock this year. The company delivered 28,277 vehicles, in May, up a whopping 146% year over year.
So, it’s perfectly understandable that Citi analyst Jeff Chung put Li Auto on a “30-day catalyst watch” for short-term share-price move to the upside.
China’s Support of Green Cars Will Benefit Li Auto
Sometimes, China’s government isn’t entirely business-friendly. However, Beijing clearly supports the nation’s EV manufacturers.
According to Reuters, China recently announced tax-break legislation valued at 520 billion yuan ($72.3 billion) “over four years for electric vehicles (EVs) and other green cars.”
This truly sounds like a win-win for everyone involved as China seeks to spur its flagging automotive market. Some commentators might have expected a tax-break package in China. However, Cui Dongshu, secretary general of the China Passenger Car Association, observed that the “extension by another four years beat market expectations.”
Here are the details. New-energy vehicles (NEVs) purchased this year or in 2025 will get a tax break worth “as much as 30,000 yuan ($4,170) per vehicle.” That tax break, however, will be “halved and capped at 15,000 yuan for purchases made in 2026 and 2027.”
I’m certainly not suggesting that Li Auto will be the only beneficiary of these tax incentives. Still, these tax breaks should drive interest in green cars in general and Li Auto’s EVs in particular. And with that in mind, it’s easy to envision upward movement in LI stock.
Try a $1,000 Stake in LI Stock
Investing in EV startups can be risky. Also, some financial traders might hesitate to get involved in international markets.
Therefore, it’s fine to start with a $1,000 position in LI stock and build it from there if you’d like. I consider the reward-to-risk balance to be highly favorable, as Li Auto’s revenue growth is undeniable and China’s support is absolutely invaluable.
On the date of publication, David Moadel did not have (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.
