China thinks it has too many local EV makers. And why that may be a problem

China is the world's largest auto market and therefore, also is the world's largest market for electric vehicles. This, in addition to the Chinese government's push for electric mobility, has led to hundreds of local EV makers competing with each other and with foreign brands for a share of the lucrative pie. But it may be a problem to have so many local players.

As per reports, Xiao Yaqing, the country's Industry and Information Technology minister, expressed his concerns about local EV players being far flung. “The firms are mostly small and scattered. The role of the market should be fully utilized and we encourage merger and restructuring efforts in the EV sector to further increase market concentration," he was quoted as saying by local media reports.

One of the key problems of having too many EV makers across the vast Chinese landscape is that resources may not be allocated as adequately as these could possibly be if there are big hubs and centers. This could be especially crucial in current times of semiconductor shortage.

Then there is the issue of production scale with some smaller players not being able to roll out enough units to meet demand and yet look at subsidies. And some have even gone bankrupt in the process.

As such, experts believe that the way forward for smaller players in the EV sector could be to collaborate with one another and collectively take on the bigger players and foreign brands which include the likes of Tesla, Volkswagen and Toyota, among others.