What happened

Shares of Chinese electric car battery maker CBAK Energy Technology (NASDAQ:CBAT) rushed ahead more than 19% in early trading Monday, before pausing and retracing in the afternoon. As of 1:35 p.m. EST, CBAT shares remain up a respectable 3.2%.

So what

What drove the stock higher, and what sapped its support as the day wore on?

In a press release this morning, CBAK announced that it has signed "a one-year strategic cooperation framework agreement" with Chinese light electric truck manufacturer Chengdu Raja New Energy Automotive Technology. Raja, says CBAK, has produced over 5,000 electric trucks in its two years in operation, and set up 3,500 electric charging stations to power them.  

The agreement outlines CBAK's plan to team up with Raja on two projects. The first is creating "a battery swapping project for the food delivery and logistics industries," wherein CBAK will supply "high-quality lithium-ion batteries" to Raja. The second is building an uninterruptible power supply for traffic lights.

Blackboard drawing of stock chart arrow going up being erased and pointing back down

Image source: Getty Images.

Now what

How big of a deal is this for CBAK? That's hard to say. In the press release, CBAK suggests it might supply as many as 1 million battery cells to Raja in the first year of the project. It does not, however, specify when that first year will be, nor the value of the contract to CBAK. Nor does the press release specify how many battery cells will be required to power one of Raja's electric trucks.

It takes approximately 7,100 cells to power a single Tesla electric car, for example. If you apply that math to the Raja deal, CBAK might only be selling enough batteries to power 140 electric trucks. That wouldn't be a very big deal at all, and it wouldn't be a very good reason for CBAK stock to be going up today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.