After President Joe Biden’s victory over former president Donald Trump, many Americans believed that tensions between the U.S. and China would slowly ease. However, tensions remain high as relations between the two countries continue to deteriorate. Investors are especially concerned about Chinese electric vehicle (EV) stocks, most notably Nio (NYSE:NIO), Li Auto (NASDAQ:LI) and XPeng (NYSE:XPEV). With DiDi Global (NYSE:DIDI) set to delist on the New York Stock Exchange, fears of potential delistings of Chinese EV stocks are spooking investors.

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So, what should investors know if that happens? And what’s behind all of the fear?

Today, Uber (NYSE:UBER) announced its plans to sell its stake in Chinese ride-hailing company DiDi. CEO Dara Khosrowshahi noted, “Our Didi stake we don’t believe is strategic. They’re a competitor, China is a pretty difficult environment with very little transparency.” However, Uber must wait for Didi’s 180-day lockup period to expire at the end of this month before selling shares. This is because DiDi listed on the NYSE in June of this year. With that said, Khosrowshahi did not say exactly when Uber would sell its 12.8% stake.

Should investors be concerned about potential delistings in Chinese EV stocks? Well, let’s take a look.

What to Know About Chinese EV Stocks Today Amid Delisting Fears

1. In the event of a delisting, notable Chinese EV stocks may pursue a Hong Kong secondary listing. Earlier this year, Reuters reported that Nio, Li Auto and XPeng were already pursuing a listing on the Hong Kong Stock Exchange. XPeng is also considering listing on Shanghai’s STAR Market.
2. Investors could possibly exchange their American depository receipt (ADR) shares for Hong Kong shares if a delisting occurs. However, a delisting would certainly create volatile price movements that could prove adverse in the short term.
3. Furthermore, on Dec. 2, the Securities and Exchange Commission (SEC) finalized rules to implement the Holding Foreign Companies Accountable Act (HFCAA). The law gives the SEC power to delist companies if the Public Company Accounting Oversight Board (PCAOB) is not able to audit requested reports for three consecutive years.
4. Additionally, KraneShares CIO Brenden Ahern added that: “It’s the Chinese regulators who are preventing the U.S. regulators from inspecting the audits. The issue unfortunately has been politicized. These companies are all audited by the Big Four accounting firms, but under Chinese law regulators are not allowing those audits to be sent to the PCAOB.”
5. On the bright side, investment bank Goldman Sachs (NYSE:GS) believes Chinese regulatory risks are already priced in. As analyst Christian Mueller-Glissmann explained, “Although risks around the Chinese growth outlook remain due to the zero-tolerance Covid-19 policies and regulatory tightening, Chinese equity markets already reflect some of those risks, offer attractive valuations and continue to be underinvested.”

On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.