What happened
Shares of Chinese electric vehicle maker Nio (NIO -4.88%) were up Thursday though there was no company-specific news driving the move. Some investors may be pushing the electric vehicle (EV) company higher in response to news that the number of new daily COVID-19 cases in Shanghai is dropping.
The EV stock had been down by as much as 5% early in the session, but had rebounded by the afternoon and closed the day up by 1%.
So what
So why was Nio's share price behaving so erratically? It could be that investors were trying to process the ever-changing news about coronavirus lockdowns in China.
Nio said last week that it had begun to slowly ramp back up some of its vehicle production following the halt in Shanghai necessitated by the Chinese government's zealous reaction to a COVID-19 outbreak in that metro area.
Image source: Getty Images.
But some investors still fear that EV companies such as Nio will experience further periods of uneven vehicle production as China continues to enforce its strict "zero COVID" policies.
On the brighter side of things, Bloomberg reported Thursday that new daily coronavirus diagnoses in Shanghai have fallen to their lowest level in three weeks.
Officials say that the results of tests conducted over the next few days will determine which areas of the city they will ease restrictions on first. As such, investors in stocks exposed to China should continue to keep a close eye on any news about the city's shutdown.
This back-and-forth about whether or not Shanghai will soon be out of lockdown restrictions is, unsurprisingly, causing confusion among Nio investors.
Now what
It's been a difficult six months for Nio investors, as the company's share price has plummeted by 57%.
While the company could end up being a good long-term investment, investors should prepare for more share price swings. The EV market is still just getting started, and it's trying to get off the ground at a time when inflation is surging globally and has hit a 40-year-high in the U.S., and as the lingering impacts of the pandemic have put kinks in supply chains worldwide.
Add in the impact that China's strict anti-COVID policies are having (and could continue to have), and it's likely that Nio will experience further price swings in the short term.
