The recent visit by U.S. House Speaker Nancy Pelosi to Taiwan has angered China's leadership, and the fallout is starting to have some far-reaching implications. Chinese EV makers like Nio (NIO -2.21%) might be caught in the middle. Investors aren't waiting to find out what that might mean, though, and Nio shares continued a recent downward drift today.
What started out as a positive move in the stock this week, after Nio reported July delivery numbers, today reversed course. Its American depositary shares were down 4.3% on Friday as of 12:36 p.m. ET.
Nio has been growing its business in Western nations with sales beginning in Europe last year in Norway, and it plans to expand to other European nations throughout 2022. Just last week, the company announced a new factory in Hungary that will begin operations next month. That plant will construct power-swap stations for the European market.
Nio's battery-swap stations allow customers to reduce the up-front cost of its electric vehicles (EVs) and effectively pay a subscription for the batteries. The company now has more than 1,000 swap stations in China that exchange drained batteries with fully charged replacements in a matter of minutes.
In the wake of Pelosi's Taiwan visit amid strong condemnation by the Chinese government, its leaders declared today that it was ceasing all discussions with the U.S. on climate cooperation, among other topics.
That might not directly impact Nio and other Chinese EV makers in the short term, but its existing Chinese factory is a joint venture with a state-owned partner. Just as the company is working to expand sales in Europe and perhaps beyond, investors are viewing the recent developments as having potentially negative consequences.