The investment thesis for Li Auto (NASDAQ:LI) stock is only partly about its cars.

It’s also about China.

Li is at the tip of the spear when it comes to China’s export push. Plug-in hybrid cars with luxury features, at reasonable prices, and a range of 600 miles sound like a dream to U.S. car buyers.

But if nationalists on both sides have their way, that won’t matter. Secretary of State Antony Blinken made a bid to reset relations recently, but the U.S. economy continues to de-couple from China.

If there’s no hope for America’s relationship with China, what Li stock offers the market won’t matter.

A Closer Look at Li Stock

Right now, Li Auto offers a lot to American investors, relative to its competitors.

The company delivered 28,277 vehicles in May. The other two U.S.-traded Chinese luxury EV makers, Nio (NYSE:NIO) and XPeng (NASDAQ:XPEV), saw their deliveries fall. Li is growing faster than the overall market, which is up 27%.

Li’s deliveries are still much smaller than those of Tesla (NASDAQ:TSLA), which shipped 77,695 vehicles from Shanghai during the month. But Li is growing faster, and much of Tesla’s production is exported. BYD (OTCMKTS:BYDDF) shipped 240,022 vehicles, and has now sold over 1 million units in 2023. But BYD is focused on the mid-market, with most prices starting around $25,000.

Li wants China’s upper middle class, not its teeming masses. It only launched its first full electric last week. The Li MEGA will have prices starting at over $70,000, with a new CATL battery that can get 240 miles of range in just 10 minutes. That requires a proprietary 800 volt charging platform, however. Current Tesla Superchargers run at 480 volts.

Family Tech

Li’s announcement came during its “Family Tech Day,” which illustrates its precise direction. Handouts proudly show a family with 2 kids surrounded by luxury technology appointments.

I have written before about how closely Li follows the government line. The government signaled this week it’s interested in making money. Interest rates are being cut to increase demand, with the value of China’s Yuan relative to the U.S. dollar now at 7.18.

China is also allowing Alibaba (NASDAQ:BABA), put in the penalty box back in 2020, to reorganize under its old leadership. The new chairman is Taiwan-born Joe Tsai, who also owns the Brooklyn Nets. The new CEO is also a former top lieutenant to deposed co-founder Jack Ma. The man they replaced, Daniel Zhang, is being given the company’s vaunted cloud unit, which will be spun out.

China’s stock market is roaring back, as the rest of the world’s markets are falling. The country’s second-largest shopping festival had strong numbers, according to JD.Com (NASDAQ:JD).

Americans like to assume China’s government is immune to political or business pressure. But moves by Shein, TikTok, and other companies to separate from the government, and a continuing brain drain by businesspeople, is something no amount of propaganda can hide.

The Bottom Line

If you buy any Chinese stock, you’re buying China. This includes Li Auto.

But if an American auto company boasted Li’s numbers, sales up 400% (with a profit) and a stock still selling at less than 5 times last year’s revenue, you would call that a bargain.

Western distrust of China’s government means all Chinese stocks are cheap, relative to their American counterparts. Negative political assumptions continue to hammer at those valuations. 

But if China’s 1978 deal with its own people is renewed, of prosperity for obedience, those valuations are bound to improve. This is especially the case for Li Auto.

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.