What happened
Chinese business leaders voiced dire warnings over the weekend, and they are hitting shares of companies including electric vehicle (EV) maker Nio (NIO 7.26%) this morning. Nio's American depositary shares dropped almost 6% in early trading Monday, and remained down 3.4% as of 11:12 a.m. ET.
So what
Executives from Nio competitor XPeng and Chinese technology company Huawei are warning that continued COVID-19 lockdowns in Shanghai could lead to severe supply chain issues that could effectively shut down automotive production.
Image source: Nio.
After XPeng CEO He Xiaopeng stressed the need for Shanghai businesses to get back to work to supply automakers with needed parts, Richard Yu, the CEO of Huawei's consumer business group, said, "all technology and industrial sectors involved with the Shanghai supply chain will be completely shut down after May, especially the automotive industry," reports EV industry outlet CnEVPost.
Now what
Last week, Nio announced it had joined other automakers, including Tesla, in suspending production due to a shortage of parts that come from areas in China that are currently locked down to address a growing spread of COVID-19. While production at Nio's facility in Hefei has resumed, business leaders warning the extended lockdowns could cause further disruption has investors scared.
Nio just began shipping its latest offering and first sedan model. The suspension of production last week already will have some impact on the number of electric cars the company delivers this month. That short-term hit wouldn't be overly consequential, but if the recent warnings from business leaders are right, there could be much more serious disruptions ahead, and that has investors selling today.
