The shares of Chinese electric vehicle (EV) makers are advancing in early trading amid indications that China plans to ease its anti-coronavirus policies. Among the Chinese EV stocks that are rallying are Nio (NYSE:NIO), which is climbing 7.5%, Li Auto (NASDAQ:LI), rising 11.5%, and Xpeng (NYSE:XPEV), soaring 17.5%.
Meanwhile, the Chinese stock exchanges soared today on the news.
Anti-Covid Measures Are Likely to Ease
In a government-backed newspaper, China’s National Health Commission was quoted as saying that the country must seek to minimize the harms caused by anti-Covid measures. Additionally, the commission reportedly suggested that Beijing’s “zero Covid policy,” which has been in place for several months, has been unnecessarily strict.
Although the newspaper stated that Beijing remained committed to the zero-Covid policy, it noted that “precise epidemic prevention” would be employed going forward.
The Likely Impact on Chinese EV Stocks
In the last several months, the country’s zero-Covid policy has periodically negatively impacted the ability of China’s EV makers to produce their vehicles. Nio recently became the latest victim of this trend, as the automaker stopped all production earlier this week. In April, the automaker took a similar step.
For its part, Li Auto in September cut its third-quarter delivery guidance, due to “supply chain disruptions” to which Beijing’s anti-coronavirus policies contributed. And the anti-Covid measures harmed the ability of all three automakers to produce their EVs last month, The South China Morning Post recently reported.
These production issues have contributed to sharp downturns of all three names in the second half of this year. In the three months that ended yesterday, NIO stock fell 51%, LI stock retreated 50%, and XPEV stock tumbled 71%. To the extent that worries about anti-Covid measures undermining the companies’ productions are relieved, these Chinese EV stocks should rally in the coming weeks and months.
On the date of publication, Larry Ramer owned shares of XPEV. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.