Morgan Stanley raised its outlook for China's electric vehicle market and is bullish on the performance of the country's electric vehicle trio.

The Wall Street bank's analyst Tim Hsiao raised his forecast for electric vehicle sales in China to 1.7 million units in 2021 from 1.5 million and raised its price target for Nio by 142% to $80 from $33. The bank kept its Overweight rating on the stock.

The bank also initiated coverage of Xpeng Motors, giving it an Overweight rating.

Morgan Stanley also raised its price target on Li Auto to $49 from $26.

Shares of all three companies fell this week until yesterday, when their sell off eased.

Nio closed up 2.13 percent to $58.37 on Thursday, while Li Auto rose 2 percent to 32.21 and Xpeng gained 0.4 percent to 50.16.