Last Friday we highlighted BYD Company (OTCMKTS: BYDDF) as a buying opportunity as it traded around $6 a share. Our timing could not have been better: a day later, the vice minister of China’s Ministry of Industry and Information Technology stated that the Chinese government is working on a timetable to phase out internal-combustion vehicles—i.e., traditional cars that run on fossil fuels. This clearly impacts BYD as well as other automakers worldwide.

China has been strongly pushing its domestic auto industry toward fully-electric or plug-in hybrid vehicles (which it calls “New Energy Vehicles,” NEVs) since 2012. Currently, domestic and foreign automakers are already under pressure to meet Beijing’s mandate for NEVs to comprise at least 8 percent of their China sales by 2019, and to sell 7 million NEVs in China by 2025.

Last year, there were only about half a million NEVs sold in China and the estimated sales total for 2017 is approximately 800 million, so the 7-million 2025 target is ambitious to say the least.

7-million also represents one-fifth of expected overall auto sales in China by 2025 and accounts for all expected auto sales growth. In practice, there are ways automakers can generate credit under the current system so the actual production and sales of NEVs is below the government’s mandated target.

The latest announcement shows that Beijing, which has expressed frustration before at the automakers’ pace of NEV production, is stepping up its plans and not-so-subtly telling automakers to step up their game.

Beijing will very likely mandate a rising NEV quota until its reaches 100 percent at a target date (yet to be announced), which we guess will be around 2040 or 2050. That is still quite a few years in the future, but a plan of this magnitude clearly requires a lot of time to implement.

Whether there are enough natural resources (such as cobalt and lithium) to support the full conversion of China’s fleet into NEVs remain to be seen, but the key point to keep in mind is that in the largest market for electric vehicles, the government actively seeks to push for a 100 percent penetration of NEVs, and that’s a big deal for the electric-vehicle industry.

Other countries will likely join in over time. In Europe, France and the U.K. have already announced bans of fossil fuel cars by 2040, and the European Commission is also mulling over a ZEV (zero-emission vehicle) mandate for the EU.

Earlier in the year, China temporarily hurt NEV sales by tightening subsidy requirements, but if Beijing support for the NEV industry was ever in question before, it should not be now. As we’ve previously noted, the Chinese government reformed its program to weed out the weaker and dishonest NEV manufacturers to make the overall industry stronger, not to harm its growth. A reputable NEV maker like BYD is actually one of the companies Beijing depends on to drive the NEV revolution, and in fact, as we’ve mentioned, its NEV sales have rebounded.

It is also important to note that besides the low-emissions benefit of electric vehicles and hybrids, from an economic perspective these NEVs represent China’s best chance to grab market shares in international auto markets. Currently, Chinese-branded traditional cars simply are not competitive in global markets.

The latest development affirms the strong long-term outlook for our BYDDF, which this week has jumped about 17 percent and surpassed our suggested buy-up-to price of $7. As updated in a Stock Talk post on our website earlier this week, for the time being we keep the suggested buy-up-to price at $7. The Chinese government’s announcement is definitely exciting, but in the short term it’s unclear how much positive impact it will have on BYD’s business. We are still evaluating and will adjust the price if necessary.

We reiterate again, the $7 figure simply represents whether the stock is a good buy at that price at this time. It’s not a target price. We think BYD will eventually go far beyond $7, although after the sharp rally this week, in the short term we would not be surprised to see the shares pull back a bit. For the time being we keep our suggested buy-up-to price at $7 and will continue to monitor the situation very closely.

Our reader should already have shares as we have repeatedly highlighted the stock as a “buy” since first adding it to the portfolio in June.