🥇How China Became a Leader in the Electric Vehicle Industry🍀

Since 2009, China has been diligently creating a supportive environment that combines direct subsidies and indirect assistance to foster the emergence of leading domestic companies in the electric vehicle (EV) sector.

At a time when this technology was not yet ready for widespread adoption, local authorities were encouraged to equip taxi and bus fleets with electric vehicles thanks to grants provided by the central government, reaching up to 60,000 yuan (7,700 euros) for each car and 100,000 yuan for each bus. The Chinese company "BYD," the first in this sector in China, emerged as the biggest beneficiary of this strategy.

In response to European Commission President Ursula von der Leyen's announcement of an investigation into China's general support for electric vehicles, China swiftly reacted. On September 14th of the current year, the Chinese Ministry of Commerce stated that "this is a clear protectionist measure that seriously disrupts and distorts the global and European automotive industry and supply chain, and will have a negative impact on economic and trade relations between China and the European Union."
This investigation, announced by Brussels, comes in response to China's exceptional rise in the automotive industry, and some figures suffice to prove this. In 2021, the country imported twice the number of cars it exported in terms of value, as reported by the French newspaper "Le Monde."

In the first half of 2023, the Chinese industry surpassed Japan to claim the top spot globally, exporting cars worth $35 billion compared to imports worth $21 billion. As for the subsidies provided for electric cars, according to "Alex Partners," they are estimated at around $57 billion in the form of tax incentives or car purchase assistance.

To bolster its domestic industry, China supported the battery sector in 2015 by obligating manufacturers to equip themselves with Chinese batteries to benefit from purchase incentives. The focus was on promoting leading local companies like "BYD" and "CATL," which overtook Panasonic in 2020 to become the world leader in this sector.

To encourage consumers to choose electric cars over traditional ones, some cities implemented additional incentive mechanisms. In 2016, Shanghai introduced privileges for electric cars by providing green license plates exempt from the rules applied to conventional vehicle plates. In the following year, other cities followed suit.

In 2019, China imposed mandatory quotas for electric vehicles on both Chinese and foreign manufacturers, rewarding companies that exceeded these quotas and imposing penalties on those that failed. This served as a way to shift the cost of subsidies from the government to the manufacturers themselves, as reported by the French newspaper.

Sometimes, it is challenging to assess the true financial cost of some of these aids due to their local nature. Often, these aids include purchase grants, research assistance, capital contributions, or in-kind benefits such as land, low-cost electricity, and low-interest credit lines provided by local banks, among others.

As the first country to heavily invest in the electric sector at a time when its prospects were uncertain, and it heavily relied on oil imports in the late nineties, China recognized the long-term opportunity in electric vehicles. It also gained control over battery component production chains. This long-term policy is paying off today, as reported by the newspaper.

By the end of 2022, "BYD" had dethroned Volkswagen to become the leading seller of individual cars in China. This year, the brand has already sold 1.4 million cars, all electric, surpassing Tesla by half a million cars.

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