What happened
There are plenty of challenges in China's electric vehicle (EV) sector right now, but Nio (NIO 2.30%) shares jumped over 8% early Thursday anyway. While they pared some of those gains, as of 12:37 p.m. ET, Nio's American depositary shares remained 6.1% higher.
So what
Nio investors can thank the Chinese government for today's boost. Nio and other EV manufacturers continue to face new challenges even as they work to recover from lost production and a drop in demand related to zero-COVID policy lockdowns in several cities.
Most recently, a major drought has caused hydroelectric power supply to drop, resulting in power cuts mandated by authorities. But the government also just announced a stimulus package to try and reinforce growth in the economy.
Image source: Nio.
Now what
Nio ramped up production in June and July after struggling to get parts and seeing a lull in demand in the spring as Chinese authorities locked down several cities to stem the spread of COVID-19. But a severe drought is now affecting hydroelectric production, with power cuts being enforced for businesses in the Sichuan province where many automotive suppliers reside. EV charging stations are now also being hit by power cuts in southwest China.
Yesterday, the government announced a 1 trillion yuan (about $150 billion) infrastructure package to spur the country's economic growth. Investors see that as very good news for the resumption of growth in demand for EVs. And it's not just industrial company stocks that are seeing a boost today. The entire consumer segment could benefit from the spending.
Investors were already looking forward to what Nio would say about its third-quarter sales when it reports its next quarterly results. Now there is anticipation that the new stimulus package could help that upcoming report be even more optimistic.
