China’s Quest to Become an EV Superpower: Analyzing Government Support and Market Impact
China’s electric vehicle (EV) industry has emerged as a global powerhouse, driven by massive government support. A recent study from the Centre for Strategic & International Studies (CSIS) reveals that China has invested at least $230 billion in government subsidies for EV manufacturers like BYD since 2009. This substantial funding has played a vital role in nurturing China’s booming EV market, making it the largest in the world.
Government subsidies have been a central pillar of China’s strategy to become an EV superpower over the past decade. The Chinese government has implemented various support measures, including infrastructure subsidies, tax exemptions, and buyer rebates. CSIS’s data shows that government support for China’s EV market tripled between 2017 and 2020, reaching an astonishing $45 billion annually in 2022 and 2023.
China’s commitment to electric mobility has resulted in remarkable growth, with the country accounting for 60% of global EV sales in 2023, according to the International Energy Agency (IEA). Major Chinese companies like BYD have made their mark on the global stage, with BYD briefly surpassing Tesla as the world’s largest EV producer in late 2022.
However, Europe’s fears of an influx of cheap Chinese vehicles have prompted the European Union to impose new tariffs. Last week, the EU announced additional tariffs of up to 38% after concluding that Chinese firms were benefiting from unfair subsidies, allowing them to sell vehicles at significantly lower prices than their European counterparts.
The $230 billion figure reported by CSIS is likely an underestimate, as it does not take into account support from regional governments and subsidies for other elements of the EV supply chain, such as battery manufacturing. Battery giant CATL, which controls about a third of the global market, received $809 million in government subsidies last year, double the amount in 2022, according to CSIS estimates.
The massive government support for China’s EV industry has fostered intense competition among the country’s numerous EV companies, leading to low prices. For example, BYD’s Seagull hatchback, one of the best-selling EVs, starts at less than $10,000 in China. In contrast, most EVs sold in the United States are higher-priced models, hindering America’s progress in transitioning to electric vehicles.
Recognizing the need to catch up, the Biden administration has launched its own government support for EVs through the 2022 Inflation Reduction Act (IRA). The IRA includes tax credits on U.S.-made EVs amounting to a $7,500 subsidy. A study by Penn Wharton University predicts that the clean vehicle provisions in the Act will cost approximately $393 billion between 2023 and 2032.
China’s investment in EVs has been instrumental in propelling the country to the forefront of the global market. The government’s substantial financial backing, coupled with intense competition among Chinese EV companies, has driven down prices and accelerated the adoption of electric vehicles within China. As Europe grapples with the implications of Chinese subsidies and the United States ramps up its own support, China’s position as an EV superpower remains firmly established.