XPEV, NIO Stock Alerts: New Report Sinks Chinese EV Stocks

  • Chinese EV stocks traded lower this morning after Chinese regulators denied reports of a three-tier system for audits to comply with the HFCAA.
  • Both XPeng (XPEV) stock and Nio (NIO) stock are on the HFCAA list.
  • Meanwhile, Congress is considering bipartisan legislation to move up the date of compliance to 2023.
Chinese EV stocks - XPEV, NIO Stock Alerts: New Report Sinks Chinese EV Stocks

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Shares of XPeng (NYSE:XPEV) and Nio (NYSE:NIO) sank lower this morning as the policies of the Holding Foreign Companies Accountable Act (HFCAA) cast a cloud over the two Chinese electric vehicle (EV) companies. The act stipulates that foreign companies that are publicly traded in the U.S. must submit audited filings to U.S. regulators. If U.S. regulators do not receive audited filings from foreign companies for three consecutive years, then the companies may face delisting from U.S. exchanges. Noncompliant companies receive a position on the HFCAA list.

Currently, there are over 270 Chinese companies on the list, which includes XPEV and NIO. These companies will have until 2024 to comply with the policies of the act. China has not allowed the U.S. to review audited filings due to national security concerns.

Today, Chinese regulators denied a previous report that claimed that Beijing had plans to sort U.S.-listed Chinese companies based on the sensitivity of the data they hold in an effort to stop U.S. regulators from delisting these companies. Let’s get into the details.

Chinese EV Stocks: XPEV, NIO Stock Under Pressure From HFCAA

Yesterday, the Financial Times reported that Chinese regulators were pursuing a three-tier system based on sensitivity of data. The system would ultimately help bring Chinese companies up to speed with U.S. regulations and the HFCAA. However, the China Securities Regulatory Commission (CSRC) announced today that it “has not studied” a three-tier system.

Meanwhile, Reuters reported that Congress is weighing bipartisan legislation to ramp up the HFCAA compliance deadline to 2023. On the bright side, it appears that China is willing to satisfy the requirements of the HFCAA. Negotiations between the two parties have been ongoing for several months.

Last May, the CSRC stated that negotiations were “progressing smoothly,” although several issues still remained. The CSRC added, “We’ve always maintained that the audit inspection issue should be solved by cooperation on the basis of equality. Our attitude has always been positive and constructive.”

Currently, we do not know the extent of sensitive data Nio and XPeng possess. Unfortunately, the overhang of the HFCAA will likely influence the two Chinese EV stocks until the U.S. and China agree on a resolution.

On the date of publication, Eddie Pan did not hold (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.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.


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