Li Auto Stock Breaks Out As China Mulls Extending EV Subsidies, BYD Stock Nears Buy Point - Investor's Business Daily

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Li Auto stock broke out Thursday as China mulled extending a tax break on purchases of electric cars. BYD stock neared a buy point. Other China EV stocks also advanced.

EV startups Li Auto (LI), Nio (NIO) and Xpeng (XPEV) aspire to shake Tesla's (TSLA) dominance in the Chinese market for luxury electric cars. They are also challenging homegrown EV and battery giant BYD (BYDDF).

At a high level Chinese government meeting Wednesday, officials suggested extending a policy that exempts so-called new energy vehicles from purchase tax, local reports said. New energy vehicles, or NEVs, include all-electric vehicles, plug-in hybrids and fuel-cell vehicles.

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The exemption could keep NEV sales growing in the world's largest market for electric cars. China EV sales more than doubled in 2021 but ran into headwinds for parts of 2022.

The exemption policy is currently set to expire at year-end. In 2014, China began its policy allowing consumers who buy NEVs to save roughly 10,000 yuan ($1,580) vs. those who buy fossil fuel cars, according to CnEVPost.com. The policy has been extended and renewed a few times since.

China EV sales slumped sharply in April. A fresh Covid surge led to harsh lockdowns, closing down factories and hitting the EV supply chain.

Li Auto Stock Breaks Out, BYD Nears Buy Point

Shares of Li Auto gapped up nearly 7% to 39.24 on the stock market today. Li Auto stock topped a 37.75 buy point from a long and deep consolidation. LI stock is far extended above the 10- and 40-week averages after a huge rally in June and the launch of its second EV, the L9. The relative strength line pegged a multiyear high as LI stock broke out Thursday.

BYD stock rose 2.9% to 39.42 Thursday. The Tesla archrival closed in on a 39.81 buy point from a cup-with-handle base. Nio added 2.8%. Xpeng gained 7.9%.

CATL's New Qilin Battery

On Thursday, Li Auto CEO Li Xiang suggested in a tweet that his company will use CATL's third-generation EV battery, the Qilin, next year.

Also on Thursday, Chinese EV battery giant CATL unveiled the Qilin. It claims the Qilin battery offers a 13% increase in power vs. Tesla's upcoming 4680 battery, with the same chemistry and same pack size.

CATL, which also supplies Tesla, aims to mass produce the Qilin in 2023.

Lagging behind Li Auto stock and others, Tesla stock lost 0.4% Thursday. The top EV maker will suspend production at its Shanghai plant in July to allow necessary upgrades, Reuters said.

Find Aparna Narayanan on Twitter at @IBD_Aparna.

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