Chinese EV stocks Nio (NYSE:NIO) and Xpeng (NYSE:XPEV) rose after the government extended its tax break on electric vehicles. The exemption is worth about $1,400 per car and has been around since 2014. The break extends to plug-in hybrids and fuel cell vehicles.
NIO stock opened today at about $17.60 per share with a market capitalization of $30 billion. In June and July, it sold between 10,000 and 12,000 vehicles per month. XPEV stock opened at about $14.30 with a market cap of $11.3 billion. Since May, it has sold about 10,000 to 15,000 cars per month.
What’s Going on With Chinese EV Stocks?
China’s electric vehicle market is large and expanding. American investors only appear to see a small slice of it.
The best-selling electric cars are made by companies that aren’t publicly traded. The Hongguan Mini is made through a partnership of state-backed SAIC Motor and General Motors (NYSE:GM). The largest maker of EVs is BYD (OTCMKTS:BYDDF), in which Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) has a stake. Tesla (NASDAQ:TSLA) is the largest producer of luxury electric vehicles from its factory in Shanghai.
But both Xpeng and Nio offer sedans that are familiar to European and American drivers. They are small enough to deliver volatility and, sometimes, trading profits to investors. They are also interested in exporting.
Xpeng has a big presence in Norway, and Nio is moving in with promises to swap out batteries in just five minutes. Nearly all new cars in Norway are now EVs, making it an important market. Tesla is by far the market leader there.
What Happens Now?
The decision to extend tax breaks will give both Nio and Xpeng a break in their home market while they try to spread their wings into Europe. Neither is yet a major factor there, but that could change.
Both of these companies are small, but they are highly rated and can achieve big gains on what may appear to be small improvements in volumes.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.