Why Li Auto Stock Jumped Monday

By all accounts, there’s a surplus of electric-vehicle (EV) production in China. This lack of demand could partly be caused by China’s sputtering economy. But one new vehicle from Li Auto (LI 4.00%) is showing there’s still strong demand for the right EV products.

Reports of strong orders for the company’s latest vehicle, launched just last month, has Li Auto shares surging Monday morning. Shares jumped as much as 7% and were still trading 4.3% higher as of 10:25 a.m. ET. The move extends the momentum behind the stock in the weeks since the company launched its new L6 five-seat premium SUV.

EV demand isn’t dead

Li Auto introduced its new SUV on April 18 as its first vehicle priced below 300,000 yuan, with both trims costing below the equivalent of $40,000. The large SUV is a family-oriented vehicle with a smart entertainment system and the ability to fold seats into a bedding area.

Last week, Li Auto reportedly announced on Chinese social media that orders for the L6 had already surpassed 30,000. It then followed up that post with another today saying that orders were now over 41,000 units. That compares to a total of 25,787 vehicles the company delivered in April.

Li says that “large-scale deliveries” for the L6 have now begun in May. The early surge in demand bodes well for the model and shows demand in China is still strong for desired model types. Li also differentiates itself from other electric-vehicle makers by utilizing a small, fossil fuel-powered motor to generate additional electricity and extend driving ranges.

That likely helps consumers feel more at ease with less range anxiety. The concept of a combination of a pure EV and gas engine has also shown increasing popularity in the U.S. with plug-in hybrid vehicles. That shows Li might have a business model that has more room for growth ahead.