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Why NIO Stock Is Down Today

By John Rosevear – Jul 22, 2020 at 11:42AM

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A flare-up of U.S.-China tensions shouldn't distract investors from the longer-term story.

What happened

Shares of electric-vehicle maker NIO (NIO -3.87%) and other Chinese stocks were moving lower on Wednesday, on investor fears of a flare-up of international tensions after the U.S. government ordered the closure of China's consulate in Houston.

As of 11:30 a.m. EDT, NIO's American depositary shares were down about 4.6% from Tuesday's closing price. 

So what

Investors in Chinese businesses reacted with concern after the U.S. State Department abruptly ordered the Chinese government to close its consulate in Houston. The State Department ordered the closure in response to "massive illegal spying and influence operations throughout the United States against U.S. government officials and American citizens," it said in a statement after the Chinese government made the order public. 

A blue NIO EC6, an upscale electric five-passenger SUV with a sleek coupe-like roofline.

NIO's latest model is the sporty EC6, which began shipping in February. Image source: NIO.

For U.S.-based investors in NIO, the ratcheting-up of tensions between the U.S. and China naturally raises concerns. But it's important to note that the United States' election-year spat with China is unlikely to put a damper on NIO's growth plans, at least in the near term. 

NIO has floated the possibility of exporting its vehicles to markets including the U.S. -- eventually. But right now, it's currently focused entirely on expanding its sales in China, where it has invested heavily in a network of company stores and service centers. That's likely to remain true even if China and the U.S. continue to bicker through the remainder of 2020.

Now what

Auto investors have reason to expect that NIO's second-quarter earnings report will be a good one, given the company's better-than-expected second-quarter sales and ongoing cost-reduction efforts. The company hasn't yet announced a date for that report, but it's likely to happen sometime next month.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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