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China has a very large car market, and there are now 486 electric car manufacturers in the country, three times as many as two years ago. Even though the government has begun to abolish the subsidy policy for the electric vehicle industry, there are still many companies that want to enter the electric vehicle industry, including giants in many other industries that have grabbed market share in this field.

According to people familiar with the matter, China has begun to consider introducing relevant regulations for the electric vehicle industry to raise the entry threshold for electric vehicle manufacturers. To enable more competitive companies to realize value, China plans to reduce the number of manufacturing outsourced startups.

The draft rules add a rule that only "qualified" companies are allowed to outsource to other carmakers, but the meaning of compliance is not yet clear.

The new regulations require a production contract of three years and an annual production of 50,000 units at one location, according to people familiar with the matter. Startups can only be allowed to sign manufacturing agreements with no more than two carmakers.

The Ministry of Industry and Information Technology, which is responsible for drafting the new rules, said the new rules were still being revised, but did not comment on the details. The Ministry of Commerce responded to a reporter's question that the public would be consulted next.

Dozens of start-ups have entered the global electric car market in recent years, raising $18 billion since 2011. Even if sales of passenger electric cars are expected to reach a record 1.6 million this year, that may not be enough to keep all assembly plants running.

Because of this, there are warnings that the ballooning electric car market may collapse and only a few companies will survive.

Startups will provide a total capacity of 3.9 million vehicles a year, not including the plans of other large car companies around the world. Although China has a huge auto market, it cannot be fully digested. Electric cars account for only 4 per cent of total sales of 23.7 million passenger cars, according to the China Association of Automobile Manufacturers.

Cui Dongshu, secretary-general of the China passenger vehicle Association, said: "the automobile penetration rate in China is relatively low, and the new energy vehicle market still has huge room for development." However, this market is for competitive enterprises, and the weakest enterprises will be squeezed out of the market. "

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