China Has Too Many EV Companies, Government Encourages Merger And Restructuring, Says Minister

China will encourage merger and restructuring efforts in the electric vehicle sector as the country has “too many” EV firms, Industry and Information Technology minister Xiao Yaqing said on Monday, according to a report by Bloomberg.

What Happened: Xiao reportedly noted that as most of the nearly 300 EV companies in China are small and scattered, the government is focusing on consolidation in the sector.

Some of the major players in the crowded Chinese market include Nio Inc. NIO, Xpeng Inc. XPEV, Li Auto Inc. LI, and BYD Company Limited BYDDF — which has the backing of Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett.

The Chinese government is also implementing steps to rein in the EV sector’s overcapacity and divert resources to several key production hubs, according to an earlier report by Bloomberg.

See Also: As Nio, Xpeng Struggled, Warren Buffett-Backed BYD Saw EV Sales Jump 21.5% Month-Over-Month In August

Why It Matters: China, which has the dubious distinction of being the world’s largest greenhouse gas producer, is also the world’s largest EV market.

The rapid growth of China’s EV market has been boosted by the government’s efforts to incentivize the purchase of new energy vehicles or NEVs by offering subsidies and help cut down on pollution. Home-bred EV makers have expanded production capacity at a rapid rate as a result.

Sales of electric vehicles are expected to grow even more strongly as the government has set a target of new electric vehicles or NEVs forming one-fifth of auto sales by 2025.

Nevertheless, shares of Xpeng, Li Auto and BYD Company are all trading lower in Hong Kong on Monday following news of the government taking steps to encourage consolidation in the EV sector.

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Photo: Courtesy of Nio