China EV Stocks Gain on New Stimulus Plan to Drive Car Demand

July 7, 2022 6:49 AM EDT

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China’s Ministry of Commerce announced Thursday a set of new measures to drive car demand, including a potential tax break for electric vehicles (EVs) and plans to make additional charging stations, as well as reduced charging fees.

The announcement was a part of a joint statement between the Ministry of Commerce and 16 other departments. Shares of local automakers including Geely and Great Wall Motor jumped 6% and 4%, respectively.

Shares of Nio (NYSE: NIO) and XPeng (NYSE: XPEV) are up 2.3% and 3.9%, respectively, while Li Auto (NASDAQ: LI) stock is up 1.3%.

The move comes after a challenging period for China’s car market, the largest in the world, as the government reopens Shanghai and several other cities following strict coronavirus lockdowns.

Last month, the Chinese authorities reduced the car purchase tax to 5% for vehicles that cost less than r 300,000 yuan ($45,000) and have 2.0-liter or smaller engines.

Additionally, those who bought certain fully and partly electric cars were not obliged to pay for the purchase tax since 2014. The government initially wanted to restore the tax but that plan may now be canceled, the ministry said.

The decision to cut the car purchase tax significantly boosted the market rebound in June, with passenger car sales soaring 22% to 1.9 million units in that month, compared to the same period last year.

Furthermore, EV sales jumped 130% to 546,000 units in June, representing almost 30% of all vehicle sales. Sales of the local EV market leader BYD more than tripled to 134,000 units.

By Senad Karaahmetovic

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Senad Karaahmetovic