Trump's trade-war truce has been a windfall for investors betting against the Tesla of China

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Nio EP9The NIO EP9 is displayed during a media preview of the Auto China 2018 motor show in Beijing, China April 25, 2018.REUTERS/Damir Sagolj

  • China announced Friday plans to roll back import charges on US vehicles and auto parts.
  • The announcement is a "negative headline for domestic Nio, but positive for the likes of imported automakers, especially Tesla," said Matthew Unterman, director of the financial analytics firm S3 Partners.
  • As a result, Nio, widely seen as the Tesla of China, tanked 10% in two days, bringing $26.9 million mark-to-market profit to investors betting against the stock.
  • Watch Nio trade live.

President Donald Trump's trade-war truce has been a windfall for short sellers who bet against Nio, widely seen as the Tesla of China, with shares falling 10% in the two days after Beijing said it would roll back import charges on US vehicles and auto parts.

China's Ministry of Finance said Friday that it will temporarily suspend an additional 25% tariff on $66 billion of US cars and trucks and a 5% duty on $60 billion of US auto parts starting January 1, 2019. As a result, China's import tax on American-made cars will be reduced from 40% to 15%, in line with those for cars made in other countries.

The announcement is a "negative headline for domestic Nio, but positive for the likes of imported automakers, especially Tesla," Matthew Unterman, director of the financial technology and analytics firm S3 Partners, said in a note out Monday.

With Nio shares tanking following China's compromise on auto tariffs, short sellers have generated a $26.9 million mark-to-market profit so far, yielding a positive 8.6% return, according to S3 data.

"Demand by bearish speculators to secure borrow to short sell the ADRs had been revving higher since its September IPO," Unterman said. "We anticipate short seller demand to remain elevated at least until the upcoming IPO Lockup Expiry in early March."

Nio, a four-year-old electric-car startup backed by the Chinese tech giant Tencent, went public on the New York Stock Exchange in September.

In October, Nio said it delivered 3,268 ES8s - its first volume-manufactured vehicle -in the third quarter, exceeding its own target of 2,900 to 3,000 vehicles. The company added that it has sold 3,350 ES8s - a seven-seater high-performance electric SUV - since beginning delivery on June 28, and targets to launch its second vehicle, the five-seater ES6 premium SUV, in June or July of 2019.

Nio was up 4.6% since going public in September.

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