Electric Car Stocks Jump as China Signals Lull in Subsidy Cuts

(Bloomberg) — Shares of Chinese electric-vehicle makers including Warren Buffett-backed BYD Co. jumped after the government signaled it won’t continue reducing subsidies for the industry at the same pace this year.

Miao Wei, the minister for industry and information technology, told an audience in Beijing on Saturday EV-purchase subsidies won’t be cut July 1, like they were on that date last year.

“Please rest assured. There wont be a further cut on July 1 this year,” Miao said in a speech at an industry forum. The audience, which included representatives from major automakers, was thrilled enough to applaud.

Though the minister later clarified his comments, investors and the industry interpreted his remarks as good news for EV manufacturers that were hit by subsidy reductions last year. Sales of new energy vehicles have dropped for six straight months in China since the government scaled back handouts in July.

A few hours after his speech, the minister’s amended statement was aired on China National Radio and the forum’s organizers asked reporters to refer to those comments.

“In order to stabilize market expectations, and ensure the industry’s sustained development, subsidies on new-energy vehicles will stay relatively stable this year, and they won’t be scaled back significantly,” the radio station quoted the minister as saying.

Shares of BYD and competitor BAIC BluePark New Energy Technology Co. surged by their daily trading limit of 10% Shenzhen and Shanghai, respectively.

The minister didn’t say whether the subsidies will be fully gone by 2021, which is what the government has stated before. Wan Gang, a vice chairman of China’s national advisory body for policy making and an EV pioneer, told the forum that regulators should refrain from making subsidy changes this year so that carmakers can prepare for next year when they will be completely phased out.

China, which began subsidizing EV purchases in 2009 to promote the industry, has been gradually reducing handouts in the past few years to encourage automakers focus on innovating and competing on their own.

Other EV companies competing in China include Tesla (NASDAQ:) Inc., which started delivering locally built electric sedans this month that also qualify for subsidies, and local sport-utility-vehicle maker NIO Inc. Both companies’ shares are traded in the U.S.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Ville Heiskanen

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