China has developed such a lead in EVs, the country is looking to dial it back, according to a recent Bloomberg report.
The country has become famous as the largest market in the world for electric cars, which account for about 3 percent of the 28 million cars sold there a year, triple the percentage of almost double the sales in the U.S. The country got there by offering generous incentives for electric cars with a $7,500 federal tax rebate and other tax incentives. (The country cut those rebates in half this year.)
This gave rise to 486 electric-car companies in the country. Now China plans to cut that number down in an effort to avoid a financial bubble like the one that gripped the dot-com industry in the early 2000s.
Electric cars, with commodity motors and batteries, are cheaper and easier to engineer than internal combustion cars, at least for new companies. And once they're designed, and a supply chain established, contract manufacturing makes it easy to get them built in China.
As competition from established foreign automakers such as Tesla and Volvo's Polestar intensifies for the likes of Kandi Motors and Yoto Auto, the Chinese government is implementing rules that grant only automakers over a certain size permission to outsource their manufacturing to contract factories.
Automakers have to:
- have built more than 15,000 electric cars over the past two years,
- have more than $580 million (4 billion yuan) of research and development investment in China over the past three years, or
- have billions of yuan in paid-in capital.
Existing outside manufacturing contracts have to cover 50,000 vehicles per year and startup automakers will be able to sign manufacturing agreements with no more than two manufacturing companies.
The rules are intended to ensure China's electric automakers have the scale to compete with foreign competition profitably, sources familiar with the rules told Bloomberg.
China announced in 2017 that it plans to require all cars sold in the country to be electric, eventually, though it has not set any target date for that law to take effect. Still, it has left both foreign and domestic automakers scrambling to develop electric cars to meet the future mandate in the world's largest global car market.