What happened
Electric vehicle (EV) stocks are volatile by nature. Most EV companies aren't yet profitable, and much of investors' excitement is built on hope and potential. But recent volatility hasn't been driven by the underlying business or market potential. U.S.-listed Chinese EV names have been especially affected recently by uncertain futures on U.S. stock exchanges.
That volatility played in their favor Wednesday, with stocks of names including Nio (NIO 3.49%), XPeng (XPEV -1.39%), and Li Auto (LI) shooting higher. As of 11:15 a.m. ET, their shares were up 20.6%, 27.1%, and 28%, respectively.
Image source: Getty Images.
So what
Today's pop comes as reports say China has indicated it will support U.S.-listed shares. The fear of delisting U.S.-based Chinese shares has grown recently as regulators from both countries have signaled they are cracking down on the listings. But China now says that it is cooperatively working with U.S. regulators to create more stability in the situation, reports CNBC.
The report quoted a statement made by Chinese regulators made at a meeting chaired by Vice Premier Liu He saying, "The Chinese government continues to support various kinds of businesses' overseas listings." The statement added that regulators intend to complete the crackdown on internet platform companies "as soon as possible."
Now what
While today's development appears to be good news for shareholders, other external risks remain. COVID-19 cases are growing in China, and some companies are having to halt operations as the government seeks to control the spread. Reuters reported today that Tesla is suspending production at its Shanghai facility for two days, for example, related to the recent outbreak.
Geopolitical events and supply chain challenges have also contributed to recent uncertainty and sinking share prices. Even with today's stock surges, the shares of Nio, XPeng, and Li Auto have dropped between 17% and 35% over the past month.
While the aforementioned risks persist, the companies themselves are growing quickly. Year over year, electric vehicle deliveries jumped 109%, 263%, and 177%, respectively, for Nio, XPeng, and Li in 2021.
These stocks have always been for aggressive parts of a portfolio. Added recent risk has driven the shares down to levels not seen in almost two years for some Chinese EV names. Today's jump shows what can happen if some risks are alleviated. Investors with long-term time horizons and enough of a risk appetite might still find recent prices attractive entry points.
