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“Looking forward, EV companies should grow bigger and stronger. We have too many EV firms on the market right now. The firms are mostly small and scattered,” Xiao Yaqing, China’s minister for industry and information technology, said at a press conference in Beijing, adding that authorities see merging and restructuring as ways to propel the industry to success.
“The role of the market should be fully utilized and we encourage merger and restructuring efforts in the EV sector to further increase market concentration,” the official stated.
A number of Chinese EV producers traded in red following the news, with Xpeng Inc. losing 2.3% in Hong Kong trading, and Li Auto Inc. dropping 1.4%. In mainland China, BYD Co. fell 1.8% and BAIC BluePark New Energy Technology Co. plunged even deeper, shedding 4.6%.
China’s electric car industry is one of the world’s biggest, with about 300 carmakers, which the government considers an overcapacity. Also, according to CNBC, the number of new Chinese businesses related to “new energy vehicles” jumped by a fourth in 2021, bringing the total to some 321,000. This is the result of Beijing’s own actions, as it increasingly subsidized the industry amid the agenda of turning to cleaner energy sources in the automotive sector to cut pollution.
Total government subsidies for new energy vehicle purchases amounted to 33 billion yuan ($5.1 billion) from 2015 to 2020, data from the Ministry for Industry and Information Technology shows.
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