The next step in electric vehicle (EV) battery innovation may come from China. As China’s EV market booms, the economic powerhouse is focused on the batteries to power the industry. According to recent reports, China’s government is at work on a state-sponsored project that will invest 6 billion yuan ($830 million) in solid-state battery production.
So far, China has selected six companies to receive state funding as part of this initiative. This means a boost for several Chinese EV stocks. But it could also benefit the publicly traded companies that back some of these battery producers. Specifically, WeLion New Energy Technology — a battery production company with backing from Chinese EV maker Nio (NYSE:NIO) — is one of the firms that has been selected. Now, news of this development is sending NIO stock into the green today.
What’s Happening With NIO Stock?
After a difficult week and a volatile month, Nio could definitely use a positive catalyst. Thankfully, the EV firm seems to have found one today. NIO stock is rising slightly as momentum for China’s new EV battery initiative picks up. While shares aren’t up by too much yet, the news is still significant for the automaker and some of its peers.
China’s government has also selected leading EV producer BYD (OTCMKTS: BYDDY) as a funding recipient and shares of BYDDY are up more than 5% today. Even for a company that already consistently outshines Tesla (NASDAQ:TSLA), this development is important. That’s because it should help BYD continue its domestic market dominance. Finally, other recipants include Chinese battery leader Contemporary Amperex Technology Co Limited (CATL) and Geely (OTCMKTS:GELYY).
Even before this project began, China enjoyed an undisputed place at the top of the global battery market. Now, it’s poised to further its global dominance as several of its leading companies benefit. As Reuters reports:
“Solid-state batteries hold the promise of improved safety, a longer lifespan and faster charging compared with conventional lithium-ion batteries that use flammable liquid electrolytes. But mass adoption remains some way off due to constraints in raw material availability, intricate manufacturing processes and the resultant high costs.”
That said, if China’s selected companies can scale solid-state-battery production, it could help speed up mass adoption across the globe. Already a cost-competitive market, China now stands to cement its place as a powerful battery market juggernaut. This is great news for its battery production partners — and by default for NIO stock. But it is much less positive for companies making the same products in international markets.
What Comes Next?
Another company that could be negatively impacted by this development is Tesla. CEO Elon Musk’s company recently broke ground on a new battery factory in Shanghai. Tensions are rising between China and the U.S. due to proposed tariffs and other international trade barriers between the two nations.
This battery production news could be concerning for Musk as well. That’s because it stands to significantly benefit some of Tesla’s battery production rivals in China, a market that the EV leader is trying to penetrate further. After all, BYD is the company’s chief rival, especially when the Chinese EV market is concerned.
NIO stock and BYD are likely to enjoy a boost from this news and keep growing as production gets underway. But Tesla, already facing significant problems, may be compromised even further at a time when shares can’t afford to keep falling.
On the date of publication, Samuel O’Brient did not hold (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.
