The delisting of Nio and other Chinese EV makers has caused a significant decline in U.S.-traded shares.

• The SEC has indicated that it will take enforcement against U.S.-listed Chinese firms that do not adhere to U.S. audit standards, and specified five such companies in a recent announcement.
• The SEC has not named Nio, XPeng, and Li Auto, but shares are down as U.S. investors reevaluate their exposure to China.

On Monday, U.S.-listed shares of Chinese electric vehicle companies opened sharply lower, as they faced pressure along with other Chinese companies' U.S.-listed issues due to new delisting fears.

The three stocks, , , and , experienced a decline of over 10% in early trading on Monday. As of 10:55 a.m. EDT, their losses were 4.4%, 7.2%, and 10%, respectively.

Five Chinese firms with U.S. stock listings were flagged by the Securities and Exchange Commission for not complying with the audit standards under the Holding Foreign Companies Accountable Act.

The SEC has the power to remove and prohibit companies from trading on U.S. exchanges if regulators are unable to examine company audits for three consecutive years. The initial step in this process is to officially label, or "identify," the companies in question.

The SEC has not named Nio, XPeng, and Li Auto, leading investors to believe that the agency may take action against other Chinese companies' U.S. listings. This concern is particularly significant for early-stage automakers, as a delisted company cannot offer new shares to U.S. investors, limiting its ability to raise additional capital.

Last week, Nio completed its listing in Hong Kong using a fast-track procedure that did not require fundraising. In contrast, Xpeng and Li Auto raised $2.1 billion and $1.5 billion respectively through more traditional paths to their Hong Kong listings last year. All three EV companies have added listings in Hong Kong as a hedge against possible U.S. regulatory action.