What happened
Shares of Chinese electric-vehicle maker XPeng (XPEV +0.69%) were trading lower on Wednesday after China's state planner told local governments to investigate a series of new-energy-vehicle-related construction projects linked to two major property developers.
As of 1 p.m. EST, Xpeng's shares were down by about 8.9% from Tuesday's closing price.
So what
U.S. auto investors aren't the only ones rushing to get in on the booming market for new-energy vehicles in China. Prominent commercial-property developers Baoneng Group and China Evergrande Group (EGRNF +0.00%) have both launched subsidiaries that aim to build and sell such vehicles -- and now, the Chinese government has some questions.
According to a Reuters report, China's National Development and Reform Commission has asked local officials to investigate construction and production details of projects related to those subsidiaries, Shenzhen Baoneng and Evergrande New Energy Vehicle, dating from 2017.
The background is that in 2018, China's government issued rules intended to restrict the ways in which automakers could invest in new manufacturing capacity for traditional gasoline-fueled vehicles as well as battery-electric vehicles. It was one of many actions that Beijing has taken to help accelerate the adoption of what it calls "new-energy vehicles," a category that includes gasoline-electric hybrids as well as fully electric vehicles powered by batteries or by hydrogen fuel cells.
Xpeng began shipping electric P7 sedans from its own factory in June. Image source: Xpeng.
Now what
XPeng isn't directly connected to either of the companies under investigation. But when the Chinese government makes moves like this against specific companies, it tends to make investors in their peers wary, because those investigations have a way of expanding in scope. It probably doesn't help that XPeng opened its own factory -- making only battery-electric vehicles -- earlier this year. Any disruption of that factory's production would be expensive for the company.
That said, for auto investors who are taking a long-term view of XPeng's stock, there doesn't seem to be much to worry about here, at least as of right now.
