Electric car industry shares boom on government plan

A worker on a production line of an E-car manufacturing factory in Xiangfan, Hubei province. [Yang Dong/for China Daily]

Shares of companies related to the new energy car industry surged on Monday, hot on the heels of the news that China is working on a timetable to ban the production and sale of fossil fuel cars.

Xin Guobin, vice-minister of industry and information technology, told the International Forum on Chinese Automotive Industry Development in Tianjin that the ministry will draw up a timetable to ban the production and sale of fossil fuel cars.

"It will profoundly drive the development environment and momentum of China's auto industry," he said, and pointed out that the industry should pay attention to the issues of excessive production and innovation of core technology.

Following his speech, the EV sector on Monday climbed 4.17 percent in the A-share market, while the Shanghai Securities Composite Index saw a slight increase of 0.33 percent.

BYD, China's largest electric-vehicle maker, gained over 7 percent in both markets in Shanghai and Shenzhen, while Shanghai-listed Guangzhou Automobile Group Co Ltd, another Chinese automaker manufacturing new energy cars, was also boosted by 4.67 percent at closing.

BYD on Monday won the bidding of 822 electric bus procurement plan by a Shenzhen-based bus operator, shortly after the announcement earlier this month that it will provide above 400 e-vehicles to another local public transportation company.

In addition, other companies related to the industry, such as raw materials, battery and charging station makers, all went up. For instance, Shenzhen Desay Battery Technology rallied 3.57 percent while Sunwoda Electronic ended up 5.44 percent.

Wang Liusheng, chief analyst of automobile industry at CSM Securities, said the plan reflects the government's long-term strategic support for the industry, but it still needs a long term to actually carry it out.

He estimated the deadline will be after 2030 because the size of automobiles in China is large and the penetration rate of EV cars now is low－only about 1.86 percent last year.

As the largest producer and market for new energy vehicles, China sold more than 520,000 EV cars in 2016 while the total sales volume of automobiles were 28 million.

The deadline will be sometime when the penetration rate grows to above 30 percent, he added.

Chen Zikun, an analyst at GF Securities, expects the Ministry of Industry and Information Technology to set a percentage in a period of time for fossil fuel cars to exit gradually and it won't be a mandatory requirement.

In short-term, Chen said the real factor shaping sales of EV cars in the next two years is still government financial subsidies, which the brokerage firm speculates won't decrease in 2018.