A new policy that limits overcapacity in traditional industries released by the State Council on Oct 8 is set to bring new impetus to the automobile industry in Shanxi province.

The policy dictates that industries experiencing overcapacity, such as steel, coal and electrolytic aluminum, should put a halt on any move that would increase capacity. It also puts a blanket ban on approving new companies that produce traditional oil-fueled vehicles.

Since non-green car manufacturers in the province are few and have a poor foundation and low output, the new measures will have little effect on the traditional industry, while existing companies will have less new competitors, giving them room to grow.

The policy is also expected to bring larger market and development opportunities for the new energy automobile industry in Shanxi, which is expected to receive strong government support over the coming years.

Taiyuan, the provincial capital of Shanxi, has gradually substituted gasoline taxis for electric cars and offered subsidies for electric taxis since the Shanxi government began heavily promoting electric vehicles in November 2015.

Shanxi will build Taiyuan, Jinzhong and Jincheng into industrial bases for manufacturing electric vehicles. In addition, the province will foster leading companies that generate more than 10 billion yuan ($1.48 billion) in sales, especially those that manufacture electric buses, trucks and cars.

Along with popularizing new energy automobiles in the public service, the local authority will also improve supporting facilities for the private car sector. The number of electric vehicles across the province is estimated to reach 200,000 as of 2020.