China is major market for electric cars – Beijing works to avoid a crash
China’s massive car market is, as regular readers of this newsfeed will know, a driving force in the trend towards electrification. But interest in the green technology has reached such a critical fever point that lawmakers are moving to prevent a boom-bust scenario like that of the dot-com bubble in the nineties. In practical terms, that means the country’s government has decided that the 486 electric vehicle companies in operation within its borders are too many – and that its focus should change to one of nurturing fewer, but more competitive, players.
A major player in the electrification game, BYD saw its share price jump at the start of the week
Source: Yahoo Finance
Bloomberg broke the news at the beginning of this week, citing anonymous sources who stressed that the new rules in question were still being drafted – and therefore, subject to change. However, as it stands, new regulations could look to “clamp down on EV [electric vehicle] start-ups who farm out their manufacturing.” These draft regulations look to supplement rules that came into effect in June, letting only “eligible” carmakers outsource production. What does eligible mean? We’re still waiting to find out.
Some of the prospective stipulations could be research and development investments into China of $580 million or more over the last three years, global sales of purely electric (no hybrids allowed!) vehicles of “at least” 15,000 units over the past two years, and “paid-in capital of potentially billions of yuan.” New rules could also call for manufacturing contracts to run for at least three years with annual production of at least 50,000 units at one location.
The people cited have highlighted the fact that these rules are still subject to change, and pointed out that the Ministry of Industry and Information Technology (which is drafting the legislation) will next go to the public to solicit views.
Shares in established electric vehicle specialists, such as BYD, which supplies a number of cities inside and outside China with electric buses and other electric vehicles, rose on the back of the news.
Dominion holds BYD in its Global Trends Managed fund.
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