China Wants to Consolidate Its 300 EV Manufacturers Into Larger Ones

You know China is the largest automotive market in the world. Having sold 25 million cars in 2020, it is almost double what the U.S. marketed in 2020 (14.5 million cars).

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What you probably missed was that the country had 300 brands of electric vehicles. Putting that in the past is not only a grammar requirement: China wants to consolidate the sector as fast as possible, reducing the number of EV companies abruptly.

On September 13, China’s minister for Industry and Information Technology, Xiao Yaqing, said that the EV sector is composed of “mostly small and scattered” companies. If that has been a problem since 2010, the semiconductor crisis is pushing for consolidation to happen faster. That would prevent big companies from halting production because small ones are trying to become more relevant.

According to ReutersBloomberg had already anticipated the measures the Chinese government wants to implement to speed up the process. The high number of EV manufacturers is due to government incentives for these companies to establish. There will be a cut in that financial help. On top of that, there will be minimum production capacity utilization standards to comply with, set for each Chinese province.

If they drop below the established limits, the central government will not allow the provinces to authorize new production facilities. In other words, the existing ones will have to reduce idle capacity before new plants can be created. China would currently have a manufacturing capacity utilization of around 53%.

With those measures, companies like Nio, Xpeng and Li Auto should benefit the most. They are the biggest EV-only manufacturers in China. By making them increase their production and reach domestically, the Chinese government would be helping them face foreign competition from a healthier position. Selling well in China can be all a company needs to make a living and wonder about international expansion.

Although BYD, Wuling and other Chinese carmakers manufacture electric cars and combustion-engined vehicles alike, they should also expand their sales with the consolidation. Apart from more demand emerging from customers of the companies that cease to exist, more available chips will help them increase regular production.