What happened

After weeks of protests in China over strict measures put in place to control the spread of rising COVID-19 cases, the official government position is now easing its strict zero-COVID approach. That gives citizens more mobility and freedom to get back to more normal routines.

But Chinese electric vehicle (EV) stocks like Nio (NIO 1.45%) are plunging today anyway. Shares of Nio, rival XPeng (XPEV 2.93%), and electric scooter maker Niu Technologies (NIU 2.98%) sank between 8% and 15% in early Wednesday trading. As of 1:10 p.m. ET, Nio shares remained lower by 4.3%, while XPeng was down by 6.5% and Niu Technologies by 8.4% at that time.  

So what

Why would presumably good news cause these stocks to tank today? One reason is investors have been anticipating an inevitable shift in China's policies after lockdowns have stifled the economy there. Shares of all three of these Chinese EV companies have jumped over the past month. XPeng and Niu have soared 37% and 47%, respectively, off their recent lows. 

But even with the pivot from lockdowns and travel restrictions helping to open the economy back up, investors are now thinking about the damage that has already been done that will likely show up in future updates from these companies. 

Now what

Local governments in China had already taken some steps to ease restrictions on the heels of protests in several major cities. Today, though, the central government released 10 new official guidelines. These looser policies include a shift to allow quarantining at home, as well as dropping a mandatory rule that required citizens to need a health QR code to enter many public places, and making domestic travel easier for citizens.

But it might be too little, too late for those with a shorter-term investing outlook. When it reported third-quarter results nearly a month ago, Nio told investors it expected a sharp increase in vehicle deliveries in the fourth quarter. Based on even the low end of its range, the company will have to report 18,763 EV shipments in December. That would represent a sequential jump of 32% over the record number it just reported for November. 

Nio, XPeng, and Niu Technologies are all still growing and working to attain profitability. Investors have been selling these more speculative stocks this year, with them all down between 60% and 80% just in 2022. But they seemed to have found a bottom recently, with expectations that China would open its economy back up from the virus restrictions. The evidence that seems to be happening now has some investors selling the recent rises in these stocks today.