Chinese electric vehicle stocks including Nio (NYSE:NIO), Xpeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) are crashing today under pressure from hawkish trade policies and the ongoing semiconductor chip shortage. XPEV stock was down more than 15% on the day, while LI stock declined more than 13% and NIO stock more than 10%.
Today the U.S. Securities and Exchange Commission begins enforcing the Holding Foreign Companies Accountable Act signed into law by former President Donald Trump last year. That bill requires foreign corporations to disclose government affiliations, and provides a mechanism for delisting foreign companies that fail to meet certain auditing standards.
While this legislation should primarily scare companies whose financials aren’t quite up to snuff, ongoing bipartisan support for trade policies that are tough on China is bad news for Chinese companies. But it’s awful news for XPEV, NIO and LI stock.
That’s because electric vehicle companies are also being hammered by the ongoing semiconductor shortage. The decline in production has hurt not only chipmakers, but numerous tech and auto makers who use semiconductors in their products as well.
Less semiconductors means less vehicles produced means lower revenues and slower adoption. That’s pretty much the last things investors want to hear when it comes to growth stocks like LI, NIO or XPEV stock. Earlier today, InvestorPlace writer Chris MacDonald said of NIO stock:
“Auto manufacturers like Nio that are priced as growth stocks are … highly sensitive to these sorts of growth-inhibiting drivers. Accordingly, investors [are] less inclined to jump aboard a growth train that is slowing.”
Trading volume in NIO and XPEV stock was slightly up for the day (17% and 37% respectively), while trading volume in LI stock was down by 7%.
On the date of publication, Vivian Medithi did not have (either directly or indirectly) any positions in the securities mentioned in this article.