China’s electric vehicle industry is on the verge of extinction as the Chinese government foists stricter regulations on new manufacturers in its growing electric car industry. Currently there are 200-plus electric car companies backed by a raft of billionaires like Jack Ma, Terry Gou, Li Ka-shing and Jia Yueting, investors who’ve poured at least $2 billion into building alternative-energy vehicles. They were mostly fueled by the country’s push for more alternative-energy vehicles to address air pollution and smog in major cities like Beijing, which became a crisis earlier this year when the air was so toxic that the public were warned not to leave their houses.

90% of the electric-car manufacturers are deemed to be affected because the Ministry of Industry and Information Technology would consider limiting the number of startup EV makers to a maximum of 10. There are currently two companies holding said permits, namely Beijing Electric Vehicle Co., which is controlled by BAIC Group, and the Hangzhou Changjiang Passenger Vehicle Co., which counts Hong Kong-traded FDG Electric Vehicles Ltd. as a major shareholder. Three more companies said that they would apply as well.

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“It’s true we’re emphasizing support to develop new-energy vehicles, but should we allow everyone to go ahead?” said Dong Yang, executive vice chairman of the manufacturers’ association.

This cap to car engineering is obviously aimed to weed out the weak, which SAIC Motor Corp. and BYD Co. obviously isn’t a part of, because they didn’t have to apply for a permit anymore. This move is the answer to overproduction that resulted from the Chinese government’s persuasion of its people to build energy-efficient vehicles that produce low carbon emissions. They got to a point of giving away incentives to those who would build electric vehicles, and this got people working, albeit without really knowing how to produce electric vehicles.

“There are too many entrants in the sector, and some of them are just speculators,” said Yin Chengliang, a professor at Shanghai Jiao Tong University’s Institute of Automotive Engineering. “The government has to raise the threshold. It’s bad to see irrational investments in projects with low technology levels.”

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Overproduction and the danger of consumers buying shoddily made vehicles where service after the sale is non-existent prompted the government to put a threshold. Companies that intent to sell electric cars now need to meet 17 technologies in order to ensure healthy development of the industry. The factors include a control system for the performance and stability of any new energy vehicle, an information system that tracks the sources and conditions of key parts, and a process for recycling or reusing batteries.

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