What happened
U Power (UCAR +3.21%) stock is making big gains again this week. The electric vehicle (EV) company's share price was up 25.5% from last week's market close prior to the start of today's daily trading session, according to data from S&P Global Market Intelligence.
On June 21, China announced that it would be implementing 520 billion yuan (roughly $72.4 billion) in tax breaks to promote the adoption of EVs and other vehicles that use non-combustion fuel sources. Investors responded by pouring into U Power stock, and its share price is now up 92% over the last month.
So what
China's tax breaks for EVs and other green-energy vehicles had been set to expire this year, but they have been expanded and will now last through 2027. U Power specializes in vehicle sourcing and battery swapping services for EVs and stands to benefit from the new tax breaks.
While the expansion of the tax breaks is a favorable development for the company, some analysts are worried that the new incentives won't be enough to jump-start adoption for electric vehicles in China. Mileage concerns and lack of charging station availability have dampened sales for EVs, and the country's auto market has been soft due to macroeconomic concerns.
Now what
U Power stock has seen volatile trading since it made its public debut in April. While the company's share price has seen some big jumps in May and June, it still trades down 83% from market close on the day of its initial public offering (IPO).
NASDAQ: UCAR
Key Data Points
U Power is in the process of shifting away from its vehicle-sourcing business in favor of focusing on its proprietary battery-swapping technologies. The company sees the market for battery-swapping solutions growing at an 82.8% compound annual rate from 2021 through 2026, but there's still a lot of uncertainty surrounding its business outlook.
Per the company's IPO prospectus filing, U Power generated just $51,000 in sales from its battery swapping business across the first six months of last year. Meanwhile, total revenue across the period came in at roughly $600,000.
Given that the company has been generating relatively small amounts of revenue and there's not much visibility when it comes to future performance, it's fair to say that U Power is a high-risk stock. There's a good chance that shares will continue to see volatile trading in the near term.
