Last month I called Li Auto (NASDAQ:LI), the only Chinese EV stock you need to own. 

Since then, shares have barely moved. The good news of its first quarter earnings was already in stock when they arrived.

Since then, I’ve discussed the decision to focus on hybrids and the founder’s story.

Before you invest, however, you should also know Li’s place in the larger Chinese business universe.

Chinese Industrial Policy

China follows an industrial policy like South Korea and Taiwan. It targets specific industries. It subsidizes producers to scale it. It focuses on global competitiveness. Then it removes the subsidies and backs the winners.

There’s also a tweak that has become apparent in this decade. China demands obedience to the government. Not just the system of government but the regime of Xi Jinping. Criticism is simply not allowed, as Jack Ma and Alibaba Group Holding (NASDAQ:BABA) have learned.

Li Auto ticks all the boxes.

The government wants to dominate the auto industry, specifically the new market in electric vehicles. It was even willing to work alongside Tesla (NASDAQ:TSLA) to ensure its companies were globally competitive.

Li’s domestic competitors, especially Nio (NYSE:NIO) and Geely (OTCMKTS:GELYF), have taken global competitiveness to mean exporting. Nio is working hard to open Europe’s market. So is Geely, through its Polestar (NASDAQ:PSNY) unit, which works from the old Swedish base of Volvo (OTCMKTS:VLVLY).

But what the government means by globally competitive may not be what Nio and Geely think it means. That’s because China brought the most globally competitive maker, Tesla, into its market years ago. What China means by being globally competitive is beating Tesla in China.

Li is doing that.

By the Numbers

Li is accelerating at a ludicrous speed. May’s delivery of 28,277 vehicles was up 146% from a year earlier. It’s still tiny next to Tesla, which is delivering 146,000 cars a month globally, but it’s gaining share in China.

More important is that Li makes money. About 5% of revenue hit the net income line in the first quarter. That’s still less than half of Tesla’s profitability, but it means Li’s cash balance grew to over $6.35 billion. Tesla had $22.4 billion.

Look at this from the government’s point of view. Li doesn’t make batteries, as Tesla does. It doesn’t sell electricity, as Tesla does. There are other Chinese companies doing that. But Li is now growing faster than Tesla. It’s winning in the home market, and it’s profitable. It’s becoming a domestic champion. Given that founder Xiang Li is still just 42 and adheres closely to the party line, there’s more reason to see him as a Chinese Musk in the making.

Remember, Li isn’t competing with Musk. China is competing with Musk. Li doesn’t have to beat Musk by himself. There are other Chinese companies like BYD (OTCMKTS:BYDDF) and the battery maker CATL to do that. Li is just an element in China’s industrial policy.

The Bottom Line

Li has succeeded with plug-in hybrids. These are electric-first hybrids, as opposed to those sold by Toyota (NYSE:TM), which are gasoline-first and have no electric outlet. The current approach lets Li advertise its vehicles for family camping trips, the battery powering phones, and other utilities overnight, with no range anxiety.

The strategy is to deliver fully electric cars in 2025 while maintaining that promise of luxury, range, and of safety. Those could be compelling promises in the American market, especially if those hybrids are aimed here once the all-electric models are ready for Chinese drivers.

We’re still in the early innings of China’s efforts to beat Tesla and, thus, win the global EV race. But Xiang Li has earned his place in that effort.

On the date of publication, Dana Blankenhorn 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.