SAIC-GM-Wuling Car Co. electrical autos are plugged in at charging stations at a roadside parking zone in Liuzhou, China, on Monday, Could 17, 2021.

Qilai Shen | Bloomberg | Getty Photographs

BEIJING — Whereas traders watched dramatic surges within the inventory costs of Chinese language electrical automobile makers like Nio and Xpeng, tens of 1000’s of firms jumped on the bandwagon because the business grew, based on enterprise database Qichacha.

The variety of new Chinese language companies associated to “new vitality autos” surged by 81,000 this yr by way of mid-August, bringing the whole to greater than 321,000, Qichacha said in a report.

The expansion this yr comes after 78,600 companies entered the business in 2020, throughout the top of the coronavirus pandemic in China, the database showed.

New vitality autos refers to a common class consisting primarily of pure-electric and hybrid-powered vehicles. China is the world’s largest marketplace for vehicles, and would like 20% of new cars sold to be new energy vehicles by 2025.

Shares of major electric car makers fell Monday after China’s Ministry of Trade and Data Know-how indicated there could possibly be sector consolidation.

“Our companies have to be greater and stronger,” Minister Xiao Yaqing stated at a press convention.

“Proper now the variety of new vitality car companies is simply too nice, and is in a small and scattered state,” the minister stated, based on a CNBC translation of a Chinese language transcript.

“That is simply model 2.0 of the central authorities seeking to trim the [number] of entrants as they did when they limited manufacturing licenses [and] permits in 2017,” stated Tu Le, founding father of Beijing-based advisory agency Sino Auto Insights.

“They seemingly [saw] a buildup of overcapacity [and] too many manufacturers that will not have the ability to compete available in the market with product,” he stated. “This has occurred typically within the Chinese language market throughout sectors and results in a race to the underside the place firms compete solely on value. It stresses the complete sector since these non-competitive firms are joyful to throw good cash after the unhealthy.”

Tu added that he expects China’s high electric-car makers Nio, Xpeng Li Auto and Warren Buffett-backed BYD to learn from efforts to consolidate the business “since it’s going to get rid of potential rivals and maybe enable them to accumulate a staff or expertise to reinforce their merchandise.”

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