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Why NIO Stock Dropped Today, Then Recovered | The Motley Fool

What happened

Electric vehicle (EV) stocks tend to be pretty volatile. Shares of Chinese EV maker NIO (NYSE:NIO) followed that pattern today, but it wasn’t the EV sector that caused the disruption. Shares of many U.S.-listed Chinese stocks are on the move today. NIO shares first dropped 2.4% before bouncing up to a gain of 2.7%. But as of 12:30 p.m. EDT on Tuesday, shares were back in the red, down about 1%. 

So what

The seesaw session comes after the Chinese government cracked down on Chinese ride-hailing company DiDi Global (NYSE:DIDI) over the weekend. DiDi just went public on the New York Stock Exchange last week, and the Chinese government seems to be letting them know who’s boss.

Chinese regulatory officials launched a cybersecurity review of DiDi and prohibited new downloads of the company’s app, according to reporting by The Wall Street Journal. Most U.S.-listed Chinese stocks dropped at the open today, but subsequent news that the crackdown is focused on technology companies might be why NIO shares bounced back.

Now what

NIO has a heavy reliance on the Chinese government. Its EVs are manufactured under an agreement with the state-owned Jianghuai Automobile Group. It recently renewed that agreement out to 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 bit nervous early today about news of a new crackdown, but NIO shares recovered as it looks like the government isn’t targeting companies with U.S. listings in a broad net. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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