What happened
Nio (NIO -0.48%) shares surged Tuesday morning in a second day of volatile trading for the stock. Nio also spiked Monday morning as reports spread of public protests across China over that country's strict zero-COVID policy. The stock gave up those early gains Monday, but the situation is fluid, and shares soared by nearly 8% in early trading Tuesday. As of 11:43 a.m. ET, the stock was holding onto a 6.3% gain.
So what
Beyond the dynamic situation related to COVID-19 restrictions in China, there was news out Tuesday that was specific to the electric vehicle (EV) maker. Nio and Chinese tech giant Tencent Holdings have agreed to work together on developing autonomous driving technology and high-definition mapping systems, according to a CNBC article.
The zero-COVID policy is having more immediate effects on Nio's business, as manufacturers in China have lost production and sales due to numerous strict lockdowns imposed this year to contain outbreaks.
However, investors were given reason to think that situation is about to take a turn for the better. Protests over the policy waned Tuesday after China's National Health Commission hosted a press conference during which it said it will implement measures to increase vaccination rates, particularly among the elderly. That implies that the government will pivot away from relying on strict lockdowns in its efforts to avoid major outbreaks. That could be good news for Nio and other Chinese businesses.
Image source: Nio.
Now what
Even through the recent struggles caused by the lockdowns, Nio's revenue jumped by 32.6% year over year to $1.8 billion in the third quarter. Vehicle deliveries also increased by nearly 30%. But the automaker expects even bigger gains in production and sales in the fourth quarter, and investors now seem more confident that those results won't be hindered by the COVID-19 situation.
Even as Nio focuses on ramping up its vehicle production and expanding sales beyond China, it continues to aim to be a leader in EV technology. Its partnership with Tencent is another example as it develops high-precision mapping systems, and Nio uses Tencent's cloud computing infrastructure for training autonomous vehicles and for data storage. Tencent is already a major investor in Nio.
Investors may be reacting more to the near-term news Tuesday, but the long-term direction of the EV company and its stock will depend more on how Nio differentiates itself from competitors. Its latest pact with Tencent seems to be a positive development on that front.
