What happened
Shares of self-driving truck start-up TuSimple Holdings (TSP) skyrocketed Wednesday morning and were up 25% at 11:20 a.m. ET.
The reason is China, but it's not what you think.
So what
Chinese stocks are soaring this week, but TuSimple is a San Diego-based company that is developing fully autonomous long-haul heavy-duty trucks. It has partnered with Volkswagen subsidiary Traton to build its trucks, which have Level 4 self-driving capabilities. Traton is one of the world's largest commercial vehicle manufacturers with some heavyweight brands including Navistar, Scania, and MAN.
TuSimple has substantial operations in China. As of Dec. 31, 2021, the company had 25 Level 4 autonomous trucks operating in China versus 75 in the U.S.
A TuSimple autonomous truck. image source: TuSimple.
TuSimple is now reportedly looking to exit China in the wake of tighter regulations in that country as well as in the U.S., according to Reuters.
On the one hand, China's crackdown on tech companies, especially the ones listed in the U.S., has stifled growth for companies there. On the other, the Securities and Exchange Commission is tightening scrutiny on foreign stocks as well as on U.S. companies with significant investments abroad that can result in control of the company by a foreigner. Chinese media company Sina, which was delisted by Nasdaq in 2021, is invested in TuSimple through affiliates.
According to Reuters, TuSimple now wants to sell its unit in China after "reaching an agreement with the U.S. government to restrict the China unit's access to data due to U.S. security concerns."
TuSimple is looking for potential buyers and hopes to raise $1 billion from the sale.
Now what
If investing in Chinese stocks is risky, recent developments have proved how investing in U.S. companies with operations in China is no less risky.
Given the backdrop, it's not surprising to see why TuSimple's rumored exit from China has sent the markets into a tizzy. The move suggests TuSimple wants to focus on the U.S. market, which looks like a smart move given how open several states in the U.S. are to driverless trucks.
After today's Reuters report, TuSimple stock will likely be on the market's radar.
