Chinese electric vehicle (EV) stocks are rising this morning on news that their sector is expanding. Consumer electronics producer Xiaomi (OTCMKTS:XIACY), the nation’s fifth-largest smartphone maker, has announced that it will be launching a new EV on March 28. This comes at a time when a price war is ravaging China’s EV market as automakers slash sticker costs to remain competitive. But this development has provided many Chinese EV producers with a much needed boost. Nio (NYSE:NIO) is enjoying the ride so far as its winning streak continues. And NIO stock isn’t the only one being pushed up by the Xiaomi announcement.
Does this mean that the Chinese EV market is nearing a turnaround? This type of innovation is certainly promising but the price war is still raging, generating considerable uncertainty. But Xiaomi’s decision to venture into this complicated market still warrants a closer look.
What’s Happening With NIO Stock
Despite some volatility this morning, NIO stock remains in the green. As of this writing, it is up 2.5% for the day, continuing a week of impressive growth. Other Chinese EV stocks are having an even better day. Sector leader BYD Company (OTCMKTS:BYDDY) has risen more than 5%, and Li Auto (NASDAQ:LI) is up more than 7.5%. Mounting competition isn’t always good news for stocks, but in this case, Xiaomi’s upcoming launch is welcome news for China’s fellow EV producers.
XIACY stock has been rising all day and is currently up more than 10%. Xiaomi has made it clear that it sees the launch of its four-door Su7 EV sedan as a key turning point for the company. Reports indicate that its new EV can outperform Tesla’s (NASDAQ:TSLA) EVs in terms of acceleration time. CEO Lei Jun has stated that it intends to become one of the world’s top five automakers. As Quartz reports:
“The automaker-to-be has pledged to invest $10 billion to produce cars over a decade, and last year it became one of the few new players in China’s EV market to win approval from the government. The SU7 will be made by BAIC Group, a state-owned automaker, in a Beijing facility capable of building 200,000 EVs annually.”
If the SU7 launch leads to quick sales, Xiaomi could certainly become one of Tesla’s rivals in the near future. The company may be new to building EVs, but it has a long history of successfully producing electronic devices. Now, it has recognized that EVs are the next frontier of technology.
The Road Ahead
It’s true that the Chinese EV market is highly competitive. But as InvestorPlace contributor Josh Enomoto states: “If the consumers who love BYD offer any clues, the SU7 should be a hit.” This suggests that the highly anticipated new EV is primed for success as it prepares to make its debut.
This momentum has been good for NIO stock and its peers today. But if the SU7 is indeed a hit, it may ultimately make it more difficult for less stable companies to sell EVs in China as the market becomes more crowded. This may raise some concerns regarding Nio’s already questionable future.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
