SAIC-GM-Wuling Automobile Co. Electric vehicles are plugged into charging stations at a roadside parking lot in Liuzhou, China, Monday, May 17, 2021.
Kilai Shen | Bloomberg | Getty Images
BEIJING — While investors saw a dramatic jump in the share prices of Chinese electric car makers such as Nio and Xpeng, thousands of companies jumped on the bandwagon as the industry grew, according to trade database Kichacha.
Kichacha said in a report that the number of new Chinese businesses related to “new energy vehicles” grew from 81,000 as of mid-August this year, bringing the total to more than 321,000.
The database showed an increase this year after 78,600 businesses entered the industry in 2020 during the height of the coronavirus pandemic in China.
New energy vehicles refers to a general category that mainly includes pure-electric and hybrid-powered cars. China is the world’s largest market for automobiles, and wants 20% of new cars to be sold as new energy vehicles by 2025.
Shares of major electric car makers fell on Monday following signs from China’s Ministry of Industry and Information Technology.
“Our businesses need to be bigger and stronger,” Minister Xiao Yaqing said at a news conference.
According to CNBC’s translation of the Chinese transcript, the minister said, “Right now the number of new energy vehicle businesses is enormous, and is in a small and scattered state.”
“It’s just version 2.0 of the central government that wants to trim [number] as entrants they did when they limited manufacturing license [and] permit in 2017,” said Tu Le, founder of Beijing-based consulting firm China Auto Insights.
“They likely [saw] building more capacity [and] Too many brands that won’t be able to compete in the market with the product,” he said. “This has often happened in the Chinese market across all sectors and leads to a race to the bottom where companies compete solely on price. Huh. It stresses the entire sector because these non-competing companies are happy to throw good money after bad.”
Tu said he expects China’s top electric-car makers Nio, Xpeng Li Auto and Warren Buffett-backed BYD to benefit from efforts to strengthen the industry “as it will eliminate potential competitors and perhaps increase them.” will allow a team or technology to acquire their product.”