Nio Inc (NIO)

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Why Nio Stock Rebounded Today
By: Motley Fool | August 18, 2021

Key Points

• Many Chinese stocks have fallen on risks related to the Communist Party, but there can be another side to that, too.

What happened

Shares of Nio (NYSE:NIO) have been on a steady decline over the past seven trading days. There are several reasons the stock dropped about 15% in that time period, but it rebounded today, rising as much as 2.4% before settling to a gain of 2% as of noon EDT.

So what

Nio reported its quarterly financial results last week, and some investors weren't adequately impressed. The automaker has also been caught in a net of U.S.-listed Chinese names that have taken hits due to Chinese government regulators who have taken aim at certain technology industries. But the latest word from China's leadership could turn into a tailwind for the electric vehicle (EV) industry.

Now what

Chinese state media said that President Xi Jinping recently spoke at an economic meeting discussing how the country would aim to spread wealth to more citizens, and curb "excessive incomes," CNBC said. The report included a translation from the meeting that said the plan is for "reasonable adjustment of excessive incomes and encouraging high income groups and businesses to return more to society."

It's impossible to know exactly what China's president and Communist government have in mind. But if it results in more of the population of the largest automotive market in the world having additional discretionary income, it could bode well for EV sellers there.

Nio sells three SUV models, and plans to launch a luxury sedan early next year. The company also said it will announce another two new products in 2022. If more Chinese citizens are able to become customers, investors may be thinking it could be another future tailwind for Nio and other EV makers.

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