China EV shares fall after record recall over door-handle safety

China's electric-vehicle stocks experienced a decline on Monday following several automakers initiated recalls of millions of vehicles due to safety concerns surrounding electronic door handles. Xiaomi shares were the most affected, dropping about 4%, while Li Auto fell 3%, Xpeng dropped 2.66%, NIO lost 1%, and BYD DRC shares declined 2%.

Tesla shares were yet to begin trading in the U.S. but are expected to be closely watched later. The recall centers on electronically operated, flush-mounted door handles that have become prevalent in EVs over the past decade. Automakers such as Xiaomi, Leapmotor, Xpeng, and Geely have announced recalls and software updates to address the issue.

Xiaomi's recall affects parts of its SU7 range, while Xpeng, Leapmotor, and Geely have announced some of their largest recalls. The concerns are heightened as these handles may become difficult to operate during emergencies, potentially causing difficulties in escaping or for rescuers to open the doors from outside if the vehicle loses power after a crash.

The issue has broader implications, as automakers may face increased compliance, redesign, and software-update costs due to the widespread use of the technology. Moreover, regulators in China, the U.S., and Europe are scrutinizing safety standards for electronically operated handles, raising the possibility of future implications beyond China's market.

China plans to ban hidden door handles from 2027, making it the first country to implement such a rule.