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Why NIO shares fell today, then recovered

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What happened

Electric vehicle (EV) stocks tend to be quite volatile. Shares of Chinese electric vehicle maker NIO (NYSE: NIO) has followed that pattern today, but it wasn’t the electric vehicle industry that caused the disruption. The shares of many Chinese stocks listed in the United States are on the move today. NIO shares initially fell 2.4% before rebounding to a gain of 2.7%. But at 12:30 p.m. EDT on Tuesday, stocks were back in the red, down about 1%.

So what

Toggle session comes after Chinese government cracked down on Chinese ridesharing company DiDi Global (NYSE: DIDI) during the weekend. DiDi was just listed on the New York Stock Exchange last week, and the Chinese government appears to be letting them know who’s boss.

bull with green arrow up and bear with red arrow down.

Image source: Getty Images.

Chinese regulatory authorities have launched a cybersecurity review of DiDi and banned new downloads of the company’s app, according to a report by The Wall Street Journal. Most US-listed Chinese stocks fell at the open today, but subsequent news that the crackdown is focused on tech companies could explain why NIO stocks rebounded.

Now what

The NIO is heavily dependent on the Chinese government. Its electric vehicles are manufactured under an agreement with the state-owned Jianghuai Automobile Group. It recently renewed the deal until May 2024. The renewal comes as the company prepares to launch its first sedan, double its production capacity and begin sales in Norway in its first market outside of China.

Investors seemed a little nervous today when news of another crackdown was announced, but NIO shares have rallied as it appears the government is not targeting US-listed companies in a large network.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

Sources

1/ https://Google.com/

2/ https://www.fool.com/investing/2021/07/06/nio-stock-is-caught-up-in-the-chinese-crackdown/

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