NIO gains 1.8% after Pentagon adds EV maker to military list

The Pentagon added NIO to its Chinese Military Companies list, a designation the EV maker said lacks justification as it does not support China's military-civil fusion policy.

"NIO is neither a Chinese military company nor a contributor to China's military-civil fusion within the defense industrial base," the company said.

The designation, published June 8 in the Federal Register, places NIO among nearly 200 companies the Pentagon believes aid the People's Liberation Army. NIO shares rose 1.8% in Hong Kong trading, with short selling accounting for HK$29.9 million, or 32.2% of turnover.

While the CMC list carries no immediate trading restrictions or sanctions, the designation creates headline risk that could prompt US-based institutional investors to reduce exposure. NIO said it will proactively engage with the Pentagon, including taking legal action if necessary, to safeguard shareholder interests.

The Pentagon's updated 1260H list, which was briefly published in February before being withdrawn minutes later, also includes Alibaba Group, Baidu, BYD and Tencent Holdings — three of China's artificial intelligence champions — as well as memory chipmakers ChangXin Memory Technologies and Yangtze Memory Technologies. WuXi AppTec, a pharmaceutical contractor producing ingredients for Eli Lilly's obesity drug Zepbound, was also named.

"The Pentagon's republished Chinese military companies list serves as a post-summit reality check," said Craig Singleton, senior China fellow at the Foundation for Defense of Democracies. "The Xi-Trump meeting did not pause competition; it clarified where competition will continue."

The list was released less than a month after President Donald Trump met with Chinese President Xi Jinping in Beijing, where the two leaders discussed trade tensions. That summit failed to yield a significant easing in tensions over advanced technology, especially artificial intelligence.

For NIO, the designation adds to a challenging operating environment. The company joins BYD, China's top EV maker, on the list, reflecting the Pentagon's view that Beijing's military-civil fusion policy mandates private-sector collaboration with the armed forces. John McEntee, a former senior Trump White House official who lobbies for Tencent, criticized the expanded scope. "By expanding the list to Chinese car companies like BYD and NIO, they're revealing how ridiculous the justification is," he said. "By their logic, Ford and GM should be classified as American military companies."

The CMC list, first published in 2021, now includes more than 100 businesses accused of working with the Chinese military. While the designation carries few immediate legal repercussions, the Pentagon is increasingly using it to restrict companies' ability to contract with the military or receive research funding. It also serves as a warning to US investors and is widely considered a red flag that can precede more punitive trade restrictions.

The February version of the list was taken down within minutes after a senior White House official called the Pentagon to express displeasure that concerns about removing CXMT and YMTC had been ignored. The June version reinstated those two chipmakers, highlighting the internal tensions between the Pentagon and the White House over China policy.

NIO said the CMC list does not restrict trading of its securities and that US government procurement restrictions associated with the list will not affect its business operations. The company plans to engage with the Pentagon to address its inclusion and may take legal action.

This article is for informational purposes only and does not constitute investment advice.