The electric vehicle (EV) market continues to get more investors' attention. The sector has seen some of the biggest gains this year, and there have been a couple of catalysts. For one, electric cars are expected to displace gas-powered vehicles by the year 2050 according to the IEA.

In the last 10 years, we've gone from 100,000 EVs sold per year to over 7 million globally. So, it's a growth market in a world with an abundance of liquidity and paucity of secular growth opportunities.

The second catalyst is the generous subsidies and support proposed under former Vice-President Joe Biden's energy plan. Biden, currently has a decent-sized lead in the national polls and swing-states, although there has been some tightening in recent weeks. His plan calls for building out "charging infrastructure", offering additional tax credits for purchases, and a "cash for clunkers" programs targeted towards electric vehicles.

A third catalyst has simply been the improving quality of the product in terms of battery life. Additionally, more charging infrastructure means the cars become more viable which in turn boosts sales and leads to more investment in charging infrastructure.

China's EV Support

In an effort to curb pollution and improve quality of life, China has been making massive investments in the sector. The government has invested heavily in charging infrastructure, it's also expedited permitting of EVs to encourage it, and offered state-supported financing to several companies. They've also made some decisions like standardizing the types of batteries used in electric cars.

Currently, there are three Chinese electric car makers listed on US exchanges - NIO (NIO  ), Li Auto (LI  ), and xPeng (XPEV  ). Both Li and xPeng have IPO'd in August. NIO's stock has been one of the big winners in recent months as it's up more than 8x since the March bottom.

While the stocks could certainly see more gains in the near-term, it's also reasonable to be skeptical about their prospects. These companies are still in the early stages of their production and development cycle. With Tesla, we have learned that ramping up production while maintaining quality is not easy.

Additionally, the Chinese EV market is incredibly competitive. By some estimates, there are 400 registered Chinese EV companies. Additionally, foreign manufacturers are also expected to enter the market and offer their own EVs. China's strategy to increase the penetration of EVs seems to be to support the whole industry - charging units and batteries are interchangeable. This means that if any company going bankrupt, it doesn't mean that the batteries will be able to be recycled and reused.