What happened

Shares of Chinese electric vehicle (EV) manufacturer NIO (NIO -4.02%) soared 59.4% in August, according to data provided by S&P Global Market Intelligence. That performance came on the heels of a 54.7% share price jump in July. 

Overall, NIO's shares have skyrocketed nearly 350% so far in 2020, handily outpacing the S&P 500. However, it's par for the course for electric vehicle stocks. Shares of rival Tesla (TSLA -12.34%) are up almost 400% year to date.

An electric vehicle at a charging station.

Image source: Getty Images.

So what

The market suddenly started paying attention to electric carmakers' stocks around the time start-up electric truckmaker Nikola used a reverse merger with special purpose acquisition company (SPAC) VectorIQ to go public on June 4. Since then, a number of electric vehicle companies have announced plans to go public. 

NIO, on the other hand, has been publicly traded in the U.S. since 2018. But it still benefited from the market's newfound focus on EVs. However, that's meant that NIO's share price performance is affected both by its own performance as a company and trends impacting electric vehicle stocks in general.

During August, there was a lot of positive news specific to NIO. For example, it reported its July vehicle deliveries were at near-record levels (second only to its June deliveries), and were up 322% year over year. Then, a formerly bearish analyst, UBS's Paul Gong, upgraded the stock, leading to its biggest single-day gain during the month. NIO also likely benefited from Tesla's incredible August share price run-up and general excitement about the EV sector

Now what

The good news for NIO has continued into September: August sales set a new company record, and it expects to begin shipping its third vehicle model -- the EC6 crossover SUV -- before the end of the month. 

NIO is further along than many other electric carmakers. For one thing, it's actually manufacturing and delivering vehicles, unlike Nikola. However, it's still only able to crank out about 5,000 cars per month at most. Tesla is producing about 12,500 vehicles per month in China alone. Like other electric carmakers, NIO's valuation of about 13.5 times sales is extremely high (although not as high as Tesla's current 15.7 times sales), and investors should be aware of the risk -- that the company's long-term performance won't measure up to its current price.