SHANGHAI, Oct 20 (Reuters) - Stocks of Chinese electric car and battery makers bounced off multi-year lows on Friday as investors bought their battered shares, betting the sector will benefit from China's export control of key battery-making material graphite.

The CSI New Energy Vehicles Index hit a three-year low at open pressured by CATL's weak quarterly earnings, but quickly reversed losses, gaining 1.7% by the lunch break.

The CSI Battery Index ended the morning session up 1.8%, bouncing off record lows.

Shares of CATL erased early losses, as investors bought on the dip, after the world's largest battery maker for electric vehicles (EVs) posted the weakest quarterly performance since the start of last year amid slowing demand and stiff competition.

"We believe CATL remains well positioned based on its cost competitiveness and R&D capabilities to maintain its global market share," Citi said in a note to clients.

Trading at 19 times expected 2023 earnings, and 15 times expected 2024 profit, "we believe the concerns on margins and geopolitical risks are overdone," said the Wall Street bank, which views CATL as its "top pick".

The sector also benefited from newly announced export controls on graphite - a critical raw material used in EV batteries - of which China is the world's top producer.

China will require export permits for some graphite products from Dec. 1 to protect national security, the commerce ministry said on Friday. Top buyers of graphite from China include Japan, India and South Korea, according to Chinese customs data.

The new rules will likely increase the competitiveness of Chinese battery makers, which already have a lion's share of the global market.

CATL, which owns 35% of the energy battery market in Europe, is still witnessing strong growth momentum with a new round of incoming orders, Sinolink Securities wrote in a note.

CATL will likely expand its market share with its technology upgrade and strong pricing power, the brokerage said, maintaining "buy" rating on the stock. (Reporting by Shanghai newsroom; Editing by Sohini Goswami and Eileen Soreng)