China plans to halt issuing permits to produce electric vehicles because of concern additional approvals may lead to a glut in the world’s biggest auto market, according to people with knowledge of the matter.
The National Development and Reform Commission, which oversees new investments in the auto industry, wants to evaluate the program after handing out 15 production licenses since March 2016, said the people, who asked not to be identified because the discussions aren’t public. A suspension of new permits may delay plans by companies such as Internet entrepreneur William Li’s NIO and Jia Yueting-backed LeEco’s electric-car unit that have said they intend to apply.
China has identified new-energy vehicles as a strategic emerging industry and aims to boost annual sales of plug-in hybrids and fully electric cars by 10-fold in the next decade. Besides giving generous subsidies for both consumers and manufacturers, the government created a class of permits allowing companies including billionaire Lu Guanqiu’s Wanxiang Group and a Volkswagen AG joint venture to produce only electric vehicles, while imposing a moratorium on new capacity for the manufacture of conventional gasoline-run vehicles.
The state support helped China surpass the U.S. in 2015 to become the world’s biggest market for new-energy vehicles — comprising electric vehicles, plug-in hybrids and fuel-cell cars. A total of 507,000 such vehicles were sold last year in the country, according to the China Association of Automobile Manufacturers.
The NDRC didn’t immediately respond to a faxed request for comment.
A suspension of new licenses may help incumbent electric-car manufacturers including BYD Co. and BAIC Motor Corp. by limiting the number of competitors to the industry. Volkswagen’s joint venture with Anhui Jianghuai Automobile Group Corp. received the 15th permit to produce EVs.
BYD shares climbed as much as 1.6 percent as of 9:34 a.m. to the highest intraday level in six months in Hong Kong trading, while BAIC Motor rose as much as 1.7 percent. The benchmark Hang Seng Index was little changed.
To date, newly set up companies in China have announced at least 98 billion yuan ($14 billion) of investments to build electric car factories with a total annual capacity of 2.9 million units a year, or six times the number of plug-ins sold last year, according to data compiled by Bloomberg from company statements.
Apart from Karma Automotive owner Wanxiang Group, other companies that received the permits to manufacture electric vehicles include auto-parts maker Minth Group, car designer Beijing CH-Auto Technology Co., Beijing Electric Vehicle Co., Hangzhou Changjiang Passenger Vehicle Co. and a unit of Chery Automobile Co.
Chinese Premier Li Keqiang said last week the country will stick to its pledges to tackle global warming. President Donald Trump said he would withdraw the U.S. from the Paris climate pact because it favored other nations, a move seen as an opening for China to burnish its image as a global leader on environment issues.