SAIC-GM-Wuling Automobile Co Electric Vehicles connect to the charging stations of a parking lot on the road in Liuzhou, China, on Monday, May 17, 2021.
Qilai Shen | Bloomberg | Getty Images
BEIJING – While investors watched dramatic price increases in the shares of Chinese electric car manufacturers such as Nio and Xpeng, tens of thousands of companies jumped on the bandwagon as the industry grew, according to the Qichacha business database.
The number of new Chinese companies related to “new energy vehicles” rose by 81,000 this year to mid-August, bringing the total to more than 321,000, Qichacha said in a report.
This year’s growth comes after 78,600 companies entered the industry in 2020, during the heyday of the coronavirus pandemic in China, according to the database.
New energy vehicles refer to a general category which consists mainly of pure and hybrid electric vehicles. China is the world’s largest car market and wants 20% of new vehicles sold to be new energy vehicles by 2025.
Shares of major electric car manufacturers fell on Monday after China’s Ministry of Industry and Information Technology indicated there could be consolidation in the sector.
“Our companies need to be bigger and stronger,” Minister Xiao Yaqing told a news conference.
“Right now, the number of new energy vehicle companies is too large and it is in a reduced and dispersed state,” the minister said, according to a CNBC translation of a Chinese transcript.
“This is just version 2.0 of the central government that wants to cut the [number] of participants as they did when they limited manufacturing licenses [and] permits in 2017, ”said Tu Le, founder of Beijing-based consulting firm Sino Auto Insights.
“Probably [saw] an accumulation of overcapacity [and] “There are too many brands that won’t be able to compete in the market with products,” he said. “This has often happened in the Chinese cross-sector market and leads to a race to the bottom where companies compete solely for price. The whole sector stands out, as these non-competitive companies are happy to throw good money after bad.”
You added that he hopes that major Chinese electric car manufacturers Nio, Xpeng Li Auto and BYD, backed by Warren Buffett, will benefit from efforts to consolidate the industry, “as it will eliminate potential competitors and perhaps allow them to acquire equipment or technology to improve their products “.