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Why Nio, XPeng, and Li Auto Stocks Are Falling Today

What happened

Shares of three prominent Chinese electric vehicle makers -- Nio (NYSE: NIO), XPeng Motors (NYSE: XPEV), and Li Auto (NASDAQ: LI) -- were trading sharply lower on Tuesday, on growing concerns about the Chinese government's ongoing actions to restrict technology companies.

Here's where things stood as of 10:45 a.m. EDT, relative to Monday's closing prices.

  • Li Auto's shares were down about 9.1%.
  • Nio was down about 7.5%.
  • XPeng was about 13.5% lower.

So what

There was no major company-specific (or sector-specific) news pushing these companies' stocks lower. It appears that all were dropping as part of a broader sell-off of U.S.-listed shares of Chinese technology companies.

Earlier this month, China's government said it has launched cybersecurity reviews on a number of companies that have listed on U.S. stock exchanges in 2021, including ride-hailing giant DiDi Global, online job-listing platform Kanzhun, and Full Truck Alliance, which provides services similar to ridesharing for the trucking industry.

It's not completely clear what the Chinese government's goal is here, hence the uncertainty that is putting pressure on shares of Nio, Li, and XPeng. But it's worth noting that DiDi, Kanzhun, and Full Truck Alliance are all consumer-facing online platforms -- businesses that are very different from building and selling electric vehicles.

NIO's push to expand its battery-swap network is on track: It opened its 321st station in China on Monday. But that wasn't enough to overcome U.S. investors' worries on Tuesday. Image source: Nio.

Some analysts have suggested that China may be looking to realign technology resources away from consumer-facing internet business and toward more strategic industries. If so, that might -- might -- turn out to be bullish for these three automakers (and other high-tech manufacturing companies) over time.

But that said, given the lack of clarity around the government's aims, I won't be surprised if Chinese companies' U.S.-listed stocks remain under pressure for a while. I think auto investors holding or watching these three names would be wise to proceed with caution until we know more.

Now what

We may get more clarity around what's happening when we hear from the companies during their second-quarter earnings calls. None of the three have yet announced dates for their quarterly reports, but based on past reports' timing I expect them all in the second half of August.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NIO Inc. The Motley Fool has a disclosure policy.


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