What happened

Nio (NIO 1.55%) stock plunged today, sinking as low as 7.2% as of 12:47 p.m. ET. With today's fall, the electric vehicle (EV) stock extended its steep losses from the previous day and was down 15.8% through the week and a staggering 45% in one month, as of this writing. A huge price cut from an analyst amid a jarring sell-off in Chinese stocks sent Nio shares plunging.

So what

Barclays analyst Jiong Shao has slashed Nio stock's price target to $19 a share, as reported by The Fly. That's a dramatic U-turn, as the analyst had awarded Nio stock a price target of $34 a share earlier this year on the back of bullishness about China's EV market. Turns out, China is to blame for Nio stock's price target cut.

Chinese stocks plunged on Friday, with Hong Kong's Hang Seng stock index tumbling to levels not seen since 2009. Ever since President Xi Jinping secured a third term in power earlier this week, investors have dumped Chinese stocks as they fear the nation will double down on its zero-COVID policy under Xi and drive the economy toward a slowdown.

Although Xi hasn't said anything new about his zero-COVID policy yet, most analysts expect the nation's COVID-19 controls to tighten further. In fact, reports about major cities in China putting more areas under lockdowns this week have added fuel to investors' fears. As of Thursday, Nomura analysts projected the latest round of lockdowns and controls to have affected as much as 9.2% of China's gross domestic product, according to CNBC.

Since Xi is also infamous for his crackdowns on the private sector, particularly technology companies, his confirmation of a third term triggered a stock market rout in China this week. The ripple effects were felt on shares of Chinese companies listed in the U.S., including Nio.

Investors in Nio are also scared about lockdowns spreading to the industrial regions in China, which could hurt the EV maker right when it's growing. Earlier this year, most automakers in the nation bore steep declines in vehicle sales after they were forced to suspend operations for several weeks under lockdowns.

Now what

It's not an easy time to be an investor in Chinese stocks. The nation is already grappling with a property crisis, and Xi's extension of his rule now has refueled fears of a slowdown, even compelling some analysts to trim their medium-term growth forecasts for China. Although Nio is expanding in Europe, the Chinese EV market remains its bread and butter. So if the Chinese economy slows down, Nio will struggle to grow as well; and it's this fear that's giving its investors sleepless nights right now.