The local government plans to give away 20,000 license plates to buyers of specific electric vehicles by the end of the year in an effort to boost sales of environmentally friendly automobiles, local media reported Monday.

The incentive could be a boon for potential car buyers looking to cut the cost of owning a vehicle in Shanghai, where license plates have cost 50,000 yuan ($7,980) or more this year. The plan would also benefit the electric car industry, which has been suffering from slow sales.

Because Shanghai is a pilot city for the development of electric vehicles, the plan helps the city meet its goal of putting more electric vehicles on the road, an unnamed official from the Shanghai Municipal Transport and Port Authority told the Shanghai Evening Post. The official said that the authority might increase the number of free plates in the future if the program catches on.

Last month, the local government sold 9,500 plates at its auction at an average price of 66,425 yuan.

The local government auctions off a specific number of license plates each month. The free license plates given out as part of the program won't take up any of that quota, according to the newspaper report.

The transportation authority is still working out the details of which electric vehicles will qualify for the program. The license plates for electric vehicles would be easy to distinguish from current plates and would not be transferable. Once a car owner gets rid of his electric car, he or she would have to obtain new plates at the auction.

The plan may help electric car makers prop up flagging sales, said Bai Mei, a press officer for SAIC Motor, one of the country's primary electric vehicle manufacturers. "Although we've spent a lot on marketing, electric vehicle sales are sluggish because drivers remain concerned about the underdeveloped technology and inconvenient charging facilities," Bai told the Global Times.

Nonetheless, the impact of the incentive will be limited because it doesn't address the challenges that have hampered the industry's development, said Sun Xiaoming, a senior editor at Auto Suppliers Magazine. "The key is technology. Unlike taxi and bus companies, which are able to set up their own charging stations, private owners of electric vehicle require a greater number of charging stations over a wider area because the batteries don't last long enough," he told the Global Times.

The industry needs to improve the quality of their batteries and lobby local authorities to get more charging stations built, he added.