China's EV Stimulus Puts Nio-Heavy ETFs Back In Focus

China's recent push to boost consumer spending puts a spotlight on ETFs that include the nation's electric vehicle makers, like Nio Inc (NYSE:NIO). Beijing has announced plans to introduce up to $8.9 billion in trade-in subsidies next year. This policy aims to fight deflation and weakness in the Chinese economy, and it could serve as a key driver for ETFs that hold a significant amount of Nio stock.

On Tuesday, shares of the Shanghai-based automaker rose more than 3.5% after the announcement, showing how quickly policy changes can affect prices for funds focused on China's shift to electric vehicles.

Nio's Rebound Matters More At The ETF Level

Nio has been one of the most sold China EV stocks in recent months. Its shares are down over 30% from 2025 highs in October. This decline has increased the stock's impact on several ETFs, where even small rebounds can improve overall fund performance.

The KraneShares MSCI China Environment Index ETF (NYSE:KGRN) is particularly exposed. Nio has historically been one of the fund's top holdings, often making up a significant portion. A sustained rise in Nio's stock could therefore greatly influence this ETF, which targets Chinese companies linked to clean energy and environmental initiatives.

Trade-In Subsidies Target Nio's Core Market

The trade-in program encourages consumers to swap their older vehicles for newer models, including electric ones. This supports Beijing's ongoing goal of increasing electrification. For Nio, which relies heavily on domestic demand, this stimulus could boost sales and lower inventory risks.

This week, Nio’s management announced a projection of over $4 billion in vehicle sales for the fourth quarter. This is a sharp increase from $2.7 billion a year earlier. Additionally, options markets show optimism, with contracts expiring in mid-2025 indicating potential gains for Nio shares in the next five months, according to Barchart.

A Smoother Way To Play The Upside

Aside from KGRN, Nio has a mid-single-digit weighting in the Invesco Golden Dragon China ETF (NASDAQ:PGJ), making it a key player if demand for electric vehicles rises. Other funds like the Global X Autonomous & Electric Vehicles ETF (NASDAAQ: DRIV), VanEck Low Carbon Energy ETF (NYSE:SMOG), and SPDR S&P Kensho Smart Mobility ETF (NYSE:HAIL) also include Nio along with other automakers and battery firms.

In these ETFs, Nio doesn't need to experience a huge rally for its recovery to be significant. Small gains can still enhance performance when combined with broader momentum driven by policy changes across the EV sector.

A Policy-Driven Test For China EV ETFs

With a price-to-sales ratio around 1.2x per YCharts, Nio is priced attractively compared to U.S. competitors like Tesla Inc (NASDAQ:TSLA) and Rivian Automotive Inc (NASDAQ:RIVN). While Wall Street consensus rating on the stock is a "Buy," price targets going up to $16 (according to Benzinga Pro) suggest substantial upside if stimulus measures lead to increased sales.

In the upcoming months, ETF investors may find a clearer indication of whether China's EV stimulus can boost not only individual stocks like Nio, but also the wider array of funds centered on China and electric vehicles.

Read Next:

• Trump Media Launches 5 Truth Social ETFs — But Are Investors Really Getting Diversification?

Image: Shutterstock