Nio Shares Trade Higher After Chinese Official Says EV Subsidy Will Be Maintained

Nio Inc – ADR NIO shares, which had a turbulent 2019, continue to be volatile in the new year despite reporting strong December quarter deliveries. The shares were experiencing some upward momentum Monday following some positive news on EV subsidies in China. 

China Maintains EV Subsidy

China will maintain its new energy vehicle subsidy this year and will not significantly roll back the benefit in order to stabilize market expectations, Miao Wei, the Chinese minister for industry and information technology, was quoted as saying at an electric vehicle forum over the weekend.

China uses the term NEV to refer to battery EVs, plug-in hybrid vehicles and fuel cell EVs.

The government's move may have been influenced by the impact the subsidy reduction had on sales in 2019.

Chinese EV Production, Sales Sag In 2019 

NEV sales were down for the first time in a decade, the National Business Daily of China said.

Production and sales of NEVs fell 2.3% and 4% in 2019, according to data released by the China Association of Automobile Manufacturers, or CAAM.

Pure EVs, which accounted for over 80% of the total NEV sales and production, saw declines of 3.4% and 1.2%, respectively.

The weakness was due to subsidy cuts in June that dragged NEV sales sharply lower in the second half of last year, according to the CAAM. 

China, which began subsidizing NEVs in 2009 in order to fuel sales of the eco-friendly vehicles, has been striving to gradually wean consumers off the subsidies. 

In June, government subsidies were cut by as much as 50,000 yuan, or about $7,153, per EV, Europe Auto News reported.

Good News For Nio?

The government announcement bodes well for Nio, which has seen a sales resurgence after a steep setback over the summer.

The company recently reported record deliveries for the fourth quarter , as macro- and company-specific factors improved. 

Nio shares were trading 2.84% higher at $3.62 at the time of publication. 

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Photo courtesy of Nio.