What happened

Shares of Chinese electric-vehicle makers NIO (NYSE:NIO) and XPeng (NYSE:XPEV) were trading lower on Thursday, after a Wall Street analyst cut his bank's rating on XPeng following its recent rally. 

As of 11:10 a.m. EST, NIO's American depositary shares were down about 3.6% from Wednesday's closing price, and XPeng's were down about 4.8%.

So what

In a note released after the U.S. markets closed on Wednesday, UBS analyst Paul Gong cut his bank's rating on XPeng to neutral, from buy, while raising its price target to $59 from $25.

Gong wrote that while he believes XPeng is leading China's race to self-driving vehicles, he thinks that "investors more or less already recognize this" after the stock's recent 200%-plus rally. Gong noted that peers including NIO have also made recent progress toward autonomous driving, but he said that he thinks XPeng remains the group's leader on that front.

A red XPeng G3, an electric crossover SUV

UBS sees XPeng as a technology leader among China's EV makers. Image source: XPeng.

Long story short: Gong thinks XPeng is more or less fully valued, and that's why the stock is down today. And what about NIO?

Now what

Gong has been more of a skeptic on NIO -- in fact, he was an outright bear earlier in 2020. The analyst had something of a change of heart in August, raising his rating to neutral from sell after NIO's sales recovered and its gross margin improved in the second quarter.

But I think that Gong's note on XPeng might have had a sobering effect on auto investors holding NIO's stock as well, if only by reminding them that both of these companies' stocks have had very big run-ups since the spring.