BYD Co., one of China’s leading electric vehicle (EV) manufacturers, has received substantial direct government subsidies as part of China’s efforts to dominate the clean technology sector. According to the Kiel Institute for the World Economy, subsidies for BYD increased from €220 million in 2020 to €2.1 billion in just two years. These subsidies, along with support for local battery manufacturers and rebates for car buyers, have allowed Chinese firms to rapidly scale up, dominate the domestic market, and expand into the European Union (EU) markets.
The EU is now facing calls to rebalance trade with China as countries like France raise concerns about the economic threat posed by an influx of Chinese-made products flooding the EU market. Companies like BYD, Nio, and Geely are expanding their presence in Europe after achieving success in China, where established Western manufacturers such as Tesla and Volkswagen are losing market share amidst a fierce EV price war.
The Kiel Institute report highlights that almost all of China’s listed companies received direct handouts in 2022, particularly in sectors such as wind, solar, and railway rolling stock. In fact, industry aid in China is three to four times higher than in large EU and OECD countries. As a response to China’s dominance in clean technology, the EU has established a €40 billion innovation fund and earmarked subsidies in the U.S. Inflation Reduction Act. In October, the European Commission initiated an investigation into whether Chinese aid gave companies like BYD, SAIC, and Geely an unfair advantage. Initial tariffs could be imposed as early as July.
China has criticized the subsidy probe, labeling it protectionist, and asserting that its carmakers are winning the EV race due to their superior products. Chinese Minister of Commerce Wang Wentao emphasized that Chinese EV manufacturers rely on continuous technological innovation and advanced local supply chains rather than government support.
German Chancellor Olaf Scholz’s upcoming trip to China presents an excellent opportunity to negotiate with Beijing regarding its subsidies, according to Dirk Dohse, one of the co-authors of the report.
BYD initially began as a battery maker but invested heavily in EV and plug-in hybrid technology. As China’s domestic car market experienced significant growth, thanks to generous EV purchasing subsidies, BYD’s growth also soared. The company’s success is further enhanced by its ability to offer competitive pricing in China, undercutting Western manufacturers. For example, their Seagull hatchback, equipped with a 10-inch rotating touchscreen, is priced under $10,000.
In conclusion, China’s BYD Co. has received substantial government subsidies, enabling it to become a major player in the EV market. The EU is now under pressure to address the influx of Chinese-made products and rebalance trade. This ongoing situation highlights the fierce competition and issues surrounding subsidies in the global clean technology industry.