What happened

Shares of Chinese electric-vehicle maker Nio (NIO -0.19%) were trading lower on Monday, in the aftermath of a crash that killed a prominent Chinese entrepreneur. An initial report indicated that the victim's Nio had its hands-free driving system engaged at the time of the crash.

As of 10:30 a.m. EDT, Nio's American depositary shares were down about 6.4% from Friday's closing price. 

So what

Lin Wenquin, the 31-year-old founder of several successful Chinese restaurant chains, died after his Nio ES8 crashed in Fujian on Aug. 12. According to an obituary posted to his company's WeChat account on Saturday, Lin's Nio had been operating on "Navigation on Pilot" (NOP), a hands-free highway-driving system similar to Tesla's Autopilot.

A NIO ES8, an upscale three-row electric SUV.

A Nio ES8 crash that killed a prominent entrepreneur has drawn the attention of Chinese regulators. Image source: Nio.

The crash was the second fatal accident involving a Nio in recent weeks. Another Nio driver was killed in Shanghai on July 30 when his EC6 hit a stone pier and burst into flames. 

The two incidents have drawn attention from government regulators. Securities Times, a state-owned business newspaper, ran an editorial on Monday that took note of the two incidents.

Titled "Ensuring product safety is the main line and bottom line of car companies," the editorial hinted that additional regulation of so-called "smart electric vehicles" may be forthcoming if the companies don't "focus more on essential work involving personal safety." That's a clear warning. 

Now what

Car accidents happen, of course. But there are two specific issues here that are likely contributing to the move in the stock:

  • Nio's hands-free driving system may be implicated in the most recent accident.
  • The two incidents have drawn the Chinese government's attention. 

A regulatory crackdown on advanced driver-assist features wouldn't necessarily be terrible for Nio, if only because its competitors would be equally affected. But the Chinese government's recent actions against DiDi Global and several other fast-growing start-ups that had drawn its ire seem to have made U.S. auto investors wary of the possibility that the government might make an example of Nio.

That's why Nio's stock is trading lower today.