Investors in electric car manufacturer Nio are taking legal action against the company for deception and alleged violations of US securities laws. They are also saying that the firm made little effort to follow through on its plans to build a production plant in Shanghai.

Multiple law firms have launched investigations into the company for “injuring investors,” following the release of Nio’s fourth-quarter results in early March. The law firms said that reports of a greater than expected slowdown in Nio deliveries led the company’s stock price to fall by nearly 20%, thereby resulting in losses for investors.

Nio was not immediately available for comment.

A class action lawsuit has also been filed on behalf of investors, though it is yet to be certified. Los Angeles-based Schall Law Firm said in a release the damages were a result of Nio making false or misleading statements, including those relating to its now-defunct factory plans.

“Nio made no effort to build a manufacturing facility for its electric vehicles, instead relying on an obscure manufacturer owned by the Chinese government, JAC Auto, to build its products,” the law firm said.

Nio recently abandoned plans to build a manufacturing plant in Shanghai, opting instead to focus on “joint manufacturing” in the long term. The company’s vehicles are currently produced in the eastern Chinese city of Hefei by JAC. Nio is required to pay the auto manufacturer for every car built. Nio previously planned to complete construction on its Shanghai plant by the end of 2020.

Industry sources told TechNode earlier this month that China’s top economic planning agency blocked Nio from building the factory to enforce new rules aimed at combating overcapacity in the auto sector.

According to its listing documents, Nio is also required to compensate JAC for any operating losses it incursduring the first three years of production. By the end of June 2018, the company had paid JAC RMB 65 million (around $10 million) for the auto manufacturer’s 2018 second-quarter losses.

Nio expects its slowdown to continue, projecting that deliveries of its ES8 SUV will fall by more than 50% compared to the previous quarter, according to its latest financial results.

Christopher Udemans is TechNode's former Shanghai-based data and graphics reporter. He covered Chinese artificial intelligence, mobility, cleantech, and cybersecurity.

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