(Bloomberg) -- Shares of electric-vehicle makers including Tesla Inc. and 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. Tesla, which is just starting to deliver locally built cars to customers, saw its stock climb above $500 for the first time as optimism about China combined with a bullish analyst report.
“Please rest assured: There won’t 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, applauded his statement.
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.
Tesla rose as much as 5.3% to $503.49 shortly after the start of regular trading in New York. An analyst at Oppenheimer & Co. raised his price target to a street high $612.
Chinese electric-SUV maker NIO Inc., which also trades in the U.S., surged as much as 6% to $3.72.
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.
(Updates with Tesla stock milestone in second paragraph)
To contact Bloomberg News staff for this story: Tian Ying in Beijing at email@example.com
To contact the editors responsible for this story: Young-Sam Cho at firstname.lastname@example.org, Craig Trudell, Kevin Miller
For more articles like this, please visit us at bloomberg.com
©2020 Bloomberg L.P.