What happened

Nio (NIO -1.74%) stock opened sharply lower in trading this morning and was down 5.5% as of 11:40 a.m. ET.

Rising competition, disturbing news from China, and rumors that a Nio executive plans to quit are just some of the reasons why investors in the electric vehicle (EV) company are feeling nervous.

So what

Nio primarily sells its EVs in China, but it entered Europe last year and is rumored to be eyeing an expansion into the U.S. market in the near future. Its leaders have often said they aim to give Tesla (TSLA 4.34%) a run for its money by selling better vehicles at lower prices.

Nio ET7 sedan.

Image source: Nio.

However, more and more automakers now want to make a splash in the EV market and beat Tesla at its own game. The latest news on such plans came from General Motors (GM 0.44%) and Honda (HMC -0.39%) on Tuesday. The legacy automakers announced a collaboration to develop affordable EVs using GM's Ultium battery technology. The companies expect to start mass global production of those new vehicles by 2027.

That's a pretty big deal considering the size of the two automakers involved. If successful, they should be able to offer multiple EV options, including crossover vehicles, at cheaper prices than Tesla's current offerings.

For Nio though, it could mean even more intense competition as it attempts to eventually create an affordable, mass-market EV brand.

Meanwhile, fears of slower economic growth are emerging yet again with coronavirus cases surging in China. On Tuesday, China recorded more new COVID-19 cases than it did on its peak day of 2020, which means that its stringent lockdowns -- especially in key manufacturing and tech hubs like Shanghai -- may not end any time soon. Tesla, for example, was unable to restart operations at its Shanghai plant as planned on Monday, as nearly all of Shanghai remained under lockdown.

And, if rumors are to be believed, Nio's associate vice president of autonomous driving, Zhang Jiangyong, is quitting, according to CnEvPost, a news site covering the EV industry in China.  Zhang has been deeply involved in building Nio's autonomous driving system.

Now what

The rumor about Zhang's impending exit is just that for now -- a rumor -- so I would recommend that investors not read too much into it.

Meanwhile, Nio is focused on new vehicle launches and international expansion in 2022 and beyond. It's also building aggressively on its battery-as-a-service program, which is one of its biggest competitive advantages. The company's growth potential is real, which is perhaps why famed investor Cathie Wood recently bought Nio shares for the first time for her Ark Invest funds. However, because Nio is an early-stage company in a growing industry, its stock is bound to be volatile at times. On Wednesday, investors are getting another taste of that volatility.