Nio Clarifies It Has Nothing To Do With Customer Protest Against Tesla At Shanghai Auto Show

Tesla Inc.'s TSLA outing at the Shanghai Auto show was marred by customer backlash against the company for an accident involving the Model 3 sedan that was allegedly caused by brake failure.

What Happened: Following the incident, Tesla's rival NIO Inc - ADR NIO was drawn into the issue, with rumors suggesting that the Chinese electric vehicle maker may have had a hand in the whole affair.

After Nio's President Lihong Qin informally clarified that the company had nothing to do with what was termed the "Tesla drama," the company issued an official statement through its Weibo account in which it referred to Tesla as a "certain brand" without naming it.

Nio clarified that organized rumors were falsely claiming protests against a certain brand at the Shanghai Auto Show and the company has never participated in, or promoted any third party to participate in, protests against this brand.

"Weilai has collected evidence and reported the case to relevant departments in order to find out the facts and protect its rights and interests," the statement concluded.

Nio is locally known in China as Weilai, which translates to "Blue Sky Coming."

Related Link: Tesla's Battery Charging Vs. Nio's Battery Swapping: What Investors Should Know

Why It's Important: Nio's official response comes in the wake of Nio customers, partners and group companies being subjected to online abuse.

China is a key market for Tesla, given the prospects of strong growth and higher EV penetration rate. The company is forced to contend with several homegrown rivals that are offering cost-competitive products and are matching the U.S. company on the technology front.

The negative headlines out of China bodes ill for Tesla in its EV push. Tesla is manufacturing both Model 3 and Model Y vehicles in China, and these vehicles are important for giving a thrust to the company's auto gross margins and in turn profitability. Any misstep in China or negative publicity could dent Tesla in a big way.

NIO and TSLA Price Action: At last check, Nio shares were slipping 3.06% to $41.32 and Tesla was down 3.76% to $710.43.

Related Link: Investment Arm of World's Second-Largest Reinsurer Swoops In On Nio, Tesla Stock In Q1

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(Photo: Nio)