Will China Target NIO and Xpeng (XPEV) Stock After DIDI and BABA?
China is clamping down on its tech giants and DiDi Global (DIDI) and Alibaba (BABA) have especially borne the brunt. China decided to block new downloads for the DiDi app in China just days after it went public. The move has rightly infuriated investors and even U.S. lawmakers seem irked. Republican Sen. Marco Rubio called Didi an unaccountable Chinese company. There's bipartisan support against China. More oversight of Chinese companies among U.S. lawmakers and events like Didi only make things worse. First, it's important to understand the intent behind the recent crackdown on BABA and DIDI. Alibabas case stands out since the company got on Chinese authorities' radar after its founder Jack Ma made critical comments about regulators. Chinas antitrust probe against tech companies looked Alibaba-focused from the very beginning. After Chinas crackdown on the tech giants, many investors wonder whether the country will target EV companies next. NIO and XPEV are among the most popular Chinese EV companies listed on U.S. exchanges. Previously, China cracked down on domestic EV companies but it was done with the intent to eliminate small zombie companies and push towards fewer but bigger manufacturers. To maintain authority, the Chinese government imposed strict data policies. The massive data that companies like DiDi and Alibaba process seem to be making authorities apprehensive. Woke up to the shocking news of the Didi ban in China. People are interpreting this news in ways that best fit their own bias, but according to Chinese netizens its story of Cold War where Didi leaked data of citizens and roads to the US in order to go IPO on NYSE. As for DiDi, China is worried about the massive amount of Chinese citizens' data that it possesses. China is concerned that the data might get shared with a foreign government considering the companys U.S. listing. Coming back to EV companies like NIO and Xpeng, it looks highly unlikely that China will target them since the country has gone after companies like BABA and DIDI. First, China sees EVs as a strategic industry under its Make in China 2025 program. Arms of Chinese governments have invested in both NIO and XPEV, which highlights their strategic importance for the country. Article continues below advertisement  Chinese government understands that Tesla's success in China legitimizes EVs broadly and helps the domestic Chinese EV manufacturers (BYD, NIO, etc.). China has a vested interest in Tesla's success, also as an exporter. China understands business. Legacy loses this battle.$TSLA  James (@TSLAFanMtl) July 1, 2021  Second, NIO gets its cars made at JAC Motors, which is an SOE (state-owned enterprise). Targeting NIO would target a large SOE. China has given NIO special privileges. The countrys EV subsidiary policy has a special category for companies with battery swapping, which has been created to make NIO for the EV subsidy. Article continues below advertisement  Finally, EV companies like NIO and Xpeng dont have the kind of customer data that the other tech companies have. This makes it highly unlikely that China will go after EV companies. However, it doesn't mean that Chinese EV companies dont face geopolitical risks.